REUTERS | Dani Cardona

Public procurement case digest (October 2017)

October’s case digest includes an ECJ judgment concerning the methodology of identifying abnormally low tenders, and a High Court ruling considering extensions of time and the dispute timetable in procurement disputes.

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 judgment on appeal of General Court judgment regarding Commission procurement decision (Agriconsulting Europe v European Commission)

The European Court of Justice (ECJ) has handed down its judgment on an appeal by Agriconsulting Europe SA (Agriconsulting) against a judgment of the General Court regarding a European Commission procurement decision.

Agriconsulting submitted a bid in response to the Commission’s call for tenders for a contract seeking to establish a network facility for the implementation of the European Innovation Partnership for Agricultural Productivity and Sustainability. On 25 March 2013, the Commission notified Agriconsulting that its tender had not been successful because it had failed to reach the minimum score required for an award criterion and also because its tender was abnormally low as regards the prices offered for the performance of some additional tasks. Agriconsulting appealed to the General Court, which dismissed the appeal in its entirety.

The ECJ has also dismissed the appeal in its entirety, as partly inadmissible and partly unfounded. In particular, the ECJ noted that in the absence of a definition of the notion of an abnormally low tender or of rules making it possible to identify such a tender under Article 139(1) or Article 146(4) of the Financial Regulation (2342/2002), it falls to the contracting authority to determine the method used to identify abnormally low tenders provided that that method is objective and non-discriminatory.

In this case, the General Court stated that the evaluation committee identified the abnormally low nature of Agriconsulting’s tender by comparing the amount of that tender to the total maximum budget, set out in the specifications, in the sum of EUR2.5 million. While the winning bidder’s tender was slightly lower than that budget, Agriconsulting’s tender was itself lower by nearly EUR1 million. The ECJ noted that nothing prevents the contracting authority from comparing tenders with the estimated budget in the tender specifications and from identifying one of them as being abnormally low where the amount of that tender is considerably lower than the estimated budget.

ECJ rules that company wholly owned by a contracting authority can be a body governed by public law (LitSpecMet UAB v Vilniaus Iokomotyvu remonto depas UAB and another)

This case concerned a request for a preliminary ruling from the Regional Court, Vilnius, Lithuania to the ECJ. The questions submitted by the national court arose in the context of proceedings to challenge a tendering procedure commenced by a company which was wholly owned by the Lithuanian State railway company (VLRD) (whose status as a contracting authority was not disputed), to which the company supplied certain goods and services. The subsidiary claimed that, despite its links with the parent company, it was not a “public body” within the meaning of the procurement directives since it was not established “for the … purpose of meeting needs in the general interest, not having an industrial or commercial character”.

The ECJ in its preliminary ruling held that:

  • A company which was wholly owned by a contracting authority (whose activity consisted of meeting needs in the general interest) and which carried out both internal transactions for that contracting authority and transactions on the competitive market had, subject to the certain conditions, to be classified as a “body governed by public law”.
  • The conditions were that the activities of that company were necessary for the contracting authority to exercise its own activity and, in order to meet needs in the general interest, that company was able to be guided by non-economic considerations, which it was for the referring court to ascertain. The fact that the value of the internal transactions may in future represent less than 90% or an insignificant part of the overall turnover of the company was irrelevant.

This decision is of interest because it has confirmed that it is possible for a company wholly owned by a contracting authority to be classified as a contracting authority itself where the company’s activities (if able to be guided by non-economic factors) were necessary to enable the controlling authority to meet needs in the general interest. Further, this could be the case even if the company also undertook market transactions. While such an outcome has previously been considered to be a distinct possibility by those involved with group structures established by contracting authorities, this case has confirmed that this will be the outcome if the conditions set out in the ruling are satisfied. This ruling will, therefore, be of interest to contracting authorities establishing group delivery structures for public service projects.

High Court refuses application to extend time to serve particulars of claim until a date after disclosure of documents in procurement dispute (Cemex UK Operations Ltd v Network Rail Infrastructure Ltd and another)

The issues before the court arose out of a procurement challenge brought by the claimant, CEMEX UK Operations Limited (Cemex), against the decision of the defendant, National Rail Infrastructure Limited (NR), to award a contract concerning the manufacture and supply of railway sleepers to PCM RAIL.ONE AG (Rail.One). Cemex had issued its claim which had the effect of automatically suspending the contract. NR subsequently applied to the court to lift the suspension.

The court considered a number of applications and decided that:

  • Rail.One would be identified as an interested party for the hearing and for a later hearing to lift the suspension.
  • An application by Cemex to extend time for the service of the particulars of claim (until a date after the provision of further documents by NR) would be refused on the basis on which it was made. The court did, however, extend time, because that was what the parties agreed in the course of the proceedings, for the service of the particulars of claim.
  • An application by Cemex for specific disclosure of certain documents contained in Rail.One’s bid would be refused.

The application by Cemex for an extension of time to serve the particulars of claim until a date after the provision of further documents by NR was described by the court as extremely unusual and that it raised an important point of principle and practice in procurement cases. It appears from this judgment that, in order to be successful, such an application would need to be supported by a very robust justification.

We have also published a blog, Ignore the procurement dispute timetable at your peril, which provides further commentary on this case.

Vice-President of General Court dismisses application for interim relief during tender process (Wall Street Systems UK v ECB)

The European Central Bank (ECB) initiated a negotiated tendering procedure for the conclusion of a framework agreement concerning the provision of a treasury management system. Wall Street Systems (applicant) was informed by the ECB that its tender had not been selected for the award of the contract since it was not the most economically advantageous tender.

The applicant brought an action under Article 263 of the Treaty on the Functioning of the European Union (TFEU) for annulment of the ECB’s decision. The applicant also applied for interim measures, claiming that the Vice-President (VP) of the General Court of the European Court of Justice (ECJ) should order the ECB to refrain from entering into the framework agreement with the successful tenderer and adopt any other necessary measures for the protection of the applicant’s rights until the ECJ had ruled on the application for annulment of the contested decision.

However, the VP rejected the arguments put forward by the applicant and ordered that:

  • The alleged damage suffered, if proved, was not supported by any specific factor giving grounds for a finding that there was serious harm.
  • The application for interim measures had to be dismissed for lack of urgency

This decision helpfully sets out the conditions for obtaining interim relief. It also confirms that the exceptional nature of the relief means that the applicant must clear a high hurdle in order to succeed.

Practical Law Public procurement law digest

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