When can a public authority award work directly to an in-house entity or through public-public cooperation without competition?

Short answer

Under Article 12 of Directive 2014/24/EU, a contracting authority may award a contract without an EU procurement procedure in two main situations. An in-house award requires control over the recipient similar to control over the authority's own departments, more than 80% captive activity, and normally no direct private capital. Public-public cooperation requires genuine cooperation between contracting authorities to provide public services in pursuit of common objectives, implementation governed solely by public-interest considerations, and less than 20% open-market activity in the activities concerned.

These are different routes. Public ownership alone is insufficient, and an ordinary one-way purchase does not become cooperation because both parties are public. The authority should select the correct legal route, prove every condition before award, calculate activity percentages on the statutory basis, and check national implementing law. The utilities and concessions directives contain parallel, but separately applicable, provisions.

Later changes to ownership, control or market activity require reassessment, although separate contract-modification rules may sometimes preserve an existing award.

First identify the transaction and the applicable regime

Article 12 is relevant where an arrangement would otherwise be a public contract under Directive 2014/24. It does not create a general exemption for the public sector.

Identify the connected agreements, payment, obligations and recipient, then select the possible route:

• individual or indirect in-house control under Article 12(1);
• a reverse or horizontal in-house award under Article 12(2);
• joint in-house control under Article 12(3); or
• public-public cooperation under Article 12(4).

For a concession, Article 17 of Directive 2014/23/EU contains the parallel controlled-entity and cooperation rules. For utilities procurement, Article 28 of Directive 2014/25/EU is the corresponding provision. Meeting the wording of the wrong directive is not enough; scope, recipient and activity must be tested under the applicable regime and national implementation.

Individual in-house awards require three cumulative conditions

Article 12(1) allows a direct award to a legally separate public- or private-law person only if all three conditions are met:

1. Similar control. The authority exercises decisive influence over both the recipient's strategic objectives and significant decisions, directly or through another entity controlled in the same way.
2. More than 80% captive activity. More than 80% of the recipient's activities perform tasks entrusted by the controlling authority or other legal persons controlled by it.
3. No disqualifying private capital. There is no direct private capital, except non-controlling and non-blocking participation required by national legislation, compatible with the Treaties, which gives no decisive influence.

Control is substantive. Map ownership, appointments and supervision against actual power over strategy and significant decisions; include vetoes, reserved matters and private interests.

The modern statutory test develops the rule first stated in Teckal, Case C-107/98:

“the local authority exercises over the person concerned a control which is similar to that which it exercises over its own departments and, at the same time, that person carries out the essential part of its activities with the controlling local authority or authorities.” — Teckal, C-107/98, paragraph 50

Article 12(2) also covers a controlled entity awarding to its controlling authority, or to another entity controlled by the same authority. The recipient must still satisfy the provision's private-capital restriction. This is sometimes described as a reverse or horizontal in-house award; the corporate control chain should be documented rather than assumed.

Joint control is possible, but must be real

Several contracting authorities may jointly control an entity under Article 12(3). In addition to the more-than-80% activity and private-capital conditions, three features establish joint similar control:

• the controlled entity's decision-making bodies include representatives of all participating authorities, although one representative may represent several or all;
• the authorities can jointly exert decisive influence over strategic objectives and significant decisions; and
• the entity pursues no interests contrary to those authorities.

No authority needs unilateral control, but a small shareholding without meaningful governance is insufficient. Founding instruments, voting, board composition and reserved decisions should prove collective direction.

Public-public cooperation needs a joint public-service project

Article 12(4) is not a control test and does not require a jointly owned vehicle. It applies to a contract concluded exclusively between two or more contracting authorities where:

• the arrangement establishes or implements cooperation to ensure that public services each must perform are provided with a view to common objectives;
• implementation is governed solely by public-interest considerations; and
• the authorities perform less than 20% of the activities concerned by the cooperation on the open market.

The services need not be identical and contributions need not be equal. Ancillary activities can qualify where they contribute to effective performance of the public services. Financial transfers and cost reimbursement are possible. What matters is a cooperative concept with real commitments, not simply one authority ordering a service that another supplies for payment.

