Response to UK Cabinet Office consultation on 'Social Value in Government Contracts'

The UK Cabinet Office is currently consulting on its draft policy on ‘Social Value in Government Contracts’ and will be receiving submissions until 10 June 2019. Below is my contribution to the public consultation, which will probably make more sense if read after the consultation paper. Comments and feedback most welcome.

reasons for the deduction of points at tender evaluation must be fully disclosed to their last detail: AG MENGOZZI ON DUTY TO MOTIVATE PROCUREMENT DECISIONS (C-376/16 P)

AG Mengozzi has put pressure on the Court of Justice (ECJ) to continue pushing for excessive transparency in the context of procurement litigation. On this occasion, the AG has invited the ECJ to establish an extremely stringent requirement for the disclosure of detailed comparisons of the evaluation reports to the level of award sub-criteria, without assessing the extent to which the contracting authority can have legitimate reasons to withhold parts of the evaluation.

In my view, this approach would create significant imbalances between the duty to provide reasons to disappointed tenderers and the duty to preserve competition for public contracts and sufficient protection of business and commercial information, which is problematic [for discussion, see K-M Halonen, 'Disclosure Rules in EU Public Procurement: Balancing between Competition and Transparency’ (2016) 16(4) Journal of Public Procurement 528; A Sanchez-Graells, ‘The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives’ (2013) Univ. of Leicester School of Law Research Paper No. 13-11]. Therefore, I argue that the ECJ should deviate from the Opinion of AG Mengozzi in its final Judgment in this case.

It is worth noting that the case is subjected to a previous version of the procurement rules in the EU Financial Regulation, but the ECJ's Judgment will be more generally relevant, both in the context of the current Financial Regulation controlling EU Institutional procurement and, more generally, for procurement controlled by the rules in the 2014 EU Public Procurement Package.

The AG Opinion

In his Opinion of 28 September 2017 in case EUIPO v European Dynamics Luxembourg and Others, C-376/16 P, EU:C:2017:729, AG Mengozzi has once more attempted a delineation of the obligation to state reasons for a decision to reject a tender and, in particular, "with regard to the correlation between the specific negative assessments set out in the evaluation report and the deductions of net points made by the contracting authority" (para 19). Or, in other words, AG Mengozzi has indicated the way in which the case law of the Court of Justice (ECJ) on the duty to provide justifications in the context of procurement debriefing applies to the reasons for the deduction of points on the basis of negative judgements of the evaluation committee [for general discussion of this obligation, see A Sanchez-Graells, “Transparency in Procurement by the EU Institutions”, in K-M Halonen, R Caranta & A Sanchez-Graells (eds), Disclosure Rules within Public Procurement Procedures and During Contract Period, vol 9 EPL Series (Edward Elgar, forthc.)].

This point of law was raised by EUIPO against the previous finding of the General Court (GC) that, despite the fact that contracting authorities are not required to provide unsuccessful tenderers with a detailed summary of how each aspect of their tenders was taken into account for its evaluation, however,

when the contracting authority makes specific assessments as to the manner in which the tender in question fulfils or otherwise [award] criteria and sub-criteria, which are clearly relevant to the overall score of the tender, the duty to state reasons necessarily includes the need to explain how, in particular, negative assessments gave rise to the deduction of points (Judgment of 27 April 2016 in European Dynamics Luxembourg and Others v EUIPO, T-556/11, EU:T:2016:248, para 250).

In the specific case, the GC considered it particularly important because the evaluation method included relative measures, so that "any deduction of net points in respect of certain sub-criteria automatically resulted, under the formula applied by the contracting authority, in the increase in the number of gross points to be allocated to the successful tenderers’ tenders in respect of their technical quality" (AGO C-376/16 P, para 24 & T-556/11, para 251).

The circumstances of the case where such that EUIPO disclosed the overall score for each of the three technical or qualitative criteria used in tender evaluation, but not the detailed breakdown for each of the award sub-criteria taken into consideration by the evaluation committee. In those circumstances, the GC found that "it was impossible, both for [the disappointed tenderer] and for the Court, to understand the calculation or precise breakdown of the points deducted for each sub-criterion, or even for each of the sub-points, and that it was therefore also not possible to verify whether and to what extent those deductions actually corresponded to the negative assessments made in the evaluation report and, accordingly, whether they were justified or not, or, at the very least, sufficiently plausible" (AGO C-376/16 P, para 26 & T-556/11, para 252).

