CJEU offers clarification on identification and assessment of conflicts of interest in public procurement (C-538/13)

In its Judgment in eVigilo, C-538/13, EU:C:2015:166, the Court of Justice of the European Union (CJEU) has offered very much needed guidance on the assessment of conflicts of interest in public procurement, as well as the degree of forcefulness with which contracting authorities must tackle such important issue. 

Its guidance will be very relevant in the interpretation and application of Article 24 of Directive 2014/24 on conflicts of interest, as well as the related provision on exclusion of economic operators affected by conflicts of interest [art 57(4)(e) dir 2014/24]. Thus, the eVigilo Judgment and the CJEU's reasoning deserve some close analysis.

Concerning the issue of conflict of interest (there were others to be addressed, particularly regarding the time limits for the challenge of a procurement decision), it is worth highlighting that eVigilo challenged the award on the basis of a bias of the experts who evaluated the tenders due to the existence of professional relations between them and the specialists referred to in the winning tender. 

More specifically, eVigilo claimed that the specialists referred to in the tender submitted by the successful tenderers were colleagues at the Technical University of Kaunas (Kauno technologijos universitetas) of three of the six experts of the contracting authority who drew up the tender documents and evaluated the tenders. In its view, this was sufficient to strike the award decision down.

This is a situation that, in my view, would now be clearly covered by Art 24 Dir 2014/24 (not applicable to the conflict time-wise), whereby "conflicts of interest shall at least cover any situation where staff members of the contracting authority or of a procurement service provider acting on behalf of the contracting authority who are involved in the conduct of the procurement procedure or may influence the outcome of that procedure have, directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement procedure" (emphasis added). 

Hence, the CJEU's assessment of the claim is highly relevant. After reiterating its case law on the principles of equality, non-discrimination and transparency, and stressing that "[u]nder the principle of equal treatment as between tenderers, the aim of which is to promote the development of healthy and effective competition between undertakings taking part in a public procurement procedure, all tenderers must be afforded equality of opportunity", the CJEU considered that
37 The finding of bias on the part of an expert requires in particular the assessment of facts and evidence that comes within the competence of the contracting authorities and the administrative or judicial control authorities.
38 It should be pointed out that neither Directive 89/665 nor Directive 2004/18 contains specific provisions in that regard
[and, it is worth adding, Directive 2014/24 does not contain any specific procedural rules as to how to assess these issues either].
39 The Court has consistently held that, in the absence of EU rules governing the matter, it is for every Member State to lay down the detailed rules of administrative and judicial procedures for safeguarding rights which individuals derive from EU law. Those detailed procedural rules must, however, be no less favourable than those governing similar domestic actions (principle of equivalence) and must not render impossible in practice or excessively difficult the exercise of rights conferred by EU law (principle of effectiveness) (see judgment in Club Hotel Loutraki and Others, C‑145/08 et C‑149/08, EU:C:2010:247, paragraph 74 and the case-law cited).
40 In particular, the detailed procedural rules governing the remedies intended to protect rights conferred by EU law on candidates and tenderers harmed by decisions of contracting authorities must not compromise the effectiveness of Directive 89/665 (see judgment in Uniplex (UK), C‑406/08, EU:C:2010:45, paragraph 27 and case-law cited).
41 It is not, as a general rule, contrary to those principles for an expert’s bias to be established in a Member State solely on the basis of an objective situation in order to prevent any risk that the public contracting authority could be guided by considerations unrelated to the contract in question and liable, by virtue of that fact alone, to give preference to one tenderer.
42 Concerning the rules on evidence in that regard, it should be pointed out that ... the contracting authorities are to treat economic operators equally and non-discriminatorily and to act in a transparent way. It follows that they are assigned an active role in the application of those principles of public procurement.
43 Since that duty relates to the very essence of the public procurement directives (see judgment in Michaniki, C‑213/07, EU:C:2008:731, paragraph 45), it follows that the contracting authority is, at all events, required to determine whether any conflicts of interests exist and to take appropriate measures in order to prevent and detect conflicts of interests and remedy them. It would be incompatible with that active role for the applicant to bear the burden of proving, in the context of the appeal proceedings, that the experts appointed by the contracting authority were in fact biased. Such an outcome would also be contrary to the principle of effectiveness and the requirement of an effective remedy ... in light, in particular, of the fact that a tenderer is not, in general, in a position to have access to information and evidence allowing him to prove such bias.
44 Thus, if the unsuccessful tenderer presents objective evidence calling into question the impartiality of one of the contracting authority’s experts, it is for that contracting authority to examine all the relevant circumstances having led to the adoption of the decision relating to the award of the contract in order to prevent and detect conflicts of interests and remedy them, including, where appropriate, requesting the parties to provide certain information and evidence.
45 Evidence such as the claims in the main proceedings relating to the connections between the experts appointed by the contracting authority and the specialists of the undertakings awarded the contract, in particular, the fact that those persons work together in the same university, belong to the same research group or have relationships of employer and employee within that university, if proved to be true, constitutes such objective evidence as must lead to a thorough examination by the contracting authority or, as the case may be, by the administrative or judicial control authorities.
46 Subject to compliance with the obligations under EU law, and specifically with those referred to in paragraph 43 above, the concept of ‘bias’ and the criteria for it are to be defined by national law. The same applies to the rules relating to the legal effects of possible bias. Thus, it is for national law to determine whether, and if so to what extent, the competent administrative and judicial authorities must take into account the fact that possible bias on the part of the experts had no effect on the decision to award the contract
(C-538/13, paras 37 to 46, emphasis added).
In my view, the CJEU has handed down a very straightforward Judgment that clearly favours (or, actually, imposes) a strong reaction to allegations of bias and conflict of interest, and which sets a very high threshold regarding the relevant duty of the contracting authority to investigate and to act. Ultimately, this derives from the obligation of contracting authorities to enforce the general principles of procurement (now in art 18 dir 2014/24, which includes the principle of competition) and its diligent administration implications.

