Why call it essential national interest when you mean control? Thoughts on the converging exceptions to the EU procurement rules a propos the Austrian passports case (C-187/16)

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In its Judgment of 20 March 2018 in Commission v Austria (Imprimerie d'État), C-187/16, EU:C:2018:194, the Court of Justice of the European Union (CJEU) assessed the extent to which Austria could rely on claims of national security interest and/or essential national interest to justify the direct award of several contracts for the printing of passports and other secure documents to the former Austrian national printing office (ÖS). In rejecting this possibility, the CJEU followed AG Kokott’s strict approach to the interpretation of derogations of the EU public procurement rules (as discussed here) and, crucially, determined that ‘a Member State which wishes to avail itself of those derogations must establish that the protection of such interests could not have been attained within a competitive tendering procedure as provided for by’ the relevant EU public procurement rules (para 79).

The case is interesting, but hardly novel, in the narrow approach taken by the CJEU in the interpretation of exceptions from competitive tendering under the EU procurement rules (paras 69-96), as well as in relation to the standard of proof required to justify the existence of a ‘certain cross-border interest’ in the tendering of contracts not covered by the EU rules (paras 103-111, which largely follow the recent case of Tecnoedi, see here). However, I think that the case is also interesting for the ‘forward continuity’ and systemic convergence it shows amongst the different exceptions to the EU public procurement rules, which requires an appreciation of the case in the context of the evolution of EU public procurement law. I explore this idea in this post.

It is worth stressing that the case was decided in relation to the third and fourth generation of EU procurement rules, as Directives 92/50/EEC and 2004/18/EC were applicable to the case ratione temporis. Differently from the current Directive 2014/24/EU, both the 1992 and the 2004 version of the EU procurement rules preceded the adoption of Directive 2009/81/EC on defence and security procurement, as well as the development (Dir 92/50) and consolidation (Dir 2004/18) of the in-house providing and public-public cooperation exemptions (as Teckal dates back to 1999 and Commission v Germany (Hamburg waste) dates back to 2009). This is relevant in the interpretation of their exemptions based on security or essential national interests.

‘Forward continuity’ in the treatment of security or essential interest-based exemptions

Dir 92/50 foresaw the possibility for Member States to exempt the direct (or less than fully competitive) award of contracts for the provision of ‘services which are declared secret or the execution of which must be accompanied by special security measures in accordance with the laws, regulations or administrative provisions in force in the Member State concerned or when the protection of the basic interests of that State’s security so requires’ (Art 4(2), emphasis added). Similarly, Dir 2004/18 contained an equivalent exemption for ‘public contracts when they are declared to be secret, when their performance must be accompanied by special security measures in accordance with the laws, regulations or administrative provisions in force in the Member State concerned, or when the protection of the essential interests of that Member State so requires’ (Art 14, emphasis added).

This functionally-equivalent exemption under the 1992 and 2004 versions of the EU public procurement rules could have been used, for example, to justify the direct award of a contract to an entity controlled (or heavily influenced/supervised?) by the contracting authority in order to protect the relevant essential / security national interest through an organic governance relationship rather than through contract. In fact, this seems to be the thrust of the justifications put forward by Austria in the case now decided by the CJEU, given that most of the arguments are (rather implicitly based) on the ‘special relationship’ that Austria has established with ÖS (or rather, kept after ÖS’ privatisation). These exemptions would, in the end, possibly be seen as simple clarification that the existence of the EU public procurement rules did not require the contractualisation (and prior award) of the management of this type of services—provided that the existence of the security/essential national interest existed and the exemption from EU procurement rules passed muster under a (strict) proportionality assessment—although this approach to exemption based on the relationship between the contracting authority and the service provider seems to now be clearly within the functional realm of the in-house and public-public collaboration exemptions, rather than that of defence-related exemptions (see below).

Since its regulation in Dir 92/50 (and to a large extent, Dir 2004/18), the possibility to avoid contractualising (and tendering) the entrustment of the provision of services involving security or essential interests (through contracts or other types of ‘written agreements’, of which domestic administrative law regulates a garden variety) and/or the tendering of such public contracts has since evolved in two meaningful ways. First, Dir 2009/81 has come to establish a clearer instrument for the regulation of procurement involving defence and security interests and I argue that the subjection of a contract not covered by that specific instrument to the general rules of Dir 2014/24 will be largely dependent on a strict analysis similar to that carried out by the CJEU in the case against Austria, as Art 15(2) Dir 2014/24 echoes the wording of the Judgment. This will ensure ‘forward continuity’ in the assessment of these matters under EU procurement law.

Indeed, in relation to the pre-2014 rules, the CJEU has found that a ‘Member State which wishes to avail itself of those derogations must show that such derogation is necessary in order to protect its essential security interests’ (para 78) and that ‘the protection of such interests could not have been attained within a competitive tendering procedure’ (para 79), which assessment needs to take into account that ‘the requirement to impose an obligation of confidentiality does not in itself prevent the use of a competitive tendering procedure for the award of a contract’ (para 89) and that this is compatible with ‘the confidential nature of data can be protected by a duty of secrecy, without it being necessary to contravene public procurement procedures’ (para 90). Moreover, the exemption of a direct award needs to overcome a strict proportionality based on the absence of less intrusive measures, such as the possibility of establishing effective control mechanisms (para 86) and screening the trustworthiness of potential service providers based in a different Member State (para 87).

This is mirrored by the 2014 Directive’s requirement that it ‘shall not apply to public contracts and design contests … to the extent that the protection of the essential security interests of a Member State cannot be guaranteed by less intrusive measures, for instance by imposing requirements aimed at protecting the confidential nature of information which the contracting authority makes available in a contract award procedure as provided for in this Directive’ (Art 15(2) emphases added). This basically comes to ‘consolidate’ or sum up the requirements set by the CJEU in the Judgment in Commission v Austria, which is thus fully aligned with the rules in Dir 2014/24. In that regard, there will be a clear continuity in the analysis of these situations despite the approval of Dir 2009/18 in the intervening period.

Convergence with exemptions based on control of the service provider

Second, and maybe less self-evidently, the interpretation of the exemptions in Dir 92/50 and Dir 2004/18 need to be coordinated with the consolidation of the in-house and public-public cooperation exemptions in the case law of the CJEU to date—which may however experience further transformation in the future, as the rules in Dir 2014/24 start being interpreted by the CJEU.

It seems clear that, as a result of the Teckal and Hamburg doctrines, and even before their ‘recast’ in Art 12 of Dir 2014/24, Member States could have exempted the direct award of contracts for the printing of passports—or any other contracts involving security/essential national interests—not on those grounds, but on the basis of the ‘special’ relationship between the contracting authority and the provider of those ‘sensitive’ services. Where the relationship was one of ‘administrative mutualism’, the direct award could be exempted under the public-public exemption. Where the relationship was one of ‘similar control’ by the contracting authority, the exemption could be justified on the in-house providing doctrine.

In either of the cases, the relationship underlying the exemption requires a certain element of intuitu personae (to put it that way) between the entities participating in the non-tendered (contractual) arrangement. The existence of that ‘special nexus’ would justify a conceptualisation of the decision to award the contract as subjected to organic relationships and administrative governance, rather than contractualised mechanisms based on market-based governance and competition-based checks and balances. Conversely, where the contracting authority decided to contractualise the management of the relationship, and in the absence of special links with the arm’s length provider of the services, the contracting authority had to comply with the EU procurement rules.

The Commission v Austria case is interesting in that, underlying the reasoning of the Court (as well as the analysis of AG Kokott in her Opinion, see here) is an element of dismissiveness of the ‘special relationship’ created between Austria and ÖS. To put it in rather simple and tentative terms, my reading of the Judgment is that the CJEU is reluctant to recognise the exemption of a direct award where the mechanisms set up by the Member State to administer the security/essential national interest implicit in the provision of the services are fungible, in the sense that they could be easily recreated in relation to an alternative provider (or providers).

This is clear in the same paragraphs where the CJEU demonstrates the lack of proportionality of the direct award of the contract for the printing of passports (mainly, paras 80-94), where the Court repeatedly stresses the possibility for the Austrian authorities to have created adequate safeguards through contractual mechanisms aimed at: (i) ensuring the centralised execution of the contract (paras 81-83), (ii) the establishment of effective administrative supervision mechanisms (paras 84-86), (iii) guarantee of supply (para 87), (iv) the screening of the trustworthiness of the provider and confidentiality of sensitive information (paras 88-94).

This is compatible with the fact that, under the in-house and public-public cooperation doctrines, the entrustment of the provision of services to entities lacking that intuitu personae or special nexus—ie those governed by contract rather organic relationships—must comply with EU public procurement rules. This excludes the exemptability of direct awards such as that attempted by Austria, which is implicitly what the CJEU has established here by stressing the replicability with a suitable alternative provider of the ‘control’ or influence/oversight mechanisms that Austria has over ÖS—which would then fail to justify both (or either) exemption under the defence/essential interest doctrine and the in-house/public-public cooperation approach.

In my view, this is welcome as it reflects internal functional convergence across exemptions from compliance with EU public procurement rules on the basis of a distinction between the governance of relationships based on organic/administrative relationships and those based on markets and a competition logic. I think that this is a perspective worthy of further consideration, and it will be interesting to see of the CJEU makes this more explicit in future judgments.

Becoming a digital scholar -- some thoughts

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This post is based on a session of the South West Doctoral Training Partnership (SWDTP) 2017/18 student conference, and will also soon be published in its student-run journal.

The increasing digitisation of the world we live in is producing pervasive changes on the object of social science scholarship (both teaching and research) and on the ways in which scholarship across all fields is conducted, published and disseminated (for detailed analysis, see Daniels & Thistlethwaite, 2016). It is thus no wonder that PhD and early career researchers (ECRs) have developed a keen interest in understanding what this all means and in developing effective strategies to become ‘digital scholars’. This is not to say that scholars that have been in the game a bit longer have all gone digital, and ‘technology-averse’ or ‘technology-averting’ scholars are still very much present. However, as with many other entry requirements to the academic profession, it now seems that access to an academic job is almost conditional on establishing (or having established) a digital presence.

Against this background, I think it was a good call for the organisers of the SWDTP Student Conference to include a session on this topic as part of the programme dedicated to reflecting on ‘Research in a Changing World: Critical Encounters’. I am not so sure they chose the best facilitator for the session, but it was my great pleasure to exchange views and experiences with a great group of PhDs and ECRs. The following is a summary of the most salient points I took home from the discussion, which may or may not provide some useful guidance to scholars approaching their ‘digital transformation’.

1. There are different levels of engagement for ‘digital scholars’, and everyone can find an intensity with which they find themselves comfortable

Almost everyone employed by a higher education institution, research centre, public sector or private services provider will have some ‘involuntary’ online presence—if nothing else, due to the creation of a (possibly pictureless) personal profile page in their institutional website. Beyond that, developing a digital presence can mean different things to different people. Some will be comfortable with having their papers available in open access repositories (be they institutional, or general like SSRN), other people will take the additional step of blogging (again, either in institutional or specialised blogs, or in their own—which can be easily created with blogger, wordpress or my favourite squarespace), and the most enthusiastic will create profiles in social networks—either professional (academia, linkedin) or mixed (facebook, snapchat)—and/or engage with twitter (as well as some of the more techy-oriented add-ons, such as tweetdeck or hashtagify). I am not sure whether this would count as supporting one’s digital presence or goes beyond that, but there also are increasing possibilities to share presentations (slideshare, prezi) and videos (youtube) in digital platforms, which are used in different ways by academics and academic institutions.

It is important to decide ‘how far to go digital’ depending on one’s personal circumstances, but also bearing in mind that for a digital presence to be effective and convey the right messages (of being active and engaged, of having interwoven digital interactions as part of general academic activities), it will be necessary to keep a certain level of update or activity. While posting new papers on SSRN can hardly require any specific timing for updates and contributing guest posts to institutional or other blogs can also be done sporadically, running your own blog will require something between 3 and 10 posts a month, and having a ‘satisfied’ following on twitter will probably require some daily activity.

Therefore, it is important to consider how much time and energy it is possible to spend in these activities and how they fit around daily/weekly routines. Conversely, though, it also seems to me important to have very good reasons not to engage in non-recurring activities such as facilitating open access to scholarly publications and writing up more accessible blogs—as these can generate clear advantages (see below) and do not create an on-going commitment with the ‘digital world’. Thus, I would wholeheartedly invite everyone reading this to try to create a blog post on the basis of their most recently completed piece of research (Prof Dunleavy offers great tips on how to do so). The exercise will not be in vain, as it will help you reflect on your writing and, once you have your blog post, you will be one step closer to creating or boosting your digital presence (eg, by sending the blog post to a suitable platform in your field of expertise).

2. There can be great gains from nurturing a visible digital presence, but they may come late and most of them are rather serendipitous

Other than for those that genuinely enjoy those interactions, or those that use digital tools as part of their research method, the main advantage of engaging with the ‘digital world’ is probably not for the academic, at least in the short term, but rather for society at large. A big part of the content and effort that is put into developing the digital presence (eg blogs, active twitter interactions, etc) will primarily be for the benefit of the audience to which it is addressed—and, ultimately, for anyone engaging with those insights, with the knowledge, as a public good. Scholars will only benefit from making the content accessible to such broader audience—which would otherwise largely ignore academic research behind pay walls or solely disseminated in academic circles—to the extent that there is an engagement with the research and, in particular, if that research is adopted or followed by relevant stakeholders and policy-makers. Therefore, the main role that digital scholarship can have is that of supporting the core academic endeavour of pursuing and exchanging knowledge both for its own sake and for the bettering of society.

From a more utilitarian perspective, in my view, there are two additional important points to bear in mind here. One, that while one has control over his or her own digital strategy, the availability of content and one side of the engagement efforts, there is always an uncontrollable element in that ‘shouting at the internet’ does not mean that anyone is necessarily listening. This should not detract from the value of putting ourselves and our research ‘out there’ because we never know when someone might start listening. Second, it is worth stressing that impact (in particular in REF terms) can hardly be fabricated, but it can be facilitated. And, in an environment where most people (including professional researchers, journalists and policy-makers) are getting their information online (Google knows it all), having a digital presence can make a big difference in terms of being noticed and benefiting from important opportunities.

In my own personal experience, it has taken a long time of sustained effort in building a digital presence until it has generated some tangible benefits—but these have been rather substantial. I started blogging in 2011 in Spanish and then switched to English in 2012 when I joined UK academia. It took the best part of three years of blogging regularly to get my personal blog positioned as the blog of reference in my core area of expertise (EU public procurement law). But once the blog’s presence and reputation (and mine, indirectly) were established, a few high-profile opportunities emerged, such as the possibility of acting as an expert for the European Court of Auditors (2014), the European Commission (since 2015), being invited to submit evidence to the House of Lords (2016) and to engage with the Department for International Trade (2018). I am thanked regularly by practitioners for the update and insight provided by the blog, and I have also been contacted by journalists who had identified me as an expert in the areas they were intending to report about (sometimes rightly, sometimes not). Of course, this is not solely the result of my blogging and tweeting activities, but had my ‘deeper’ research or my ‘standard’ expertise not been disseminated through the blog, twitter and SSRN, they probably would have gone largely unnoticed. I think my experience may serve as an indication that there is value in being digitally present, even if it is not clear whether anyone is watching or listening, and even if the advantages are not immediate (or even observable). Thus, the investment of time and energy in blogging, tweeting or otherwise being active in social networks needs to be seen as cumulative and for the long term.

Of course, it must be acknowledged that more digital exposure also means more space for criticism or even trolling, in particular if one engages with controversial topics and/or holds controversial views (such as the ones I held concerning Brexit or the Catalan independence challenge). While constructive criticism should always be welcome (and digital exchanges are great at facilitating timely feedback), trolling or even online abuse can be quite annoying. That said, unless one becomes an ‘academic celebrity’, it is also fairly unlikely that dealing with the less pleasing side of twitter or other interactions cannot be restrained by simply ignoring or blocking a few trolls—who also tend to lose interest rather quickly.

3. What and how much to show?

A final point bearing some consideration before embarking in the construction or reconstruction of one’s digital presence is to consider how to balance academic (or professional) and personal aspects. Some people will not make a hard distinction between personal and academic personas (I do not, although I have a separate twitter handle for my blog and for myself), while others will prefer to keep their digital presence purely academic. This is certainly a matter of personal choice and I can see advantages and disadvantages in both approaches.