EUIPO opposed that finding, and the more general point of law made by the GC, on the basis that neither the applicable rules, nor the case law of the CJEU required the debriefing information provided to a disappointed tenderer to include a demonstration of "which negative comment led to which deduction of points for each specific sub-criterion or sub-point" (AGO C-376/16 P, para 28 - for details of the reasons, see paras 29-31).

Thus, the main point of contention concerns the limits of the duty to disclose details of the evaluation process and report. Or, as AG Mengozzi put it, the question is "in essence, whether the [GC] was right in holding that the decision to reject the tender did not satisfy the requirements to state reasons stemming from [the applicable rules], as interpreted by the case-law, or whether the [GC] applied an overly strict test compared with the aforementioned provisions and the relevant case-law of the [ECJ]" (AGO, C-376/16 P, para 32). 

After a short restatement of the ECJ case law on the limits of the obligation to provide reasons and disclose relevant parts of the evaluation report, and despite stressing that "the contracting authority [is not] under an obligation to provide an unsuccessful tenderer, upon written request from it, with a full copy of the evaluation report" (AGO, C-376/16 P, para 36), in short, AG Mengozzi has invited the ECJ to establish that the right disclosure standard is one where

(i) the extracts of the evaluation reports disclosed by the [contracting authority] [make] it possible to deduce the number of points obtained by the appellant in question in comparison with the successful tenderer, broken down each time for each sub-criterion, and the weight of each sub-criterion in the overall evaluation, and (ii), the comments of the evaluation committee which [are] disclosed [explain], for each award criterion, on the basis of which sub-criteria the [contracting authority] had found the tender of the successful tenderer or that of the appellant in question to be the best (AGO C-376/16 P, para 47, emphases in the original).

AG Mengozzi suggests that this would have already been implicitly established in the Judgment of 4 October 2012 in Evropaïki Dynamiki v Commission, C-629/11 P, EU:C:2012:617, para 11, where the circumstances of the case reflected this level of disclosure.

Criticism

In my view, this is not an adequate test.

First of all, I struggle to see where the boundary lies between having to disclose the evaluation report in full and having to provide an absolutely broken down comparative assessment of the evaluation of the disappointed tenderers' tender and that of the preferred tenderer. To be fair, the previous case law is riddled with such tensions and it is difficult to establish clear boundaries on the obligation to disclose information contained in the evaluation report. However, in my view, the step taken by AG Mengozzi (and previously by the GC) comes to nullify the general (minimum) safeguard that contracting authorities are not required to disclose the evaluation report in full.

Secondly, I am not sure that in the assessment of these issues enough consideration is given to the fact that the relevant rules allow contracting authorities not to disclose certain details where disclosure would hinder application of the law, would be contrary to the public interest or would harm the legitimate business interests of public or private undertakings or could distort fair competition between those undertakings. In my view, there is a clear case to be made for restricting the level of disclosure of the points given to competing tenderers to a level of generality (eg award criteria rather than sub-award criteria) that strikes a balance between allowing for the review of the procurement decision while preserving competing interests. If the case law of the ECJ develop in the direction suggested by AG Mengozzi, it will be almost impossible for contracting authorities to protect legitimate interests in the context of procurement, and this will have chilling effects on participation.

Third, such a test would potentially make sense in terms of disclosure between the contracting authority and the review body or court, but not in relation to the disappointed tenderer. It would make much more sense to allow for disclosure limited to the level of award criteria at debriefing stage and, only in case the disappointed tenderer is not satisfied and launches an administrative or judicial review, for that information to be released to the review body of court, with stringent rules on access to that confidential information (for example, along the lines of the guidelines recently adopted in England). In the absence of this differential access to sensitive information, the adoption of the test proposed by AG Mengozzi is excessive and creates structural risks for abuse and competitive distortions--which makes it an undesirable test.

