In its Judgment of 2 December 2015 in European Dynamics Luxembourg and Evropaïki Dynamiki v Joint undertaking Fusion for Energy, T-553/13, EU:T:2015:918, the General Court (GC) of the Court of Justice of the European Union (CJEU) has assessed one more case of procurement litigation concerning a cascade-based framework agreement for the provision of IT services (for previous cases, see here and here). This is proving to be quite a highly litigated design for framework agreements, so it is worth looking in detail at the scope of the dispute to determine whether the design of this type of arrangement makes them more exposed to litigation. The analysis will show that it does not because the claims made against the conclusion of the framework agreement are purely procedural.
In the case at hand, the Joint undertaking Fusion for Energy (F4E) issued a tender for a framework agreement for the provision of IT Services and requested that offers remained valid for a minimum of 130 days from the deadline for the receipt of tenders. The successful tenderers were also required to maintain the validity of their tenders for a further 60 days from the notification of the award of the contract. Given the high volume of tenders received, F4E took longer than 130 days in evaluating them, and the evaluation was concluded after the minimum validity period of the tenders had expired.
European Dynamics (ED) was once more a disappointed tenderer. Its offer was not included in the cascade mechanism of the framework agreement, which F4E intended to conclude with three alternative suppliers. Additionally to its standard arguments on failure to meet the duty to provide reasons (which, this time, do not constitute the core of the dispute), ED challenged the process claiming that by evaluating the tenders after their validity period had come to an end, F4E infringed the applicable rules [which require that ‘[t]he invitation to tender ... shall at least … specify the period during which a tender will remain valid and may not be varied in any respect’] and treated ED in a discriminatory manner compared with other tenderers. The key argument submitted by ED is that
the principles of sound administration, transparency and equal treatment of tenderers require that no contract be awarded or signed in the event that one or more tenders are no longer valid in the course of the evaluation, unless the contracting authority officially requests and obtains an extension of the validity period of the tenders... Accordingly, it is a prerequisite for the validity of the evaluation of tenders and the award procedure that tenders be valid throughout the entire evaluation process, in order to ensure that the evaluator’s examination is impartial (T-553/13, para 18).
The GC rejects the argument on several points. Firstly, the GC stresses that the requirement to indicate a minimum tender validity does not impose
an obligation on the contracting authority to complete the evaluation of a tender within the validity period of that tender. Whilst it is certainly in the interest of the contracting authority to complete its assessment before the expiry of the tenders’ validity period, exceeding that time-limit cannot render the procedure unlawful, nor can it constitute a ground for cancellation of the evaluation of the tenders (T-553/13, para 22).
The GC clarifies that 'the purpose of the validity period of tenders is to ensure that a tenderer does not vary his tender during the evaluation stage and that compliance with that period is not a condition sine qua non for the signature of contracts at the end of the award procedure' (T-553/13, para 24).
The formulation of the second part of this clarification could lead to uncertainty, as it could be understood that a tender which validity period did not meet the minimum, or that was modified during that term, could still lead to award of the contract. That is not what the GC intends to indicate. In fact, the GC makes reference to the previous case Evropaïki Dynamiki v Commission, T-236/09, EU:T:2012:127, where that clarification was made in a different context. In that case, the GC ruled that
As regards the ... argument that the principles of transparency, good administration and equal treatment among tenderers preclude a contract being signed when one or more tenders are no longer valid, suffice it to say that the purpose of the period of validity of tenders is to ensure that a tenderer does not vary his tender during the evaluation stage ... it is not a condition sine qua non for the signature of contracts at the end of the award procedure. In the present case, the decisions to award the contracts were taken ... within the period of validity of the tenders. Moreover, the applicant merely states that signing the contract when one or more tenders are no longer valid is a breach of the principles of transparency, good administration and equal treatment, but does not explain in what way that constitutes a breach (T-236/09, para 40, emphasis added).
