Tragsa as an Instrument of Providing Essential Services in Rural Areas

Silvia Díez Sastre (coord), Jorge Castillo Abella, Juan Antonio Chinchilla Peinado, Mónica Domínguez Martín, Alfonso Egea de Haro, Moneyba González Medina and Lucía López de Castro García-Morato, Instituto de Derecho Local, Universidad Autónoma de Madrid

Relevance of the Practice

Rural areas represent 85 per cent of the Spanish territory (6,678 municipalities), but only 20 per cent of the population live therein (7,686,815 inhabitants). These data reveal the cleavage that is increasingly opening between urban local governments (ULGs) and rural local governments (RLGs). In this context, Tragsa (Transformación Agraria, S.A.) was created more than 40 years ago as a publicly owned company with the aim of providing essential services in the field of rural development and environmental protection.

Originally, Tragsa was conceived as a company owned solely by the state and the autonomous regions. Over the years, local entities such as provincial councils, island councils and the autonomous cities of Ceuta and Melilla, were given the opportunity to own a shareholding interest in Tragsa by means of acquisition of shares. Additionally, 30 years ago a subsidiary of Tragsa, named Tragsatec, was created to carry out specialized, technical activities in the areas of rural development, marine environment, and public health. As a result, Tragsa Group is nowadays one of the most important public groups of companies in the country, responsible for delivering a wide range of services mainly in rural settings under the control of 52 different public entities.

Description of the Practice

Tragsa is a vehicle and technical service of the administration. As a public company, it could be regarded as a form of privatization from an organizational perspective. As a rule, public companies and foundations are entities subject to private law, although they have to comply with many public law provisions regarding public procurement, staff recruitment and internal accounts. According to the law, Tragsa shall be required to execute exclusively, by itself or through its subsidiaries, the works entrusted to it by the shareholders in matters falling within the company´s purpose. Currently, Tragsa´s share capital amounts to more than EUR 32 million, made up of 29,579 shares. All the shares belong to public entities at the state, regional, and local levels, as shown in the following chart.

ShareholdersNumber of sharesOwnership Percentage
SEPI (State Public Company)15.08651,0024%
Autonomous Regions and Autonomous Cities (Ceuta and Melilla)190,0646%
Provincial Councils210,0714%
Island Councils110,0374%
Table 1: Shareholders of Tragsa[1]

Tragsa´s articles of association provide its organization and decision-making procedures, in accordance with the provisions of Act 9/2017 on Public Contracts (Ley de Contratos del Sector Público), regarding Tragsa Group. The company´s governing bodies are composed of shareholders’ representatives in proportion to their shareholding interest, ensuring representation of shareholders at the regional and local levels. Control over Tragsa´s activities and decisions by public entities is ensured thereby, in order to fulfill EU Directives requirements of ‘control similar to that exercised over its own departments’ as part of public-public vertical cooperation (in-house providing). Furthermore, Tragsa has no choice but to accept a demand made by the competent authorities (the shareholders) and their fee proposal for its services. As the ECJ stated in its ruling in the case of Asemfo v. Tragsa (C-295/05), control is also sufficiently ensured.

Besides that, Tragsa and its subsidiaries may not participate in public procurement procedures put in place by the public authorities whose instrument they are (the shareholders), with the aim of protecting competition. However, in the absence of any tenderer, Tragsa may be entrusted with the execution of the activity subject to the public call for tenders.

