Introduction
Public procurement is a cornerstone of modern economies, functioning as a mechanism to foster competition, transparency, and fairness in the allocation of public resources. It is an inherently dynamic process, designed not only to ensure the efficient and effective use of public funds but also to establish a level playing field for economic operators of all sizes1.
Within the European Union, public procurement is governed by a detailed and cohesive legal framework that upholds the principles of equal treatment, transparency, and proportionality. Directive 2014/24/EU (the “Directive”), a central pillar of this framework, outlines the procedures for awarding public contracts in a manner that ensures competition, fairness, and accountability. At the heart of public procurement lies the interaction between economic operators and third parties, a relationship explicitly addressed in Article 63 of the Directive. Article 63 empowers economic operators to rely on the capacities of third parties -whether technical, financial, or professional- to meet the tender requirements established by contracting authorities. This provision embodies the EU’s commitment to inclusivity and flexibility in public procurement, facilitating access for small and medium-sized enterprises (SMEs) and enabling them to overcome capacity constraints through collaborative arrangements. By permitting economic operators to structure their relationships with third parties in ways that best suit project demands, Article 63 opens the door to broader participation and fosters innovation in procurement practices2. Despite the flexibility envisioned in Article 63, economic operators often face significant challenges arising from restrictive practices imposed by contracting authorities. In certain cases, authorities require rigid or overly prescriptive structures for third-party relationships, creating substantial obstacles for operators seeking to participate in procurement processes. Such restrictions disproportionately impact SMEs and specialized operators, discouraging their participation and narrowing the field of competition. These inefficiencies highlight a fundamental tension between the Directive’s principles of proportionality and transparency and the practical realities imposed by contracting authorities.
Judicial oversight has thus become critical in ensuring a balance between procedural integrity and the operational freedom of economic operators. Recent rulings from the Court of Justice of the European Union (CJEU) and the Greek Council of State exemplify this evolving jurisprudence.
In this context, the preliminary ruling by the Court of Justice of the European Union in NV Construct3 and judgment No. 1412/2024 of the Greek Council of State, issued in the context of a pilot trial in November 2024, represent significant judgments that reaffirm the principles underpinning Article 63 of the Directive. These decisions acknowledge the practical realities faced by economic operators and emphasize that contracting authorities must not unduly constrain their ability to organize legal relationships when exercising the right to rely on third parties to satisfy selection criteria set out in procurement documents. Notably, the Greek Council of State judgment explicitly followed the reasoning of the CJEU, highlighting the substantial influence of European jurisprudence on national legal systems.
Insights from CJEU’s Judgment in Case NV Construct
The CJEU’s judgment in Case NV Construct addressed critical questions regarding the discretion afforded to economic operators under Article 63 of the Directive. The case arose from a public procurement procedure initiated by the District of Timiș, Romania. NV Construct, ranked fourth in the tender, contested the rankings of the three higher-scored bidders, arguing that they failed to meet specific technical and professional capacity requirements. Consequently, the CJEU was tasked with determining whether Article 63, interpreted in light of the principle of proportionality, precludes the exclusion of a tenderer from a procurement procedure in a context where the tenderer has not designated a third party, on whose capacities it relies, as a subcontractor to meet specific criteria related to technical and professional capacity, but has instead opted for an alternative contractual arrangement—such as a service provision agreement—or submitted a declaration from the third party expressing willingness to contribute to the contract.
The CJEU held that Article 63 of the Directive must be interpreted as conferring on economic operators the right to rely on the capacities of other entities, regardless of the legal nature of their links, to satisfy selection criteria. Importantly, the CJEU clarified that subcontracting is merely one method by which operators may rely on third-party capacities and cannot be imposed as a requirement by contracting authorities. The judgment emphasized that, under Article 63, it suffices for an economic operator to prove it will have access to the necessary resources, for instance, through a commitment by the third party in question. This approach ensures flexibility in meeting selection criteria and upholds the principles of transparency, proportionality, and competition enshrined in the Directive.
