REUTERS | Dani Cardona

Public procurement case digest (August – September 2016)

August and September’s case digest includes four ECJ decisions, including a ruling that betting and gaming concessions fall outside the scope of Directive 2004/18, and a High Court judgment that strongly criticises a tender process conducted by the Nuclear Decommissioning Authority.

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 dismisses claims by European Dynamics against a European Institute of Innovation and Technology procurement for software development and services (European Dynamics Luxembourg SA, Evropaiki Dynamiki Proigmena Systimata Tilepikoinonion Pliroforikis kai Tilematikis AE v European Institute of Innovation and Technology)

Following a challenge to a procurement for software development and services undertaken by the European Institute of Innovation and Technology (EIT), the ECJ has dismissed applications:

  • To annul the decision by EIT to rank second the European Dynamics tender and all other related decisions including that to award the contract to the tenderer ranked first.
  • To annul the decision of EIT to refuse to disclose the identity of the members of the tender evaluation committee.
  • For damages for the loss of an opportunity to be awarded a contract in the context of the call for tenders.

While this claim was unsuccessful, this judgment re-emphasises the importance for contracting authorities of conducting a fair, well-balanced and transparent procurement process that pays careful attention to the material legal and procedural requirements combined with a detailed, objective and well documented tender evaluation exercise.

The evaluation decision in this case was challenged on numerous grounds and multiple points were taken on the specifications and how they were applied to the bids.

The courts are very diligent and contracting authorities should proceed accordingly.

ECJ holds that refundable good conduct guarantee is a permissible pre-condition to enforcement proceedings (SC Star Storage SA v Institutul Naţional de Cercetare-Dezvoltare în Informatică and SC Max Boegl România SRL and others v RA Aeroportul Oradea and others)

The ECJ has handed down a preliminary ruling in the two joined cases concerning restrictions on the right to challenge the actions of a contracting authority.

The ECJ held that Article 1(1) to (3) of Directive 89/665 and Article 1(1) to (3) of Directive 92/13, read in the light of Article 47 of the Charter of Fundamental Rights of the EU, do not preclude national legislation that makes the admissibility of any action against an act of the contracting authority subject to the obligation for the applicant to provide a good conduct guarantee to the contracting authority, if that guarantee must be refunded to the applicant whatever the outcome of the action.

Although this ruling relates to Romanian domestic legislation, the judgment is of interest because it sets out the key principles that the courts should apply to tender admissibility criteria.

ECJ rules that settlement agreement can amount to a regulated modification of a contract (Finn Frogne A/S v Rigspolitiet ved Center for Beredskabskommunikation)

The ECJ has ruled that:

  • Article 2 of Directive 2004/18/EC must be interpreted as meaning that a material amendment cannot be made to a public contract without a new tendering procedure even in the case where that amendment is a type of settlement agreement designed to bring an end to a commercial dispute.
  • The position would be different only if the contract documents provided for the possibility of adjusting certain conditions, even material ones, after the contract had been awarded and fixed the detailed rules for the application of that possibility.

In doing so, the ECJ has confirmed that a settlement agreement which has the effect of varying a public contract will be subject to the same tests as are applied to modifications under what is now regulation 72 of the Public Contracts Regulations 2015.

ECJ holds that betting and gambling concessions fall outside the scope of Directive 2004/18 (Domenico Politanò)

The ECJ has ruled that:

  • Directive 2004/18/EC and in particular Article 47, must be interpreted as meaning that national legislation governing the grant of concessions in the field of betting and gambling, such as that at issue in the main proceedings, does not fall within its scope.
  • Article 49 TFEU must be interpreted as not precluding a national provision, such as that at issue in the main proceedings, which imposes on operators wishing to respond to a call for tenders for the grant of concessions in the field of betting and gambling, the obligation of providing evidence of their economic and financial standing by means of statements issued by at least two banks, without also allowing that standing to be proved by other means, where such a provision is capable of satisfying the conditions of proportionality laid down by the case-law of the court, which is for the referring court to ascertain.

Whilst the issue relating to the relevant regulatory regime for concessions has now largely been settled by the introduction of the Concession Contracts Regulations 2016, the ruling is a helpful reminder of one of the key differentiating factors between a concession and a services contract, namely substantial risk transfer to the operator.

