Electronic auctions under Reg.35 Public Contracts Regulations 2015

Reg.35 of the Public Contracts Regulations 2015 (PCR2015) transposes Art 35 of Directive 2014/24 and sets out rules for the conduct of electronic auctions, which consolidate current practice and clarify some aspects of their initial regulation in Directive 2004/18. Reg.35(8) PCR2015 also includes the further details provided in Annex VI of Dir 2014/24, which makes the rules more readily accessible. Pedro has focused on the relationship between electronic auctions and transparency here.

Indeed, as a specific method of price-setting, and as a novelty that tried to introduce additional flexibility in certain tendering procedures—particularly, follow-up tenders developed in relation with i) negotiated procedures following an event of irregular tenders or the submission of tenders which are unacceptable under national provisions, ii) the reopening of competition among the parties to a framework agreement, or iii) the opening for competition of contracts to be awarded under the dynamic purchasing system—and increase their economic efficiency, Directive 2004/18 allowed Member States to provide that contracting authorities may use electronic auctions (art 54(1) and 54(2) dir 2004/18) [for general discussion on eProcurement and electronic auctions, see G Racca, ‘The Electronic Award and Execution of PublicProcurement’ (2012) Ius Publicum Network Review; and DC Wyld, ‘Reverse Auctions: How Electronic Auctions Can Aid Governments in Significantly Cutting Their Procurement Spending and Introduce Greater Competition in Public Sector Contracting’ (2013) 151 Emerging Trends in Computing, Informatics, Systems Sciences, and Engineering 277–89. See also S Khorana, K Ferguson-Boucher and WA Kerr, ‘Governance Issues in the EU's e-Procurement Framework’ (2014) Journal of Common Market Studies 1–19].

This technique continues to be available under the rules of reg.35 PCR2015, which extend the intended use of the electronic auctions to a larger array of situations, including tenders in open or restricted procedures or competitive procedures with negotiation where technical specifications can be established with precision. In terms of scope of application, Directive 2014/24 has also clarified that certain public service contracts and certain public works contracts having as their subject-matter intellectual performances, such as the design of works, which cannot be ranked using automatic evaluation methods, shall not be the object of electronic auctions [reg.35(3) PCR2015]. It is also now clearer that the electronic auction shall be based either (a) solely on prices where the contract is awarded on the basis of price only; or (b) on prices and/or on the new values of the features of the tenders indicated in the procurement documents where the contract is awarded on the basis of the best price-quality ratio or to the tender with the lowest cost using a cost-effectiveness approach [reg.35(6) PCR2015].
In case contracting authorities decide to conduct electronic auctions, they must comply with the specific procedure , which determines in fairly precise detail the steps and rules to be followed in the conduct of the electronic auctions (in terms of disclosure of information, time limits, applicable criteria and formulae, etc) [reg.35(7) to (28) PCR2015). The use of electronic auctions for the award of the contract seems to be particularly prone to the generation of unacceptable changes in the subject-matter of the contract—particularly because of the ability of tenderers to alter significantly the terms of their offers during the auction phase—and, consequently, article 54(8) of Directive 2004/18 emphasised that contracting authorities may not use electronic auctions ‘to change the subject-matter of the contract, as put up for tender in the published contract notice and defined in the specification’. This restriction is now suppressed in the text of Directive 2014/24 (and hence, of the PCR2015), but the limitation seems to remain in place in view of the rules on irregular, unacceptable and unsuitable tenders [regs.35(9) to (13) PCR2015). In this regard, general restrictions on the need to prevent material changes in the original specifications of the (re-)tendered contract will apply, particularly in framework agreements and dynamic purchasing systems.

Of more interest, it is also important to stress that article 54(8) of Directive 2004/18 also seemed to have been drafted in the light of the potentially pro-collusive features of electronic auctions, which can increase the likelihood of distortions of competition [see C Kennedy-Loest and R Kelly, ‘The EC Competition Law Rules and Electronic Reverse Auctions: A Case for Concern?’ (2003) 12 Public Procurement Law Review 27; and, in more general terms, regarding electronic markets, PA Trepte, ‘Electronic Procurement Marketplaces: The Competition Law Implications’ (2001) 10 Public Procurement Law Review 260.]. In this regard, article 54(8) specified and strengthened the applicability of the principle of competition in the conduct of electronic auctions, by restricting the ability of contracting authorities to ‘use them in such a way as to prevent, restrict or distort 

Once again, this specific requirement has been suppressed in the text of article 35 of Directive 2014/24 (and hence, of the PCR2015), but it is submitted that it remains in place as an implicit requirement derived from the principle of competition in reg.18(1). Therefore, contracting authorities should be particularly careful in the design of the specific rules applicable to the electronic auction, so as to prevent instances of collusion amongst tenderers—particularly, by restricting the information disclosed [although regs.35(23) & (24) PCR2015 allow them to do otherwise] which, however, cannot include the identities of the bidders in any circumstances [ex reg.35(25) PCR2015]. 

The same level of care should be put in ensuring equality of opportunity for all tenderers to place bids in each of the eventual rounds or phases of the electronic auction (so as not to distort competition within the auction) [reg.35(14) PCR2015], subject to rules restricting the number of tenderers that can advance from one phase to the next—which must be clearly specified in the tender documents and implemented in a transparent manner by the contracting authority [reg.35(15) PCR2015].

A final consideration regards the decisions made as to the electronic equipment used and the arrangements and technical specifications for connection—which, in order to prevent unnecessary restrictions of competition, should aim at choosing widely spread and easily accessible technologies, so as not to restrict the participation of less technologically advanced tenderers or to advantage unduly one or several tenderers by reason of their communications technology (which is unrelated to the subject-matter of the contract).