The key takeaways from the aforesaid judgment can be summarized as follows:
The CJEU reaffirmed the broad discretion granted to economic operators under Article 63 of the Directive, emphasizing their right to rely on third-party capacities without being compelled to establish subcontracting relationships. Instead, operators may choose alternative arrangements, such as services agreements or declarations of availability, to meet tender requirements. This reinforces the Directive’s intent to provide operators with the flexibility needed to organize their resources efficiently and effectively. Moreover, the judgment imposes clear limitations on contracting authorities, stating that subcontracting cannot be mandated as the sole method for fulfilling obligations linked to selection criteria unless such constraints are necessary and justified. The judgment set a significant precedent for operational autonomy. It ensures that public procurement processes remain accessible and competitive while safeguarding economic operators’ right to choose how to organize their third-party relationships. By precluding the imposition of rigid subcontracting requirements, the CJEU paved the way for more inclusive and innovative procurement practices, aligning with the broader objectives of the Directive.
Greek Council of State Judgment: Clarifying Public Procurement Law in a Pilot Trial
The Greek Council of State issued its Judgment No. 1412/2024 in the context of a pilot trial conducted under the provisions of Law No. 3900/2010. The pilot trial procedure is a special legal mechanism designed to ensure uniformity in the interpretation of critical legal provisions and address issues of broad legal significance. Under this procedure, a legal action before an administrative court may be referred to the Council of State e.g. upon request by one of the parties involved. This referral is granted when the case raises a legal question of general interest with implications for a broader circle of individuals or entities. Once the Council of State resolves the legal issue(s) at hand, it may refer the case back to the competent administrative court for further adjudication. In this instance, the Council of State was called upon to clarify specific provisions of Law No. 4412/2016, which transposed the Directive into Greek law.
To contextualize the legal issues at hand, it is essential to first outline the facts of the case that gave rise to the dispute. A municipality issued a tender for the rehabilitation of certain streets, awarding the contract to the bidder offering the lowest price. After evaluating the bids, the tender committee declared the first-ranked bidder as the provisional contractor. The third-ranked bidder submitted a pre-judicial appeal to the Hellenic Single Public Procurement Authority (EADHSY), contesting the decision of the contracting authority4. The appeal alleged that the first-ranked bidder, despite declaring reliance on a third party to meet professional capacity requirements, failed to designate this third party as a subcontractor, as -supposedly- required. EADHSY dismissed the appeal, prompting the third-ranked bidder to challenge the legality of its decision before the competent administrative court.
This dispute culminated in one of the key questions examined by the Greek Council of State: the interpretation of Article 78 of Law No. 4412/2016, which transposes Article 63 of the Directive, and more specifically, whether third parties providing support in relation to qualifications, professional credentials, or relevant professional experience are obligated to act as subcontractors in order to perform the activities linked to those capacities.
Article 78 of Law No. 4412/2016 serves as the legal foundation for determining the extent of flexibility and obligations in third-party relationships under Greek procurement law, forming the basis for the Greek Council of State’s analysis in this case. It permits reliance on third parties regardless of the legal nature of the links between them, provided the operator can demonstrate access to the necessary resources. Additionally, for criteria involving qualifications, professional credentials, or relevant experience, third parties must also execute the works or services linked to those capacities. Proof of this reliance must be provided to the contracting authority, typically through a formal commitment from the third party.
The Greek Council of State affirmed the right of economic operators to rely on the capacities of third parties for specific public contracts regarding selection criteria. This right aims to open public procurement to greater competition, benefiting both economic operators and contracting authorities, while also facilitating access for small and medium-sized enterprises (SMEs) to public contracts. It explained that this right is subject to specific conditions and limitations to ensure the proper and timely execution of public contracts. Regarding technical and professional capacity, Article 78 of Law No. 4412/2016 explicitly allows an economic operator to rely on third-party capacities regardless of the legal nature of its relationship with those entities. The operator must demonstrate to the contracting authority that it will have the necessary resources from those third parties during the contract’s execution. This can be proven through any suitable means, such as a binding commitment from the third party. A crucial legal requirement is that the tenderer must prove it will genuinely have access to the third party’s resources for the duration of the contract. An operator invoking such capacities cannot be excluded unless it fails to demonstrate its actual ability to use those capacities.