The reader will allow me to submit that this is fundamentally in line with my interpretation of the rules on conflict of interest under Art 24 Dir 2014/24 as developed in Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 369-373, which I reproduce below. 

Consequently, I cannot but welcome the CJEU's eVigilo Judgment and hope that Member States will take it into due account in the transposition of the rules of Dir 2014/24 into their domestic legal orders.

As a preliminary issue with potential ramifications regarding all the decisions to be adopted at the stage of evaluation of the tenders and award of the contract—although, as mentioned previously, it is also relevant in various previous phases related inter alia to the qualitative selection of tenderers—in our view, contracting authorities are under an obligation to adopt an approach to the development of these tasks that is both neutral and possibilistic. The existence of a duty of neutrality or ‘impartiality’ of procurement procedures—and, implicitly, of contracting authorities—as a specification of the principles of equal treatment, of the ensuing transparency obligation, and of the principle of competition is a clear requirement of the system envisaged in the directives,[1] and has been hinted at in the EU case law by requiring that ‘the impartiality of procurement procedures’ is ensured.[2]
The existence of such a neutrality requirement is fundamental, and the EU judicature has consistently stressed the obligation of contracting authorities to guarantee equality of opportunity of tenderers at each and every stage of the tendering procedure.[3] Importantly, it should be stressed that

Under the principle of equal treatment as between tenderers, the aim of which is to promote the development of healthy and effective competition between undertakings taking part in a public procurement procedure, all tenderers must be afforded equality of opportunity when formulating their tenders, which therefore implies that the tenders of all competitors must be subject to the same conditions (emphasis added).[4] Moreover, this ultimately rests on the clear position that a system of undistorted competition, as laid down in the Treaty, can be guaranteed only if equality of opportunity is secured as between the various economic operators.[5]

