Public & private

It is widely rumoured that registered social landlords will soon be designated as public bodies for the purposes of the European procurement rules (HT 4 June, page 9). This will have important implications for RSLs.

The rules state that contracts for services, supplies and works that exceed specified thresholds are to be subject to union-wide competition. The rule only applies to bodies that are "contracting authorities" and "governed by public law". The test is whether the body is financed for the most part by the state, regional or local authorities, or is subject to management supervision by such bodies.

A judgment in 2001 (C-237/99 EC v France) brought low-rent housing bodies operating in France within the definition of public bodies. The court decided that the relevant question is whether the controls to which the entities are subject render them dependent on the public authorities to the extent that they can influence their decisions on contracts.

The authorities regulating the French housing bodies had the right to:

• check the accounts
  
• wind up the body and appoint a liquidator
  
• suspend managerial functions and appoint a provisional administrator in the event of serious irregularities or gross mismanagement
  
• control any excessive activity
  
• carry out on-the-spot inspections, audits or assessments.

The European court reasoned that these powers, even where exercised exceptionally, implied permanent supervision. Thus the French housing bodies were considered to be governed by public law.

Private developers may gain an advantage over RSLs, as the EU rules would not apply

So what about Great Britain? The regulatory powers of the Housing Corporation not only mirror those of similar bodies in France, but also provide further powers such as:

• the right to appoint additional RSL directors
  
• rights of direction, including transfer of land
  
• the right to require provision of information
  
• certain search powers.

Given these powers, the UK government is expected to concede by the end of the year that RSLs can be considered public bodies – and will have to play by the EU procurement rules. Of course, local authorities have been bound by the rules for many years. If they are applied to RSLs, every planned new contract will have to be reviewed to ascertain whether the rules apply and to factor in an appropriate time frame to undertake the necessary advertising, selection and bidding process.

Care must be taken to ensure that the relevant contracts are subjected to the procurement rules and that full advantage is taken of the areas exempted from such rules. RSLs will also have to consider the extent to which they can continue to use partnering arrangements with suppliers and consultants. Partnering has been heavily encouraged by the government but the EU regime may in some areas conflict with such arrangements – particularly where long-term or "strategic" contracts are in place.

If, as has been mooted in the Housing Bill, housebuilders get corporation grant to build homes, they may gain a competitive advantage over RSLs – as the EU rules would not apply.