Practical Law

January’s case digest includes an ECJ ruling creating a possible “third way” for public authorities to organise the delivery of public services extending beyond the existing possibilities first established by the Teckal and Hamburg in-house case law, and a High Court judgement on the award of damages that contains a detailed examination of the core principles set out in Francovich and Factortame.

Please feel free to submit a comment below or send us an Ask query if you have any views on the cases covered, or think that we have missed a case that should be brought to the attention of public procurement practitioners.

ECJ rules that the transfer of functions by public authorities to an autonomous SPV governed by public law is not a public contract (Remondis GmbH & amp, Co. KG Region Nord v Region Hannover and others)

This request for a preliminary ruling concerned the interpretation of Article 1(2)(a) of Directive 2004/18/EC on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts.

The request was made in proceedings between Remondis GmbH & Co. KG Region Nord and the Region of Hannover, Germany regarding the lawfulness of the transfer by the Region of Hannover of waste treatment tasks that were its responsibility to a public body, which was a special-purpose association for waste management created by local authorities in the Region of Hannover.

The ECJ ruled that:

• Article 1(2)(a) of Directive 2004/18/EC meant that an agreement concluded by two regional authorities, by which they adopt constituent statutes forming a special-purpose association with legal personality governed by public law, and transfer to that new public entity competences previously held by those authorities and, after transfer, belonging to that special-purpose association, does not constitute a “public contract”.
• However, such a transfer of competences concerning the performance of public tasks exists only if it concerns both the responsibilities associated with the transferred competence and the powers that are the corollary thereof, so that the newly competent public authority has decision-making and financial autonomy, which it is for the referring court to verify.

It appears that this court ruling has opened the door to a “third way” for public authorities to organise the delivery of public services extending beyond the existing possibilities first established by the Teckal and Hamburg in-house case law.

ECJ rules that a bidder which has been definitively excluded cannot challenge an award decision (Bietergemeinschaft Technische Gebäudebetreuung GesmbH und Caverion Österreich GmbH v Universität für Bodenkultur Wien and others)

This request for a preliminary ruling concerned the interpretation of Article 1(3) of Council Directive 89/665/EEC as amended by Directive 2007/66/EC, which relates to public procurement remedies (Directive 89/665).

The request was made in proceedings between Bietergemeinschaft Technische Gebäudebetreuung GesmbH und Caverion Österreich GmbH (consortium), and University of Natural Resources and Life Sciences, Vienna, Austria (BOKU Wien) concerning the latter’s award of a framework contract for public services to VAMED Management und Service GmbH & Co. KG in Wien (Vamed).

The court ruled that Article 1(3) of Directive 89/665/EEC (as amended by Directive 2007/66/EC) must be interpreted as not precluding a tenderer, excluded from a public procurement procedure by a final decision of the contracting authority, from being refused access to a review of the decision awarding the public contract concerned and of the conclusion of the contract, where only that unsuccessful tenderer and the successful tenderer submitted bids and the unsuccessful tenderer maintains that the successful tenderer’s bid should also have been rejected.

The court has clarified that Article 1(3) of Directive 89/665/EEC cannot be interpreted as precluding a tenderer from being refused access to the review of an award decision, provided that it is a definitively excluded tenderer within the meaning of the second subparagraph of Article 2a(2) of that directive. The effect of this ruling appears to limit the scope of the ability of bidders to commence proceedings in regulation 91(1) of the Public Contracts Regulations 2015 and regulation 52(1) Concession Contracts Regulations 2016 which provide that “A breach … is actionable by any economic operator which, in consequence, suffers, or risks suffering, loss or damage.”

