Practical Law

February and March’s case digest includes an ECJ judgment that provides detailed analysis of key transparency and good governance principles in relation to tender evaluation and the communication of award decisions, and a High Court decision examining expeditions of hearings and stays of proceedings in procurement claims.

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 annuls part of European Commission award decision but declines to award damages (European Dynamics Luxembourg and others v European Commission)

By a contract notice published on 12 November 2013, the European Commission (Commission) launched a call for tenders for external services provision for development, studies and support comprising four lots. Lot 4 concerned the provision of information technology services relating to off-site information systems development, studies and support.

In accordance with the call for tenders, “multiple framework contracts based on a reopening to competition mechanism” were to be concluded, for Lot 4. Specific contracts implementing the “competitive multiple framework contracts” were to be awarded on the basis of “mini competitions” between the selected framework contractors. Thus, whenever the Commission wished services to be provided in the context of that lot, it had to send a request for a formal offer for services, or a “Request for Quotation”, to the framework contractors on the basis that the contract would be awarded to the most economically advantageous tenders.

A consortium (consortium), led by European Dynamics Luxembourg successfully submitted a tender for Lot 4.

This case concerned two Requests for Quotation in the context of Lot 4 in respect of which the consortium tendered unsuccessfully. These were Request for Quotation No 455 and Request for Quotation No 485.

The applicants put forward two pleas in law, of which the first, alleging infringement of the obligation to state reasons, was common to both Requests for Quotation. The second, applying only to the second contested decision, alleged the existence of manifest errors of assessment.

The consortium claimed that the court should annul both decisions and award them damages for the loss of the commercial opportunity.

In relation to Quotation 455, the court held that:

• The single plea in law alleging an inadequate statement of reasons concerning the abnormally low nature of the selected tenderer’s tender for Request for Quotation No 455 was upheld.
• Consequently, the Commission’s disregard of essential procedural requirements relating to the first contested decision led to its annulment without it being necessary to reply to the substantive arguments that the contracting authority was wrong to estimate the effort required to carry out the tasks laid down in the context of Request for Quotation No 455. Therefore, it was wrong to consider that the tender selected was not abnormally low.

In relation to Quotation 485, the court held that:

• The evaluation assessment was reasoned to the required legal standard and accordingly, the complaint had to be rejected as unfounded.
• All the consortium’s arguments alleging a manifest error of assessment relating to the evaluation of the consortium’s tender in relation to project management, the estimated periods, and the overlapping of project tasks, for the completion of the project had to be rejected.
• The application for annulment of the second contested decision as a whole also had to be rejected.
• The consortium had neither proved, nor provided the court with evidence which would enable it to conclude that its tender ought to have been admitted to the stage of the comparative evaluation of the tenders. Since all the arguments put forward to demonstrate the unlawfulness of the decision rejecting their tender for the Request for Quotation No 485 had been examined and rejected, the claim for damages in respect of that Request for Quotation had to be rejected in its entirety as unfounded.

This judgment is of interest because of the detailed analysis of the key principles applying to transparency and good governance in relation to tender evaluation and the communication of award decisions.

High Court confirms trial expedition principles for procurement claims (Joseph Gleave & Son Limited v Secretary of State for Defence)

This was a dispute about an on-going procurement of over 6,000 product lines of hand tools for essential military needs. Following various delays, it became apparent that the second stage of the tender process was likely to be completed at the end of February 2017, and the award of the contract was scheduled for early May 2017. At a case management conference on 3 February 2017, Joseph Gleave and Son Limited (claimant) sought an expedited trial so that the outcome of its challenge would be known before the contract was awarded in early May, whilst the Secretary of State for Defence (defendant) sought a stay of the proceedings until after the contract award. Given the possible significant implications of its decision for the parties and more generally, the court reserved judgment.

Taking into account the principles as to whether there should be an expedited trial, the court held that:

• The claimant’s application for an expedited trial (to start on 13 March 2017) was not made out.
• Subject to the following exception, it was appropriate to stay the proceedings until 10 May 2017, when the contract was expected to be awarded. The exception was the giving of directions for the provision by the claimant of formal proposals in respect of sampling of the product lines; a detailed response from the defendant; and a meeting between leading counsel to endeavour to agree a sampling exercise.

This case is of interest because of its examination of the principles relating to the expedition of hearings and the stay of proceedings and how they are likely to be applied to procurement claims.