The reasoning of the court in relation to financial vetting also appears to be in line with the provisions of regulation 38 of the Concession Contracts Regulations 2016 which provide that the conditions for participation shall be proportionate to the need to ensure the ability of the operator to perform the contract. This appears to suggest that the court will support a risk based approach to financial vetting where justified by the subject matter of the contract.

High Court decides that a development agreement secured best consideration and was not subject to Public Contracts Regulations 2015 (R (Faraday Development Ltd) v West Berkshire Council and another)

The High Court has dismissed a challenge by an unsuccessful bidder for a regeneration project. The court held that, in entering into a development agreement with St Modwen Developments Limited (SMDL), West Berkshire Council (the council) had complied with its duty under section 123 of the Local Government Act 1972, to obtain the best consideration reasonably obtainable for the disposal of interests in its land. Further, that the development agreement was not a “public works contract” within the meaning of Directive 2014/24/EU and the council’s decision not to comply with the public procurement regime was both rational and lawful.

This case demonstrates the benefit to a local authority of good governance in relation to a major regeneration project. The policies in place were clear, robust and aligned as were the reports presented to the council. The council commissioned specialist advice and took proper account of it. The development agreement was carefully drafted to take account of the council’s key objectives and the provisions of the public procurement regime.

High Court rules that Nuclear Decommissioning Authority “manipulated and fudged” tender process for £7 billion clean-up contract (EnergySolutions EU Limited v Nuclear Commissioning)

The High Court has held that the procurement exercise conducted by the Nuclear Decommissioning Authority (NDA) in relation to a contract for the clean-up of 12 of the UK’s nuclear sites was wrongly awarded. If the NDA had correctly applied its own evaluation rules, the winning tenderer (Cavendish Fluor Partnership (CFP)) would have been disqualified from the tender process. The court found that the NDA had manipulated the valuation process in order to avoid disqualifying CFP’s bid and had “fudged the evaluation”. In doing so, the NDA had fallen short in meeting its obligations of transparency and equal treatment under the Public Contracts Regulations 2006. After applying the appropriate weighting to the new scores, the adjusted results of the procurement competition (without taking account of the court’s finding that CFP should have been disqualified from the competition) meant that the claimant, EnergySolutions EU Limited, had submitted the most economically advantageous tender.

General Court dismisses appeal against Commission procurement decision regarding access to documents (Secolux v Commission)

The General Court has dismissed an appeal by Secolux against a decision of the European Commission not to disclose certain documents relating to a procurement contract for safety checks to be carried out at various buildings of EU institutions in Luxembourg.

Secolux had asked the General Court to annul the Commission’s decisions to refuse to grant access to all the documents relating to the contract award procedure and, in particular, the tender of the successful tenderer, the price schedule, the evaluation report of that offer and also the service contract entered into with the contracting authority.

The General Court dismissed the appeal in its entirety, finding that the Commission had not infringed Article 4 of Regulation 1049/2001. In particular, the General Court found that the Commission did not err in considering that there was a general presumption that access to the bids submitted by the other tenderers would undermine the interest protected and Secolux did not put forward any evidence to justify the conclusion that that presumption did not apply to the documents in this case.

General Court dismisses appeal against Commission tender for development and support of information systems (Evropaïki Dynamiki – Proigmena Systimata Tilepikoinonion Pliroforikis kai Tilematikis AE v European Commission)

The General Court has handed down its judgment on an appeal by the Greek company European Dynamics against the rejection of its tender in a procurement process organised by the European Commission.

The General Court rejected the appeal in its entirety, finding that the Commission had satisfied its duty to state reasons and that the Commission had carried out a proper assessment in order to verify that there were no abnormally low tenders. The General Court also found that the Commission had not infringed the principle of free competition by imposing binding conditions with regard to the submission of the financial tenders.

General Court Order confirms that Commission has not erred in imposing penalty payment on Portugal for breach of Remedies Directive (Portugal v Commission)

The General Court has handed down an order on an appeal by Portugal against the European Commission regarding a Commission decision to impose periodic penalty payments on Portugal, following a judgment of the European Court of Justice (ECJ).

In 2004, the ECJ handed down a judgment which found that Portugal had failed correctly to implement Directive 89/665 establishing procedures for the review of the award of public contracts (the old Remedies Directive). In 2008, the ECJ handed down another ruling, finding that Portugal had failed to take the necessary measures to comply with the ECJ’s earlier judgment and it imposed a penalty payment of EUR19,392 for each day of delay in such implementation. The Commission ordered payment of the penalty.

