Does the in-house exemption apply to a non-profit organisation?

Case C-574/12 Centro Hospitalar v Eurest Portugal was a case referred to the European Court of Justice (ECJ) by the Portuguese court. It was a challenge by Eurest to the direct award of a five-year catering contract by Centro Hospitalar de Setúbal, a Portuguese public hospital, to the Serviço de Utilização Comum dos Hospitais (SUCH), a non-profit entity. Eurest was a competitor of SUCH and argued that the contract should have been put out to procurement. Centro Hospitalar argued it was covered by the in-house exemption that was established by the Teckal case.

The Teckal case set the rule that a contract does not need to be procured if it is awarded to an entity: over which the contracting authority exercises ‘a control similar to that which it exercises over its own departments’; that has no private sector ownership or control; or that carries out ‘the essential part’ of its activities with the contracting authority. Subsequent case law has 90 per cent as a rule of thumb for the essential part.

This has now been codified in the new Public Procurement Directive, article 12 (although ‘the essential part’ is at least 80 per cent)…

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