On the whole, I think that this Opinion and the previous decision by the GC show that the logic and operation of the rules on disclosure of information in the context of procurement litigation require a careful reassessment. In a case such as this one, where the record shows that EUIPO made significant efforts to disclose information to the disappointed tenderer, while still (maybe implicitly) aiming to protect sensitive information, the imposition of higher levels of disclosure obligations seems to me excessive. Once more, this militates in favour of the regulation of specific procedural steps to assess issues of confidentiality and, in particular, the need to create some asymmetrically opaque review mechanisms that allow for proper scrutiny of procurement decisions in a way that does not jeopardise competition in the market or anyone's legitimate business and commercial interests.

 

GC case law round up: Three relatively recent public procurement judgments (T-700/14; T-74/15; T-441/15)

After some months of having them sitting on my desk, and now that teaching obligations at the University of Bristol Law School subside a bit, it is about time to comment on three relatively recent Judgments of the General Court (GC) of the Court of Justice of the European Union (CJEU) in the area of public procurement. Of the three cases, two concern abnormally low tenders and the other  a tricky point about the scope of the CJEU's jurisdiction in the context of framework agreements--which creates some fuzziness in the delineation of private/public law dimensions of public procurement by the EU Institutions. Anecdotally, two of the cases involve European Dynamics, and two of them are available in French but not in English.

Abnormally low tenders (I): Substantive Aspects

Judgment of 26 January 2017, TV1 v Commission, T-700/14, not published, EU:T:2017:35. This tender concerned the provision of integrated audiovisual production, dissemination and archiving services for the European Commission in the context of the Europe by Satellite programme and was, thus, regulated by the Financial Regulation (version of 2012).

The procedure for the award of the contract foresaw three technical quality criteria in addition to the price criterion. It established that only offers that achieved a minimum score of 60% under each technical quality criterion and an overall score of at least 70% on their overall technical quality would be considered for award. It also determined that the overall score of a given tender would be calculated as follows: the ratio between the lowest priced offer and the price of a given offer would be multiplied by 40, and this would be added to the total (technical) quality score (over 100) multiplied by 60 (para 4, own translation from French). In other words, the award criteria relied on 60% of the points given to an absolute evaluation of technical quality and 40% of the points given to a relative evaluation of the prices offered by different tenderers. Given the relative assessment of the price component, this type of evaluation method is prone to challenges based on the treatment of seemingly abnormally low tenders.

Indeed, amongst other legal grounds, the award of the contract was challenged on this basis; the incumbent provider and disappointed tenderer, TV1, argued that the Commission had infringed Art 110(2) Financial Regulation, in conjunction with Art 151 of its Implementing Regulation and the general duty of good administration by not proceeding to a detailed assessment (and rejection) of the seemingly abnormally low offer submitted by the successful tenderer. The GC will eventually reject the complaint in its entirety. In my opinion, some parts of the reasoning of the GC deserve closer attention.

After reproducing consolidated case law on the interpretation of these provisions and the circumstances under which a contracting authority may (or should) have doubts about the viability of a seemingly abnormal tender (paras 32-42), as well as on the broad discretion enjoyed by the contracting authority and the limited review in which the court should engage (para 44), the GC proceeds to analyse the different arguments raised by TV1 against the Commission's decision. In particular, it is interesting to note that the GC dismisses arguments put forward by TV1 concerning the duty the Commission should have had to identify the winning offer as seemingly abnormally low on the basis of the fact that (i) it was 40% lower than the maximum annual budget allowed by the Commission in the tender documents and (ii) it was 11% lower than TV1's offer.

(i) Interestingly, the reasoning of the GC concerning the irrelevance of the fact that the winning tender was 40% below the maximum budget set by the Commission (and that the challengers' offer was itself 32% below maximum budget) rests on the inaccuracy of the budget set by the Commission. Apparently, when setting the maximum budget, the Commission had failed to take into account sharp reductions in the cost of providing the services now (re)tendered (para 49). Thus, the GC was satisfied that the discrepancy between maximum budget and actual offers was a result of the Commission's inaccurate budgeting rather that of abnormal low prices included in the offers. Logically, this makes sense and it could have well been the case. It does, however, raise important concerns about the accuracy and usefulness of budgeting for public contracts under the Financial Regulations--but that is probably a discussion to be had some other time.