Most importantly, the Greek Council of State emphasized that it is within the discretion of the tenderer to choose the legal nature of its relationship with the third party providing the required capacities. This discretion extends to the choice of evidence submitted to prove the existence of such relationships, whether it involves a contract for services, a subcontracting arrangement, or another form of cooperation.
In cases where reliance is placed on third-party capacities for qualifications, professional credentials, or relevant professional experience—categories expressly identified in Article 63(1) of the Directive—the second subparagraph of Article 78(1) of Law no. 4412/2016 introduces a specific condition. It requires that the third party performing the work or services linked to these capacities must execute those tasks directly and personally. This condition reflects the nature of such capacities, which, according to EU law, can only be made available to the tenderer through the direct involvement of the third party in performing the contract. In this regard, the Greek Council of State clarified that even in such cases, the only condition for relying on these capacities is proof, through any appropriate means, that the third party will indeed perform the relevant works or services. The tenderer retains broad discretion to organize the legal structure of its relationship with the third party, including whether it takes the form of a contract for works, service provision, subcontracting, or another type of collaboration. The contracting authority cannot impose a specific legal form for this relationship.
This interpretation aligns with the principles outlined by the CJEU in Case NV Construct, discussed above, which emphasized that subcontracting is only one of the many forms of collaboration that economic operators can employ and cannot be mandated.
Consequently, the Greek Council of State rejected any interpretation of Article 78 of Law no. 4412/2016 that presumes or mandates that third parties relied upon for qualifications, professional credentials, or experience must necessarily or presumptively be considered subcontractors. Such a presumption would contradict the legal framework’s intention to allow flexibility in organizing third-party relationships, as long as the execution of the relevant tasks or services by the third party is adequately demonstrated.
The judgment highlights the strong alignment of the Greek Council of State with EU jurisprudence, reflecting a commitment to ensuring that domestic rules and their interpretation remain in harmony with EU law.
Broader Implications and Analysis
The discussed judgments bring much-needed clarity and protection for economic operators, safeguarding them from disproportionate restrictions on how they organize their relationships with third parties. By emphasizing flexibility, they reinforce that the primary concern in public procurement is the proper execution of the contract rather than prescribing rigid structures for third-party arrangements. This approach is particularly significant for fostering innovation and participation, especially for small and medium-sized enterprises (SMEs), which often depend on adaptable arrangements to compete effectively in procurement processes.
Moreover, the judgments acknowledge the diverse operational realities faced by economic operators, fostering a procurement environment that is both efficient and inclusive. A particularly noteworthy aspect of the rulings is their recognition of the various ways in which economic operators may engage third parties to fulfill public contract requirements. While subcontracting remains a common and practical method, it is not the only permissible avenue. For example, an economic operator may opt for an employment agreement, directly integrating the third party’s expertise into its organizational structure during contract execution. This approach not only ensures access to necessary resources but also facilitates a seamless transfer of skills and responsibilities within the economic operator’s operations. Alternatively, service contracts may be used, as underscored by the CJEU and the Greek Council of State, allowing the third party to provide the required expertise or services under a contractual arrangement that clearly defines their role. Similarly, works contracts may be employed, whereby the third party undertakes specific deliverables within the broader project. These structures enable economic operators to tailor their collaborations to meet the particular needs of a public contract, ensuring both efficiency and compliance with procurement objectives.
The Notion of Subcontracting: An Open Question in EU Public Procurement
A key takeaway from both judgments is not whether the chosen structure of engaging with third parties constituted subcontracting, but rather that subcontracting could not be imposed as the sole permissible method for engaging third parties.
This leaves open an important question: what precisely constitutes subcontracting under the Directive?