On the one hand, it may be that the audience one is trying to address is rather formal or even institutional, so that content or interaction based on personal experiences, hobbies or non-expert opinions is not necessary, welcome or even frowned upon. On the other hand, however, and within limits, it seems interesting to know more about the researcher/academic and his or her world view. Moreover, some distinctions can be somehow artificial. While I would have no problem in refraining from tweeting about jazz music or bread-making if I wanted to keep my twitter account ‘academic’, I would not be sure where to draw the line when I engage with current events, exchange political views, or discuss issues outside my core area of expertise.

I think that there will not be a right or wrong approach (although it is always good to consider whether we would be happy to share personal details and information with perfect strangers in a face-to-face interaction, which can help deflate a certain ‘online hype of anonymity’), but it is worth considering this issue at the outset and to keep a consistent approach, and with which one feels comfortable.

Wrapping up

On the whole, I think there is plenty that researchers and academics can happily embrace in the process of becoming digital scholars or building up a digital presence. I think that everyone should be pushing open-access agendas as far as possible and blogging about their research, with no exception. Other steps, which require more energy and time, will appeal to different people at different levels of intensity. The only advice I would venture is to consider those demands in advance and, if in doubt, to step into the digital world incrementally. I think that doing so and disseminating research to the widest possible audiences has value in and of itself. I also think that it can generate significant benefits for researchers and academics in the long run, which should influence the level of investment in time and energy and provide some comfort when the effort may seem to be lost. Finally, like in everything else, we need to decide what persona to project in the digital sphere, and the one certainty is that there is no one size fits all.

Easter 2018 Procurement Radar [back on w/c 9 April]

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Dear How to Crack a Nut friends,

I am sure you will have had as full a first quarter of the year as me, and I hope you can enjoy a well-deserved break over the Easter period.

I have a few things on the radar, on which I am thinking but have not had time to write blog posts (see below, in case you need some reading, and thanks to those of you who alerted me to some of these issues).

However, I need to take a break from blogging to concentrate on a couple of papers and an edited book that I have neglected for too long. So, I thought I would stop for the duration of the Easter judicial vacation of the Court of Justice. I will thus aim to resume blogging on the week commencing 9 April.

I hope to find you here then.
Best wishes,
Albert

On the radar

  • On conflicts of interest and damages compensation for loss of opportunity in public procurement of the EU Institutions (ie under Art 340 TFEU), see the Judgment of the General Court (Third Chamber, Extended Composition) of 28 February 2018 in Vakakis kai Synergates v Commission, T-292/15,  EU:T:2018:103.

  • On the protection of essential interests of the Member States (special security measures) as an exception to compliance with EU public procurement law, see Judgment of the Court of Justice of the European Union of 20 March 2018 in Commission v Austria, C-187/16, EU:C:2018:194. For discussion of the Opinion of AG Kokkot in this case, see my previous blog entry.

  • On the threshold for liability in damages due to breach of public procurement law, in addition to the discussion of Fosen-Linjen (see here and here), you may be interested in the views of the Irish Court of Appeals--which followed the UK Supreme Court's approach and implicitly rejected the EFTA Court's position by establishing that 'in the case of Francovich damages (and, by extension, damages for breach of public procurement rules under Article 9(6) of the 2010 Regulations), it is necessary to show not simply that there had been an objective breach of breach of E.U. law, but rather that such breach was either “grave or manifest” or “inexcusable”'; Word Perfect Translation Services Limited -v- Minister for Public Expenditure and Reform [2018] IECA 35, para 56.

  • On the classification of concessions contracts as for works or for services, see the Judgment of the EFTA Court of 21 March 2018 in  EFTA Surveillance Authority v Norway (Kristiansand's parking), case E-4/17 (and a press release also available).

  • On public-private partnerships and their failure to deliver adequate value for money, see the hot-off-the-press European Court of Auditors Special report 09/2018: Public Private Partnerships in the EU: Widespread shortcomings and limited benefits.

  • Even if it was published a while back, it may be worth catching up with the European Commission's February 2018 Public Procurement Guidance on avoiding the most common errors in projects funded by the European structural and investment funds. 

Do EU procurement & State aid rules conflict on possibility for consortium members to 'go it alone'? (C-127/16 P)

In its Judgment of 7 March 2018 in SNCF Mobilités v Commission, C-127/16 P, EU:C:2018:165, in the context of the analysis of a measure of State aid for restructuring and recapitalisation involving a bidding process, the Court of Justice of the European Union (CJEU) indicated that it is not acceptable for the assets to be transferred to a bidder that had initially participated in the process as a member of a consortium but subsequently decided to 'go it alone' and submitted a solo bid for the assets. In establishing this principle, the CJEU seems to have taken a position that can potentially be functionally incompatible with its previous case law in the area of public procurement and, in particular, in its Judgment of 24 May 2016 in MT Højgaard and Züblin, C-396/14, EU:C:2016:347 (see here). This blog post discusses this potential functional contradiction in the case law of the Court.

 

SNCF Mobilités v Commission

In simple terms, this dispute concerned France's obligation to recover State aid given to SNCF (its national state-owned railway company) that was declared incompatible with EU law (Art 107 TFEU) by the European Commission. One of the possibilities that France had was to sell all assets of the relevant company within the SNCF group (Sernam) 'en bloc ... at market price through a transparent and open procedure to a company that has no legal link with SNCF' (C-127/16 P, para 7). The process for the sale of Sernam's assets en bloc was rather complicated, but the relevant part of the mechanism was as follows:

... Sernam’s economic situation failed to elicit any proposals based on a positive valuation in the call for tenders conducted on SNCF’s behalf by a bank. All the offers submitted under that procedure concluded that the value was very negative. As no firm offer had been submitted, the decision was taken to continue the discussions solely with the consortium established by candidate 5 who was associated with Sernam’s management team. On 15 June 2005, candidate 5 ultimately informed SNCF orally that it was not in a position to submit a takeover offer — not even a conditional one — before 30 June 2005. On 30 June 2005, SNCF took the decision to conclude the sale with Financière Sernam, which was wholly owned by Sernam’s management team (C-127/16 P, paras 8-9).

In the context of the dispute whether France met the requirements of the previous Commission decision requiring recovery of the State aid, one of the legal issues triggered by the French authorities' decision to enter into a sale agreement with Sernam's management team (through Financière Sernam) is whether it met the requirements for the transfer to result from 'a transparent and open procedure'. The Commission took the view that this was not the case. Before the CJEU considered this issue on appeal, the General Court (GC) had assessed the situation in its Judgment of 17 December 2015 in SNCF v Commission, T-242/12, EU:T:2015:1003.

In the relevant part of the Judgment (T-242/12, paras 162 and ff), the GC explains how, in the context of the procedure aimed at finding a buyer Sernam's assets en bloc, a final round of negotiations resulted in two offers. In simple terms, there was an offer by candidate 4 that valued the assets at - €65.2mn and an offer by a consortium composed of candidate 5 and Sernam's management team that valued the assets at -€56.4mn. In view of this, it was agreed to solely continue discussions with candidate 5 and Sernam’s management (para 164). During these discussions, as mentioned above, candidate 5 withdrew from the process and the management team submitted a solo offer that valued the assets at -€95.5mn (para 167). The acceptance of this offer by SNCF triggered two main issues.

First, given their significant divergence in the valuation of Sernam's assets, whether the solo offer submitted by Sernam's management team was comparable to the prior indicative offer of the consortium with candidate 5. The GC considered that 'the Commission was correct in not considering equivalent in terms of credibility and soundness the offer from a financial investor, candidate 5, who, moreover, was proposing to inject a significant amount of capital into Sernam, and the offer from 84 management and director employees financing a low amount, being EUR 2 million of the price, from their own resources' (T-242/12, para 168). Second, and more relevant for our discussion, there were concerns about the transparency and openness of the procedure for the sale of the assets en bloc. In that regard, the GC established that

... [SNCF] and the French Republic observe that the requirement that a procedure be transparent and open does not cease once the best bidder has been selected and the other candidates have, by definition, been rejected, and that the discussions continue with the ‘last interested party’.

The ‘last interested person’ in the transparent and open tendering procedure in this case was candidate 4 ... the management team’s firm offer, for EUR ‑95.5 million, was also less attractive for the vendor than the preliminary second-round offer from candidate 4, with its negative price of EUR ‑65.2 million ... As observed by the Commission in its written pleadings, following candidate 5’s withdrawal, recourse should have been had to candidate 4, who had been part of the process since the beginning and had also indicated its interest at the end of the second round.

The offer from the management team cannot be considered that of the ‘last interested party’, since it did not participate independently in the transparent and open procedure.

... the applicant submits that it is not relevant to compare the management team’s firm offer with the non-binding offer from the consortium of which it was a part, as only the firm offer is valid, even if it is not the best bid.

That argument must be rejected, since the question here is whether the management team’s firm offer was the result of the tendering procedure, which necessarily involves an examination of the non-binding offers submitted during the tendering procedure.

Therefore, the argument aimed at establishing that the management team participated from the beginning of the tendering procedure must be rejected because it did not participate independently and did not submit alone the offer it had initially submitted with candidate 5. Its offer cannot therefore be considered to result from a transparent and open procedure (T-242/12, paras 169-174, emphases added).

Regardless of the issue of equivalence of the offers, the argumentation constructed by the GC in these passages (implicitly) relies on the principle that members of a consortium cannot be seen as participating both within the consortium and in their own name, which establishes an insurmountable impossibility against any decision to 'go it alone' if the other member(s) of the consortium withdraw.

This principle was directly challenged in the appeal before the CJEU. In short, the challenge was that '... candidate 5 and Sernam’s management team had, within a consortium, been associated with the tendering procedure from the start of that procedure and had proposed the least negative value for the assets en bloc. It was only after candidate 5 withdrew that Sernam’s management team decided to pursue the process and submit on their own the takeover offer initially put forward by the consortium. The applicant thus takes the view that such circumstances meet the requirements of an open and transparent tendering procedure as reflected in the Commission’s decision-making practice and the Court’s case-law' (C-127/16 P, para 62).

Remarkably, SNCF argued that 'it is possible to accept that the principles of openness and transparency in public procurement may be applicable by analogy to procedures involving transfers of assets. It is apparent from Directive 2014/24/EU ... and from Directive 2014/23/EU ... that EU law allows for awarding such a contract to an economic operator without prior advertising or competition following an unsuccessful first tendering procedure, including when the operator did not participate in that first procedure, without that constituting an infringement of the principles of openness and transparency. Those principles should a fortiori be deemed to have been observed where the assets have been transferred to the last interested party, the only one to have made a firm offer, when it has participated in the process in its entirety, initially as part of a consortium from which the other party withdrew in the course of the procedure' (C-127/16 P, para 64).

On this point, the CJEU reasoned as follows:

First of all, without it being necessary to rule on a potential analogy between the tendering procedure relevant to the present case and the principles that are applicable in public procurement ... it should be noted that the applicant’s argument concerning that potential analogy is based on the fact that, at the end of the tendering procedure, no bid or no appropriate bid had been submitted. That kind of argument can be successful only if it challenges the General Court’s findings of fact in paragraph 170 of the judgment under appeal, to the effect that ‘[t]he “last interested person” in the transparent and open tendering procedure in this case was candidate 4. … As observed by the Commission in its written pleadings, following candidate 5’s withdrawal, recourse should have been had to candidate 4, who had been part of the process since the beginning and had also indicated its interest at the end of the second round’. That argument, which asks the Court of Justice to substitute its analysis for the one carried out by the General Court as part of its sovereign assessment of the facts and evidence, is therefore inadmissible and must be rejected.

Next, the practice followed by the Commission in its decisions or its guidelines, even if that practice were to support the applicant’s argument cannot, in any event, bind the Court in its interpretation of the EU rules ...

In any event ... according the Court’s case-law, the question whether a tendering procedure has been open and transparent is determined on the basis of a body of indicia specific to the circumstances of each case ...

Accordingly, in the light of the facts of the present case, and having held in paragraphs 170 and 171 of the judgment under appeal, that the successful bid did not originate from a candidate who had participated autonomously in the tendering procedure from the beginning of that procedure, the General Court was correct in holding, in paragraph 174 of that judgment, that the requirement of an open and transparent procedure had not been observed (C-127/16 P, paras 66-69, references omitted).

Accordingly, the CJEU SNCF Mobilités Judgment explicitly upholds the fact that for a tenderer to be awarded the contract for the sale of assets en bloc as a result of an 'open and transparent procedure', it is an absolute requirement that the 'successful bid ... originate[s] from a candidate who had participated autonomously in the tendering procedure from the beginning of that procedure'. This is in functional conflict with the previous Judgment in MT Højgaard and Züblin, as discussed below.

MT Højgaard and Züblin

In this public procurement case based on the 2004 EU utilities procurement rules (Dir 2004/17/EC), the CJEU ruled on whether the principle of equal treatment of economic operators must be interpreted as precluding a contracting entity from allowing an economic operator that is a member of a group of two undertakings which was pre-selected and which submitted the first tender in a negotiated procedure for the award of a public contract, to continue to take part in that procedure in its own name, after the dissolution of that group due to the bankruptcy of the other partner.

In that case, the contracting authority had indicated that it wanted to proceed to negotiations with between four and six candidates. It received expressions of interest from five candidates, which included interest by a consortium consisting of Per Aarsleff and E. Pihl og Søn A/S (‘the Aarsleff and Pihl group’). The contracting authority pre-selected all five candidates and invited them to submit tenders. One of the pre-selected candidates subsequently withdrew from the procedure. 

For the purposes of our discussion, the relevant fact is that Pihl entered into bankruptcy prior to the submission of the tender, which de facto implied the dissolution of the Aarsleff and Pihl group. Aarsleff decided to 'go it alone' and proceed as a solo tenderer. The contracting authority was thus left with two options: (a) to consider that Aarsleff was not qualified on its own merits (or, in the terms of the SNCF Mobilités Judgment (above) that it had not 'participated autonomously in the tendering procedure from the beginning') and to carry on with the negotiated procedure with 'only' three tenders; or, conversely, (b) to consider that Aarsleff could benefit from the qualification of the group to which it initially belonged and go forward with its desired minimum of four tenders. After some deliberation and information to all remaining candidates, Aarsleff was  allowed to submit a solo tender and, after a further round of best and final offers between the three better placed tenderers, it was awarded the contract.

In reviewing the compatibility of this decision with general principles of EU public procurement law, the CJEU established that, in the absence of specific rules on this subject, 'the question of whether a contracting entity may allow such an alteration must be examined with regard to the general principles of EU law, in particular the principle of equal treatment and the duty of transparency that flows from it, and the objectives of that law in relation to public procurement' (C‑396/14, para 36). In carrying out such analysis, the CJEU determined that

The principle of equal treatment of tenderers, the aim of which is to promote the development of healthy and effective competition between undertakings taking part in a public procurement procedure, requires that all tenderers must be afforded equality of opportunity when formulating their tenders, and therefore implies that the tenders of all competitors must be subject to the same conditions ...

...  [the rules on qualitative selection] may be qualified in order to ensure, in a negotiated procedure, adequate competition ...

If, however, an economic operator is to continue to participate in the negotiated procedure in its own name, following the dissolution of the group of which it formed part and which had been pre-selected by the contracting entity, that continued participation must take place in conditions which do not infringe the principle of equal treatment of the tenderers as a whole.

In that regard, a contracting entity is not in breach of that principle where it permits one of two economic operators, who formed part of a group of undertakings that had, as such, been invited to submit tenders by that contracting entity, to take the place of that group following the group’s dissolution, and to take part, in its own name, in the negotiated procedure for the award of a public contract, provided that it is established, first, that that economic operator by itself meets the requirements laid down by the contracting entity and, second, that the continuation of its participation in that procedure does not mean that the other tenderers are placed at a competitive disadvantage
(C-396/14, paras 38, 41, 43-44 & 47, references omitted and emphases added). 

As is clear from these passages, in MT Højgaard and Züblin, the CJEU rejected the principle that transparency and equal treatment required that a tenderer had 'participated autonomously in the tendering procedure from the beginning'. It rather established a more nuanced approach that required that the 'going it alone' tenderer was in a position to meet all relevant requirements of previous phases of the procedure (in that case, qualitative selection) and that it gained no competitive advantage--or, conversely, that no other tenderer was placed at a competitive disadvantage.

Overall comments

In my view, the SNCF Mobilités Judgment is problematic for the dogmatic principle that it sets out in terms of an absolute requirement of autonomous participation from the beginning. The MT Højgaard and Züblin Judgment can be criticised on other grounds (see here) but, from that perspective, its more nuanced approach towards tolerating decisions to 'go it alone' may be preferable in contexts where retention of a solo tender by the remaining member of a disbanded consortium can be determinative of the competitive tension within the tender procedure [see A Sanchez-Graells, Public procurement and the EU competition rules, 2nd edn (Oxford, Hart, 2015) 339].