In this regard, it has been emphasised that contracting authorities are under a particular duty to avoid conflicts of interest[6] with the result that, after the discovery of such a conflict of interests between a member of the evaluation committee and one of the tenderers, the contracting authority must act with due diligence and on the basis of all the relevant information when formulating and adopting its decision on the outcome of the procedure for the award of the tender at issue in order to comply with the basic obligation of ensuring equality of opportunity.[7] This might require different reactions from the contracting authority, depending on the circumstances of the case, but should always be oriented towards preventing instances of discriminationie, not favouring, or discriminating against, a tenderer as a result of the bias of the member of the evaluation committee.[8] Therefore, there should be no doubt as to the neutrality requirements in the conduct of the evaluation of tenders and award of public contracts. This is now particularly clear in light of the provisions in article 24 of Directive 2014/24, which expressly requires that Member States ensure that contracting authorities take appropriate measures to effectively prevent, identify and remedy conflicts of interest arising in the conduct of procurement procedures so as to avoid any distortion of competition and to ensure equal treatment of all economic operators.[9] This measure is complemented by the new ground for exclusion of economic operators in clonflict of interest (as discussed above §II.A.vii). Consequently, under the 2014 rules, contracting authorities are under a very clear mandate to detect, investigate and effectively tackle conflicts of interest.
As regards the adoption of a ‘possibilistic’ or anti-formalistic approach—oriented towards maintaining the maximum possible degree of competition by avoiding the rejection of offers on the basis of too formal and/or automatic rejection criteria—it is important to underline that the relevant case law has already offered some guidance that points in this direction by stressing that ‘the guarantees conferred by the European Union legal order in administrative proceedings include, in particular, the principle of good administration, involving the duty of the competent institution to examine carefully and impartially all the relevant aspects of the individual case’ (emphasis added)[10]—which, in the case of public procurement, should be interpreted as requiring contracting authorities to exercise due care in the evaluation of the bids submitted by tenderers.[11] To be sure, the obligation of contracting authorities to review the bids for possible mistakes and to contact tenderers to seek for correction is limited as a mandate of the principle of non-discrimination (below §II.B.ix); but the scope for clarification of the tenders and for the establishment of rules allowing for a flexible treatment of formally non-fully compliant bids (on this, below §II.B.iv), support the adoption of a possibilistic approach towards the evaluation of bids as a specification or particularisation of the duty of due care or diligent administration that is required of contracting authorities.
In this regard, as reasoned by EU case law, the evaluating team is under an obligation to conduct the revision of the bids in accordance with the principle of good administration and is, consequently, under an obligation to exercise the power to ask for additional information in circumstances where the clarification of a tender is clearly both practically possible and necessary, and as long as the exercise of that duty to seek clarification is in accordance with the principle of equal treatment.[12] It is submitted that this means that the evaluating team is to adopt an anti-formalistic approach that renders the effective appraisal of the tenders possible—regardless of minor deficiencies, ambiguities or apparent mistakes. Indeed, as stressed by the jurisprudence, in cases where the terms of a tender themselves and the surrounding circumstances known to the authority indicate that the ambiguity probably has a simple explanation and can be easily resolved, then, in principle, it is contrary to the requirements of good administration for an evaluation committee to reject the tender without exercising its power to seek clarification. A decision to reject a tender in such circumstances is, consequently, liable to be vitiated by a manifest error of assessment on the part of the institution in the exercise of that power,[13] and could result in an unnecessary restriction of competition. In that regard, it should be taken into consideration that

it is also essential, in the interests of legal certainty, that the contracting authority should be able to ascertain precisely what a tender offer means and, in particular, whether it complies with the conditions set out in the specifications. Thus, where a tender is ambiguous and it is not possible for the contracting authority to establish, swiftly and efficiently, what it actually means, that authority has no choice but to reject that tender (emphasis added).[14]

Therefore, in a nutshell, contracting authorities should ensure that the evaluation of bids leading to the award of the contract is based on the substance of the tenders, adopting a possibilistic or anti-formalist approach that excludes purely formal decisions that restrict competition unnecessarily; subject, always, to guaranteeing compliance with the principle of equal treatment. In that vein, it is important to stress that the duty of good administration does not go so far as to require the evaluation team to seek clarification in every case where a tender is ambiguously drafted.[15] Particularly as regards calculations and other possible non-obvious clerical mistakes, the duty of good administration is considerably more restricted and the evaluation team’s diligence only requires that clarification be sought in the face of obvious errors that should have been detected by the purchasing agency when assessing the bid.[16] This is so particularly because the presence of non-obvious errors and their subsequent amendment or correction might result in breaches of the principle of equal treatment.[17] Therefore, as general criteria, it seems that the relevant case law intends to favour the possibilistic approach hereby advanced, subject to two restrictions: i) that it does not breach the principle of equal treatment (ie, that it does not jeopardise the neutrality of the evaluation of tenders), and ii) that it does not require the contracting authority to develop special efforts to identify errors or insufficiencies in the tenders that do not arise from a diligent and regular evaluation.
Therefore, it is submitted that contracting authorities should develop the activities of evaluation of bids and award of the contract on the basis of such a neutral and possibilistic approach—which must be aimed at trying not to restrict competition on the basis of considerations that are too formal (ie, effectively to appraise which is the tender that actually or in substance offers the best conditions, regardless of minor formal defects or non-fulfilment of immaterial requirements) and, at the same time, ensuring compliance with the principle of non-discrimination and the ensuing transparency obligation.

