The status of universities

Victoria Pender

The question of whether universities are funded by public or private funds is an ongoing key issue in the HE sector. HEFCE announced its decision to distribute £4.47 billion to higher education in England on 31 January 2013 for the 2013/2014 academic year.  The funding allocation to individual universities and colleges is expected to take place on 21 March 2013 which undoubtedly will once again raise the question, not least in the context of purchasing and procurement, are universities and colleges publicly or privately funded?

The German case IVD GmbH & Co. KG v Ärztekammer Westfalen-Lippe on 30 January 2013 may provide some additional guidance in relation to this question. IVD GmbH & Co KG (IVD) brought an appeal against the German Medical Council of Westfalen-Lippe (Medical Council) before the German independent competition authority. IVD was an unsuccessful bidder in a tender for a contract to provide printing information leaflets, advertising and subscriptions to the Medical Council. The German independent competition authority rejected the claim and IVD appealed to the regional high court. The high court considered that IVD’s claim was only admissible if the Medical Council was a Contracting Authority for the purposes of Directive 2004/18 (the Public Contracts Directive). Therefore, one of the two questions referred to the European Court of Justice was whether a body governed by public law within the meaning of the second paragraph of Article 1(9)(c) of the Public Contracts Directive is "financed, for the most part, by the state" or subject to "management supervision" by the state?

The Advocate General did not consider that the Medical Council had a “close dependency” on the German state because the State had no influence over the way in which the Medical Council carried out its purpose or spent members’ contributions. The European Court of Justice therefore recommended that it is not sufficient to create a "close dependency" of the professional association on the state such that the association is considered to be "financed, for the most part, by the state" under Article 1(9)(c) of the Public Contracts Directive if a national law provides for a professional association to be financed by contributions from its members, without fixing the amount of the contributions or the manner in which they are spent.

So what guidance can we take from the Advocate General’s recommendation in relation to the question of university funding? The government has influence over the way in which universities carry out their purpose to the extent that HEFCE still provides a proportion of their funding and sets a cap on the fees charged to UK students. However, it is the Council or governing body that is responsible for the way in which a university carries out its purpose or spends student fees.

The Public Contracts Regulations 2006 (Regulations) give effect to the Public Contracts Directive in English law. So once again the question can be posed, how can universities be Contracting Authorities for the purposes of the Regulations? As we await the funding decisions for the academic year 2013/2014, perhaps the government will publish a revised decision about the status of universities?

Victoria Pender
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  1. Gravatar

    Thank you Victoria. Useful points to consider.

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