More importantly, in my view, the SNCF Mobilités Judgment could have reached the same conclusions if it applied the more nuanced approach of MT Højgaard and Züblin. Indeed, it is hard to argue against the view that, by continuing conversations solely with Sernam's management team and accepting an offer that valued the assets at a very significant value below the previous consortium offer as well as the previous offer by candidate 4, SNCF put Sernam's management team at a clear advantage. In view of the withdrawal of candidate 5, SNCF would have been better advised to go back to the immediate previous step of the procedure and compare whichever solo offer Sernam's management team could submit with that of candidate 4. Doing that would also respect the basic principles of stage rounds of negotiations, whereby ceteris paribus the offers presented in each of the rounds should improve upon previous offers.

On the whole, then, I think that the SNCF Mobilités Judgment is a missed opportunity to have created more integration and compatibility between the procedural requirements applicable under EU State aid and public procurement rules. At the same time, given that the CJEU avoided engaging in the 'potential analogy between the tendering procedure [for the sale of assets en bloc] and the principles that are applicable in public procurement', it is to be hoped that the dogmatic approach of the SNCF Mobilités Judgment will not muddy the waters of the case law on modification of the composition of bidding consortia for the strict purposes of EU public procurement law.

Recording of seminar on procurement damages post-Fosen Linjen available

The Bergen Center for Competition Law & Economics (BECCLE) has now published the recording of the excellent seminar "Damages for breach of Public Procurement Law – Fosen-Linjen AS v AtB AS and its implications" held on 1 March--in which I had the pleasure and honour to participate. The recording includes four excellent and very lively presentations (modesty apart): 

  • Dag Sørlie Lund – “The Norwegian law and practice on damages arising from public procurement breaches before Fosen-Linjen AS v AtB AS, and the challenges it entails.”
  • Kirsi-Maria Halonen – “A comparative approach to damages: The Finnish and Swedish practice on damages arising from public procurement breaches.”
  • Albert Sánchez Graells – “Approaches to the ‘seriousness’ of the breach: The EFTA Court vs the UK Supreme Court.”
  • Halvard Haukeland Fredriksen – “Norway after the Fosen-Linjen AS v AtB AS case: What is to be expected and what are its repercussions – here and elsewhere.”

Given that the case is headed for the Norwegian Supreme Court after the Frostating Court of Appeal decided not to follow the EFTA Court's Opinion, the discussion we had in the seminar may be of particular interest. My arguments are further developed in this paper.

When will you show me the papers? Technical capacity, technical dossiers and verification during the procurement process (C-14/17)

In his Opinion of 28 February 2018 in VAR, C-14/17, EU:C:2018:135 (not available in English), AG Campos Sánchez-Bordona addressed a tricky preliminary question regarding the procurement of spare parts for buses, trolleybuses and tramways under the 2004 Utilities Procurement Directive (Dir 2004/17/EC). The legal dispute concerned the procedural stage at which contracting authorities must require tenderers to provide certificates attesting compliance with the applicable technical specifications. AG Campos suggested that such phase needs not always be prior to the award of the contract.

This case is relevant in the context of the contracting authorities’ verification duties prior to the award of the contract. In my view, while couched in promising pro-competitive terms aimed at preventing the imposition of disproportionate participation requirements, the approach followed by AG Campos can create legal uncertainty and an irreconcilable functional tension with prior cases such as EVN and Wienstrom (C-448/01, EU:C:2003:651). Therefore, the VAR Opinion merits some critical discussion.

Background

It is important to note that the VAR case has the relevant peculiarity that the contracting authority (presumably) owning a stock of vehicles of a given brand, had specified for the spare parts to be of such named brand ‘or equivalent’ as part of the technical specifications. Therefore, the relevant certificates were not of compliance with functional technical specifications or prescribed technical standards, but rather ‘certificates of equivalence’ between the offered parts and the named branded parts. The contracting authority had indicated in the tender documentation that such certificates of equivalence had to be submitted with the first supply of equivalent parts. As a result, the chosen tenderer was awarded the contract without having provided documentary evidence of the equivalence between the (cheaper) offered parts and the (pricier) branded ones. As could be expected, after the contract was awarded to the competing supplier, the ‘original equipment manufacturer’ (OEM, or owner of the brand) challenged the decision on the grounds that Dir 2004/17 required submission of the relevant certificates pre-award and that the contracting authority could not legally award a contract without having carried out minimal technical compliance verification.

The canonical view

The position taken by the disappointed tenderer that equivalence certificates should have been required prior to the award of the contract represents, in my opinion, the canonical view. Indeed, this was also the position of the Italian Government and the European Commission in this case, both of which held that a systemic interpretation of the relevant rules (ie Art 34(8), in relation to Art 34(3) and 34(4) Dir 2004/17) leads to the conclusion that certificates must be required prior to the award of the contract (see AGO, para 22).

As AG Campos sums up their arguments (see paras 38-41), such systemic/functional interpretation would derive from the fact that (i) proof of technical equivalence is a necessary element for the contracting authority to reach a judgment on which is the most economically advantageous tender amongst those received; (ii) in the absence of a prior verification of the tenderers’ ability to deliver on their contractual obligations, a contracting authority faced with non-compliant supplies would only be left with the option to terminate the contract, which is undesirable; and (iii) given that Art 34(8) Dir 2004/17 solely establishes the exceptionality of the recourse to a named brand and prohibits it except if twinned with the explicit mention of the acceptability of equivalent solutions, the general requirements for verification of technical compliance under Arts 34(3) and 34(4) Dir 2004/17—both of which require pre-award submission of documentation—should be applicable to cases where the contracting authority has made use of the exceptional reference to branded products.

In my view, this reflects the correct interpretation of the rules on verification of technical compliance under Dir 2004/17—and the same logic that remains applicable under the revised rules of the 2014 Public Procurement Package.

An alternate view

However, taking an alternate view, AG Campos suggested that Dir 2004/17 does not necessarily require tenderers to provide—and, implicitly, does not necessarily require contracting authorities to demand that tenderers submit—the relevant certificates prior to award of the contract if (i) the contracting authority has specified products of a named brand ‘or equivalent’, and (ii) it has indicated that such documents need only be submitted with the first supply of spare parts (para 74). The reasons given for this approach—which are flanked by thought-provoking references to the competition law rules applicable to the distribution of vehicles and their parts (not to be discussed in this post)—can be summarised as follows (see paras 42 and ff):

(1) AG Campos considers that the possibility to use a direct reference to branded products ‘or equivalent’ changes the contours of the technical verification to be undertaken by the contracting authority. The rules requiring pre-award verification are justified by the uncertainty or indetermination derived from the discretion conferred to the contracting authority in the way it can set technical specifications (eg by performance requirements alone, or mixed with technical standards). In contrast, “[w]hat explains the singular mention of a trademark, a patent or similar figures (always with the addition of their ‘equivalents’) is that the space of indetermination disappears. When, for example, it is only possible to supply spare parts for vehicles corresponding to a single brand …, or their equivalents, the contracting authority has already chosen to make "a sufficiently precise and intelligible description of the object of the contract". This is the key difference with respect to paragraphs 3 and 4 of Article 34 of Directive 2004/17, which makes it possible to deal disparately with the requirements on certificates of equivalence” (AGO C-14/17, para 43, own translation from Spanish). In other words, the reference to the brand ‘or equivalent’ would have made the technical specifications so precise that no verification of technical compliance would be necessary prior to the award of the contract.

In my view, this is a functionally and logically untenable position. Given that the use of a reference to branded products is only acceptable “on an exceptional basis, where a sufficiently precise and intelligible description of the subject-matter of the contract pursuant to paragraphs 3 and 4 is not possible”, the recourse to the brand can only be considered as short-hand or a proxy for what are otherwise insufficiently precise or inintelligible technical descriptions of the goods to be supplied. This cannot be seen as excluding the need to assess technical equivalence, but simply as setting the technical benchmark against which such verification needs to be carried out—for otherwise, how could the contracting authority make sure that the supplies of anyone by the OEM meet the requirements?

(2) AG Campos also considers that there is a clash of public and private interests that excludes a requirement of unavoidable pre-award verification of technical compliance. Or, in other words, “[i]t is of course legitimate to have the concern not to frustrate the success of the procedure, which could happen if the contracting authority that had not previously required [the equivalence certificates] would find, in the end, that the successful tenderer is not in a position to prove the equivalence of the pieces … That aspiration, however, cannot supersede the essential principles of public procurement, in particular, the need to guarantee bidders have equal access and are not confronted with ‘unjustified obstacles to the opening of public contracts to competition’” (AGO C-14/17, paras 48-49, own translation from Spanish).

This clash of interests between the contracting authority’s interest in carrying out sound pre-award technical compliance verification and the tenderers’ interest in being allowed access to the tender is constructed on the assumption that, for a supplier to be able to participate in a tender requiring the supply of original or equivalent spare parts, it would need to have individualised certificates for each and every one of the spare parts to be supplied (in the case at hand, over 2,000 parts). This would indeed give an advantage to the OEM manufacturer, which is of course under no need to certify compliance with its own technical standards.

However, this seems like an extremely rigid approach to technical compliance verification through documentation, which is only explained by the conflation of qualitative selection and technical verification carried out in the next set of reasons. A contracting authority could have taken a proportionate approach eg by requiring the submission of samples with the tender, together with a certificate of equivalence of the sample parts or sufficient technical information about the sample parts as to demonstrate that equivalence of the contractual supplies would be achieved. That would allow for a non-restrictive design of the tender procedure not requiring the award of the contract without carrying out sufficient verification of technical compliance.

(3) As AG Campos explains in his Opinion (see paras 57 and ff), in the case at hand, the contracting authority was able to award the contract without the need to receive documentation attesting technical equivalence because it had carried out an unduly restrictive qualitative selection by requiring that tenderers demonstrated experience in supplying a high value of spare parts of the named brand or equivalent in the previous three years. Indeed, he considers that “[p]rocurement documentation drawn up in those terms is restrictive, since it circumscribes the circle of recipients to those who have already manufactured spare parts of the [named] brand, whether original or equivalent, which excludes the participation of other manufacturers … the procuring entity, which had already imposed this rigorous conditions, could reasonably rely on them as criteria to assess the technical standing of the tenderers, without having to require them, in addition, to initially provide the certificates of equivalence of the 2,195 pieces referred to in the supply contract” (AGO C-14/17, para 60, own translation from Spanish).

In my view, this determines the existence not of one, but two, breaches of EU public procurement law. First, because the qualitative selection criteria are indeed too narrow and exclude the possibility for other OEMs or other ‘generic spare parts’ manufacturers to tender for the supply of pieces equivalent to the specific named brand on the basis of technical capability and previous experience in delivering original or equivalent pieces of other named brands (or OEMs). Second and on an alternative understanding of the facts, because in VAR the contracting authority would not have actually waived its obligation to carry out pre-award technical compliance certification by accepting certificates with the first supplies, but it would rather have carried out the verification at qualitative selection stage—which does not seem in line with the distinction between qualitative selection and award criteria according to Lianakis (C-532/06, EU:C:2008:40). Indeed, from a functional perspective, it seemed clear that in VAR the contracting authority screened potential suppliers on the basis of their ability to meet the particular technical specifications of the supplies it required, rather than on the basis of general technical capabilities to produce original or equivalent spare parts for buses, trolleybuses and tramways.

By taking the (inadvertent?) position that ‘two wrongs make a right’, AG Campos may have missed an additional important point. In practice, his position would allow contracting authorities to include requirements in the tender documentation that they have no intention of verifying prior to the award of the contract. This runs functionally contrary to the precedent of EVN and Wienstrom. There, the CJEU clearly established that “where a contracting authority lays down an award criterion indicating that it neither intends, nor is able, to verify the accuracy of the information supplied by the tenderers, it infringes the principle of equal treatment, because such a criterion does not ensure the transparency and objectivity of the tender procedure” (C-448/01, para 51). The difficulty here is not that the information cannot be verified at all, but that the information cannot be verified during the tender procedure—which in my view is a logical implication of the EVN and Wienstrom Judgment. Even if I would not support such an approach, this possibility for deferred verification during contractual execution could maybe only change now that contract modification is explicitly regulated in the 2014 Public Procurement Package; but any such logic would not apply to procurement covered by the 2004 Utilities Directive.

Moreover, the deferral of verification of technical compliance to contract execution and award of the contract without documentary or sample-based checks would create two undesirable effects: (i) opening up the possibility of self-certification of technical compliance by the tenderers and (ii) conflating verification of compliance with technical specifications for award purposes and quality control for contract performance purposes, which are not necessarily identical functions and certainly serve two distinct legal aims; respectively, ensuring the objectivity and probity of the award decision and ensuring compliance with contractual obligations.

Overall consideration

On the whole, in my view, the VAR Opinion is flawed by a misconstruction of the tests and verification carried out by the contracting authority, as well as by a misunderstanding of the technical simplification expected to derive from the exceptional recourse to branded ‘or equivalent’ supplies. As a matter of principle, contracting authorities should not be allowed to award contracts without carrying out sound checks on technical compliance. They should also not be allowed to defer them to contract execution without more. Contracting authorities should also not be allowed to use technical specifications as qualitative selection criteria due to the artificial narrowing of competition that involves (as clearly stressed, but not thoroughly analysed, by AG Campos in his Opinion).

Therefore, I would argue for the CJEU not to follow AG Campos on this occasion and rather clarify that (i) technical compliance cannot be deferred beyond the award of the contract, regardless of the use of references to branded ‘or equivalent’ products, and (ii) it is for the national court to determine whether the rules on technical specifications and qualitative selection were infringed in the design of the procedure in the case at hand. Otherwise, if the CJEU decided to follow the VAR Opinion, its case law would continue to add internal inconsistencies and unnecessary complexity in this already difficult area of procurement regulation.

CJEU greenlights ‘remedying procedural short-comings in return for (proportionate) payment’ (C-523/16 & C-536/16)

In its Judgment of 28 February 2018 in MA.T.I. SUD, C-523/16, EU:C:2018:135, the Court of Justice of the European Union (CJEU) accepted the compatibility with EU public procurement law (2004 version) in principle of domestic rules allowing for the 'remedying of procedural shortcomings in return for payment', whereby a contracting authority can invite any tenderer whose tender is vitiated by serious irregularities to rectify that tender, subject to the payment of a financial penalty--provided that the amount of that penalty is proportionate.

However, given previous case law excluding the possibility to remedy serious shortcomings in submitted tenders, the CJEU has stressed that such 'remedial mechanism in return for payment' is subject to the limitation that, despite the existence of such financial penalty, the contracting authority cannot require a tenderer to remedy the lack of a document which, according to the express provisions in the contract documentation, must result in the exclusion of that tenderer, or to eliminate irregularities such that any corrections or changes would amount to a new tender (para 65).

It is important to note, though, that despite establishing this position in principle, the CJEU also provided extremely clear indications that, in its view, there is a need to subject the assessment of the adequacy of the correction of the tenders to a strict assessment to make sure that they do not imply a new tender or the circumvention of the tender documentation (or, in other words, to make sure that the correction is not really of a serious irregularity, but rather a minor one), and that the penalties threatened in the Italian domestic cases that generated the preliminary reference cannot be considered proportionate (paras 62 & 64).

This anticipated analysis of incompatibility in concreto despite compatibility in abstracto begs the question whether the position in principle taken by the CJEU--ie the acceptaibility of non-serious modifications subject to proportionate financial penalties--is an adequate default rule, or whether a different default rule would be preferable--ie the acceptability of non-serious modifications without penalty.

In my view, and largely for the same reasons given in criticising the Opinion of AG Campos Sanchez-Bordona that the CJEU has now followed (see here, where they are developed in detail), in tolerating the imposition of financial penalties as a condition for the remediation of minor procedural defects, the MA.T.I. SUD Judgment sets the wrong default rule and is undesirable for its potential anti-SME effects, as well as due to the potential blurring of the narrow space that actually exists for the correction of serious irregularities under the Manova-Slovensko-Archus and Gama case law (see here, here and here). In adopting a seemingly more flexible approach in principle, in MA.T.I. SUD the CJEU may be creating more confusion than providing clarity, solely with the aim of maintaining a questionable space for domestic procedural administrative discretion. On balance, I would have thought it preferable for the CJEU to indicate more clearly and simply that serious irregularities cannot be corrected (with or without financial penalty), and that the correction of minor irregularities needs to be always accepted without sanction.