(ii) The reasoning of the GC concerning the 11% discrepancy between the lowest (winning) tender and the next (challenger) tender is also interesting. As a matter of general consideration, the GC stresses that "[a]n offer may be cheaper than another without being abnormally low" (para 58) and that "[t]his also applies to a situation in which the tender price of the successful tenderer is lower than that of the tender of the incumbent provider. Otherwise, the incumbent provider could systematically question the reliability of the cheaper offers of the other tenderers, even if they are not abnormally low, but only economically more advantageous" (para 59, own translation from French). In that connection, it is important to stress that the GC sets aside as insufficient reasons to trigger an in-depth assessment of the challenger's offer as apparently abnormally low, the claims brought forward by TV1 that it had to make significant investments when it was first awarded the contract now (re)tendered, and that an expert should be appointed to check that the winning tenderer "should have incurred expenses comparable to those which the [incumbent] had had to bear several years previously in order to be able to supply the services covered by the earlier contract" (para 67, own translation from French). This is interesting because it avoids an analysis of sunk costs that could, otherwise, advantage the incumbent [for related analysis, see A Sanchez-Graells, Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 412 ff].

Overall, then, the GC's assessment of the reasons adduced by TV1 to justify the existence of an obligation on the part of the Commission to engage in an in-depth investigation of the winning tender as apparently abnormally low is sound and should be welcome.

Abnormally low tenders (II): Procedural Aspects

Judgment of 2 February 2017,  European Dynamics Luxembourg and Evropaïki Dynamiki v Commission, T-74/15, not published, EU:T:2017:55. In this case, the tendered contract concerned the provision of IT services relating to off-site information systems development, studies and support. The tender was for the conclusion of a framework agreement which would operate on the basis of mini-competitions.

The challenge brought by European Dynamics concerned the rejection of two specific requests for quotations as a result of two such mini-competitions. One of the challenges concerned an allegation that the chosen quotation was abnormally low, and the legal basis on which it is founded concerns a failure to provide reasons for a dismissal of the claim that the winning quotation was not abnormally low (ie a breach of Arts 113(2) of the Financial Regulation and Art 161(2) of its Implementing Regulation, as cited above). Thus, in this case, the challenge is not based primarily on the dismissal of reasons adduced to create or justify an appearance of abnormality in a tender, but rather on the absence of motivation for that result.

The GC thus takes a very different approach in this case and, rather than concentrating on the elements under which the discretion of the contracting authority is assessed in relation to its determination of whether a tender is seemingly abnormally low or not (as above), on this occasion the GC concentrates on the duty to give reasons as the main check and balance of such discretion, as well as a necessary procedural step in order to preserve the procedural rights of tenderers for public contracts (paras 35-41). From this perspective, the GC stresses that

In the present case, it is apparent ... that the applicants expressly requested clarification from the Commission in order to demonstrate that the price offered by the successful tenderer was not abnormally low ... the Commission confirmed that its [debriefing] letter ... contained its reply in that regard. So far as concerns the nature of the tender selected [in the specific mini-competition] it is apparent from the last page of that letter that the Commission merely stated, in a single sentence, that ‘“the winning offer” of the IPT tender did not fall under the case of “abnormally low” offers.’ (para 45, emphasis added).

The legal issue in front of the GC was, consequently, whether such brief dismissal of the allegation brought forward by European Dynamics sufficed to meet the relevant threshold for the purposes of the duty to provide reasons. As could be expected, the GC does not offer a positive answer. It stresses that

... the single sentence in the letter ... stating that the tender was not abnormally low does not fulfil the duties assigned to the obligation to state reasons, that is, the reasons must be disclosed clearly and unequivocally so as, on the one hand, to make the persons concerned aware of the reasons for the measure and thereby enable them to defend their rights and, on the other, to enable the Court to exercise its power of review. It cannot be accepted that a contracting authority should explain the not abnormally low nature of a tender merely by stating that such was considered not to be the case (para 47, emphasis added).

