Some difficult questions on the interaction between public procurement and competition law

I was invited to participate in the Irish Society for European Law (ISEL) Public Procurement Forum a couple of days ago. 

The session started off with two presentations from distinguished members of the Irish Competition and Consumer Protection Commission (Pat Kenny, Member with responsibility for Criminal Enforcement and Úna Butler, Legal Advisor, Competition and Consumer Protection Commission), who respectively addressed issues concerning bid rigging and consortium bidding in public tenders by SMEs. Both presentations were excellent and I had not much left to say. In view of that, I just launched some 10 groups of difficult questions to the audience. The debate that ensued was really interesting. 

I am reproducing a reworked version of the 10 questions below, in the hope that they can be useful to researchers trying to find topics in the area of public procurement and competition law. Hopefully, some (of my) answers will be available in the 2nd edition of my book. Of course, I am happy to exchange views on these and any other issues at:

A) In relation to bid rigging and the application of Article 57(4) of Directive 2014/24

1. How will contracting authorities treat instances of contemporaneous bid rigging? Will they be allowed (by Member States) to exclude tenderers or candidates right away or will they have to stay proceedings and get the competition authorities involved? How will this play-out in relation to the very short deadlines required by procurement procedures and, in particular, the 10-day standstill obligation under Directive 2007/66

2. What procedural guarantees will be necessary to ensure that a "presumption of guiltiness" is not constructed? How wide will the protection under Article 47 CFREU be [on that key point, see M Safjan and D Düsterhaus, "A Union of Effective Judicial Protection: Addressing a Multi-level Challenge through the Lens of Article 47 CFREU" (2014) 33(1) Yearbook of European Law 3-40]. What if, in the future, they are proven wrong? Will excluded tenderers and candidates be entitled to significant damages?

B) In relation to joint participation or consortium bidding [particularly in relation to Arts 19(2) and 63 of Directive 2014/24]

3. From a competition law perspective, it is clear that joint bidding will be controversial when actual or potential competitors enter into consortium agreements.In that case, the application of Article 101(3) TFEU requires efficiencies to be generated by the agreement (and those to be passed on to consumers). This creates some difficult issues, such as: must those efficiencies be solely economic? If yes, how can we square that with the growing inclusion of non-economic considerations in award criteria, and particularly with the special rules in Art 76 of Directive 2014/24 regarding the procurement of social and special services? If not, how can we square this with the general enforcement of Art 101(3) TFEU [and the on-going controversy on the use of non-economic factors]? Can we take into account SME-specific issues, such as the existence of high opportunity costs (such as iddleness of capacity available to the contracting authority) or the creation of social benefits? Can efficiencies be created in the public procurement market at the expense of general open markets, or reversely [on this, see the thought provoking post by Alfonso Lamadrid "On the (mis)application of Article 101(3): of judicial capture and cross-market assessments", Chillin' Competition].

4. How must those efficiencies or other advantages be documented? Can at some point the burden of proof reverse, so that the contracting authority needs to disprove indicia of advantage submitted by the (wannabe) joint tenderers? Will the competition authority be involved/available to assess that evidence? How can they make sure that they are building the right counter factuals? Is this not too complicated within the scope of a procurement process with tight deadlines?

5. On the point of exchanges of information, when is the exchange assessed, during the exploratory conversations (where maybe too much information could be disclosed) or at the moment of submission of the tenders? How can companies make sure that they exchange the absolute minimum of necessary information and how can a "need to know" test be developed safely? Given that SMEs may be reluctant or incapable of protecting their proprietary information through IP rights, how can they not be deterred from participating in order to protect their business secrets? Which specific assurances can they get that their information will not be disclosed at debriefing stage (particularly if a competitor challenges the technical capacity of the consortium)?

6. How will ancillary restrictions be treated in the field of consortium agreements? Would non-poaching clauses be allowed? If so, would it be justified to include 2 year non-compete/non-poaching clauses on employees and consortium partners, even if the tender is unsuccesful? If not, how can this not become a significant deterrent for SMEs strongly reliant on the technical knowledge of a very limited number of (difficult to replace) staff?

7. Even if the rules in Art 63(3) in fine of Directive 2014/24 establishes that contracting authorities can require joint liability for the execution of the contract, members of consortia (and particularly SMEs) will be tempted to reallocate liability internally (through side letters, or otherwise). Is this compatible with the procurement rules? If it is, should the contracting authorities be informed? Should financial guarantees be required to a larger extent? If it is not allowed, would such liability redistribution / indemnity agreements fall foul of Art 63(3) Dir 2014/24 and/or Art 101(2) TFEU? If the law is not clear on this point, will this not be a very significant deterrent for consortium bidding?

8. Where an undertaking participates in more than one bid, particularly as a specialised sub-contractor, it holds (relative) market power. Does this bring it under the prohibitions of Art 102 TFEU, particularly as price discrimination is concerned? Would that sub-contractor, then, be forced to quote the same prices and conditions to all groupings of tenderers? Can they not enter into exclusivity agreements or simply decide to only deal with a given consortium on the strength of existing business relationships?

9. Can rules on conflict of interest now affect the possibility to participate as part of different consortia with different composition of members in different projects? At what point would being in a "network" of consortia arrangements create significant risks for the undertaking, particularly as being perceived as a nexus for the exchange of information?

10. What is the interaction between SME support, public procurement and State aid? Particularly in innovation partnerships that may be concluded with a consortium of innovative SMEs (or start-ups), how is it possible to avoid the undercover granting of State aid [cf the issues that arise whene SMEs that spin-off from universities enter into subsequent contracts here: State aid and (university) software licensing: who's interested? (T-488/11)]? How and when should the evaluation of the expected innovation be carried out? Can SMEs actually engage in the complex legal negotiations needed to comply with the requirements of Art 31(6) of Directive 2014/24 ex ante?