This month sees two apparently conflicting cases on how a contracting authority should deal with a mistake made by a provider when submitting their tender. The ECJ has also confirmed the application of the EU principle of transparency to service concession contracts.
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Legal Services Commission still right to reject tender due to blank form (R (All About Rights Law Practice) v Legal Services Commission [2013] EWHC 3461 (Admin))
In this case, the High Court concluded for the second time that the Legal Services Commission (LSC) had not acted disproportionately in rejecting a tender as non-compliant due to the erroneous submission of a blank mandatory form. AAR, a sole practitioner firm relying on its contract with the LSC for mental health work, would have won a contract had it submitted the form properly.
The case had been remitted when new evidence emerged that the LSC had sometimes sought clarification from suppliers who had similarly submitted blank forms in other procurement processes. The court at the initial hearing had relied on the LSC’s adherence to its stated policy of never seeking clarification from tenderers who had submitted no response at all as evidence that it had not acted disproportionately by rejecting AAR’s tender.
However, any inconsistency in the LSC’s evidence did not help AAR. The court found it had to allow the LSC an appropriate margin of appreciation and should not interfere in its assessment unless it was satisfied there had been some manifest error or unjustified conduct, for which the threshold was high.
The case is a useful reminder of the difficulties faced by contracting authorities when tenderers make mistakes in submitting tenders in the context of their obligations to act transparently and treat all bidders equally. Although the effect of the LSC’s position on AAR was grave, it succeeded at trial because it could demonstrate a pattern of consistent behaviour in how it responded to ambiguous or incomplete tenders. It is interesting that the court felt a contracting authority could justify a more lenient stance in relation to defective PQQs than with defective tenders.
Contracting authority not in breach of transparency principle by allowing bidders to submit missing information after deadline (Case C-336/12- Ministeriet for Forskning, Innovation og Videregaende Uddannelser v Manova A/S)
In contrast with the above case, in Manova, the ECJ held that contracting authorities were not precluded from asking a candidate to forward information which it had neglected to include with its PQQ. The case arose when two suppliers failed to provide copies of their balance sheets at selection stage and went on to be awarded contracts.
The ECJ held that a tender cannot be amended after it is submitted, whether at the request of the authority or the bidder. However, the contracting authority can require the bidder to clarify the tender or to correct obvious material errors, on a limited and specific basis.
In the case in question, it was permissible to request the particular information, that is the balance sheets, as they pre-dated the deadline for submission of the PQQ.
However, if the contract documents had expressly stated that failure to provide the missing information would result in exclusion from the process, the contracting authority would have had to comply strictly with the criteria it had laid down.
This case, together with the latest LSC decision above, is troubling for both suppliers and contracting authorities as they create a certain grey area around what amounts to legitimate clarification of obvious errors, in these examples, missing documents, and the submission of a new tender. While the outcomes may have been different it should be noted that in both cases, the court held that the contracting authority must act within the bounds of discretion it has set itself.
Change in physical nature or function within 5 years may lead to claw back of EU structural funding (Case C-388/12 Commune di Ancona v Regione Marche 1-549-2407)
In Ancona, the ECJ considered a preliminary reference from a regional Italian court in relation to a dispute as to whether funds granted under the European Regional Development Fund (ERDF) to construct a slipway were recoverable from the contracting authority because:
- It had directly awarded a service concession contract for managing the slipway without competition; and
- The slipway was being used otherwise than as envisaged, that is for pleasure craft.
Under Article 30(4) of Regulation 1260/1999 (the Structural Funds Regulation), a contribution from the Structural Funds to an operation will be definitively retained only where the operation does not undergo “substantial modification” within 5 years of the decision to grant the funds. The ECJ held that both modifications made during and after the construction phase must be considered where these arise within 5 years of the decision to grant the funds. In determining whether the modification falls within the Regulations, the referring court must consider whether it has given rise to undue advantage and/or whether it has affected the nature of the implementation conditions of the operation. It must then consider whether such affects are substantial. The ECJ also confirmed that modifications can be both physical and functional.
Finally, the ECJ noted that service concession contracts can be awarded directly provided they comply with the principle of transparency, which is for the referring court to assess.
Challenges against direct awards where all the parties operate within a member state can be challenged on EU grounds if there would be cross border interest (Case C-221/12- Belgacon NV v Interkommunale voor Teledistributie van het gewest Antwerpen and Others)
In another case concerning the direct award of a service concession contract, the ECJ held that it was possible for an economic operator to challenge the direct award of a contract from a contracting authority to another operator, where all parties operate within the same member state on the basis of a breach of EU principles.
In this case, four inter-municipal associations had granted the exclusive right to use their cable networks to Telenet as well as the transfer of their television services and subscription contracts. The ECJ held that the fact the arrangement arose out of a previous agreement which had been concluded 12 years previously, did not present an over-riding reason in the public interest justifying derogation from the EU principle of transparency.