In its Judgment of 17 January 2017 in Cofely Solelec and Others v Parliament, T-419/15, EU:T:2017:8 (available only in French), the General Court (GC) assessed the compatibility with the rules on public procurement by the EU institutions of the partial cancellation of a tender for a works contract by the European Parliament (EP). The interesting detail in the facts of the case is that the EP decided to partially cancel the tender after the award of the contentious lot had already been challenged, as well as the very succinct motivation it provided for such a decision. The reasoning of the GC, even if based on the Financial Regulation, is of general interest concerning the 2014 Public Procurement Package.
In the case, the EP had called for tenders for several lots of works regarding the refurbishment of one of its buildings. One of the lots concerned electrical work. The economic operators whose joint offer had been ranked second opposed the award of the contract on the basis that the winning tender was abnormally low. The EP initially dismissed the allegation of abnormality of the lowest priced offer and intended to proceed to the signature of the contract. This was challenged judicially by the disappointed tenderers, which prompted the EP to reassess the claim of abnormality of the lowest-priced tender. While that challenge was at judicial stage, the EP decided to cancel the tender for that lot. The reasons provided to the disappointed tenderers for such decision were that
After an in-depth analysis of the documents in the file, it appeared that the tender of the successful tenderer was not admissible insofar as the documents submitted concerning the selection criteria did not provide an assurance that they [the criteria] were fully satisfied. The other offers received, including yours, substantially exceeded the estimate of the value of the contract previously relied upon by the contracting authority and are therefore unacceptable (T-419/15, para 56, own translation from French).
The procedural circumstances of the case are complicated due to the cross-challenges of the award decision to the apparently abnormally low offer and of the subsequent decision to partially cancel the tender, and the fact that disappointed tenderers received different pieces of information in the course of each of the judicial procedures. However, the point in the GC's reasoning I find interesting is that it considers that
59 ... it is settled case-law that the statement of reasons required by Article 296 TFEU must be adapted to the nature of the act in question and must show clearly and unequivocally the reasoning of the institution ... so as to enable the persons concerned to know the reasons for the measure adopted and the competent court to exercise its review power ...
60 As regards the intensity of the statement of reasons, there is no requirement that the decision should specify all the relevant elements of fact and of law. The sufficiency of the statement of reasons given for a decision may be assessed in the light not only of its wording but also of the context in which it was adopted and of all the legal rules governing the matter concerned ... It is sufficient that the decision expounds the main points of law and fact in a succinct but clear and relevant manner ...
61 Furthermore, where a decision has been adopted in a context which is well known to the person concerned, it may be motivated in a succinct manner ...
72 ... the applicants took part in the tender procedure run by the Parliament and alerted the latter several times as to certain irregularities, in particular as regards the tender of the successful tenderer and, consequently, the context in which the contested decisions were adopted was familiar to them.
73 ... in accordance with the case-law cited ... above, the contested decisions could be the subject of a summary statement of reasons (T-419/15, paras 59-61 and 72-73, own translation from French and references to previous case law omitted).
This is interesting because the GC is creating space for contracting authorities to preserve the confidentiality of some information (in the case, in particular, the way the EP had arrived at the estimate of the contract value, which disclosure was considered damaging of the EP's options to obtain value for money in any future re-run of the tender), but it also seems to create a tricky set of incentives for disappointed tenderers, which will have to assess the extent to which an active participation in information exchange with the contracting authorities reduces their protection in terms of debriefing and rights to challenge procurement decisions.
Interestingly, the Judgment goes on to assess whether the EP erred in its assessment that the offer of the disappointed tenderers was unacceptable due to its high cost (per comparison with the estimate). The analysis is relevant because it concerns the ability of the EP to justify its estimate for the cost of the tendered works in relation to (a) its available budget and (b) to the cost of the offer eventually rejected (both benchmarks being challenged by the disappointed tenderer). This approach to the justification of the cost estimates was implicitly supported by the GC in relation to the obligation to provide reasons (above) by indicating that part of the information to which the disappointed tenderer was privy, and which allowed for the summary motivation of the partial annulment decision, included the fact that the lowest-priced offer was almost €11 million cheaper than its own offer (para 67), and that the lowest-priced offer was "within an acceptable range relative to the controller's estimate of the costs on the basis of the detailed surveys [for the work]" (T-419/15, para 68, own translation from French).
In my view, the key point concerning the justification of the estimates comes at the end of the GC's reasoning, where it actually deactivates any claim based on under-estimation of the cost of the works on the basis of a budgetary logic that is difficult to work around:
107 In any event, in the present case, the tenderers' offer, irrespective of the correctness of the [estimated] value of the contract, was greater than Parliament's available budget, so that the latter could not have been awarded to it.
108 In other words, in view of the absence of sufficient budgetary appropriations allocated by the budgetary authority to the contract at issue, the Parliament's annulment of the tender was a logical, if not necessary, choice (T-419/15, paras 107-108, own translation from French).
As mentioned, from a strict legality assessment, this is a definitive argument. However, practically, it seems difficult to square with procurement practice that does not result in wasted effort and frustration. Given the absolute budgetary constraint, it could be desirable for the contracting authority to pre-disclose this limit, so that no excessive offers are submitted and tenderers that cannot (or do not want to) carry out the work within the allocated budget can spare themselves (and the evaluation team/contracting authority) the trouble. However, this transparency would be undesirable in terms of price signalling and allowing tenderers to engage in limit pricing [at least under some market circumstances; for discussion, see A Sanchez-Graells, Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 73 ff].
So one can but wonder whether budgetary rules could be reviewed to create some flexibility in terms of allocation of budget, particularly in projects where the estimation of costs is challenging (which does not mean to say that this was the situation in the specific case). Otherwise, the uneasy relationship between budgetary and procurement rules will continue to create difficult situations (and frustration for practitioners).