Practical Law

Warsha Kalé, Associate Director, and Stuart Stock, Associate, Berwin Leighton Paisner LLP:

Partnering and alliance arrangements in both the public and private sectors are increasingly common. In such situations, the contracting authority is looking to procure a “partner” rather than simply goods, services or works, although the partner may subsequently provide such goods, services or works as part of the arrangement.

This creates uncertainty when trying to maintain the rigorous distinction between the criteria that can be tested at the selection and award stages of a procurement under the Public Contracts Regulations 2006 (the PCRs) and the EU Directive (Directive 2004/18/EC). Such arrangements necessarily require partners to possess certain attributes in order to perform the actual contract and make the relationship work. However, under a strict interpretation of the rules, evidence that proposed partners possess such attributes may only be tested when pre-qualifying bidders, and not at the award stage.

The principle

In the leading case, Emm. G. Lianakis AE and Others v Dimos Alexandroupolis and Others (C-532/06), the European Court of Justice drew a clear distinction between selection and award criteria under the public procurement rules.  Selection criteria are retrospective and test the economic and financial standing and the technical capability of the bidder. In contrast, award criteria are prospective, and should properly assess the bid, based on either the lowest price or the most economically advantageous offer, as set out in the PCRs.

The PCRs do not exhaustively list the criteria that may be taken into account by a contracting authority at award stage; the only guidance, given in PCR 30(2), is that the award criteria should be “linked to the subject matter of the contract”. It is therefore not surprising that the issue of the distinction between selection and award criteria has often arisen before the EU and UK courts.

The strict distinction adopted in Lianakis was reaffirmed by the General Court in December 2012 in Evropaiki Dynamiki v EFSA (Case T-457/07), when it stated that:

“award criteria cannot include criteria that are not designed to identify the tender offering the best value for money, but are instead essentially linked to the evaluation of the tenderers’ technical and professional capacity to perform the contract in question.” (paragraph 68).

The problem

In a simple procurement, such a distinction between the bidder and the bid makes sense. However, in more complex procurements, drawing this distinction is more difficult and, in some cases, potentially meaningless.

In particular, we foresee a problem with this approach in respect of partnering and alliance arrangements.  As stated above these increasingly-popular project structures are not procurements of goods, services or works as typically understood, but are rather procurements of the partner itself. These arrangements require economic operators to bring to the table certain attributes which in principle could rightfully be assessed as part of the bid. In an alliance arrangement, for example, the contracting authority will need to ascertain the bidder’s suitability for working collaboratively and to form part of a team, commonly through previous references.  Such factors are at the same time prospective – as they are related to the subject matter of the contract, and retrospective – as they evidence the ability of the economic operator.

In such circumstances, the bid/bidder (or selection/award) distinction breaks down. The ability of the economic operator to work collaboratively with the contracting authority (and other partners or alliance members) is inextricably linked with the contracting authority’s efforts to obtain value for money.

A more commercial approach

The approach of the UK judiciary to selection versus award criteria has typically been more pragmatic. In May 2012, the Competition Appeal Tribunal stated, in SRCL Limited v Competition Commission [2012] CAT 14, that the ECJ in Lianakis:

“[did] not say that in a case where the contract award criteria are properly directed at identifying the most economically advantageous tender, the customer must put out of its mind any experience it has of dealing with the various bidders when scoring them against those criteria.” (paragraph 42).  

Such an approach would not rule out criteria tested at selection stage from being taken into account at award stage.

Moreover, this issue has not gone totally unnoticed in Europe. Indeed, in Evropaiki Dynamiki, the General Court appeared to acknowledge some of the problems associated with the strict approach adopted in Lianakis: it recognised that the same body of evidence – in that case CVs – could be used at both selection and award stage. This has the effect of blurring the distinction between selection and award criteria, but is somewhat at odds with the Court’s (repeated) exhortations that the way in which the evidence was used by the contracting authority was distinct at award as opposed to selection stage.

We believe the statements in the Evropaiki Dynamiki judgment supporting a more flexible attitude will be of use to contracting authorities going forward, when deciding whether they are acting in compliance with the rules on a case-by-case basis. These statements are therefore to be welcomed as supporting a more commercial approach, and procurement practitioners will be keeping an eye on the European Courts’ case law to see if this approach continues post Evropaiki Dynamiki.

Transparency and equal treatment always key

As a final point, perhaps the most useful and significant factor to bear in mind is the need to respect fundamental principles of equal treatment and transparency. Such a “back-to-basics” approach should help contracting authorities steer a pragmatic course between protecting bidders’ interests and ensuring the flexibility they need when entering into partnership arrangements.