Pursuant to the articles of association, Tragsa can pursue a wide range of tasks in rural areas, such as the following, among others:

  • the carrying out of all types of actions works and supplies of services in respect of agriculture, stock-rearing, forestry, rural development, conservation and protection of nature and the environment, of aquaculture and fisheries, as well as the actions necessary for the improvement of the use and of the management of natural resources, in particular, the carrying out of works of conservation and enrichment of the historic Spanish patrimony in the countryside;
  • agricultural activities, stock-rearing, forestry and aquaculture, and the marketing of the products thereof, administration and management of farms, mountains, agricultural, forestry environmental and nature protection centers, and the management of open spaces and natural resources;
  • the promotion, development, and adaptation of new techniques of new agricultural, forestry, environmental, aquacultural, or fishery equipment and nature protection systems, and systems for the logical use of natural resources;
  • the manufacture and marketing of moveable goods for the logical use of the same character;
  • the prevention of and campaign against plant and animal disasters and diseases and against forest fires and the performance of works and tasks of emergency technical support;
  • the preparation of studies plans and projects and all types of advice and technical assistance and training in respect of agriculture, forestry, rural development, environmental protection and improvement, aquaculture and fisheries, nature conservation, as well as in respect of the use and management of natural resources.

Additionally, Tragsa and its subsidiaries can be called directly by the public authorities to take immediate action in emergencies in rural or urban areas. To that end, Tragsa and its subsidiaries are integrated into the arrangements for danger prevention and into action plans and shall be subject to implementing protocols.

Assessment of the Practice

Tragsa is an interesting example of insourcing in very important fields of action in rural areas throughout the country. Furthermore, it is prepared to provide civil protection and public services in urban settings only in case of emergency, when there is no time to award a public contract. A consequence of its effectiveness is the increase in the number of shareholders, as well as the creation of public companies at the regional level following suit. This kind of institutionalized/vertical cooperation appears to be very useful in a highly decentralized state as Spain with a large rural territory, where the outsourcing of many services across the country seems to be more expensive and ineffective. In addition, its preparedness for emergencies in urban areas enables a quick response in comparison with public procurement procedures. Nevertheless, its full compliance with European and national provisions on public contracts is controversial. The ownership percentage of autonomous regions and autonomous cities, provincial councils and island councils could be considered too small to fulfill EU Law requirements of control which is similar to that which they exercise over their own. Furthermore, Tragsa´s corporate purpose comprises a very wide range of activities, which has also been perceived as an obstacle to control its activity. These facts justify the convenience of conducting in-depth research on Tragsa in the future. 

References to Scientific and Non-Scientific Publications

Legal Documents:

Informe 1/2019, de 13 de marzo, de la Junta Consultiva de Contratación Administrativa de la Generalitat de Catalunya [Report 1/2019, of 13 March, of the Administrative Procurement Advisory Board to the Autonomous Government of Catalonia]

Circular conjunta, de 22 de marzo, de 2019, de la Abogacía General del Estado-Dirección del Servicio Jurídico del Estado y de la Intervención General de la Administración del Estado sobre criterios para el cálculo del cómputo del requisito de actividad exigido por la Ley 9/2017, de 9 de noviembre, de Contratos del Sector Público en aquellas entidades que sean consideradas medios propios [Joint Circular, of 22 March 2019, of the State General Legal Service, State Judiciary Service and General Intervention of the State Administration Directorate, on the criteria for the calculation of the activity requirement demanded by the Law no 9/2017, of 9 November, on Public Sector Contracts in those entities that are considered their own means]

Scientific and Non-Scientific Publications:

Amoedo Souto CA, TRAGSA: medios propios de la Administración y huida del derecho administrativo (Atelier 2004)

Noguera de la Muela B, ‘Cooperación vertical: los encargos a medios propios o servicios técnicos’ in Isabel Gallego Córcoles and Eduardo Gamero Casado (eds), Tratado de Contratos del Sector Público (Tirant lo Blanc 2018)

Pintos Santiago J, ‘Tragsa y las entidades locales. Encomiendas, convenios y contratos públicos’ (2016) 5 Gabilex 37

Pereña Pinedo I, ‘TRAGSA un medio instrumental en un país descentralizado: comentarios a la sentencia de 19 de abril de 2007 del Tribunal de Justicia de la Unión Europea’ (2007) 730 Actualidad Jurídica Aranzadi 1 Vilalta Reixach M, La encomienda de gestión: entre la eficacia administrativa y la contratación pública (Aranzadi 2012)

[1] Prepared by the authors based on data supplied by Tragsa.