In MA.T.I. SUD, the CJEU assessed the compatibility with Art 51 of Directive 2004/18/EC of an Italian provision that enabled tenderers for public contracts to remedy any irregularities in their tenders, but at the same time imposed on them a financial penalty proportional to the value of the contract--of between 0.1% and 1% of the value of the contract, with a maximum ceiling of €50,000. The amount of the penalty was to be set in advance by the contracting authority and guaranteed by a provisional security (or bid bond), and could not be adjusted according to the gravity of the irregularity that it remedied. The maximum penalty was later reduced to €5,000, and eventually suppressed. This reduces the immediate impact of the MA.T.I. SUD Judgment. However, this CJEU ruling will be relevant beyond the specific context of Italian procurement rules, not only in relation with the now phased out transposition of Art 51 of Directive 2004/18, but also with Art 59 of Directive 2014/24/EU (which was not applicable ratione temporis). Both provisions foresee that contracting authorities can seek clarifications from tenderers under specified conditions.

There are some passages of the Judgment I consider relevant:

... when they implement the possibility provided for in Article 51 of Directive 2004/18 [whereby the contracting authority may invite economic operators to supplement or clarify the certificates and documents submitted to it], the Member States must ensure that they do not jeopardise the attainment of the objectives pursued by that directive or undermine the effectiveness of its provisions and other relevant provisions and principles of EU law, particularly the principles of equal treatment and non-discrimination, transparency and proportionality ...

It must also be borne in mind that Article 51 of Directive 2004/18 cannot be interpreted as allowing the contracting authority to accept any rectification of omissions which, as expressly provided for in the contract documentation, had to lead to the exclusion of the tenderer ...

... a request for clarification cannot make up for the lack of a document or information whose production was required by the contract documents, the contracting authority being required to comply strictly with the criteria which it has itself laid down ...

In addition, such a request may not lead to the submission by a tenderer of what would appear in reality to be a new tender

... the very concept of substantial irregularity ... does not appear to be compatible with Article 51 of Directive 2004/18 or with the requirements to which the clarification of a tender in the context of a public contract falling within the scope of Directive 2004/17 is subject, according to the case-law of the Court ...

It follows that the mechanism of assistance in compiling the documentation [under dispute] ... is not applicable if the tender submitted by a tenderer cannot be rectified or clarified within the meaning of the case-law referred ... above, and that, consequently, no penalty can be imposed on the tenderers in such a case (C-523/16, paras 48-49, 51-52 & 55-56 references omitted and emphasis added).

In my view, this reasoning of the CJEU reflects the state of the law and a desirable normative position. It would have allowed the CJEU to simply declare the Italian system incompatible due to the excess that a correction of serious irregularities would imply in comparison with the boundaries on tender modification derived from Manova-Slovensko-Archus and Gama. And the CJEU could have done that without entering into a discussion of whether proportionate penalties for non-substantial modifications are acceptable. On this point, it should be stressed that contested Italian rule also foresaw that '[i]n the case of non-substantial irregularities, that is, any non-essential absence or incompleteness of declarations, the contracting authority shall not require the remedying thereof or impose any penalty' (AGO, C-523/16, para 5). Therefore, in the case at hand, the narrow regulatory space left by the CJEU for the imposition of sanctions would not be occupied by the Italian rules, as the Italian legislator saw no need to sanction any such minor tender corrections.

On the whole, then, the MA.T.I. SUD Judgment seems to unnecessarily create a default rule that can be problematic in the interpretation and operationalisation of the rules in Arts 56 and 59 of Dir 2014/24. This stems from the fact that the CJEU has endorsed the underlying principle that 'the imposition of a financial penalty is indeed an appropriate means of achieving the legitimate objectives pursued by the Member State related to the need to place responsibility on the tenderers in submitting their tenders and to offset the financial burden that any regularisation represents for the contracting authority' (para 63). In my view, this runs contrary to the pro-competitive and pro-SME orientation of the 2014 Public Procurement Package. It also reflects a general understanding of public procurement law not as a mode of governance aimed at ensuring best value for money in the expenditure of public funds, but rather a set of fully justiciable rules aimed at discharging the cost and risk of the procurement function on the economic operators, which is then of course putting pressure at the other end of the spectrum via claims for damages where (complex) justiciable rules are not complied with absolutely. In my view, this creates an unrealistic framework for the carrying out of procurement efforts, and more scope for collaborative approaches within the boundaries of the requirements for equal treatment and competition would be superior.

Therefore, I can only hope that, in the future and with a right case, the CJEU will be able to further clarify its position--or, rectius, to reverse position and rule out the possibility of intra-tender sanctions for minor modifications. This is a normative point and, as I said before, the same way I argue against charging potentially interested tenderers for access to the tender documentation, I also take the normative position that imposing fines for the remediation of documentation shortcomings is undesirable, which leads me to propose their eradication de lege ferenda (by analogy, see A Sanchez-Graells, Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 280-281).

 

 

The end of procurement as we knew it? CJEU consolidates Falk Pharma approach to definition of procurement in Tirkkonen (C-9/17)

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In its Judgment of 1 March 2018 in Tirkkonen, C-9/17, EU:C:2018:142, the Court of Justice of the European Union (CJEU) had to assess whether a scheme with the following characteristics had to be classed as a framework agreement and thus subjected to the EU procurement rules (at the relevant time, Directive 2004/18/EC, now repealed by Directive 2014/24/EU).

The scheme was as follows: the Finnish Agency for Rural Affairs (contracting authority, or Agency) had to manage the provision of agricultural advisory services to farmers and land managers having entered into an environmental agreement concerning the payment of environmental compensation payments. The Agency designed a draft contract for the provision of agricultural advisory services that potential suppliers had to adhere to as a condition for their participation in the scheme as service providers. The draft contract foresaw an hourly rate for the retribution of the services, which was to be covered by the Agency, with the beneficiary farmer or land manager paying the applicable VAT. The Agency would create a pool of potential suppliers amongst those qualified that had expressed interest and passed an examination. Once this pool was created, no other providers would be able to join the scheme for the period 2015-2020. Farmers and land owners require the services of any of the advisors included in the scheme.

In deciding the case, the CJEU reiterated that 'the choice of a tender and, thus, of a successful tenderer, is intrinsically linked to the regulation of public contracts by [Directive 2004/18] and, consequently, to the concept of "public contract" within the meaning of Article 1(2) of that directive'. Further, the CJEU extracted the implication 'that the fact that the contracting authority does not designate an economic operator to whom contractual exclusivity is to be awarded means that there is no need to control, through the detailed rules of Directive 2004/18, the action of that contracting authority so as to prevent it from awarding a contract in favour of national operators' (C-9/17, paras 30-31). By stressing that procurement requires the contracting authority to choose the economic operator meant to provide the relevant supplies, services or works, the CJEU concluded that, in the case at hand, 'a farm advisory scheme ... through which a public entity accepts all the economic operators who meet the suitability requirements set out in the invitation to tender and who pass the examination referred to in that invitation to tender, even if no new operator can be admitted during the limited validity period of that scheme, does not constitute a public contract within the meaning of that directive' (C-9/17, para 41).

In formulating this position, the CJEU largely followed the approach suggested by AG Campos Sanchez-Bordona (criticised here) and consolidated the restrictive approach to the definition of procurement the CJEU itself had first formulated in Falk Pharma (C-410/14, EU:C:2016:399; also criticised here). In doing so, the CJEU has further jeopardised the effectiveness of EU public procurement law beyond the initial dent made by Falk Pharma. Tirkkonen concerned a factual situation clearly subsumable within the concept of a framework agreement that involved exclusion of potential competing providers of services for a period of 5 years--whereas Falk Pharma concerned an open-ended system where entry by new providers was possible, which made its classification within the concept of dynamic purchasing system perhaps less straightforward (although not really). This makes Tirkkonen a Judgment even more troubling than Falk Pharma. Given that the CJEU relied on Directive 2014/24 in Falk Pharma, even if Tirkkonen does not mention it in its operative part, it seems that this restrictive approach is now clearly consolidated for the foreseeable future and that it will impose a restrictive approach to the concept of procurement in the future. For the reasons discussed below, I find this development regrettable.

Excessively narrow concept of procurement--Choice obsession

The CJEU has not placed center-stage the requirement for the contracting authority to choose 'tender and, thus, ... a successful tenderer ... to whom contractual exclusivity is to be awarded' (presumably, solely, or within a framework agreement), but rather idolatrised it and put it in a high pedestal from which it can only fall in the future.

The CJEU has forced this position to the extreme of potentially creating further confusion about the distinction between selection and award criteria concerning professional qualifications and expertise of the members of staff involved in the future provision of services--thus potentially reigniting the discussion of the interaction between Lianakis and Ambisig (see here). This emerges from the exceedingly formal reasoning followed by the CJEU in Tirkkonen, where the CJEU was at pains to avoid classifying the

... it is apparent ... that the Agency intends to set up a large pool of advisers who must fulfil a number of conditions. However, in so far as the Agency admits all the candidates who satisfy those requirements, it is clear ... that it makes no selection among the admissible tenders and that it confines itself to ensuring that qualitative criteria are respected.

... the fact that, unlike the context that gave rise to ... Falk Pharma ... a farm advisory scheme ... is not permanently open to interested economic operators is irrelevant. In the present case, the decisive factor is that the contracting authority has not referred to any award criteria for the purpose of comparing and classifying admissible tenders. In the absence of that factor, which is, as is apparent from paragraph 38 of ... Falk Pharma ..., intrinsically linked to the regulation of public contracts, a farm advisory scheme ... cannot constitute a public contract within the meaning of Article 1(2)(a) of Directive 2004/18.

Furthermore, ... even if the verification of the tenderers’ suitability and the award of the contract are carried out simultaneously, those two operations must be regarded as two different operations governed by different rules ...

Accordingly, criteria that are not aimed at identifying the tender which is economically the most advantageous, but are instead essentially linked to the evaluation of the tenderers’ suitability to perform the contract in question, cannot be regarded as ‘award criteria’. Criteria relating mainly to the experience, qualifications and means to ensure the proper performance of the contract concerned were considered to relate to the suitability of tenderers to perform that contract and not as ‘award criteria’, even though the contracting authority had classified them as such ...

Finally, that conclusion is in no way affected by the solution adopted in ... Ambisig ..., in which the Court pointed out, in essence, that the skills and experience of the members of the team assigned to performing the public contract may be included as award criteria in the contract notice or in the tender specifications, in so far as the quality of the performance of a contract may depend decisively on the ‘professional merit’ of the people entrusted with its performance, which is made up of their professional experience and background, particularly where the contract covers the provision of services of an intellectual nature and relates to training and advisory services.

That assessment must, however, be understood ... in the light of the contracting authority’s choice of the tender which it intended to accept from several admissible tenders. In so doing, unlike the case at issue in the main proceedings, the contracting authority, in ... Ambisig ... made a real comparison of the admissible tenders in order to identify the most economically advantageous tender. In the latter case, the experience of the proposed technical team was an intrinsic feature of the tender and was not merely a criterion for assessing the tenderers’ suitability.

It follows from the foregoing considerations that the requirements set out in the invitation to tender published by the Agency cannot constitute award criteria within the meaning of Directive 2004/18 (C-9/17, paras 33, 35-40, references omitted and emphases added).

The CJEU certainly takes an extremely formal view here, in particular because the nature of the scheme was such that potential suppliers were to offer homogeneous or equally economically advantageous tenders, given that the Agency had predefined the parameters of the provision of the services. In that regard, the contracting authority did not 'confine itself to ensuring that qualitative criteria were respected', but rather established all applicable requirements in such a way that tenderers were faced with a 'take it or leave it' set of conditions for their offers. It can thus be argued that in this case the involvement of the contracting authority was even more intense than in the context of previous cases, such as Ambisig, in that the contracting authority had even more control of the content of the future contracts.

As I already mentioned when criticising the AG Opinion (see here), this approach misunderstands how framework agreements work. Both frameworks that involve mini-competitions, where the conclusion of the framework agreement does not imply any specific choice of tender because its conditions are subject to the result of the mini-competition prior to call-off (see Art 32(4)II second indent, and now Art 33(4)(b) and (c) Dir 2014/24); as well as frameworks that already set all conditions for future call-offs without any further mini-competition, where all conditions of what constitutes the most economically advantageous tender are set at the point of concluding the framework agreement (see Art 32(4)II first indent, and now Art 33(4)(a) Dir 2014/24). Functionally, the choice-centric reasoning of the CJEU manages to be at odds with both types of framework agreements, which could be seen as incompatibly covered by a Tirkkonen-compliant interpretation of the relevant rules.

Excessively narrow goals of EU procurement law

From a broader perspective, the CJEU Judgment in Tirkkonen can also be criticised by adopting a very narrow understanding of the goals of EU public procurement law strictly based on the prevention of discrimination on the basis of nationality. This is at odds with the significant case law that stresses the importance of competition considerations in procurement.

Since its emergence in CJEU case law over twenty-five years ago (see Commission v Denmark (Bridge over the Storebaelt), C-243/89, EU:C:1993:257, para 33), the principle of competition has progressively acquired central relevance in the field of public procurement. This evolution has generally been framed by the Court as a clarification of the main goal of the successive generations of EU public procurement rules. In one of its latest formulations, the CJEU has emphasised that ‘the main objective of the rules of EU law in the field of public contracts [is] the free movement of goods and services and the opening-up of undistorted competition in all the Member States’ (see Undis Servizi, C-553/15, EU:C:2016:935, para 28). The CJEU has also recently stressed that ‘the EU rules on public procurement were adopted in pursuance of the establishment of a single market, the purpose of which is to ensure freedom of movement and eliminate restrictions on competition’ (Lloyd's of London, C-144/17, EU:C:2018:78, para 33).

Therefore, from a systemic perspective, limited doubt can be cast on the competition-orientatedness of the EU public procurement rules [see eg C Bovis, ‘The Regulation of Public Procurement as a Key Element of European Economic Law’ (1998) 4(2) European Law Review 220; R Caranta, I contratti pubblici, 2nd edn (Turin, Giappichelli, 2012) 20; for extended discussion, see A Sanchez-Graells, Public procurement and the EU competition rules, 2nd edn (Oxford, Hart, 2015)]. And yet, in Tirkkonen the CJEU is inconsistent in recognising the importance of the principle of competition in drawing the boundaries of EU public procurement law. Its goal is not solely to prevent discrimination on the basis of nationality, or otherwise, but to ensure that contracting authorities benefit from the outcomes that undistorted competition for public contracts generates. In that regard, it seems clear that a recognition of the broader competition goal of EU public procurement law would have required the CJEU to assess whether the decision-making process underlying the Tirkkonen case was potentially unduly restrictive of competition--which it was, given the harshness of the exclusion decision--which would have forced the Court to recognise the relevance of applying EU public procurement law to curve such type of publicly-created distortions of competition [for a proposal on how to operationalise such a test, see A Sanchez-Graells, 'Some Reflections on the 'Artificial Narrowing of Competition' as a Check on Executive Discretion in Public Procurement', in S Bogojević, X Groussot & J Hettne (eds), Discretion in EU Public Procurement Law, IECL Series (Oxford, Hart, forthcoming)].

Excessive leeway for 'strategic design' going forward -- Need to reinvent the wheel?

The Tirkkonen case is not solely problematic from a conceptual and a normative perspective, as discussed above, but also from a practical standpoint. As already mentioned when criticising the AG Opinion, on the whole, as a result of the cumulative effect of Tirkkonen and its expansion of the Falk Pharma doctrine, Member States willing to avoid compliance with EU public procurement rules could now easily do so by creating systems of ‘user/beneficiary choice’ whereby contracting authorities create the entire 'choice architecture' and the underlying contractual mechanisms, but defer the choice of the specific provider to the user (patient, in Falk Pharma, aid beneficiary, in Tirkkonen). This could be quite problematic particularly in the context of services and supply contracts, where the existence of end users detached from the contracting authority can enable this type of mechanisms.

In the extreme, if central purchasing bodies created this type of mechanisms for use by individual decision-makers (eg civil servants or public employees), the atomisation of procurement that would ensue could well result in a de-regulation of the procurement function. Procurement rules would not apply to the CPB because it would not ‘choose definitely’ the specific supplier or provider, and they may not apply to the decision to call-off that does exercise that choice if the value of the call-offs is small enough—which would then trigger litigation around the legality or less of the atomisation of the procurement decision on the last stage, for which analysis the concept of ‘separate operational units’ in Art 5(2) of Directive 2014/24/EU (see also recital (20)) would become highly relevant; see K-M Halonen, 'Characteristics of Separate Operational Units – A Study on Aggregation Rules under Public Procurement Law' (2017) report for the Competition Authority; see here. There is thus a functional need to keep proper checks and balances at the level of creation of the mechanism.