The GC does not stop there and goes to the extra length of consolidating the substantive standard applicable to the reasons that should be given in order to discharge this duty vis-a-vis a claim concerning the abnormally low nature of a tender. The consolidation of the standard is rather formulaic and may be seen to follow too closely the specific aspects which the Financial Regulation sets out to be possible cause for the abnormality of low values in a tender (eg non-compliance with employment and social law), but it can be a generally useful benchmark in that it clarifies that

... requiring the contracting authority to present the grounds on the basis of which an offer was not considered to be abnormally low does not require it to disclose precise information on the technical and financial aspects of that tender, such as the prices offered or the resources that the successful bidder proposes to use in order to provide the services that it offers. In order to provide a sufficient statement of reasons for that aspect of the selected tender, the contracting authority must set out the reasoning on the basis of which, on the one hand, it concluded that, because of its principally financial characteristics, such an offer complied with the national legislation of the country in which the services were to be carried out in respect of the remuneration of staff, contribution to the social security scheme and compliance with occupational safety and health standards and, on the other, it determined that the proposed price included all the costs arising from the technical aspects of the selected tender ... Accordingly, the Commission’s argument that the tenders in the present case had not raised any doubts that they were not abnormally low and that there was therefore no other information which it could have provided to the applicants must be rejected. (para 49, references omitted and emphasis added).

This comes to clarify that, even if the contracting authority does not think that there is a need to engage in an in-depth assessment of the (winning) tender to determine if it is abnormally low, it must at all times be in a position to provide the reasons why it did not think that was the case. Overall, this seems adequate, although it continues a line of case law that tends to create a significant burden at debriefing stage and that can trigger significant concerns of excessive transparency of commercially-sensitive information between competitors, as the GC's relatively open-ended requirement in para 49 of the Judgment may be difficult to square with the contracting authority's obligation not to disclose information in a way that could alter competition [on that, generally, see A Sanchez-Graells, "The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives" (2013). University of Leicester School of Law Research Paper No. 13-11]. 

A Tricky Jurisdictional Point

Judgment of 17 February 2017, European Dynamics Luxembourg and Others v EMA, T-441/15, not published, EU:T:2017:104. The tender in this case concerned the provision of IT services through a framework agreement that included a cascade mechanism for the allocation of call-off contracts within the framework (for a reference to previous litigation concerning this type of mechanism, see here). European Dynamics was awarded the second-tier framework agreement. At the relevant time, EMA asked European Dynamics for CVs of its candidates for the position of project manager for a given contract. EMA rejected all 5 candidates presented by European Dynamics, and this triggered the challenge.

From a jurisdictional perspective, the difficulty in this case was to determine whether EMA's rejection of the candidates put forward by European Dynamics was a decision of an EU Institution challengeable before the CJEU (GC) under its competence as per Art 263 TFEU. In that regard, the GC stressed that "[i]t must be borne in mind that, under Article 263 TFEU, the [Court] only reviews the legality of acts adopted by the institutions intended to produce legal effects vis-à-vis third parties, significantly by altering their legal position" (para 18, own translation from French). The key question was thus whether EMA's rejection of European Dynamic candidates fell within this jurisdictional framework. 

The GC distinguished this case from the previous analysis in Evropaïki Dynamiki v Commission (OLAF), T-498/11, EU:T:2014:831 (for discussion see here) on the basis that, "[t]he present case differs from [case T-498/11] in that [in the previous instance,] the specific contracts had not yet been awarded but had to be awarded on the basis of 'mini-competitions' between the selected 'framework contractors' ... [whereas] in the present case, as regards the implementation of a multiple framework contract with cascade allocation, the specific contract has already been allocated according to the position of the economic operators in the cascade, without the need for any further competition between those [economic operators]. Therefore, if the first economic operator is unable to provide the required service or not interested in doing so, the second best operator will be contacted. If the latter is unable to provide the required service or is not interested, then the third best operator will be contacted" (para 24, own translation from French).

Without any additional reasoning, the GC concludes that "the claim for annulment must be declared inadmissible in so far as it is based on Article 263 TFEU" (para 27), on the (implicit) basis that EMA's decision to reject European Dynamic's candidates falls strictly within a pre-established contractual relationship. In the specific case, the CJEU's jurisdiction is saved by the existence of a compromissory clause compatible with Art 272 TFEU in the framework agreement signed between EMA and European Dynamics (para 20), as well as due to the fact that EMA did not challenge the reclassification of the claim for annulment as a contractual claim (para 16). However, it is easy to see how the approach adopted by the GC could have left the claim in limbo -- and possibly time-barred ... -- had it not been by EMA's willingness to deal with the claim in a principled and open manner. Moreover, even if the GC's strictly literal interpretation was right (of which I am not convinced), there would be normative issues concerning the different treatment of functionally identical decisions depending on the type of framework agreement that European Institutions chose to conclude.

