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Public procurement case digest (October – November 2016)

October and November’s case digest includes three ECJ orders on the compatibility of Italian national law with the EU procurement rules on exclusion of tenders, a High Court decision to lift an automatic suspension, and an Advocate General Opinion on the test for misrepresentation of tender information.

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 orders on preliminary references from Italian courts regarding the compatibility of national law with the EU procurement rules on the exclusion of tenderers (Spinosa Costruzioni Generali SpA and Melfi Srl v Comune di Monteroduni,  Edra Costruzioni Soc. coop. and Edilfac Srl v Comune di Maiolati Spontini, and  MB Srl v Società Metropolitana Acque Torino (SMAT) SpA)

The European Court of Justice (ECJ) has handed down three orders on preliminary references from Italian courts concerning the compatibility of national law with the EU procurement rules on exclusion of tenderers.

The Italian courts asked whether failure to list the corporate safety and security costs separately in a bid inevitably results in the exclusion of the tendering undertaking concerned, even where the obligation to list that information separately was not set out in the tender rules or on the attached form to be completed for the submission of the tender, and even though, in substantive terms, the tender in question took into account the minimum costs of corporate safety and security.

The ECJ responded to the Italian court by finding that the principle of equal treatment and the obligation of transparency must be interpreted as precluding an economic operator from being excluded from a contract award procedure as a result of that economic operator’s non-compliance with an obligation which does not expressly arise from the tender documents or out of the national law in force, but from an interpretation of that law and those documents and from the incorporation of provisions into those documents by the national authorities or administrative courts.

The ECJ added that the principles of equal treatment and of proportionality must be interpreted as not precluding an economic operator from being allowed to regularise its position and comply with that obligation within a period of time set by the contracting authority.

ECJ ruling on right to exclude bid for non-compliance with social security contributions at time when bid was submitted (Ciclat Soc. coop. v Consip SpA)

The ECJ has handed down a ruling on a preliminary reference from an Italian court regarding whether Article 45 of Directive 2004/18 precluded national legislation that allows a contracting authority to request a certificate from the national social security organisation regarding the status of a company’s compliance with social security contributions and to exclude the company from the procurement process in the event of non-compliance at the time the tender was submitted.

The ECJ responded to the Italian court by finding that Article 45 of Directive 2004/18 should be interpreted as allowing national legislation which obliges contracting authorities to exclude tenderers which are not in compliance with social security contributions at the time when a tender is submitted. This situation can be verified by a certificate requested by the contracting authority of the relevant social security organisation and it is irrelevant if the failure to pay was subsequently made good (even if this was done before the contract was awarded).

ECJ rules that request for preliminary ruling on cross border interest is not admissible (Tecnoedi Costruzioni Srl v Comune di Fossano and others)

Following a request for a preliminary ruling, relating to whether an issue is of cross border interest, the ECJ has held that:

  • The request was inadmissible because it was not supported by material evidence.
  • It could not be argued that a works contract, valued at less than a quarter of the EU threshold, and whose place of performance was 200km from the border of another member state, could be of cross border interest solely because a certain number of tenders were submitted by undertakings established in the member state in question, and located at a considerable distance from where the work was to be carried out.
  • A conclusion that there is certain cross border interest cannot be inferred hypothetically from certain factors which, considered in the abstract, could constitute evidence to that effect, but must be the positive outcome of a specific assessment of the circumstances of the contract at issue.

Apart from providing a helpful summary of the core criteria to establish cross border interest in a contract, this ruling is also a reminder that a referring court must secure the material evidence required to enable the ECJ to hand down a ruling under Article 267 of the Treaty on the Functioning of the European Union.

High Court lifts automatic suspension in a public procurement challenge on the basis that damages are an adequate remedy (Perinatal Institute v Healthcare Quality Improvement Partnership)

The High Court has lifted the automatic suspension on the awarding of a contract under regulation 95(1) of the Public Contracts Regulations 2015 (SI 2015/102) (PCR 2015). It did so following the application by the defendant, Healthcare Quality Improvement Partnership, for an interim order under regulation 96 of the PCR 2015, imposed as a consequence of proceedings commenced by Perinatal Institute, the unsuccessful tenderer. The court concluded that, while there was a serious issue to be tried, damages would be adequate for the claimant and the balance of convenience favoured lifting the suspension. The case will be of interest to procurement practitioners in its consideration of when it is just to confine a claimant to a remedy of damages. Although the court recognised the public interest in the proper application of the PCR 2015, it appears that the fact that this was a procurement designed to reduce perinatal mortality meant that any delay from keeping the suspension in place would be against the public interest in allowing the procurement to proceed.

Court of Session finds that council not required to allow tender to be corrected after tender deadline (Dem-Master Demolition Limited v Renfrewshire Council)

Renfrewshire Council (the council) invited tenders for a framework agreement for demolition services, divided into three lots, for a number of Scottish public authorities. Dem-Master Demolition Limited (the contractor) submitted a tender for all three lots on the tender deadline date.

The council informed the contractor that it had failed to submit a commercial offer for the three lots because it had not provided percentage figures for overheads and profit for Lots 1 and 2 and had submitted a blank template for Lot 3. The contractor provided the missing information but the council responded that the tender could not be evaluated. The contractor issued proceedings seeking an order setting aside the council’s decision not to evaluate the tender and an interim order staying the award of the framework agreement.

The Court of Session, in finding for the council, held that:

  • There was no duty on the council to give the contractor the opportunity to correct the errors in the tender after the tender deadline date.
  • To avoid a breach of the principle of equal treatment, documents requested after a tender deadline must objectively predate the deadline and there must be no explicit provision in the tender documents that a tender will be rejected if omitted documents were not provided. Neither of those requirements had been met in this case.
  • The reservation of a right “to clarify any information supplied” in the tender documents, applied to ambiguities but did not extend to a right to seek late submission of omitted information.

This is a reminder of the importance of diligent risk management in relation to tender procedures.

The contractor submitted its bid on the deadline day, which left little margin for error. On the other hand, the council’s tender requirements and attendant warnings were unequivocal and this carried decisive weight with the court.

This case is also of interest because the court reviewed a number of key authorities in relation to tender errors and clarifications.

Advocate General Bobek issues Opinion on tenderers experience and the test for misrepresentation of tender information (Esaprojekt Sp.z o.o. v Wojewodztwo Lodzkie (AG’s Opinion))

This case concerned a challenge to the award of a public contract to supply hospital IT systems in Poland, which led to a request to the ECJ for a preliminary ruling.

The Advocate General issued an opinion to the effect that:

  • A bidder was not permitted to refer to, nor rely upon the performance of third parties, which it had not originally referred to, when clarifying or amending a tender. This was also the case when such reliance had been lawfully excluded by the contracting authority.
  • Except where provided for in Directive 2004/18, a bidder can only rely on its own experience when it has performed a contract as part of a group of operators. However, unless expressly excluded by the contracting authority, a bidder could rely jointly on the experience of two or more contracts as a single public contract.
  • Following the supply or failure to supply required information, a bidder would be guilty of serious misrepresentation only where this can have the effect of keeping the bidder in the procedure when otherwise it would not be able to participate.

Subject to the court confirming this opinion and to the provisions in Directive 2014/24 that balance the control given to contracting authorities over the vetting and use of third parties against the provisions allowing bidders to rely on third parties, and a requirement that misleading information must have been provided negligently, the principles underlying this opinion will continue to be of relevance to decisions made under the Public Contracts Regulations 2015 in relation to the issues addressed in this case.

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