I was already concerned that Falk Pharma was eroding the scope and effectiveness of the EU public procurement rules, but Tirkkonen could magnify such undesirable effect. Moreover, this would simply displace the problem towards general EU free movement law, which is not a sensible approach in view of the more developed criteria and rules in the EU public procurement framework. There may now be a need to reinvent the wheel and 'export' to general internal market law the more sophisticated mechanisms developed in the area of EU public procurement law, which seems like a significant waste of effort. It may well be that all of this takes us full circle, but it will certainly take time and the legal uncertainty involved in the process cannot be productive.

Some may argue that this is the spillover of the CJEU's increasing deference to the Member States in the area of procurement. This is certainly something that requires some further thought. Based on conversartions with some colleagues, maybe we will manage to organise a conference in this topic in the next couple of years. Watch this space.

 

Rejection of tenders for EU research funding, any lessons for procurement? (T-76/15)

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In its Judgment of 18 January 2018 in Kenup Foundation and Others v EIT, T-76/15, EU:T:2018:9, the General Court of the Court of Justice of the EU (GC) assessed the compatibility with EU law of the rejection of a tender for funding under the Horizon 2020 framework programme for research and innovation. Some of the GC's analysis in this context can provide interesting insights for the rejection of tenders in procedures controlled by the EU public procurement rules, if evaluation and award decisions are adopted through two-tier bodies (eg a technical evaluation and an overall 'political' decision-making). This could be particularly relevant in the context of competitive dialogues or innovation partnerships. To be sure, the Kenup case hinges on EU administrative law, but I think it raises issues that can be comparable in some domestic settings in the Member States.

In Kenup, the European Institute of Innovation and Technology (EIT) issued a call for the designation of a Knowledge and Innovation Community (KIC) in the field of innovation for healthy living and active ageing. The cooperation established between the EIT and the KIC would take the form of a framework partnership, with an initial duration of seven years, in the course of which grants could be paid by the EIT on the basis of the conclusion of specific agreements. The call for proposals established specific criteria for the exclusion, eligibility and selection of proposals, which were to be undertaken under EIT's responsibility. The decision on the designation of the KIC was subjected to a three-tier process, as follows:

According to the rules in ... that call for tenders, which the parties agree were complied with both by the independent experts and by the EIT, eligible proposals were to be evaluated by high-level independent external experts. Each proposal was thus examined by five experts, that is to say three thematic experts and two ‘horizontal’ experts, each responsible for an evaluation report for each proposal. The panel of experts was then required to draw up a consolidated evaluation report for each proposal. Next, the three proposals with the best rankings were evaluated by a second panel of high-level independent experts responsible for making a final recommendation containing an overview of those three proposals as well as recommendations for their improvement or reinforcement. Finally, representatives of the three proposals with the best scores were to be heard by the governing board before it designated the selected KIC (T-76/15, para 58).

Therefore, the decision on the designation of the KIC was to be made by the EIT's governing board, on the basis of the recommendation made by the second panel of experts, which only had to take into consideration the three top proposals as 'filtered' by the first panel of experts. In principle, this seems like a rather robust evaluation mechanism, in particular of the technical aspects of the proposals. However, it can also raise issues of compliance with rules on 'fully-informed' decision-making or 'unrestricted' executive discretion, as the Kenup case evidences.

In response to the call for proposals, the Kenup consortium submitted a tender under the coordination of the Stiftung Universität Lüneburg. After assessment of the proposals received in accordance with the evaluation mechanism described above, the governing board of EIT selected a  proposal for the KIC and rejected the other proposals, including Kenup's. Kenup then challenged the EIT's decision on several grounds, including issues concerned with an alleged failure by EIT to state the reasons for its decision, as well as a breach of the principles of transparency and equal treatment of tenderers.

All of these arguments are common place in the challenge of procurement decisions and their analysis would have been interesting. However, the case was decided solely on an issue concerning the implicit constraints on the exercise of executive discretion by the EIT's governing board due to the initial 'filtering' of proposals by a panel of high-level experts. This merits some close analysis.

As presented by the GC,

It follows from the evaluation process for the proposals ... that the panel of experts responsible for the final recommendation only had to examine the three proposals with the best scores following the evaluation by the first panel of experts. In addition, only representatives of those three proposals were to be heard by the governing board. In that regard, it should be noted that the call for proposals clearly indicated that the KIC would be selected by the EIT on the basis, first, of the consolidated evaluation reports relating to the three best proposals, as established by the panel of experts, secondly, of the report drawn up by the panel responsible for the final recommendation and, thirdly, of the outcome of the hearings. Accordingly, the EIT was required to make its selection only on the basis of the work carried out by the independent experts on the three proposals with the best scores and the outcome of the hearings carried out with the representatives of those proposals.

... the members of the governing board had access, via a protected website, to all the proposals submitted for the KIC on ‘Innovation for healthy living and active ageing’, including the Kenup consortium’s proposal. Furthermore, before the hearings, the director of the EIT indicated to the governing board the various stages of the evaluation procedure, including the various scores awarded overall and for sub-criteria to the five proposals submitted. However, none of the analyses of the Kenup consortium’s proposal carried out by the independent experts were submitted to the members of the governing board. Annex 1 to the information note of 1 December 2014 drawn up by the director of the EIT for the members of the governing board, produced by the EIT at the Court’s request, included merely a summary of the evaluation reports drawn up by the panel of experts relating solely to the proposals selected for the hearings. In addition, it does not follow from the procedure for the call for proposals, nor is it claimed, that members of the governing board attended the experts’ working sessions.

It is true, as the EIT maintains in its defence, that members of the governing board were free to raise questions and to request additional information concerning all the proposals and their evaluation by the experts. However, ... the members of the governing board did not possess any of the evaluations or a summary of the evaluations carried out by the panel of experts concerning the two proposals not selected for the hearings.

In any event, any initiatives of the governing board were unlikely to call into question the fact that only the three proposals with the best scores awarded by the experts could have been designated as the KIC on ‘Innovation for healthy living and active ageing’. The procedure established by the call for proposals entirely ruled out any possibility of the governing board’s selecting the Kenup consortium’s proposal and inviting its representatives to participate in the hearings, since that proposal was ranked in fourth position by the independent experts. That finding is confirmed by the wording of the letter of 10 December 2014 informing the coordinator of the Kenup consortium that its proposal had been rejected, which clearly links that exclusion with the ranking of the consortium’s proposal below third place. On that point, it may be noted ... that, in its reply to their request for further information, the EIT stated that the experts had been granted, by the call for proposals, a delegated power to preselect proposals.

Therefore, in accordance with the procedure defined in the call for proposals, the governing board could, following the hearings, only alter the ranking of the three best proposals selected by the experts ... The fact that, according to Article 15 of Regulation No 1290/2013, the selection of a KIC is made on the basis of the ranking of the proposals, in accordance with the evaluation carried out by independent experts, cannot mean that the EIT is bound, even in part, as regards the order of the proposals thus selected.

67      It follows from all the foregoing considerations that the applicants are justified in maintaining that the governing board failed fully to exercise its powers in respect of the selection of proposals, in breach of the provisions of Article 4 of Regulation No 294/2008, those powers having been delegated in part to experts without that board having, at any time, had the opportunity to make a proper assessment of the work they carried out on the proposals which were not ranked in the first three places (T-76/15, paras 61-65 & 67, emphases added).

As mentioned above, the Kenup Judgment is largely conditioned by a point of EU administrative law concerning the implicit delegation of the power to preselect proposals to the initial high-level expert panel. However, I find the case troubling in that context, and for any implications it could have in the context of procurement covered by the 2014 Public Procurement Package. I have two main issues with this Judgment.

First, and foremost, that it seems to follow the worrying trend of disrespect for expert opinion. Implicit in the GC Judgment, there is an assumption that the governing board of EIT would have been able to challenge expert reports prepared in a seemingly robust manner. This seems difficult to share. Either the independent technical evaluation was needed because the governing board does not have the expertise (or time) to sift through all proposals--in which case the assumption that the governing board will look at all documents and sort of reassess all proposals from scratch is ludicrous--or it was not needed at all, and should be abandoned--which seems equally unpersuasive. More generally, it seems that the GC misunderstands the context and boundaries of the executive discretion given to EIT's governing board by the relevant EU provisions, as well as the fact that EIT had endorsed the specific evaluation mechanism (thus potentially self-constraining any broader discretion it may have had, in a manner that the GC hardly demonstrates to run contrary to any relevant constraints). From that perspective, this Judgment is at best extremely formalistic and, at worse, simply misguided.

Second, and also of importance, depending on the rules applicable under the general administrative law of the Member States, the thrust of the Kenup Judgment can result in significant difficulties (and potential challenges) in the context of complex procurement procedures where the overall (political) decision-making is supported by one or several rounds of technical evaluation aimed at filtering the initial proposals into shortlists or recommendations. If the logic in the Kenup Judgment was adopted, and the ultimate decision-makers of the contracting authorities and entities covered by the 2014 Public Procurement Package were required to have before them (and effectively engage with) the entirety of the documentation with a view to (potentially) challenging technical evaluations, complex procurement procedures could become exceedingly burdensome and/or (even more of a) box-ticking exercise. Moreover, it would be possible to generate inadvertent corruption risks if the non-expert (ie political) board could second-guess or deviate from robust technical assessments and have unfettered discretion. This would run in stark contrast with the case law of the CJEU on award criteria and unlimited freedom to choose a tender.

Consequently, my overall view of the Kenup Judgment is that it does not offer any valuable (or at least useful) lesson for procurement, and that the GC would have been well-advised to have followed the opposite direction of travel. By taking into consideration the case law on procurement that requires discretion to be constrained by solid technical evaluation, the decision in Kenup could (and should) have been the opposite. I can only hope that this case is limited to the way EU research funding is administered, and that the Kenup Judgment results in a change of EIT's internal governance rules in a way that preserves and enhances the role of independent high-level technical evaluations against the erosion that the GC's Judgment has generated.

CJEU clarifies obligation of national supreme and constitutional courts to refer preliminary questions (C-322/16)

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In its Judgment of 20 December 2017 in Global Starnet, C-322/16, EU:C:2017:985, the Court of Justice of the European Union (CJEU) followed the Opinion of AG Wahl and clarified that a national court of last instance is under an Art 267 TFEU obligation to refer a question for preliminary ruling to the CJEU even if the constitutional court of that Member State has already assessed the constitutionality of national rules in the light of regulatory parameters with content similar to rules under EU law.

The case concerned the amendment of the terms of licences for the online operation of gaming during their term, and the challenge was based on principles of legal certainty and protection of legitimate expectations, which are common to EU law and to the constitutional frameworks of the EU's Member States (in this case, Italy). From that perspective, the Global Starnet Judgment can be particularly relevant for cases involving claims based on the EU Charter of Fundamental Rights and could create a push for a more significant role for the CJEU as a constitutional court for the Union.

There are a few passages of the Global Starnet Judgment that I find particularly interesting:

... a national court which, in a case concerning EU law, considers that a provision of national law is not only contrary to EU law, but also unconstitutional, does not lose the right, or escape the obligation under Article 267 TFEU, to refer questions to the Court of Justice on the interpretation or validity of EU law by reason of the fact that the declaration that a rule of national law is unconstitutional is subject to a mandatory reference to the constitutional court. The effectiveness of EU law would be in jeopardy if the existence of an obligation to refer a matter to a constitutional court could prevent a national court hearing a case governed by EU law exercising the right conferred on it by Article 267 TFEU to refer to the Court questions concerning the interpretation or validity of EU law in order to enable it to decide whether or not a provision of national law was compatible with that EU law ...

... the effectiveness of EU law would be impaired and the effectiveness of Article 267 TFEU diminished if, as a result of there existing a procedure for review of constitutionality, the national court were precluded from referring questions to the Court for a preliminary ruling and immediately applying EU law in a manner consistent with the Court’s decision or case-law ...

Furthermore, although it is true that the procedure laid down in Article 267 TFEU is an instrument for cooperation between the Court of Justice and the national courts, by means of which the former provides the latter with the points of interpretation of EU law necessary in order for them to decide the disputes before them, the fact remains that when there is no judicial remedy under national law against the decision of a court or tribunal of a Member State, that court or tribunal is, in principle, obliged to bring the matter before the Court of Justice under the third paragraph of Article 267 TFEU where a question relating to the interpretation of EU law is raised before it ...

The fact that the [domestic Constitutional Court] gave a ruling on the compatibility of the provisions of national law ... with the provisions of the [national] Constitution which the referring court regarded as constituting, in essence, the same regulatory parameters as [EU law] has no bearing on the obligation, laid down in Article 267 TFEU, to refer questions concerning the interpretation of EU law to the Court of Justice (C-322/16, paras 21 & 23-25, references omitted and emphases added).

More discussion of damages for breach of EU procurement rules

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Dr Ignacio Herrera Anchistegui has organised a greatly interesting BECCLE seminar on "Damages for breach of Public Procurement Law – Fosen-Linjen AS v AtB AS and its implications". It will take place this Thursday 1 March 2018 in Bergen. I have the pleasure and honour of presenting my views on the EFTA Court's Fosen-Linjen Judgment and to provide a comparative view with the UK Supreme Court's decision in Nuclear Decommissioning Authority. These are issues I had already addressed in the blog (see here and here) and, in trying to provide a more comprehensive critique of the case at the seminar, I have now tried to restructure my initial ideas and develop them in some more detail in a new SSRN working paper.

I hope the discussion will provide plenty additional ideas and food for thought, and I will try to improve the paper after the BECCLE seminar in view of that. Any additional comments or feedback on how to get it ready for publication would also be most welcome: a.sanchez-graells@bristol.ac.uk. Thank you for reading.

The abstract is as follows:

This paper offers some reflections on the position advanced by the EFTA Court that a simple breach of EU public procurement law is in itself sufficient to trigger the contracting authority's liability in damages (Fosen-Linjen). I argue that this position is flawed because it deviates from previous case law of the Court of Justice of the European Union (Spijker), and because it is based on interpretive errors and internal contradictions in the EFTA Court's reasoning. In criticising the EFTA Court's Judgment from the perspective of the harmonisation of EU law, I rely on the better view of the UK Supreme Court. The latter held that the liability of a contracting authority for the breach of EU public procurement rules under the remedies directive is assimilated to that of the State under the general EU law doctrine of State liability and thus requires a sufficiently serious breach (Nuclear Decommissioning Authority). My reflections are based on the need to keep procurement damages litigation constrained to its main function and limited to justified cases. I use this normative position to argue against the expansion of private enforcement of EU public procurement law as a correction of the shortcomings in its public enforcement.

The full reference of the paper is: A Sanchez-Graells, 'You Can't Be Serious: Critical Reflections on the Liability Threshold for Damages Claims for Breach of EU Public Procurement Law' (February 24, 2018). Presented at the BECCLE seminar on 'Public Procurement and Damages,' University of Bergen, 1 March 2018. Available at SSRN: https://ssrn.com/abstract=3129430.

New paper on competition-based checks on executive discretion in procurement

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I have just uploaded on SSRN a new working paper where I try to operationalise a substantive and procedural test for the enforcement of the principle of competition enshrined in Article 18(1) of Directive 2014/24/EU. The paper is still very much work in progress and I will need to revise it before final publication in an edited collection, so any feedback or comments would be most welcome.

The abstract of the paper is as follows:

In this paper, I go beyond prior general discussion on the place for and implications of a competition goal or principle within the EU public procurement architecture and aim to operationalise the 'competition-based constraints' on the exercise of executive discretion that derive from the prohibition to 'artificially narrow down competition'. I do so in relation to the exercise of discretion for the inclusion of social, green and human rights clauses in tender documentation. The first part of the paper revisits the case law of the Court of Justice of the European Union on the inclusion of environmental, social and labour requirements in procurement procedures, and fleshes out the ways in which competition considerations have underpinned the Court's assessment of the exercise of executive discretion in the design of tender procedures. The second part proposes a presumption-based substantive balancing test between, on the one hand, these 'competition-based constraints' and, on the other hand, the needs of 'responsible procurement' derived from the mandate to ensure environmental, social and labour compliance. The third part takes the alternative approach of a test of procedural traceability and considers the documentary obligations that contracting authorities need to discharge in relation with the exercise of executive discretion to propose the creation of a safe harbour to modulate the operation of the substantive presumption. I conclude reflecting on the desirability of the proposed tests in the context of future litigation.

The full citation of the paper is A Sanchez-Graells, 'Some Reflections on the 'Artificial Narrowing of Competition' as a Check on Executive Discretion in Public Procurement', in S Bogojević, X Groussot & J Hettne (eds), Discretion in EU Public Procurement Law, IECL Series (Hart, forthcoming). Available at SSRN: https://ssrn.com/abstract=3125304.

Some thoughts on circular economy and IT procurement

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By Conrad Mohr & Albert Sanchez-Graells.