Portugal amended its national legislation with retrospective effect (30 January 2008). Taking this into consideration, the Commission then ordered payment of EUR384,840 for the period 10-29 January 2008. Portugal brought an action challenging the legality of the Commission’s decision ordering payment.

The General Court has now dismissed the appeal in its entirety, finding that Portugal had not submitted any arguments showing the illegality of the Commission’s action. In particular, there was nothing in the previous judgments to indicate that the Commission was prevented from finding that the end of the infringement was the date when the new national legislation came into effect, 30 January 2008. Therefore, the Commission was entitled to calculate the penalty payment for the period 10-29 January 2008.

Advocate General recommends that national legislation which enables review of decisions made prior to contract award does not contravene the Remedies Directive (Marina del Mediterráneo, SL,v Consejería de Obras Públicas y Vivienda de la Junta de Andalucía (AG’s Opinion))

Following a referral from a Spanish court, the ECJ was requested to determine the standard set by EU law for the review of preparatory acts, such as a decision to admit an undertaking to submit a bid in a public procurement procedure. More particularly, did Directive 89/665/EEC (the Remedies Directive) require Member States to provide for immediate and autonomous review of any decision of the contracting authority or was it possible to defer review until a later stage of the award procedure?

The Advocate General (AG) recommended that the ECJ conclude that national legislation requiring a delay in bringing a challenge to a preparatory act until a later stage of the procurement process does not infringe EU law provided that:

  • The national legislation does not hinder immediate review of preparatory acts that produce adverse legal effects on undertakings.
  • A plea of illegality of preparatory acts that do not produce adverse legal effects on undertakings, such as a decision to admit a candidate to a tendering procedure, can be made in support of an action against the final decision awarding the contract taken on the basis of those preparatory acts.

Whilst apparently in accordance with the objective of the Remedies Directive, the reasoning of the AG appears somewhat counter intuitive, in the sense that a decision to admit a candidate, which is ultimately found to be unlawful, arguably is a decision best dealt with immediately, given that such candidate’s ability to tender (possibly successfully) for the contract in question, could arguably amount to a distortion of competition.

European Ombudsman finds no maladministration by the European Commission but suggests improvements in its tendering procedures (Decision in case 1874/2013/MG on alleged irregularities in a European Commission tendering procedure)

The complainant was an IT company which participated in a European Commission tender. The Commission asked all tenderers to complete two case studies to allow it to evaluate their technical abilities.

The complainant took issue with the fact that one of the case studies was very similar to a tender recently organised by an EU agency. It alleged that this gave the companies which had won that tender a competitive advantage in the Commission tender. The complainant also took issue with the Commission’s decision not to disclose the names of the persons who evaluated the proposals for the Commission.

Following her inquiry, the Ombudsman concluded that the Commission’s design of the tender procedure did not confer a competitive advantage on the winning tenderer. As regards the disclosure of the names of the evaluators, the Ombudsman suggested that the Commission consider releasing such names in the future.

The Ombudsman noted that it was (anonymous) company X which had won the EFSA contract and it was possible that company X obtained, during the period working with EFSA, at least some additional knowledge of the EFSA website. In particular, it might have obtained insights into the real problems encountered by users when using the EFSA website and into the real solutions put forward for those problems This is a reminder that contracting authorities should think laterally about the position of all interested parties in a tender procedure, especially incumbents.

European Ombudsman finds no maladministration on the part of the ECJ but suggests improvement to tender procedures (Decision of the European Ombudsman on complaint 2377/2013/(PMC)DR concerning the European Court of Justice’s rules governing a tender procedure in the field of translations)

The case concerned the evaluation by the European Court of Justice of two tenders for legal translation services. The complainant, an unsuccessful tenderer, alleged that the tender procedure did not meet the standards of good administration because:

  • The evaluation of the tenders was not properly documented.
  • There was no opportunity to ask for an internal administrative review.
  • It did not guarantee anonymity.

The Ombudsman found no maladministration by the ECJ. The Ombudsman, however, made three suggestions for improvement to the ECJ, namely that it:

  • Require internal evaluators to sign and date the evaluation sheets of tests.
  • Set up an internal review mechanism for dealing with complaints by unsuccessful applicants.
  • Anonymise the tests of tenderers for the purposes of the assessment made by the internal evaluators during the evaluation process.
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