In Remondis II, Case C-429/19, the Court explained the required collaborative dimension:

“the public sector entities which intend to conclude such an agreement establish jointly their needs and the solutions to be adopted.” — Remondis II, C-429/19, paragraph 33

A division of tasks can still be genuine cooperation. In ISE, Case C-796/18, software sharing and commitments concerning further development could fall within Article 12(4), and the Court confirmed that cooperation may concern ancillary activities. But it also imposed a competition safeguard:

“cooperation between contracting authorities must not have the effect, in accordance with the principle of equal treatment, of placing a private undertaking in a position of advantage vis-à-vis its competitors.” — ISE, C-796/18, operative point 3

Record the common objectives, each contribution, governance, costs and treatment of private suppliers or intellectual property. Cooperation is difficult to defend if one authority defined the need and selected the other as provider before collaboration began.

Calculate the 80% and 20% thresholds correctly

Article 12(5) prescribes the calculation. Use average total turnover or an appropriate alternative activity measure, such as costs for services, supplies and works, for the three years preceding award. For a newly created or reorganised entity, unavailable or irrelevant historic figures may be replaced by a credible activity measurement, particularly business projections.

Match numerator and denominator to the statutory test: entrusted tasks for in-house awards, and the cooperation activities' open-market share for public-public cooperation. Keep the accounts, allocations and assumptions, and monitor structural or commercial change.

A competence transfer is a separate question

A genuine reallocation of public competences can fall outside procurement rather than within Article 12. Under Article 1(6) of Directive 2014/24 and Remondis, Case C-51/15, responsibility for the task and the powers necessary to perform it must genuinely pass to a public authority that acts autonomously and under its own responsibility.

“There can thus be no transfer of competence if the newly competent public authority does not act autonomously and under its own responsibility in the performance of its tasks.” — Remondis, C-51/15, paragraph 51

If the original authority retains responsibility and merely pays another entity to perform specified work under its direction, that is more likely a public contract. Creating a public-law body or calling an arrangement a delegation does not decide the issue.

National law and wider EU law still matter

Article 12 permits qualifying direct awards; it does not compel Member States to use them. In IRGITA, Case C-285/18, the Court accepted that national law may impose additional, clear conditions compatible with EU principles. The authority must therefore check the national implementing statute, any prior make-or-buy test, approval requirements, transparency duties and available remedies.

Even where Article 12 applies, State-aid, competition, budget and sector-specific rules may require separate analysis. Material changes in control, capital, activities or scope may require reassessment.

In Fastned Deutschland, C-452/23, a concession originally awarded in-house could be modified after the concessionaire lost that status if Article 43(1)(c) was independently satisfied: unforeseeable circumstances required adaptation to preserve performance, the overall nature remained unchanged and the value cap was met. This modification rule does not permit a new direct award to an entity that fails Article 17.

Practical award file

Before signing, record:

• why the arrangement would otherwise be procurement and which directive applies;
• the precise Article 12 route relied on;
• ownership, control chain, voting rights and significant-decision powers;
• direct and indirect private participation;
• the three-year activity calculation and supporting accounts;
• for joint control, each authority's representation and collective influence;
• for cooperation, common objectives, mutual commitments and public-interest governance;
• why no private undertaking receives an advantage;
• national-law conditions and approvals; and
• review triggers for later organisational or commercial changes.

Conclusion

A public authority can award directly to an in-house entity only where similar control, more-than-80% captive activity and the private-capital restriction are all satisfied. Joint control can qualify where the participating authorities collectively exercise decisive influence and the entity's interests remain aligned with theirs.

Public-public cooperation is a different exclusion. It needs an authentic joint project for public services and common objectives, public-interest-only implementation, and less-than-20% open-market activity. Public status, cost reimbursement or a cooperation label cannot replace those facts. A contemporaneous legal and financial record, checked against national law and the correct procurement directive, is the safest basis for proceeding without competition.

Sources

• Directive 2014/24/EU on public procurement, consolidation of 1 January 2026
• Directive 2014/23/EU on concession contracts, consolidation of 1 January 2026
• Directive 2014/25/EU on utilities procurement, consolidation of 1 January 2026
• Teckal, C-107/98
• Remondis, C-51/15
• IRGITA, C-285/18
• ISE, C-796/18
• Remondis II, C-429/19
• Fastned Deutschland, C-452/23
• CURIA case file for ISE, C-796/18