This week, the European Commission is organising the 2nd annual conference of the European Circular Economy Stakeholder Platform under the title “Delivering on the Circular Economy – What's Next?”. One of the focuses of the discussion will concern the IT sector, and this post aims to raise some issues for further thought. In particular, this post aims to increase awareness of the potential for “re-use” and the purchasing of refurbished or remanufactured IT products.

Approximately 160 million new laptops are made every year, and 160,000 are disposed of every day in the EU alone. That’s 3 million tons of IT equipment waste. The result is excessive resource consumption, climate change, conflict mining, human rights issues, pollution and e-waste. Yet, some estimates indicate that some 70% of those laptops could be reused. The general trend is likely to be the same for desktop computers and other IT products, so there seems to be significant scope for effective circular economy efforts in this area.

Moreover, it seems uncontroversial that the rules in the 2014 Public Procurement Package allow for the inclusion of technical specifications that facilitate the use of refurbished or remanufactured IT products. Indeed, the European Commission has published green public procurement criteria (EU GPP criteria) for both computers and monitors, and for imaging equipment (eg printers, copiers and multifunctional devices). However, the uptake of procurement of refurbished or remanufactured IT products is still low.

The immediate questions (or concerns) that can come to mind for a public buyer considering whether to allow for (or even prefer, through adequate award criteria) refurbished or remanufactured IT products, will probably relate to functional/performance equivalence between refurbished and new products, as well as life span/warranty of refurbished or remanufactured products compared to new ones. These are valid concerns, so it is worth assessing some of the evidence.

Regarding quality, it is worth stressing that the commonly accepted definition of “remanufactured products” covers products that are equal to or better than new, with a warranty equal to or better than new. For most suppliers, circular computing products come with same as new warranty for a period of 3 years. And this can be independently certified through compliance with relevant standards, such as the British BS8887 standard, under ISO 90001, 14001 processes, all of which can be audited.

In terms of performance, there is now emerging evidence of comparability between new and remanufactured IT products. For example, Cranfield University made a like for like comparison between some remanufactured models and some of today’s newer equivalent models and the remanufactured products tested to perform on average to within 3% of new products.

Lifespan may be an additional consideration, and here it is more difficult to find public data. However, there are good indications that lifespan can be largely comparable and, in any case, adequate warranty clauses and in-use maintenance agreements can help public buyers place any risks derived from increased replacement needs, if any, on the circular IT supplier.

Therefore, the evidence starts to strongly suggest that remanufactured or refurbished IT products should be considered a functionally equivalent option for public buyers from a technical perspective. This raises the question whether low uptake responds to non-technical considerations, which are observed in consumer markets. Indeed, in consumer markets, the low uptake of refurbished and remanufactured products (not only IT) has been shown to derive from misconceptions about the quality and reliability of those products. Maybe it is time for public buyers to question whether their own assumptions are equally unfounded, and to establish IT procurement strategies that are not skewed towards new products.

Interesting case on functional approach to multiple bidding and exclusion of tenderers (C-144/17)

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In its Judgment of 8 February 2018 in Lloyd's of London, C-144/17, EU:C:2018:78, the Court of Justice of the European Union (CJEU) confirmed its increasingly pro-competitive and anti-formalistic approach to the exclusion of tenderers on grounds of prohibitions of multiple bidding. The Court provided this clarification along functional lines that may anticipate the direction of its Judgment in Specializuotas transportas (C-531/16, see discussion of the Opinion of AG Campos here).

In Lloyd's, the CJEU established that the 'principles of transparency, equal treatment and non-discrimination ...  must be interpreted as meaning that they do not preclude legislation ... which does not allow two syndicates of Lloyd’s of London to be excluded from participation in the same procedure for the award of a public service contract for insurance merely because their respective tenders were each signed by the General Representative of Lloyd’s of London for that Member State, but instead allows their exclusion if it appears, on the basis of unambiguous evidence, that their tenders were not drawn up independently' (para 47).

Or, in other words, the CJEU declared the compatibility with EU primary (internal market) and secondary (procurement) law of domestic rules that do not impose the mandatory disqualification of bidders seemingly engaged in multiple bidding due to intra-group corporate links, but rather make any such exclusion decisions conditional upon an investigation of the extent to which they are representative of genuine competition for the contract. This is reflective of a functional approach to the treatment of multiple bidding situations that I think should be welcome [for in-depth discussion, see A Sanchez-Graells, Public procurement and the EU competition rules (2nd, Hart, 2015) 340-347].

As background for the analysis of the case, it is interesting to stress the existence of an Italian rule (Article 38(1)(m), quater of Legislative Decree No 163/2006) requiring the automatic exclusion of tenderers constituting a single decisional unit, whereby 'tenderers which "… are, in relation to another participant in the same tendering procedure, in a situation of control for the purposes of Article 2359 of the Codice civile (Civil Code), or in any relationship, including a de facto relationship, where the situation of control or relationship means that the tenders are attributable to a single decision-making centre" would be excluded from participation in a procedure for the award of concessions and of public works, supply and service contracts, and could not conclude contracts pertaining thereto or sub-contracts' (para 10).

However, the relevant administrative authorities (now ANAC), had established an interpretive practice dating back to 2008 whereby such automatic exclusion would not apply to intra-group competition where the signature of tenders by the same representative was a formality required by the domestic rules concerning the organisation of the tenderers, but did not evidence of intra-group collusion but rather reflected 'independence of syndicates and competition between them', which 'serve to ensure free competition and the equal treatment of candidates' (para 19). The case is coloured by the peculiarities of the Lloyd's market for insurance and reinsurance (on that, see para 27), but this seems reflective of a broader functional approach that mitigates the automaticity and strictness of the general rule in Article 38(1)(m), quater of Legislative Decree No 163/2006.

The question for preliminary interpretation of compatibility of this interpretation of Article 38(1)(m), quater of Legislative Decree No 163/2006 with EU law reached the CJEU because the referring court feared that 'the fact that the same person signs several tenders submitted by different tenderers may undermine the independence and confidentiality of those tenders and, as a result, infringe the principle of competition laid down, in particular, in Articles 101 and 102 TFEU' (para 20). In addressing this issue, there are a few passages of the Lloyd's Judgment that are worth noting:

... according to settled case-law of the Court, ... the automatic exclusion of candidates or tenderers that are in a relationship of control or of association with other competitors goes beyond that which is necessary to prevent collusive behaviour and, as a result, to ensure the application of the principle of equal treatment and compliance with the obligation of transparency ...

Such an automatic exclusion constitutes an irrebuttable presumption of mutual interference in the respective tenders, for the same contract, of undertakings linked by a relationship of control or of association. Accordingly, it precludes the possibility for those candidates or tenderers of showing that their tenders are independent and is therefore contrary to the EU interest in ensuring the widest possible participation by tenderers in a call for tenders ...

It should be pointed out in this regard that the Court has already held that groups of undertakings can have different forms and objectives, which do not necessarily preclude controlled undertakings from enjoying a certain autonomy in the conduct of their commercial policy and their economic activities, inter alia, in the area of their participation in the award of public contracts. Relationships between undertakings in the same group may in fact be governed by specific provisions such as to guarantee both independence and confidentiality in the drawing-up of tenders which may be submitted simultaneously by the undertakings in question in the same tendering procedure ...

Observance of the principle of proportionality therefore requires that the contracting authority be required to examine and assess the facts, in order to determine whether the relationship between two entities has actually influenced the respective content of the tenders submitted in the same tendering procedure, a finding of such influence, in any form, being sufficient for those undertakings to be excluded from the procedure (C-144/17, paras 35-38, references omitted).

This is a good way of synthesising the case law in this area and, as mentioned above, the only missing link concerns the extent to which a contracting authority has a positive duty to investigate potential intra-group collusion and seek exclusion--which is the other side of the coin to a LLoyds-type situation, where the contracting authority has an interest in excluding. This will soon (hopefully) be clarified by the CJEU in its awaited Judgment in Specializuotas transportas (C-531/16). Watch this space.

Another conversation on procurement developments with the EFTA Surveillance Authority

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Last week, I had the great honor and pleasure of speaking at another EFTA Surveillance Authority lunchtime staff seminar two years after (see here for the 2016 edition), and to benefit again from the insights and challenging questions of its community of enforcers. This time, the conversation concentrated on recent policy and case law trends, and the impact they can have for the enforcement of EEA/EU internal market rules.

These are the slides I used. If time allows, I will try to publish a more complete account of my speech, although most of the issues have been covered in previous posts already, so hopefully the slides will be easy to follow. As always, feedback and comments more than welcome.

Tender evaluation & risk of illegally introducing new award criteria via comments (C-677/15 P & T-477/15)

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Thanks to the never-ending litigation efforts of European Dynamics, the EU Courts have recently added two decisions to the growing acquis on the duty to state reasons in the context of public procurement. Although the legal analysis in most of these cases tends to reiterate well-established principles of EU law; the ever more intricate arguments made by European Dynamics can sometimes make for interesting reading.

Two recent cases concern the risks that contracting authorities incur when stating the reasons for their evaluations if, as a result of the debriefing, disappointed tenderers can make an argument that the evaluation rested on award criteria not previously included in the tender documentation. In these two recent cases, the General Court (GC) has offered some insight on the treatment of examples as proxies for the evaluation of service quality (T-477/15), while the Court of Justice (ECJ) has shed some light on the situations in which specific comments on concrete aspects of a tender can be construed as illegally introducing new weighting factors for award sub-criteria (C-677/15 P). This post discusses those specific aspects of these two recent cases.

zum Beispiel

In its Judgment of 1 February 2018 in European Dynamics Luxembourg and Others v ECHA, T-477/15, EU:T:2018:52, the GC had to assess a complaint raised by European Dynamics (ED) that the evaluation committee would illegally have used award criteria not specified in the tender documentation by criticising its tender due to a lack of examples. The contract was for the provision of IT services and, in simplified terms, the tender documentation required the tenderers to submit offers based on a specific hypothetical scenario of service provision. It turned out that the winning bidder included numerous examples of the ways in which it would address service needs. Comparatively, the evaluation committee found ED's tender lacking in detail and, as justification for awarding ED a lower mark under the relevant award sub-criteria, the committee provided negative comments linked to the absence of examples to illustrate the tender submitted by ED.

ED challenged this approach by stating that "by penalising the tender ... on the ground that it did not contain a sufficient number of examples, although it [was] in line with the tender specifications, the [contracting authority] introduced a new criterion that was not included in the tender specifications ... [and] also criticis[ing] the [contracting authority] for having evaluated the tenders against an unpublished criterion, namely the tenderer’s choice as to what information to include in the tender. [ED] also refer[red] to the possibility that the [contracting authority] had based its evaluation on a horizontal criterion of the tenderer’s general understanding of the tender specifications" (para 121).

The GC placed this complaint within the strictures of the principles of equal treatment and transparency (para 123), and reiterated the general case law concerning the exercise of discretion in the choice of award criteria and evaluation rules, subject to those general principles (paras 124-126). It then established that

In the first place, it must be recalled that the fact that the content of the tender submitted by the European Dynamics consortium complied with the tender specifications does not mean that the negative assessments made by the evaluation committee on that tender resulted from the introduction of new award criteria, which were not mentioned in the documents relating to the call for tenders.

The same is true of the fact that all the negative comments did not necessarily correspond literally to one explicit requirement of the technical specifications ... In that regard, it must be recalled that an evaluation committee must be able to have some leeway in carrying out its task. Accordingly, it may, without amending the contract award criteria set out in the tender specifications or the contract notice, structure its own work of examining and analysing the submitted tenders ...

In the second place, ... the comments by the evaluation committee regarding insufficient examples illustrating more concretely the proposal for service delivery for the scenario contained in the tender submitted by the European Dynamics consortium does not mean that that committee took into account an award criterion that was not set out in the tender specifications. On the contrary, as the [contracting authority] submits, the presence of examples may be capable of reflecting the tenderer’s proper understanding of the services sought. Similarly, the selection, by the tenderers, of the information and detail included in the tender shows the understanding by the latter of the services sought. Hence, the comments relating to insufficient examples or details in the tender submitted by the European Dynamics consortium are indissociably linked to the assessment of the award criteria .... They do not therefore reveal the existence of additional award criteria.

In the third place, it is clear from the evaluation committee’s report that the value of the tenders was indeed evaluated with regard to the technical criteria referred to in the tender specifications. The fact that, as the [contracting authority] states in its defence, the points relating to each of the criteria and sub-criteria defined in the tender specifications were awarded after completion of an evaluation of the whole of the technical offer submitted by each tenderer cannot call that finding into question. Therefore, even if the objection were validly made, the argument that the [contracting authority] considered that the general understanding of the tender specification was a more important criteria than the criteria made public must be rejected (paras 129-132, references omitted and emphases added).

In my view, the GC's Judgment should be welcome. Mainly for two reasons. First, it avoids the dangerously prescriptive approach that would have underpinned a consideration that each example (or the number of examples) needs to be linked to a specific award criterion--which would have made the design of award criteria and tender formats impossibly complex and constraining. Second, because it recognises that, regardless of the break-up of criteria into sub-criteria, evaluation committees can (and I would say should) carry out the evaluation on the basis of their overall or holistic assessment of the tenders. Again, the opposite approach would be excessively constraining, and would result in an artificial split of the tenders into different sub-dimensions in a manner that could rend the evaluation process moot or exceedingly complicated. So, on the whole, this is a good example of pragmatic approach by the GC.

Detailed comments v illegal sub-criteria & their weightings

In its Judgment of 20 December 2017 in EUIPO v European Dynamics Luxembourg and Others, C-677/15 P, EU:C:2017:998 (for discussion of the GC decision under appeal, see here), the ECJ assessed whether specific comments on particular aspects of a tender can constitute the illegal introduction of sub-criteria or their weighting. It is worth recalling that the case also concerned the provision of IT services, and that the evaluation of the quality of the tenders would partially rely on their project management strategy, which was to be assessed against a long list of non-prioritised elements (such as 'change management process', or having a 'lessons learnt programme').

At first instance, ED challenged the evaluation on the basis that the contracting authority's 'negative comment on the bid submitted by [ED] that the bids obtaining a higher score than it obtained under the first award criterion "identified change management and communication as the two most essential tasks for the success of the project’ showed that [the contracting authority] had applied a weighting to the various sub-criteria within the first award criterion"' (para 11). The GC sided with ED and found that 'since such weighting was not provided for by the tender specifications or communicated in advance to the tenderers, [the contracting authority] had breached, to the detriment of [ED], the principles of equal opportunity and transparency' (ibid).

On appeal, the ECJ has now found that "[i]t is clear that the judgment under appeal is vitiated by an error of law in that regard" (para 30). However, the ECJ has reached this position on purely procedural grounds, which leaves the question open as to whether the provision of negative comments indicating relative disadvantages in relation to some, but not all, the sub-criteria published in the tender document constitutes in itself an illegal case of introduction of illegal sub-weightings. The ECJ has indeed assumed that to be the case, and provided the following reasons for the annulment of the previous GC finding on procedural grounds:

... the principle that procurement procedures must ensure equal treatment and be transparent means that the adjudicating authority must interpret the award criteria in the same way throughout the entire procedure ... Accordingly, a contracting authority cannot apply weighting rules or sub-criteria in respect of the award criteria which it has not previously brought to the tenderers’ attention ...

Nevertheless, it is possible for a contracting authority to determine, after expiry of the time-limit for submitting tenders, weighting factors for sub-criteria which correspond in essence to the criteria previously brought to the tenderers’ attention. That subsequent determination must, however, satisfy three conditions, namely, it must not: (i) alter the criteria for the award of the contract set out in the contract documents or contract notice; (ii) contain elements which, if they had been known at the time the tenders were prepared, could have affected that preparation; and (iii) have been adopted on the basis of matters likely to give rise to discrimination against one of the tenderers ...

In the present case, the disputed findings concern the introduction of weighting given to sub-criteria within one of the award criteria, which was not provided for in the tendering specifications or disclosed in advance to the tenderers ... Thus, in the light of the foregoing, the General Court was not in a position to reach a valid finding that there had been a breach of the principles of equal opportunity and transparency without first examining whether it had been pleaded and established that those three conditions had not been met.

As the General Court failed to verify ... whether those three conditions ... were met in the present case, the first ground of appeal must be upheld, without there being any need to examine the merits of [the contracting authority's] argument that the General Court failed to have due regard for its duty to state reasons when it found that the introduction of factors for the assessment of the sub-criteria in question gave rise to a breach of the principles of equal opportunity and transparency (paras 31-35, references omitted and emphases added).