Overall, I would suggest that this case should work as a cautionary tale and that the scope of the jurisdiction of the CJEU (GC) to review acts of the European Institutions that, despite taking part within a contractual setting still carry (sufficient) connotations of the exercise of a public power (something the GC only lightly touched upon in this Judgment, at para [22]), requires some rethinking.

Using "cultural fitness" as evaluation criteria breaches EU and UK public procurement law

Heather Stewart of The Guardian has reported that the UK's Department for International Trade is tendering contracts where they expect that tech companies should have the right ‘cultural fit’ if they want to be hired. This is interpreted in the news report as a clear mechanism whereby "Firms bidding for government contracts [are] asked if they back Brexit". It is indeed a worrying requirement due to the clear risk of unfettered discretion and ensuing discrimination that such 'cultural fit' requirement creates. In my opinion, the requirement runs contrary to both EU and UK public procurement rules. I will try to keep this post as jargon free as possible and limit the technical details of my legal assessment as much as possible. However, this is a rather technical area of economic law, so some technicalities will be unavoidable.

Specifically, the tenders in question introduce evaluation criteria under the category of 'cultural fit' (which carries a weight of 15% of the total points), amongst which tenderers are to be assessed based on whether they are "committed to the best possible outcome for the United Kingdom following its departure from the European Union". The other sub-criteria in this group require tenderers to "be focussed enough to stick to the task at hand and not be side-tracked in a vast and quick-moving field; be committed and hard-working, to deliver under time pressures; and be enthused by the prospect of working at the frontline in such an exciting and dynamic area". These are meant to be assessed on the basis of a written proposal and presentation (ie a beauty contest).

All of these sub-criteria raise serious concerns from the perspective of public procurement best practice, mainly due to (i) the difficulties they create for the contracting authority to carry out an objective assessment at evaluation stage (which makes the evaluation turn to a determination of who can write the best 'essay'), and (ii) their forward-looking nature and difficulty to monitor ex post during the implementation of the contract (which would make them more suited for contract compliance or termination clauses, rather than evaluation criteria, and which also raise the risk of awarding the contract to the tenderer shown to be the best liar).

Additionally, these criteria have, at best, a very tenuous link to the subject matter of the contract and rather refer to general characteristics of the tenderer that, if so, should be assessed at selection rather than evaluation stage. This is important because the criteria are not formulated in relation to the specific members of the team that will provide the services, but rather left wide open as a reference to the tenderer as a whole. More importantly, the specific question about the tenders' commitment to the best possible outcome for the United Kingdom following its departure from the European Union (as well as the question on enthusiasm) relates to attitudes that are simply unobservable for the contracting authority. 

These issues disqualify the 'cultural fit' questions as valid evaluation criteria under current law. Here, it is important to stress that the legal analysis depends on the value of the tendered contracts. Different rules apply to contracts above or below specified value thresholds--which, for services contracts are currently set at £106,047 (or €135,000, see here). The contract tendered by the Department for International Trade indicates that "We are aiming at no more than £50,000 for the totality of the Discovery, but are open to proposals from suppliers who may feel that extra resources are justifiable given the scope of the task." This creates uncertainty as to the relevant legal rules, particularly if the award results in a contract of a value above the threshold. This would suggest that the UK Government should be in compliance with the most stringent rules for contracts above thresholds to be on the safe side. Just in case, though, let's consider both sets of rules.

Contracts below thresholds

The award of contracts below the relevant value thresholds must comply with the requirements of reg. 111 of the Public Contracts Regulations 2015 (see comment here) and the general requirements derived from general principles of EU law, such as non-discrimination, equal treatment, transparency and competition. Reg. 111(5) PCR2015 indicates that "contracting authorities may ask candidates to answer suitability assessment questions only if each such question is—(a) relevant to the subject-matter of the procurement; and (b) proportionate." And reg. 111(7) PCR determines that, in doing so, the contracting authority "shall have regard to any guidance issued by the Minister for the Cabinet Office".

