Public-Public Cooperation

Public-public cooperation enables contracting authorities to work together to deliver public services without those arrangements being treated as contracts subject to competitive procurement rules. The rationale is that cooperation between public bodies to perform their own public functions is fundamentally different from a public body buying a service from a commercial supplier. It is not market activity and should not be regulated as such, provided the arrangement is genuinely cooperative rather than a disguised procurement of commercial services.

What is Public-Public Cooperation?

Article 12(4) of Directive 2014/24/EU codifies the public-public cooperation exemption, setting out three cumulative conditions.

The cooperation must establish or implement a cooperation between the participating contracting authorities with the aim of ensuring that public services they have to perform are provided with a view to achieving objectives they have in common. This means the parties must have a shared public function to perform and must genuinely be cooperating to perform it, not simply one authority providing services to another on a commercial basis.

The implementation of that cooperation must be governed solely by considerations relating to the public interest. Commercial motivations, including the desire of one party to generate revenue by selling services to the other, take the arrangement outside the exemption.

The participating contracting authorities must perform on the open market less than 20% of the activities concerned by the cooperation. This mirrors the Teckal activities test and prevents public bodies from using the cooperation exemption to build commercial service businesses.

The Court of Justice of the EU has been clear that the exemption applies to genuine horizontal cooperation between peers, not to vertical arrangements where one authority effectively controls another (which is covered by the Teckal exemption). The participating authorities must each retain their autonomy and be genuinely equal partners in the cooperation.

In the UK, the Procurement Act 2023 preserves a broadly equivalent exemption for public authority cooperation, though the precise drafting differs from the EU directive.

Why it matters for bidders

Public-public cooperation defines the boundary of the contestable market for services that public bodies could in principle either procure competitively or deliver through cooperation with other public bodies. For commercial suppliers, understanding when a cooperative arrangement is legitimately exempt and when it exceeds the limits of the exemption is important for identifying market opportunities and for challenging arrangements that should be competitively tendered.

An arrangement where one authority essentially sells services to another on a fully commercial basis, without the genuine cooperative character required by the exemption, does not fall within Article 12(4) and must be procured competitively. Identifying such arrangements requires understanding both the formal structure and the actual commercial dynamics of the relationship.

Example

Two Dutch municipalities agree to jointly operate a shared digital services centre, each contributing staff and resources, with governance shared between them, to deliver IT infrastructure and citizen-facing digital services for both. The centre does not offer its services commercially to private sector clients or other public bodies outside the cooperation. The arrangement meets all three conditions of Article 12(4): there is genuine cooperation to deliver shared public functions, the cooperation is driven by public interest considerations, and the activities are performed almost entirely for the cooperating authorities rather than the open market.

Frequently Asked Questions

Does public-public cooperation require a formal legal agreement?

The directive does not require a specific legal form, but in practice most public-public cooperation arrangements are documented in intergovernmental or inter-authority agreements that specify the scope of cooperation, governance arrangements, cost-sharing, and the public functions being jointly performed. A documented agreement also provides evidence that the cooperation meets the exemption conditions if it is ever challenged.

Can contracting authorities from different EU member states cooperate under this exemption?

Yes. Cross-border joint procurement and cross-border public-public cooperation are both addressed in Directive 2014/24/EU. The directive explicitly acknowledges that contracting authorities from different member states may cooperate, and the exemption conditions apply equally to cross-border arrangements. However, practical complexity (different national legal frameworks, language, and governance traditions) means that cross-border cooperation requires more careful legal structuring.

What is the difference between public-public cooperation and a shared services arrangement?

The distinction depends on the commercial character of the arrangement. A genuine shared services centre owned and governed jointly by multiple contracting authorities to serve their own needs collectively is likely to qualify as public-public cooperation. A shared services centre that is separately constituted, charges market rates, and competes for external business may instead be a commercial entity that should be procured from competitively, or may qualify for the Teckal exemption if the controlling authority conditions are met.