Even More Competition in Regional Public Transport

More and more courts are issuing judgments for better and less expensive transport. The trend against direct awards to the major rail companies is continuing: After the Federal Court of Justice and Düsseldorf Appeals Court, now the Southern Bavarian Procurement Board dismissed a direct award of transport services. "With a curious argument, however," explained public procurement expert Dr. Ute Jasper.

Without prior competition, the city of Lindau had ordered its own company Stadtverkehr Lindau (SVL) to perform local bus services. Lindau also allowed SVL to use subcontractors. One competitor requested a bidding procedure instead of the direct award. The city of Lindau referred to the option of an in-house award to its own company without competition.

At the request of a competitor, the Southern Bavarian Procurement Board invited the city to put out the traffic services for tender. It rejected an award-free in-house transaction since it would distort competition. In support, the procurement board pointed to SVL's right to use subcontractors.

 "The decision is not convincing," comments Dr. Ute Jasper, public procurement expert at law firm Heuking Kühn Lüer Wojtek. "Under European law, a city may place an order with its subsidiary company if the latter is not engaged in competition outside of the city. Subcontracts are not taken into account, particularly since the transport company must put these out to tender." In addition, the Procurement Board's judgment is contrary to the jurisdiction of the Düsseldorf Appeals Court. "In its recent decision of March 2, 2011, the Appeals Court clarified that a subcontractor use does not in principle preclude an in-house tender-free award," said Jasper.