Interesting case on the award of public contracts and 'prudential budgetary reserves' (T-90/14)

The tension between budgetary rules and public procurement law was rather evident in a recent case before the General Court (GC) of the Court of Justice of the European, which it decided in its Judgment of 8 October 2015 in Secolux v Commission, T-90/14, EU:T:2015:772 (only available in French). The case concerned procurement by the EU Institutions, but the situation seems to be applicable mutatis mutandis to procurement covered under the general EU rules for procurement carried out by the Member States.

In the case at hand, the European Commission received a tender valued at 4,222,680 euros and selected it for award of the contract, therefore disclosing that information to all other bidders as part of the general debriefing process. However, the Commission finally awarded the contract for a value of 5,070,000 euros and disclosed this information in the relevant contract award notice. There was no indication of the reasons behind this higher contract value in the contract award notice.

In view of this significant discrepancy between both contract values, a disappointed tenderer challenged the award decision on the basis of an infringement of the requirements of transparency, equal treatment and non-discrimination resulting from the applicable rules. Quite surprisingly, the GC dismissed this claim, on the basis of the following reasoning:
27. At the outset, it should be noted that, as the Commission has explained, the amount of the successful offer was 4,222,680 euros ... The contract has been awarded for 5 070 000 euros euros ... This later amount is equivalent to the rounded price of the offer of the successful tenderer, increased by 20% for indexing and contingencies.
29. In this context, the applicant alleges in particular infringement of the principles of transparency and equal treatment ... as well as rules on advertising.
32. ... it is understood that the applicant's complaint, in essence, is directed against the award of the contract for an amount equivalent to the offer of the successful tenderer , increased by 20% for indexing and contingencies.
37 According to the relevant case law, the principle of transparency, which is essentially aimed to ensure the absence of favoritism or arbitrariness on the part of the contracting authority, means that all terms and conditions of the award procedure must be drawn in a clear, precise and unequivocal manner in the contract notice or in the contract documents (judgments of 29 April 2004, Commission / CAS Succhi di Frutta, C-496/99 P, EU: C: 2004: 236, paragraph 111, and of 26 September 2014, Evropaïki Dynamiki / Commission, T-498/11, EU: T: 2014: 831, paragraph 119).
38 In order to ensure respect for equal treatment and transparency, it is important that all the elements taken into consideration by the contracting authority to identify the economically most advantageous tender and, if possible, their relative importance are known potential bidders when preparing their tenders (judgment of 21 July 2011, Evropaïki Dynamiki / EMSA, C-252/10 P, EU: C: 2011: 512, paragraph 30, and Evropaïki Dynamiki / Commission, paragraph 37 above, EU: T: 2014: 831, paragraph 121).
39 All these requirements were satisfied in this case. Indeed, it clearly appears from the case file that the terms and conditions of the award process have been clearly established in the call for tenders. In addition, the allocation by the Commission for a market value including indexing and contingencies was irrelevant in the identification of the most economically advantageous tender
40 ... the first plea must be rejected as in part inoperative and in part unfounded. None of the arguments advanced by the applicant is in any event undermine that conclusion. 
41 First, it should be stressed that the Commission limited itself to  the creation of a budgetary reserve, which will not be used in the absence of contingencies and applications for price indexing. Therefore, it is not a unilateral increase of the price proposed by the successful tenderer. Moreover, the reservation of a higher budget to deal with unforeseen circumstances constitutes prudential behavior on the part of the Commission (T-90/14, paras 27, 29, 32 and 37 to 411, own translation from French and emphasis added).
The reasoning of the GC is quite surprising because, regardless of the budgetary mechanisms or restrictions affecting the Commission's decision (eg under the applicable rules, there was no specific provision allowing for contract modification, which would have created an incentive for the Commission to create a budgetary reserve by means of inflating the award price), the contract was in fact awarded at a higher price than the tender submitted by the bidder, which is a significant deviation of the standard procedural requirement and opens the door to post-award negotiations that can completely undermine the pre-award competition. 

Such preservation of the result of the ex ante competition for the contract is precisely the reason why contract modification has been the object of specific regulation under Art 72 Dir 2014/24. In short, pre-empting the effectiveness of rules on contract modification (either inexistent rules that prevent it or positive rules that constrain it) by artificially increasing the price of the contract at award stage should not be seen as legitimate prudential behaviour on the part of the contracting authority, but a deviation of power that certainly infringes the basic requirements of the duty of good administration.

Moreover, in the case at hand, there were allegations that the offer was abnormally low and that the chosen tenderer would be unable to perform the contract at the prices offered. Under those circumstances, the GC would have been well advised to dig deeper into the (actual) reasons for the Commission to create such a budgetary reserve by means of an artificially high contract price (which is certainly not best or even standard practice), which could reasonably have been motivated by an actual knowledge that the execution of the contract could not be performed at the offered prices without increases (due to indexation, contingencies or otherwise). And this seems particularly suspicious in view of the fact that the awardee of the contract was an incumbent provider of services to the European Commission.

Thus, in my opinion, the decision of the GC in Secolux v Commission is either naive or way too formal and a better analysis of the behaviour of the Commission would be necessary. I am no expert in EU budgetary law at all, but I find it odd that the Commission can simply decide to create 'prudential budgetary reserves' by means of a manipulation of the prices of the contracts it awards. If there is a further appeal to the CJEU, I would prompt the Court to consider the issue under a more stringent framework.