[1] In this regard, it should be stressed that the principles of non-discrimination and competition present close links; see above ch 5 §IV.A, with references to the relevant case law.
[2] Case C-324/98 Telaustria and Telefonadress [2000] ECR I-10745 62. See also H-J Prieβ, ‘Distortions of Competition in Tender Proceedings … and the Involvement of Project Consultants’ (2002) 156.
[3] See: Case C-496/99 P Succhi di Frutta [2004] ECR I-3801 108. See also Case T-406/06 Evropaïki Dynamiki (CITL) [2008] ECR II-247 83; Joined Cases T-376/05 and T-383/05 TEA–CEGOS [2006] ECR II-205 76; Case T-160/03 AFCon Management Consultants [2005] ECR II-981 75; and Case T-145/98 ADT Projekt [2000] ECR II-387 164.
[4] Case T-345/03 Evropaïki Dynamiki v Commission (CORDIS) [2008] ECR II-341 143; and Case T-86/09 Evropaïki Dynamiki v Commission [2011] ECR II-309 61.
[5] Case C-202/88 France v Commission [1991] ECR I-1223 51; Case C-462/99 Connect Austria [2003] ECR I-5197 83; and Case T-250/05 Evropaïki Dynamiki (OPOCE) [2007] ECR II-85 46.
[6] As now emphasised in recital (16) of Directive 2014/24: ‘Contracting authorities should make use of all possible means at their disposal under national law in order to prevent distortions in public procurement procedures stemming from conflicts of interest. This could include procedures to identify, prevent and remedy conflicts of interests.’
[7] Case T-160/03 AFCon Management Consultants [2005] ECR II-981 75; and, by analogy, Case T-231/97 New Europe Consulting [1999] ECR II-2403 41. Recently, see Case T-297/05 IPK International v Commission [2011] ECR II-1859 122.
[8] For an overview of evaluating teams regulation and practice in the US—which focus on similar concerns—see SW Feldman, ‘Agency Evaluators in Negotiated Acquisitions’ (1991–1992) 21 Public Contract Law Journal 279; and DI Gordon, ‘Organizational Conflict of Interest: A Growing Integrity Challenge’ (2005–2006) 35 Public Contract Law Journal 25.
[9] Arrowsmith (n 28) 1295–96. Generally, see P Lascoumes, ‘Condemning corruption and tolerating conflicts of interest’, in JB Auby, E Breen and T Perroud (eds), Corruption and Conflicts of Interest: A Comparative Law Approach, Studies in Comparative Law and Legal Culture (Cheltenham, Edgar Elgar, 2014) 67–84. See also DI Gordon and G Racca, ‘Integrity Challenges in the EU and U.S. Procurement Systems’, in G M Racca and C R Yukins (eds), Integrity and Efficiency in Sustainable Public Contracts (Brussels, Bruylant, 2014) 117–46.
[10] Case T-236/09 Evropaïki Dynamiki v Commission [2012] pub. electr. EU:T:2012:127 45; and Joined Cases T-376/05 and T-383/05 TEA–CEGOS [2006] ECR II-205 76.
[11] ibid.
[12] See: Case T-211/02 Tideland Signal [2002] ECR II-3781 37–38, and cited case law. See also C-599/10 Slovensko [2011] ECR I-10873 and Case C-336/12 Manova [2013] pub. electr. EU:C:2013:647.
[13]  Case T-211/02 Tideland Signal [2002] ECR II-3781 37–38; Case T-63/06 Evropaïki Dynamiki v OEDT [2010] ECR II-177 98; Case T-195/08 Antwerpse Bouwwerken v Commission [2009] ECR II-4439 56; Case T-554/08 Evropaïki Dynamiki v Commission [2012] pub. electr. EU:T:2012:194 56; and Case T-553/11 European Dynamics Luxembourg v ECB [2014] pub. electr. EU:T:2014:275 300.
[14] Case T-211/02 Tideland Signal [2002] ECR II-3781 34; Case T-63/06 Evropaïki Dynamiki v OEDT [2010] ECR II-177 98; and Case T-8/09 Dredging International and Ondernemingen Jan de Nul v EMSA [2011] ECR II-6123 71.
[15] See: Case T-211/02 Tideland Signal [2002] ECR II-3781 37 ab initio.
[16] See: Case T-495/04 Belfass [2008] ECR II-781 65–71.
[17] Case T-19/95 Adia Interim [1996] ECR II-321 43–49. Similarly, Case T-169/00 Esedra [2002] ECR II-609 49; and Case T-195/05 Deloitte Business Advisory [2007] ECR II-871 102.