High Court finds failure to award contract in respect of most economically advantageous offer warrants award of damages (Energy Solutions EU Ltd v Nuclear Decommissioning Authority)

The court considered and determined the following issues:

• Whether a failure to award a contract to the tenderer whose tender ought to have been assessed as the most economically advantageous offer, is in itself a sufficiently serious breach of the contracting authority’s obligations to warrant an award of damages (Issue 1). The court answered in the affirmative.
• If not, whether in all the circumstances of this case, the breaches by the Nuclear Decommissioning Authority (NDA) of its obligations were sufficiently serious to warrant an award of damages (Issue 2). This did not arise given the answer to Issue 1. However, an individual breach by the NDA of its obligations was sufficiently serious to warrant an award of damages if it was a breach of obligation in relation to a threshold requirement, or one that was designated “pass/fail”. For all other breaches of obligation in relation to evaluation requirements, these were sufficiently serious to warrant an award of damages if they would have affected the conclusion (whether individually or cumulatively) of the competition and which tenderer had submitted the most economically advantageous tender.

Whilst much depends on the outcome of the appeal by NDA to the Supreme Court, this case is of interest because of the detailed examination of the core principles set out in Francovich and Factortame.

General Court Order finds bidder did not prove existence of a particularly serious prima facie case regarding procurement award procedure (Solelec SA, Mannelli & Associates, Paul Wagner and son SA and Socom SA v European Parliament)

The General Court has handed down an order on an appeal by Solelec SA, Mannelli and Associates SA, Paul Wagner and sons SA and Socom SA (together the Électro KAD consortium) against the European Parliament’s decision to award a procurement contract for high voltage electricity work to another consortium.

Damage of a pecuniary nature cannot, otherwise than in exceptional circumstances, be regarded as irreparable since pecuniary compensation is capable of restoring the aggrieved person to the situation before the damage suffered. However, it is settled case law that when an unsuccessful tenderer is able to show that there is a particularly serious prima facie case, it cannot be required to establish that the rejection of its application for interim measures risks causing it irreparable harm, otherwise the effective legal protection which it enjoys pursuant to Article 47 of the Charter would be undermined in a manner that is both excessive and unjustified.

In this case, the General Court dismissed Électro KAD’s action, concluding that the European Parliament had not infringed the procurement rules by rejecting Électro KAD’s tender. The European Parliament had not failed to comply with the award criteria, nor had it awarded the contract to a bidder who had submitted an abnormally low tender. Therefore, the Électro KAD consortium had not established a particularly serious prima facie case.

General Court dismisses appeal by Cofely Solelec against European Parliament procurement decision (Cofely Solelec, Mannelli & Associés SA and Cofely Fabricom v European Parliament)

The General Court has dismissed an appeal by Cofely Solelec, Mannelli & Associates SA and Cofely Fabricom (together Cofely Solelec) against a decision of the European Parliament to not award it a procurement contract relating to the extension and renovation of one of its buildings in Luxembourg.

The General Court rejected the appeal in its entirety, finding that the European Parliament had not infringed its duty to state reasons as it was clear from both contested decisions that bidders had not complied with the selection criteria and because the price submitted by a number of bidders, including Cofely Solelec, far surpassed the estimated contract value.

Further, the General Court found that Cofely Solelec had not substantiated its allegations that the European Parliament made an error of assessment in its valuation of the contract. The fact that the value of the contract was less than the average of the offers received from tenderers does not show that there was a manifest error of assessment.

General Court dismisses appeal by TV1 against Commission procurement decision (TV1 GmbH v European Commission)

The General Court has dismissed an appeal by TV1 GmbH (TV1) against a decision of the European Commission not to award a contract to TV1 after a procurement tender procedure (PO/2014-03/A4) and not to annul the decision of the defendant not to award the contract to the applicant, communicated on 25 July 2014, as well as the decision of the defendant to award the contract for Stage IV to another undertaking.

TV1 claimed that the Commission failed to carry out a thorough investigation of the abnormally low offer submitted by the undertaking which was awarded the contract, and failed to exclude that offer or the tenderer from the tender procedure.

The General Court dismissed the appeal in its entirety, concluding that it did not appear that the Commission made a manifest error of assessment in considering that the winning bidder’s financial tender offered best value for money, yet without being abnormally low. Further, the General Court found that the Commission had not infringed any general principles or the duty to state reasons in its assessment of the bids, or in its wording and weighting of the tender specifications.