The Italian competition authority strictly views the conditions for assigning contracts for public local services without tender procedures

The Italian Competition Authority has given a negative opinion on the decision taken by the Province of Trento to directly assign, without any tender procedures, a contract for the local public transport services to Trentino Trasporti Esercizio, a publicly owned undertaking ( AGCM, case AS518- Provincia Autonoma di Trento-Servizi di Trasporto Pubblico Locale). Such decision falls within the scheme of in-house provision of public services. Since the inception of the new regime for the award of public contracts regarding public local services having economic relevance with Article 23-bis of Law 133/2008, for the first time the ICA assessed a in-house assignment of a public transport services contract.
The general rule provided by Article 23-bis as for the assignment of public contract is that the public administration chooses the supplier by means of a competitive tender procedure. As a derogation to the above general rule, a tender procedure is not necessary when the peculiar economic, social, environmental and geomorphological characteristic of the territory concerned do not allow to effectively refer to the market to choice the supplier. In any event, the public contract at hand has to be awarded consistently with EU law.
The wording of Article 23-bis is rather obscure, and it is not entirely clear what the lawmaker intends to say. However, the public administration that opts to derogate to the tender procedure has the obligation to motivate this decision on the basis of a market test and transmit a report with the results of the test to the ICA. And it has to give a proper notice of its decision to not award the contract via a tender procedure.
In this case, according to the ICA, the Province of Trento failed to discharge all these obligations. First, it did not give any notice of the tendered contract. Second, it did not carry out the market test, having only submitted to the ICA qualitative data regarding the efficiencies the in-house assignment of the public contract at issue to Trentino Trasporti Esercizio would have generated. As explained by the ICA, the market test consists of a comparative analysis between different offers and it implies a market survey aimed at to identifying potential suppliers of the services to be outsourced. The Province of Trento failed to do that and it did not ascertain the presence in the market of transport operators capable to provide these services. So the ICA is not in position to assess whether the decision of the Province of Trento to directly assign the public contract at hand can effectively generate the efficiencies indicated by the latter. Moreover, the ICA has observed that the geographical morphology of the relevant territory does not constitute a per se impediment to assign a contract for local public transport services public through competitive tender procedures.
Finally the ICA criticizes the role the Province of Trento attaches to of social protection clauses as a factor militating against competitive tender procedures. Excessive reliance on such clauses would frustrate liberalization of sectors, such as local public transport, where workforce accounts for the majority of production costs. Instead, competitive tender procedures may give competitors the incentive to modify the contractual terms of employment by increasing productivity rather than by intervening on the levels of employment and wages. That should improve the quality of the services transport operators provide and also constitutes the efficiencies a public entity has to take into consideration while deciding to which operators award the contract.
In sum, the AS518 case is consistent with the opinions previously released under Article 23-bis and confirms the ICA strict position with regard to the interpretation of the conditions in which a direct in-house assignment of a public contract for local public services of economic relevance is possible. In short, it appears that public entity can lawfully opt for this was of supplying a given public services only when, following a market test, it results that there no exist in the market any operator capable to supply such a service.

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