On that point, it is important to bear in mind the guidance issued by the Crown Commercial Service on selection questionnaires. In para [57], concerned with project-specific questions such as the ones we are discussing, the Guidance indicates that the contracting authority "can ask further project-specific questions relating to the potential supplier’s technical and professional ability. Any project-specific questions asked must be relevant and proportionate to the contract. You should refer to the list of possible topics covering technical and professional ability." Importantly, these requirements concerning technical and professional ability are fundamentally limited to assessing suppliers' past performance, on which there is additional guidance.

Overall, these requirements indicate that contracting authorities can only assess the reliability of tenderers in relation to their previous experience and only in so far as this is linked to the subject matter of the contract and proportionate to its value. In my opinion, asking tenderers to answer questions concerning their commitment to the best possible outcome for the United Kingdom following its departure from the European Union and their enthusiasm to work with the Department for International Trade in carrying out Brexit-related analysis is neither linked to the subject-matter of the contract, nor verifiable according to the standards applicable to the assessment of technical and professional aspects of the tenderers' ability.

This impossibility to verify commitment and enthusiasm as part of the evaluation of the tenderers is bound to also breach general principles of EU (public procurement) law, in particular the principle of non-discrimination. If the contract below thresholds is, nonetheless, of cross-border interest, this is an additional legal basis for the illegality of the use of 'cultural fit' criteria.

Contracts above thresholds

Where the contract is above the relevant thresholds (ie for services exceeding £106,047 or €135,000), the illegality of the use of 'cultural fit' criteria becomes even clearer. This analysis is important in this specific case only if the contract significantly exceeds the initial value of £50,000, but this discussion is important in case the Department for International Trade (or the UK Government more generally) is piloting the use of 'cultural fit' as a broader procurement policy. There are two ways in which 'cultural fit' could be used in this setting; either as a selection criterion (where the contracting authority is screening the tenderers as a whole) or as an award criterion (where the contracting authority is screening the specific offer and/or the specific team proposed by the service provider).

If considered as a selection criterion, the relevant rules are those of reg. 58 of the Public Contracts Regulations 2015 (see comment here) and Art 58 of Directive 2014/24/EU. Both of these provisions must be assessed in light of the case law of the Court of Justice of the European Union (ECJ). The relevant requirements derived from these rules are that contracting authorities can only impose requirements aimed at assessing technical and professional ability with the purpose of "ensuring that economic operators possess the necessary human and technical resources and experience to perform the contract to an appropriate quality standard" [reg. 58(15) PCR2015], and provided they are "related and proportionate to the subject-matter of the contract" [reg. 58(4) PCR2015]. 

'Cultural fit' selection criteria are not in line with these requirements. The ECJ was clear in its famous Dutch coffee case (C-368/10, EU:C:2012:284, paras 105-108) in establishing that selection criteria that relate to general policies or attitudes of the tenderer (in that case, whether they "fulfil[led] the criteria of sustainable purchasing and socially responsible business [and] contribute[d] to improving the sustainability of the coffee market and to environmentally, socially and economically responsible coffee production") are not allowed. I have no doubt that the 'cultural fit' criteria used by the Department for International trade in this case, and any criteria that more generally aim to screen tenderers on the basis of their commitment to specific outcomes or their enthusiasm in their generation will equally fall foul of UK and EU public procurement law.

'Cultural fit' questions can also be seen to aim to structure an assessment around "quality-based" award criteria, which are regulated by reg. 67 of the Public Contracts Regulations 2015 (see comment here) and Art 67 of Directive 2014/24/EU. Both of these provisions must be assessed in light of the ECJ case law as well. There are several aspects to consider--such as, again, the link of the award criteria to the subject matter of the contract--but the relevant part of the current domestic rules specifies that "Award criteria shall—(a) ensure the possibility of effective competition; and (b) be accompanied by specifications that allow the information provided by the tenderers to be effectively verified in order to assess how well the tenders meet the award criteria."

