Specifying location requirements

Ruth Smith examines the outcome of a recent Spanish procurement case where a contracting authority had sought to specify location requirements for a health service contract.

Specifying location requirements can be a tricky business when running an EU procurement exercise. Get this wrong and you risk a challenge on grounds of lack of equal treatment and/or for creating an unjustified obstacle to open competition. A Spanish contracting authority recently learned this the hard way when specifying its location requirements for a health service contract with the result that the matter was referred to the ECJ. 

The facts were that in an attempt to reduce the pressure on public hospitals in the Basque region of Spain their Department of Health decided to outsource various public health care surgical services to private hospitals. The surgical procedures were still to be performed by surgeons of the public health service but they would travel to the hospital facilities of the selected private hospitals to carry them out.

The Department of Health advertised two separate contracts for these services under the open procedure. The procurement directive in force at the time was Directive 2004/18 and, as these were above threshold Part B services, the rules in the Directive on technical specifications applied. A minimum requirement of the Department’s technical specifications was that the private hospitals offered had to be located in Bilbao. The precise wording of the requirement was as follows:

“Having regard to the need for services to be provided with sufficient proximity patients and their families, the availability of public transport and travelling time, and the need to minimise the necessary travel by medical staff of the …. hospitals, the health care centres proposed must be situated in the municipality of Bilbao.”

A private hospital located in a municipality adjacent to Bilbao challenged the procurements on the grounds that the Bilbao location requirement was unjustified and contrary to the principles of equal treatment and freedom of access to public procurement procedures.

It was relevant that the services covered by the contract(s) were not exclusively for patients who resided in Bilbao and covered patients living in other nearby localities. Further, that the hospital facilities offered by the challenger, although not located in Bilbao, satisfied all other conditions of the procurements including being sufficiently close and accessible for patients, their families and the public health surgeons who were required to travel there.

The Court agreed with the challenger and concluded that the location requirement in the specification (i.e. for the hospitals to be located in Bilbao), which resulted in the automatic exclusion of the challenger, was contrary to the Directive’s rules on technical specifications, as applicable to Part B contracts (in particular, Article 23(2)), as it did not allow equal access for tenderers and was an unjustified obstacle to competition.

Comment

Although the decision is not surprising it serves as a good reminder of the need for care when drafting specifications. This is not only with regard to location but also generally to ensure your requirements are justified and do not pose an unnecessary obstacle to competition. It is worth noting that in this case the court did not criticise the more general proximity requirement in the specification (as that was clearly justifiable) but the requirement to be in Bilbao, which was the only point which the challenger could not meet and led to its automatic exclusion, was unnecessary, unjustified and a step too far.

Ruth Smith is National Head of Procurement Law at Mills & Reeve. She can be contacted on 01223 222585 or This email address is being protected from spambots. You need JavaScript enabled to view it.. This article first appeared in the firm's Procurement Portal.