In my view, this is a lost opportunity for the ECJ to have clarified the extent to which a literal interpretation of the comments given by the contracting authority in debriefing documents can be subjected to the level of scrutiny that the GC had engaged in. It is also relatively difficult to put the two cases discussed in this post together. Strictly speaking, applying the logic that emerges from this second case to the first one, it would seem that ED may have been right in claiming that mentioning the existence of a larger number of examples as the reason for a lower technical mark could constitute a new sub-criterion (or a new sub-weighting if the provision of examples was indicated amongst the list of criteria to be taken into account). In that regard, the GC seems to have adopted a more lenient approach in the first case than the ECJ may be willing to recognise. Should the first case be appealed by ED (who knows?), this may be a tricky issue for the ECJ to iron out.

No comment unless in the presence of my lawyer?

On the whole, I think that these two cases show that, regardless of how flexible the courts are in the assessment of the comments given by the contracting authorities in the context of procurement debriefing, these are dangerous waters. Should this then lead to evaluation teams requiring a lawyer to sit in their meetings and make sure that nothing that is committed to paper (keyboard) can then be used to challenge the evaluation? 

No comment.

Paper on Public Procurement & "Core" Human Rights

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I have uploaded a new paper on SSRN, which is a draft chapter for a forthcoming book: O Martin-Ortega & C M O’Brien (eds), Public Procurement and Human Rights: Risks, Dilemmas and Opportunities for the State as a Buyer (Edward Elgar). In my chapter 'Public Procurement and "Core" Human Rights: A Sketch of the EU Legal Framework', I sketch the main mechanisms for the implementation of a "core" human rights-orientated public procurement policy foreseen in the 2014 EU Public Procurement Package.

In particular, I discuss the main constraints for the inclusion of human rights-related considerations in the procurement process through the following instruments: exclusion grounds; use of labels; award criteria; and contract performance requirements. I conclude by offering a sceptical view of the effectiveness of any of these mechanisms due to policy fuzziness and significant resource constraints, and query their desirability due to the implicit trade-offs they impose on the general effectiveness of the procurement function.

This is still very much work-in-progress, so any comments or feedback would be most welcome: a.sanchez-graells@bristol.ac.uk. The full paper is available on SSRN as: A Sanchez-Graells, 'Public Procurement and "Core" Human Rights: A Sketch of the EU Legal Framework' (January 16, 2018), to be published in O Martin-Ortega & C M O’Brien (eds), Public Procurement and Human Rights: Risks, Dilemmas and Opportunities for the State as a Buyer (Edward Elgar, forthcoming): https://ssrn.com/abstract=3103194.

Legal Archaeology: Timing of Brexit, CJEU case law & substantive public procurement rules

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At the extremely thought-provoking conference "Trade Relations after Brexit: Impetus for the Negotiation Process", I had the chance to present some thoughts on the regulatory challenges that Brexit poses for EU public procurement regulation, and to explore potential solutions that could/should be designed in the context of an agreement regulating future EU-UK relationships. I already posted my general views here. However, the discussions at the conference made me think in more detail about the specific challenge of fostering substantive coordination post-Brexit--which is an unavoidable challenge if the UK is to have any sort of meaningful access to the EU internal market, and all the more in the context of an ambitious FTA.

Of course, this challenge is not all that peculiar to the area of public procurement, and the general problems that section 6(2) of the European Union (Withdrawal) Bill (EUWB) creates concerning the non-bindingness of the future case law of the Court of Justice have been extensively discussed by others. Indeed, by establishing that 'A court or tribunal need not have regard to anything done on or after exit day by the European Court, another EU entity or the EU but may do so if it considers it appropriate to do so', if unchanged, the EU (Withdrawal) Act would create a level of legal uncertainty that nobody desires--first and foremost, prominent UK Judges such as Lord Neuberger.

However, it seems to me that, should Brexit day come some time in 2019 or 2020, the effects of the EUWB could be rather undesirable--unless, of course, UK courts decided to systematically (and voluntarily) keep a close eye on the CJEU future case interpreting the 2014 Public Procurement Package. Why is that?

The UK transposed the 2014 Public Procurement Package by copying it out, primarily into the Public Contracts Regulations 2015 [A Sanchez-Graells, 'The Implementation of Directive 2014/24/EU in the UK', in S Treumer & M Comba (eds), Implementation of Directive 2014/24, vol. 8 European Procurement Law Series (Edward Elgar, forthcoming). ]. Thus, barring any intervening 'fine-tuning' of the transposition, on Brexit Day (and until such time as the PCR2015 are reformed, or EU procurement law subject to further revision), the domestic UK rules will be perfectly aligned with EU public procurement law. However, and rather counterintuitively, this cannot by itself ensure substantive coordination in the foreseeable future. How come?

As things stand, and unless I have missed something, the CJEU is yet to issue any judgment interpreting the three Directives included in the 2014 Public Procurement Package (Dirs 23, 24 and 25/2014/EU). On occasion, the Court has indirectly taken into consideration some of the reforms the 2014 Package brought about, but most of the rules where there is a sharp distinction between the pre-2014 and the post-2014 rules (which sometimes involve a 'flexible recast' or implicit reform of case law that got incorporated to the new Directives) remain untouched. Enter the EUWB.

According to section 6(3) EUWB, "Any question as to the validity, meaning or effect of any retained EU law is to be decided, so far as that law is unmodified on or after exit day and so far as they are relevant to it—(a) in accordance with any retained case law and any retained general principles of EU law, ...". So, when confronted with the need to interpret the PCR2015 (identical to the 2014 Package), the UK Courts will only be able to rely on 'old' CJEU case law, which may or may not be a good proxy of the interpretation the CJEU would (will) make of the revised rules, in particular where there is a clash between such 'old' case law and the new rules [for extended discussion, see GS Ølykke & A Sanchez-Graells (eds), Reformation or Deformation of the EU Public Procurement Rules (Edward Elgar, 2016)].

Moreover, given the different techniques of statutory interpretation applicable in the UK and those the CJEU tends to follow, even the most willing UK court may find itself carrying out complex exercises in 'legal archeology' to ascertain the extent to which the 'old' case law buried under the new rules is of any use in the construction of the latter. Oddly enough, should the UK courts--willingly, due to convenience, or inadvertently--give more weight to the 'old' case law than the CJEU itself (which could decide to go by the literal tenor of the new rules, even if they deactivate previous jurisprudential positions, to show deference to the EU legislators) the UK could end up with 'purer' EU public procurement rules than the EU itself. Surely not what the drafters of section 6(2) and (3) EUWB had in mind.

Of course, this hypothetical scenario is bound to lose relevance as time goes by and the CJEU has the chance to engage in the direct interpretation of the 2014 Package--and a long transition period may do away with the peculiarity derived from the current 'estimated' timing of Brexit and the recent reform of EU public procurement law. More generally, all in all, this is probably highly theoretical or even absurd, but I think it militates in favour of a flexible mechanism for UK courts to (voluntarily, sure) send references on interpretation to the CJEU post-Brexit, if there is to be substantive coordination--not solely on procurement, but in all areas of 'regulatory allignment' of a flavour or other, in the context of the agreement for future EU-UK relationships. Will the next wave of negotiations raise to this challenge?

Two recent cases on transparency & access to documents in EU Institutional procurement (II) (T-164/15)

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Two recent General Court judgments have addressed different aspects of transparency duties and access to documents requirements in EU Institutional procurement [for discussion, see A Sanchez-Graells, 'Transparency in Procurement by the EU Institutions' (2017)]. A previous post discussed the Judgment of 14 December 2017 in Evropaïki Dynamiki v Parliament (T-136/15, EU:T:2017:915), which concerned access to procurement documents under Regulation 1049/2001. This post discusses the second Judgment, also of 14 December 2017, and also involving European Dynamics Luxembourg and Evropaïki Dynamiki v Parliament (T-164/15, EU:T:2017:906, not available in English), which addresses issues concerning the duty to provide reasons under the applicable (2012) version of the EU Financial Regulation

A Kafka-esque case concerning the justification of the Substitution or (re)Classification of tenders within cascade mechanisms?

The dispute in European Dynamics Luxembourg and Evropaïki Dynamiki v Parliament (T-164/15, EU:T:2017:906) concerned one more instance of classification of the tenderers within a cascade mechanism for the purposes of the award of a framework contract divided into several lots. The case is interesting because it concerns an instance of substitution, rather than (strict) reclassification, of one the economic operators included in the framework.

In the case at hand, the Parliament tendered a framework agreement divided into lots for the provision of several types of IT services. The framework contract for each lot was to be concluded with the three economic operators offering the most advantageous tenders, which were to be ranked in a cascade mechanism. European Dynamics' tender was initially rejected (or rather, not retained) for not being amongst the three strongest submissions. Upon being notified of the award decision, European Dynamics required additional details and the Parliament sent debriefing materials justifying the relative advantages of the retained three offers by comparison to European Dynamics'. After European Dynamics received this information, 'the Parliament informed all the tenderers that one of the participants had detected an error in the parametric formula established in the tender documentation for the calculation of the overall price of the tenders. However, [the Parliament] clarified that, after verification, this error was purely material and had no impact on the ranking of the tenders' (T-164/15, para 9, own translation from French). However, this issue does not seem to have much relevance in the analysis by the GC.

After that initial debriefing exchange, including the clarification on the applicable formula for the assessment of the overall price, European Dynamics raised with the Parliament an objection to the cascade classification for the relevant lot on the basis that the economic operator ranked first had also been engaged (as part of a consortium) for the provision of services of a different lot, and that multiple engagement in several lots was not allowed by the tender documentation. The Parliament eventually decided to exclude that economic operator from the relevant lot, and to add European Dynamics to the framework agreement, assigning it the third position in the cascade mechanism.

At this stage, European Dynamics informed the Parliament that it interpreted the decision to (re)classify them as third in the cascade mechanism as the simple result of the exclusion of the economic operator initially ranked first, and that they therefore assumed that 'thus, the awarding phase was conducted on the basis of the initial evaluation, the points awarded and the justifications remaining the same as those' covered in the previous debriefing letter (T-164/15, para 12, own translation from French). In view of this interpretation, European Dynamics asked for additional debriefing of any new information concerning the exclusion of the tenderer previously ranked as first. 'Parliament confirmed ... that the exclusion of the tenderer whose tender had initially been ranked in the first position had no impact on the evaluation of the other tenders and that, consequently, the information already provided to the applicants ... remained relevant and included all the information required' (T-164/15, para 13, own translation from French).

European Dynamics challenged the Parliament's decision to (re)classify their tender as third within the cascade mechanism, mainly on the basis that the duty to provide reasons incumbent upon Parliament was not properly discharged with the simple explanation that their tender would have substituted the one initially first-ranked upon its exclusion. Given that the GC decided to quash that decision, it is interesting to assess the details of the shortcomings found by the GC in the course of action taken by Parliament.

It is also worth noting that the GC starts its reasoning by reiterating the general principles and limits of the duty to provide reasons. It is framed by reference to the 2012 version of the EU Financial Regulation (see T-164/15, paras 25-28), but the general framework is common to that under the 2014 Public Procurement Package. It is also important to stress that the GC frames the analysis of the dispute on the premise that European Dynamics' request for additional details following its reclassification as third in the cascade as a result of the substitution of the excluded tender, constituted a fresh request for debriefing details that engaged the transparency obligations of the Parliament in full (paras 29-34). In my view, while this is relevant regarding the disclosure of information concerning the financial evaluation (which seems to have changed after the exclusion of the initially highest ranked tender due to the relative comparison of the overall price of the tenders, as mentioned below), this is not relevant concerning the disclosure of information related to the technical evaluation, which is the main issue discussed in this post. However, the reader may want to keep this in mind when reading the case as a whole.

Need for detail--still short of full disclosure of the evaluation report?

At this stage, it may be useful to describe the debriefing that had been initially carried out by Parliament--when European Dynamics had had its offer rejected--which was as follows: 'Parliament's [initial debriefing] letter ... specified the names of the three tenderers initially selected. It also included a table showing the marks obtained by those tenders' and the applicants' tenders in the technical evaluation, extracts from the evaluation committee's comments on the strengths and weaknesses identified in those four tenders in the context of their technical evaluation, a table giving the scores obtained by the four tenders in the financial evaluation, as well as a table giving the overall marks awarded to the same four tenders' (T-164/15, para 39, own translation from French). European Dynamics challenged this as insufficient because the debriefing did not offer specific comments for each of the technical criteria, but solely in relation to those criteria related to the relative strengths and weaknesses.

In finding fault with the level of detail provided by the Parliament in that initial debriefing, the GC considered that '... even if the marks awarded by the Parliament offered the applicants the opportunity to compare, under each technical award criterion, the points which had been awarded to their tender with those obtained by the tenders ranked first and second in the cascade, they did not allow them to know the reasons why those marks had been attributed to those offers. In that regard ... a cross-reading of the comments relating to the three tenders [initially] retained in the cascade, combined with the figures, did not make it possible to make up for the lack of any information concerning the reasons for the attribution of certain marks. Indeed, in addition to the general assessment of the quality (good, very good or satisfactory) of the offers, each comment related to a specific technical award criterion. In addition, some of these comments were of a very general nature' (T-164/15, paras 44-45, own translation from French, emphasis added).

This comes to establish an extremely high debriefing burden, and one that should be criticised for the excessive transparency it can create. Moreover, it is difficult to find a clear boundary between the insufficiency of the overall comparison of tenders that was disclosed by the Parliament in this case, and the more general principles that derive from the ECJ case law. Indeed, as the GC itself reiterated in this occasion (para 28), 'it is apparent from the case-law that the [contracting authority] cannot be required to communicate to an unsuccessful tenderer, first, in addition to the reasons for rejecting its tender, a detailed summary of how each detail of its tender was taken into account when the tender was evaluated and, second, in the context of notification of the characteristics and relative advantages of the successful tender, a detailed comparative analysis of the successful tender and of the unsuccessful tender ... Similarly, the contracting authority is not under an obligation to provide an unsuccessful tenderer, upon written request from it, with a full copy of the evaluation report' (see Evropaïki Dynamiki v Commission, C‑629/11 P, EU:C:2012:617, paras 21-22).

Disappointingly, the GC did not seem to give much weight to this general principle, when it established that

... the corollary of the Parliament's margin of appreciation in the area of public procurement is a duty to state the factual and legal grounds on which it based its assessment. It is only in the light of these elements that the applicant is really able to understand the reasons for which the marks were awarded ... In that regard, the fact ... that the contracting authority cannot be required to carry out a detailed comparative analysis of the tenders retained, and that it is not required to disclose the evaluation report in full, cannot lead to the comments sent to the applicants not showing clearly and unequivocally the reasoning of the institution, so as to enable them to know the justifications for the classification of their offer in the third position of the cascade mechanism ... Indeed, only such motivation enables them to assert their rights and allows the Tribunal to exercise its control (T-164/15, para 51, references omitted, own translation from French and emphasis added).

So, in the end, the GC is forcing a round peg into a square hole, and creates a large area of uncertainty concerning the intensity of the debriefing duties for contracting authorities subjected to EU Institutional procurement rules (and more generally). I find this quite problematic, as it continues to put pressure on contracting authorities to engage in excessive disclosure, and it creates significant uncertainty as to how to operationalise fuzzy requirements, in particular if the threshold of disclosure changes with the specific circumstances of the case, as discussed below.

Moving goal posts in dynamic (re)classification or substitution decisions

Indeed, in addition to the issue of the level of detail just discussed, the GC created additional uncertainty by subsequently engaging in a reasoning that can only be described as moving the goal posts in situations where the exclusion of the highest-ranked tender compresses the differences between the tenders eventually retained in the framework agreement--or, even further, in situations where the overall score obtained by the tenderers does not show significant spread of marks. The GC seems to hang its reasoning on the presumption that the closer the final scores, the higher the risk of mis-evaluation and/or likelihood of successful litigation. This does not make sense, in particular where the overall score is constructed by clearly separate sets of (technical and financial) evaluation exercises. Moreover, it could create a perverse incentive for evaluation teams to artificially create a larger spread of marks in order to reduce litigation risk, which would be clearly undesirable.

As I will explain in a moment, the establishment of higher standards of disclosure where the overall scoring of the tenders reflects smaller (overall) differences between the tenders can only create problems, in particular where the initial evaluation and ranking is later used for decisions on reclassification or substitution of tenders. Given that technical and financial evaluation are carried independently, imposing a higher or lower duty of motivation of the technical evaluation dependent upon the results of the financial evaluation is very problematic. By not acknowledging this, and simply assuming that there will always be a wealth of information on qualitative comments justifying specific technical assessments that the contracting authority can decide to disclose or not depending on the outcome of the financial and overall scoring of the tenders is both impractical and can result in excessive formalism in the completion of technical evaluation reports.