General Court judgment on appeal by Portugal against Commission’s request for penalty payment regarding failure to implement the Universal Service Directive (Portugal v Commission)

On 28 March 2017, the General Court handed down its judgment on an action by Portugal against the European Commission’s request for payment of a daily penalty imposed by the European Court of Justice (ECJ) in 2014 for failure to implement Directive 2002/22 (the Universal Service Directive).

In 2014, the ECJ found that despite the ECJ’s ruling in 2010, Portugal had still not designated its universal service provider(s) in accordance with the provisions of the Universal Service Directive. The ECJ ordered that Portugal pay a daily penalty payment of EUR10,000 for each day of delay in adopting the measures necessary to comply with the ECJ’s 2010 judgment, from the date on which judgment is delivered in this case until the date on which the 2010 judgment is complied with. The ECJ also imposed a lump sum penalty of EUR3 million.

On 23 July 2014, the Commission requested payment. Portugal paid on 14 August 2014. At the same time, the Commission asked for proof that the concession contract with PT Comunicações SA (PTC) had been terminated. Portugal paid and sent the termination agreement to the Commission on 22 August 2014. The Commission then requested payment for the period from 25 June 2014 to 21 August 2014. Portugal brought an action before the General Court alleging that the demand for payment was invalid.

The General Court dismissed the appeal, finding that the Commission was right to consider that until 21 August 2014, Portugal had not taken all the necessary measures required to implement the ECJ’s 2010 judgment. Portugal had terminated the concession contract with PTC in October 2013 and the effects of the termination were fully implemented by 1 June 2014, but the General Court deemed that Portugal was not fully compliant with the 2010 judgment until the terminated agreement had been communicated to the Commission.

General Court dismisses European Dynamics appeal against EMA rejection of candidates under framework contract (European Dynamics Luxembourg SA, Evropaïki Dynamiki – Proigmena Systimata Tilepikoinonion Pliroforikis kai Tilematikis AE, établie à Athènes and European Dynamics Belgium SA v European Medicines Agency)

On 17 February 2017, the General Court dismissed an appeal by the Greek company Evropaiki Dinamiki (European Dynamics) in relation to the rejection by the European Medicines Agency (EMA) of candidates put forward in a request for services under a framework contract. The EMA considered that the candidates did not meet the skills and experience requirements set out in the services request. The General Court found that, having regard to the EMA’s specific needs, which the applicants acknowledged, it was without breaching the principle of proportionality that the EMA required, as a prerequisite, that each proposed candidate hold a specified project management certification in addition to being able to demonstrate the necessary practical experience.

Advocate General’s Opinion on assessment of selection criteria relating to economic and financial standing (INGSTEEL spol. s r.o.,Metrostav, as, v Úrad pre verejné obstarávanie (AG’s Opinion))

On 21 March 2017, the Advocate General delivered an opinion in the case of INGSTEEL spol. s r.o., Metrostav, as, v Úrad pre verejné obstarávanie.

A joint tender application by Ingsteel and Metrostav was rejected because the relevant authority did not accept as evidence of economic and financial standing a bank declaration that the tender fulfilled all relevant requirements (including a current-account credit facility exceeding EUR 5 million), or a sworn statement given by those companies that they would have in their account, at the conclusion and throughout the period of the contract, a minimum amount of EUR 3 million.

Ingsteel and Metrostav brought an action seeking annulment of the decision excluding them from the tendering procedure. On a reference to the ECJ from the Slovakian Supreme Court, the Advocate General delivered the following opinion:

• Article 47(1)(a) and (4) of Directive 2004/18/EC did not preclude including in a contract notice, as selection criteria relating to economic and financial standing, the criteria included in the contract notice giving rise to the main proceedings.
• It was for the referring court to determine whether there was a “valid reason”, for the purposes of Article 47(5) of Directive 2004/18/EC, precluding a tenderer from providing the references requested by the contracting authority. If that was the case, the referring court must also determine whether, in accordance with Slovak law, a sworn statement by the tenderer concerning its economic and financial standing was acceptable as an appropriate economic and financial guarantee.
• The fact that the successful tenderer had almost completed performance of the contract did not prevent the excluded tenderers bringing the appropriate proceedings, in accordance with the first and second paragraphs of Article 47 of the Charter of Fundamental Rights of the European Union, in conjunction with Articles 1 and 2 of Directive 89/665/EEC.

Given that the legal provisions applied in this opinion relating to public procurement are reproduced in the Public Contracts Regulations 2015, the outcome of this case will be of interest to practitioners.