Therefore, the combined reading of para 24 of ED v E4F (T-553/13) and para 40 of ED v Commission (T-236/09) leads to the interpretation that the signature of the contract is not prevented by the fact that one or more tenders are no longer valid at that time. However, it also raises the issue of whether the tender chosen for the award of the contract must remain valid at the time of that decision (as T-236/09, para 40 suggests). The rest of the ED v E4F case discusses this in more detail. As the GC explains
25 ... the applicants may not regard evaluation of the tenders during their validity period as a condition of the validity of the tender procedure ...[the] claim that the principles of transparency, sound administration and equal treatment between tenderers preclude a contract from being concluded when one or more tenders is no longer valid must be rejected (see, to that effect, [T-236/09] paragraph 40).
26 Moreover, in so far as the applicants claim that F4E should have officially requested [ED] to extend the validity of its tender when it realised that the period in question was not long enough to complete the evaluation phase, it should be stressed that, whilst it is true that the contracting authority is entitled to request an extension of the validity period of tenders, it is not required to do so under any of the applicable provisions.
27 As F4E correctly notes, the only consequence that may arise from that provision for the contracting authority is that it cannot oblige a tenderer whose tender has expired to sign and perform a contract based on the conditions set out in that tender.
28 In addition, equal treatment between tenderers is ensured by evaluating all the tenders using the same evaluation criteria and comparing them with one another. If the validity period of the tenders is not one of the evaluation criteria, it could only lead to discrimination in respect of their evaluation if it were proved that a tender was not taken into account on the ground that it had expired ...
29 The file shows that the tenders of all tenderers were evaluated, including [ED]’s tender, and that that evaluation took place while the tenders were valid ...
30 In such circumstances, the mere fact that the final decision was adopted after that validity period had ended cannot render the award decision unlawful (T-553/13, paras 25-29, emphasis added).
In my view, the GC fails to take into account all possible scenarios of discrimination that could arise in such circumstances. It is true that not taking into account a tender for the purposes of evaluation on the ground that it had expired would constitute discriminatory treatment. However, it would also be discriminatory to allow undertakings that set a specific period of validity for their tender to waive it upon hearing that their tender was chosen for award.
Thus, the argument that the contracting authority must ensure that all tenders remain valid throughout the period carries weight if one considers the strategic games that could ensue when tenderers whose offer has expired are allowed to extend them, particularly if that implicitly creates financial impacts that will (possibly) require modifications of the contract down the line (even if those modifications 'simply' result in the trigger of price revision clauses earlier than would have otherwise been expected).
In my view, the GC also fails to make proper use of the right to good administration. If a diligent contracting authority fails to evaluate the tenders it receives in good time to make sure that all of them remain valid when it aims to enter into the framework agreement or contract, it should (or, I would say, shall) actually request them to extend the validity of their offers. There is no reason to allow the contracting authority not to do so on the basis that "the only consequence ... is that it cannot oblige a tenderer whose tender has expired to sign and perform a contract based on the conditions set out in that tender". That would constitute very poor administration and would severely limit the ability of the contracting authority (and society at large, indirectly) to benefit from competitive outcomes leading to value for money due to its poor time and workload management. Thus, this does not seem to be a proper analysis under the principle of good administration.
On a related note, I think that the GC also got the wrong end of the stick when assessing instances where the contracting authority actually decides to request such extensions of the validity of offers when it realises that it cannot complete the evaluation and award the contract in time. In the previous ED v Commission case, the GC considered that "the fact that the [contracting authority] stated that it did not intend to cancel the tendering procedure in the event of a tenderer refusing to extend the validity of its tender does not mean that the [tenderer who was approach for an extension] was under pressure to agree to the request for extension" (T-236/09, para 39). From a business perspective, this simply makes no sense. Commercial pressure to extend offers should also be subjected to a high standard of assessment under the principle of good administration and the contracting authority should have very powerful reasons not to cancel the tender. The same reasoning that prevents contracting authorities to resort to urgency-based procedures due to situations they should have avoided applies here [see A Sanchez Graells, Public procurement and the EU competition rules, 2nd edn, (Oxford, Hart, 2015) 435-436].
Overall, it seems to me that the GC is generally failing to incorporate commercial reality arguments into its judicial decision-making when it comes to this tricky issue of expiry of time-limited tenders during the evaluation process, or before award of the contract. I would thus support a change of tack in future cases, so that there is really no space for strategic games at that stage, and so that contracting authorities do not engage in business-like negotiations that they could (and should) have prevented by reacting earlier on during the evaluation period.