Returning to the case, and in simple terms, the situation that the GC considered problematic results from the fact that the tender was evaluated through technical criteria weighting 70%, and financial criteria weighting 30% of the total points (para 3)--with the financial aspects of the tender evaluated through the parametric formula mentioned above, which carried out a relative analysis based on maximum points awarded to the lowest price (para 5). In that regard, it seems clear that (globally), technical criteria were more important than financial criteria, and that there was a relative comparison of financial aspects that depended on the values of the tenders received (NB: this is discussed in detail by the GC in a separate ground of appeal, which I will not comment on this occasion--see paras 54-66).

On the basis of those award criteria, the initial technical scoring awarded to the (eventually excluded) best tender was 54.39 out of 70, and this was more than 4 points higher than European Dynamics' scoring, and more than 3 points higher than the score of the second-ranked tender (para 47). Implicitly, this placed all tenders eventually retained in the framework (including European Dynamics') within a bracket of approximately 1 technical point (ie, somewhere between 49 and 51 points). This narrow distribution of technical scores necessarily had an impact on the final overall marks of the tenders, which were also rather close.

As the GC stressed, 

the decision to classify [European Dynamics'] tender in third place came at the end of the final evaluation, that is to say after the evaluation of the price-quality ratio of the tenders. However, the difference between the overall scores attributed to the successful tenders was low or very low. In that regard, it should be noted that the exclusion of the tenderer whose tender had initially been ranked first had a minor impact on the financial evaluation of the tenders, which was reflected on the overall scoring of the offers. In fact, in the light of the rectified overall marks attributed to the three tenders finally accepted as a result of that assessment ... it must be stressed that the tender which was finally classified in the first place was awarded an overall mark of 79.11 points, the tender which was finally ranked second obtained an overall score of 77.67 points, and [European Dynamics'] offer was given the overall score of 77.64 points. It follows from those overall scores ... that only 0.03 points separated the tender which was finally ranked second from [European Dynamics']' (T-164/15, paras 48-49, own translation from French).

From this narrow difference in overall final scores, the GC infers that

Given the small or very small difference in score between the tenders of the three successful tenderers, [European Dynamics'] interest in obtaining a clear and comprehensible explanation as to the technical evaluation of their tender in order to verify the absence of error in the attribution of results was particularly high (sic) ... That interest was all the more important since, despite the fact that the price of the tender which was finally ranked first was higher than that of [European Dynamics'] tender, the Parliament considered that the first offer presented the best value for money and was thus economically the most advantageous. It therefore appears that the assessment of the quality of the services with regard to the qualitative award criteria has played an important role (T-164/15, para 50, references omitted, own translation from French, emphases added).

Once more, this is rather problematic. Not solely for the moving target implicit in the conditionality of the debriefing obligations upon the difference in scores obtained by the different tenderers, but also because it fails to recognise the limits set out as general principles by the ECJ (see above) and because it loses sight of the function that debriefing should serve and of the complex trade-offs between procedural guarantees and risks derived from excessive transparency at this stage. Moreover, as mentioned above, the GC seems to be less trusting of close scores than widely diverging ones, and also shows a clear bias against the evaluation of non-price criteria. While the underlying concerns may be understood from a pure judicial review perspective, they can be rather harmful and certainly go against the grain of the 2014 revision of the EU procurement rules (which reflected earlier tendencies) in its effort to discourage price-only procurement and to embed mechanisms for the assessment of quality and other relevant factors. On the whole, this sort of reasoning by the GC seems to act as a relevant deterrent for more sophisticated procurement efforts, which will necessarily carry a large (or excessive) risk of litigation, and which will be vulnerable to such risk. Whether this advances procurement practice can be doubted.

Final note

On the whole, the GC Judgment in European Dynamics Luxembourg and Evropaïki Dynamiki v Parliament (T-164/15) leaves the impression that the only way in which contracting authorities can avoid claims of insufficient motivation is by disclosing the entirety of the evaluation report--and make sure that there are extremely clear and fully-articulated rationales for each of the scores and sub-scores given to each specific element of each tender (and regardless of the ECJ case law indicating that this is not the applicable standard).

However, contracting authorities, even if willing, cannot do engage in that level of disclosure because they have positive duties to withhold certain information where its release would impede law enforcement, would be contrary to the public interest or would prejudice the legitimate commercial interests of economic operators or might distort fair competition between them (and this is common to EU Institutional procurement and to procurement covered by the 2014 Public Procurement Package). Therefore, contracting authorities find themselves in the perfect catch 22 and open to abuse by litigation-prone tenderers. This cannot be considered a satisfactory state of affairs, but the GC does not seem to be aware of this, or willing to curve this trend.

Therefore, the more cases I read on the duty to state reasons in the context of procurement debriefing, the more I am persuaded that the current strategy of relying on tenderers' justiciable transparency rights as a mechanism for the oversight of the procurement function is rather inadequate. I cannot but reiterate my conviction of the need to create some asymmetrically opaque review mechanisms that allow for proper scrutiny of procurement decisions in a way that does not jeopardise competition in the market or anyone's legitimate business and commercial interests.

Two recent cases on transparency & access to documents in EU Institutional procurement (I) (T-136/15)

1200px-Great_Wave_off_Kanagawa2.jpg

Two recent General Court judgments have addressed different aspects of transparency duties and access to documents requirements in EU Institutional procurement [for discussion, see A Sanchez-Graells, 'Transparency in Procurement by the EU Institutions' (2017)].

The first Judgment of 14 December 2017 in Evropaïki Dynamiki v Parliament (T-136/15, EU:T:2017:915) concerns access to procurement documents under Regulation 1049/2001. The other Judgment of 14 December 2017, and also involving European Dynamics Luxembourg and Evropaïki Dynamiki v Parliament (T-164/15, EU:T:2017:906, not available in English), addresses issues concerning the duty to provide reasons under the applicable (2012) version of the EU Financial Regulation

This post discusses T-136/15, and a follow-up post will discuss T-164/15.

Access to procurement documents under Regulation 1049/2001--
a blow to the almighty presumed protection of business secrets?

As a starting point, it is worth reminding that the Court of Justice (ECJ) has recognised that the protection of business secrets is a general principle applicable in the context of public procurement [Judgment of 14 February 2008, Varec, C-450/06, EU:C:2008:91, paragraph 49; see also Opinion of AG Kokott of 23 September 2010 in Stichting Natuur en Milieu and Others, C-266/09, EU:C:2010:546, paragraph 77], and that the General Court (GC) has accepted that there is general presumption of confidentiality in respect of the bids submitted by tenderers in a public procurement procedure in the event that a request for access is made by another tenderer, in particular on account of the economic and technical information contained in those bids [Judgment of 29 January 2013, Cosepuri v EFSA, T-339/10 and T-532/10, EU:T:2013:38, paragraphs 95 and 101; and Judgment of 21 September 2016, Secolux v Commission, T-363/14, EU:T:2016:521, paragraphs 47 and 49]. However, in this case, the disappointed bidder (European Dynamics) did not seek access to the tenders submitted by its competitors, but to 'all available information concerning all the requests for quotation which were issued by the [Parliament] for all lots' (T-136/15, para 2). This created an opportunity for the GC to reassess the extent of the presumption against the disclosure of documents containing potential business secrets, as the documents did not originate from the bidders, but rather from the contracting authority. The case does not provide much detail, but it seems that the requests for quotations may have been different between themselves, and that European Dynamics wanted to ascertain whether they represented a proper split of the contract into lots.

With this in mind, and given the width of the general presumption against disclosure of documents on the basis of business secrets, it should come as no surprise that, when European Dynamics asked the European Parliament to provide all requests for quotations--and in addition to other arguments for the rejection of such request, including workload implications, public security, personal data and procedural decision-making issues--the Parliament sought to ground its rejection of access on the fact that 'the documents requested contain information of an economic and technical nature, the presentation of which could reveal the Parliament’s profile as a buyer in the market. In addition, the requests for quotation could contain information on the particular skills of the suppliers selected for each lot as well as details of their commercial strategy and alliances or links with third parties. The protection of commercial interests, namely those of the economic actors involved and of the Parliament, also justified, in the view of the Parliament, refusing all access to the documents requested' (T-136/15, para 16). The Parliament also pressed the additional point that 'the ... exceptions to the right of access... were to be regarded as applying to all ... documents by virtue of a general presumption, in accordance with the line of reasoning developed by the Court of Justice in its judgment of 29 June 2010, Commission v Technische Glaswerke Ilmenau (C‑139/07 P, EU:C:2010:376)' (T-136/15, para 19). Also unsurprisingly, European Dynamics challenged that decision.

In its assessment of this specific aspect of the dispute, the GC found that:

(1) Parliament was generally entitled to rely on presumptions of applicability of the grounds for non-disclosure, as 'the Court of Justice has acknowledged that it is open to the institutions to base their decisions, as regards how granting access might specifically and actually undermine the interest protected by an exception under Article 4 of Regulation No 1049/2001, on general presumptions which apply to certain categories of documents, as considerations of a generally similar kind are likely to apply to requests for disclosure relating to documents of the same nature (judgments of 1 July 2008, Sweden and Turco v Council, C‑39/05 P and C‑52/05 P, EU:C:2008:374, paragraph 50; of 29 June 2010, Commission v Technische Glaswerke Ilmenau, C‑139/07 P, EU:C:2010:376, paragraph 54; of 21 September 2010, Sweden and Others v API and Commission, C‑514/07 P, C‑528/07 P and C‑532/07 P, EU:C:2010:541, paragraph 74, and of 27 February 2014, Commission v EnBW, C‑365/12 P, EU:C:2014:112, paragraph 65)' (T-136/15, para 47, emphasis added). But the possibility of relying on such presumptions required that 'documents of the same category ... contain the same kind of information. ... only if an exception to the right of access manifestly covers the content of those documents in its entirety ... the institution may avoid undertaking a specific, individual examination of those documents (see, to that effect, judgment of 9 September 2011, LPN v Commission, T‑29/08, EU:T:2011:448, paragraph 114)' (T-136/15, para 48). Thus, a detailed assessment of the applicability of the grounds to the specific type of document was necessary.

(2) Reliance on such a presumption was not justified on grounds relating to (i) protection of public security, (ii) privacy or (iii) the protection of Parliament's decision-making process because not all documents covered by the request for access could be presumed to include information relevant to those issues (see T-136/15, paras 50-60). This left the legality Parliament's rejection of access to documentation dependent on the GC's view on the exclusion from disclosure based on the first indent of Article 4(2) Reg 1049/2001, according to which '[t]he institutions shall refuse access to a document where disclosure would undermine the protection of: ... commercial interests of a natural or legal person, including intellectual property'.

(3) When assessing the applicability of a general presumption of exemption in line with the first indent of Art 4(2) Reg 1049/2001, the GC stressed the different nature of documents covered by European Dynamics' request. Its arguments (even if lengthy) require some close analysis:

as regards requests for quotations, a general presumption that commercial interests would be undermined cannot be based ... on the case-law ... relating to the bids of tenderers ...

... in order to attain the objective of the rules on EU public procurement, which is based on undistorted competition, it is important that the contracting authorities do not release information relating to public contract award procedures which could be used to distort competition, whether in an ongoing procurement procedure or in subsequent procedures ...

... it is recognised in the case-law that the economic and technical information in the tenderers’ bids is such as to justify refusal by the institution concerned to grant access to the bid of the successful tenderer. That is the case in particular where such bids contain details of the specific skills of the tenderers and contribute to the individual nature and appeal of the tenderers’ bids ...

 Having regard to the nature and purpose of a request for quotation drawn up by the contracting authority in performance of a framework contract, it cannot be presumed that such a document contains economic and technical information on the contractor or details its specific skill. On the contrary, its request for quotation, which comes from the contracting authority and not from its contractors, includes as a general rule a description of the tasks which the contracting authority wishes to have carried out under the framework contract which it has signed with the contractor. In principle, it is only in response to that request for quotation that the contractor will provide details on the services which it considers it can provide to the contracting authority, the profile of the experts which it can make available and the cost of its services.

Furthermore, the Parliament cannot argue that the disclosure of the requests for quotation will undermine its own interests, in that disclosure could reveal its ‘purchasing profile’ on the market. In fact, even if disclosure of the relationship between the tasks to be performed and the number of working days necessary to complete them could enable the tenderers, in future public procurement procedures, to unveil the Parliament’s costing technique, the fact that tenderers could know the prices quoted in the past for a corresponding service seems more likely to lead to a situation of genuine competition than to a situation where competition would be distorted (sic) ...

... having regard to the nature of a request for quotation drawn up by the contracting authority in performance of a framework agreement and the objective pursued by the [procurement rules], the Parliament was not entitled to rely on a general presumption that the interests protected by the first indent of Article 4(2) of Regulation No 1049/2001 would be undermined to avoid a specific, individual examination of the documents requested.

A request for quotation includes, in principle, a description of the tasks which the contracting authority wishes to have carried out under the framework contract which it has signed with the contracting party, but also more general information concerning, in particular, the practical management and monitoring of projects, the persons responsible, or the format of the reports to be provided on a regular basis. Thus, it is not established that the disclosure of all the information contained in the documents requested would undermine the commercial interests of the Parliament or of third parties.

... the Parliament could not rely on the exception to the right of access set out in the first indent of Article 4(2) of Regulation No 1049/2001 relating to the protection of commercial interests to refuse to carry out a specific, individual examination of the documents requested and to disclose them (T-136/15, paras 63, 68-72, and 74-75, references omitted and emphases added).

Despite excluding the possibility for the Parliament to rely on the presumptions, the GC recognised the validity of the rejection of the request to access the documents on the grounds that complying with it would have generated an excessive workload for the Parliament (see T-136/15, paras 78-103). Therefore, the documents were not disclosed. However, in my view, the approach to the applicability of the presumption of confidentiality to requests for quotations within framework agreements undertaken by the GC in its Evropaïki Dynamiki v Parliament Judgment (T-136/15) is faulty.

Critical comments

Indeed, there are two issues that require particular criticism because, in my view, the GC improperly assessed them.

First,  the GC seems to misinterpret the extent to which a request for quotations within the context of a framework agreement is likely to contain commercially-sensitive information, and errs on the side of presuming excessive neutrality or homogeneity in those requests. In my view, thus, the GC gets it wrong when it considers that '[i]n principle,it is only in response to [a] request for quotation that the contractor will provide details on the services which it considers it can provide to the contracting authority, the profile of the experts which it can make available and the cost of its services' (T-136/15, para 70). This is a reasoning that implicitly establishes the wrong functional equivalence between a call for tenders prior to the award of a public contract (including framework agreements) and a request for quotations within the context of a framework agreement. Given that the award decision (based on the previous tender) would already have established details of the services covered by the concluded framework, the GC gets the general principle backwards in ignoring that each of the requests for quotation would have been different and based on the peculiarities of each contractor's prior offer--otherwise, why would Parliament have issued over 1,000 (different) requests for quotation, and why would European Dynamics be interested in having access to them?

Indeed, given that award of the framework agreement (or, to be more precise, the placing of a contractor in a specific position in the cascade mechanism within the framework, as in the case at hand) results from the previous tender successfully submitted by the interested economic operator--and that, consequently, not all contractors included in the framework agreement would have been included under homogeneous conditions--in my view, the requests for quotations are more likely than not to include details of the previous tender that can be easily 'reverse-engineered' by their competitors. Thus, the protection given by the presumption of confidentiality to the original tender needs to carry through to requests for (more specific) quotations on its basis, so as to avoid such risk of leakage of commercially-relevant information. By taking a different approach, the GC has created a potential negative erosion of the presumption of protection of commercially-sensitive information in the context of EU Institutional procurement where framework agreements are involved. In my view, this is undesirable and the GC's position should be challenged.

Second, the GC's complementary position that 'the fact that tenderers could know the prices quoted in the past for a corresponding service seems more likely to lead to a situation of genuine competition than to a situation where competition would be distorted' (T-136/15, para 71) makes no economic sense, in my opinion. Given that what is presented as information on "past pricing" would, in the case at hand, have concerned "contemporaneous pricing", and that it would be disclosed within such a closed competitive setting as a framework agreement, economic theory predicts anticompetitive effects and a heightened risk of collusion [for discussion, generally, see K-M Halonen, 'Disclosure Rules in EU Public Procurement: Balancing between Competition and Transparency’ (2016) 16(4) Journal of Public Procurement 528; A Sanchez-Graells, ‘The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives’ (2013) Univ. of Leicester School of Law Research Paper No. 13-11]. By failing to take that risk into account, and starting to consolidate a jurisprudential position that revelation of past pricing information is pro-competitive, the GC is following the wrong functional approach. This, too, I would like to see challenged and changed.