As a term within the Directive, subcontracting has an autonomous meaning in EU law, distinct from definitions under national legal systems. This principle of autonomous interpretation ensures uniformity and legal certainty across Member States, aligning the term’s meaning with the Directive’s objectives while preventing fragmentation due to divergent national interpretations. This uniform approach is particularly vital in the context of cross-border activities like public procurement, where consistency is essential for fostering competition and inclusivity. While some CJEU judgments5 have shed light on certain aspects of subcontracting, the CJEU has yet to establish a precise, overarching definition of ‘subcontracting’ within EU law and particularly within the context of public procurement.
The judgments under discussion appear to establish a distinction between service contracts and subcontracting. While the judgments themselves do not delve into the reasoning behind this distinction, it is worth exploring how such a differentiation could be justified. The following analysis represents a possible interpretation of the functional and practical differences between these types of arrangements -an interpretation that may hopefully be further clarified or affirmed in future judgments.
Unlike service contracts, subcontracting is not a specific, standalone type of contract. Instead, it represents a functional relationship within the execution of a primary contract. Subcontracting occurs when a third party takes on part of the obligations that the primary contractor owes to the contracting authority under the main contract. What differentiates subcontracting from other types of arrangements is the degree of independence granted to the third party. In a subcontracting relationship, the third party generally performs the delegated obligations autonomously, without requiring detailed instructions or close supervision from the primary contractor. This independence contrasts with other scenarios, such as service or employment contracts, where the third party may act more as an auxiliary, performing tasks under the primary contractor’s direct oversight or control. In essence, subcontracting is defined not by the label or formal classification of the agreement but by its functional role in the contractual chain. It involves the third party stepping into the primary contractor’s role for a specific portion of the public contract, assuming responsibility (vis-à-vis the primary contractor) for those obligations directly and independently.
Conclusion
The judgments of the CJEU and the Greek Council of State represent a pivotal advancement in public procurement law, emphasizing the principles of flexibility, fairness, and inclusivity at the heart of the Directive. By affirming that economic operators have the autonomy to determine the structure of their relationships with third parties—free from unnecessary and rigid constraints—these decisions strike a critical balance between safeguarding procedural integrity and respecting operational realities.
For economic operators, this jurisprudence fosters an environment conducive to innovation and broader participation, particularly for SMEs, which often rely on creative and adaptable solutions to compete in the public procurement arena. For contracting authorities, these rulings highlight the need for precision and proportionality in drafting tender documents, ensuring that public procurement remains a transparent and competitive process.
Nonetheless, the judgments also underscore the need for continued judicial and legislative clarity on unresolved questions, such as the precise definition and scope of subcontracting under EU law. As cross-border procurement becomes increasingly prominent, harmonized interpretations of such fundamental terms are essential to ensuring consistency and legal certainty.
Footnote(s):
1 Arrowsmith, Sue. The Law of Public and Utilities Procurement. 3rd ed., Sweet & Maxwell, 2014, pp. 3–15.
2 Arrowsmith, The Law of Public and Utilities Procurement, pp. 1282–1292.
3 Judgment of 26 January 2023, NV Construct, C-403/21, ECLI:EU:C:2023:47.
4 The Hellenic Single Public Procurement Authority (HSPPA) serves as an authority tasked with safeguarding transparency, fairness, and legality in public procurement procedures. In the context of Greek public procurement law, filing a pre-judicial appeal with EADHSY is not merely an optional step but a mandatory procedural requirement. This step ensures that disputes are initially reviewed by a specialized body before escalating to judicial proceedings. According to Law No. 4412/2016, only if a pre-judicial appeal has been filed and resolved can a bidder pursue legal action before the administrative courts, making this process a crucial gateway to judicial review in public procurement disputes.
5 Judgment of 3 October 2019, Delta Antrepriză de Construcţii şi Montaj 93 SA, C-267/18, ECLI:EU:C:2019:826, Judgment of 14 July 2016, Wrocław – Miasto na prawach powiatu, C-406/14, ECLI:EU:C:2016:562.