Once more, the impossibility of verifying commitment or enthusiasm exclude the possibility of using 'cultural fit' as an award criterion. This is in line with the general requirements set by ECJ case law, which exclude the use of criteria that provide the contracting authority with unlimited discretion [for extended discussion, see A Sanchez-Graells, Public procurement and the EU competition rules, 2nd edn (Oxford, hart, 2015) 378 and ff].

Final remarks

For the reasons above (and some other technical ones I am happy to explore further if it is of interest), I think that the Government's policy (or the Department for International Trade tenders, if this is an isolated incident) constitutes a clear infringement of both UK and EU public procurement rules.

Further, in my view, the problem that underlies the specific call for tenders for advisory services issued by the Department for International Trade is the impossibility of obtaining a perfect substitution between in-house capabilities and contracted-out consultancy. While the Government may be in a better position to push for its political agenda in steering the work of the civil service (which is probably a matter for a separate discussion), it is clearly in a very weak position to do so when it is contracting-out (or in?) advisory capabilities.

All procurement rules allow the public sector to do is to specify the services it aims to acquire. And this implies that the service itself needs to be susceptible of specification. Where non-contractible elements drive the decision to contract, public procurement is simply not a useful tool. The Government may have difficulties building up its in-house capabilities, or even 'reigning in' the civil service, but they will definitely not have it easier through procurement.

 

 

A strange Scottish case on evaluation of tenders -- Boston Sci. Ltd v Common Service Agency [2016] CSOH 132

I find the recent Scottish case Boston Scientific Limited v The Common Service Agency [2016] CSOH 132 most confusing. This is a case of healthcare-related procurement whereby the Scottish NHS' central purchasing body, the Common Service Agency, was tendering framework contracts for the supply of certain types of medical equipment--for simplicity, pacemakers and implantable defibrillators.

The litigation concerned the applicable award criteria and the ensuing evaluation of the tender submitted by Boston Scientific Limited. Even if the case seems to be decided mainly on procedural grounds (the claimant, or pursuer in Scottish terminology, seemed to have been time-barred in raising a challenge against the published award criteria), it raises substantive issues that, in my view, should have been dealt with differently by the Court.

The tender had been advertised and the relevant invitation to tender (ITT) had published the applicable award criteria. For each of the lots in which the framework agreement was to be divided, the tenders would be assessed against a pass/fail criterion of essential features (ie mandatory technical specifications) and then evaluated on a 60:20:20 split of the maximum score of 100. The offered price would carry a 60% weight, whereas two quality criteria would carry 20% each: (a) the inclusion of certain defined desirable features and (b) the longevity of the devices.

The challenge was based on Boston Scientific's submission that the assessment of the longevity of the pacemakers must have been wrong. In a nutshell, Boston Scientific claimed that their position as market leaders and the existence of independent tests that demonstrated that their devices had a very long individual life led them to the conclusion that 'there must have been a failure to compare like with like because if there had not been such a failure [Boston Scientific] would have had the highest longevity scores' [para 15]. In short, the tenderer was not convinced that its competitors could (truthfully) have offered devices with a superior longevity.

Boston Scientific's submission of improper technical evaluation of the tenders is complicated by two additional factors. First, that tenderers had only been asked to declare (or self-certify) the longevity of their devices without providing any supporting evidence. Second, that the criteria applicable to the evaluation of the longevity component were not all that clear.

Self-certification of verifiable technical characteristics?

On the first issue, the complaint considers that the contracting authority was not allowed to include as award criteria elements based on pure self-declaration and which it intended not to verify. Indeed, the case seems peculiar because the Common Service Agency 'had stated clearly prior to the date for submission of tenders that supporting evidence was not sought.  It had protected itself in a different way by making clear that the framework agreement would include a clawback provision if battery life fell short of the figure submitted in a tender' [para 18].

This seems to me to be a peculiar way of conducting business because the longevity of devices that need to be implanted in the human body seems a rather important technical characteristic (as submitted by Boston Scientific, but dismissed by Lord Tyre in his Opinion, despite the relevance of this issue for the purposes of EU consumer law as discussed here), and the abrogation of the power to check compliance with technical specifications in this regard seems odd, regardless of the inclusion of financial penalties in the contract. The Judgment relies on two English precedents that would support the legality of relying on self-certification of compliance with contractual terms. Most importantly, it ignores the EU precedent in EVN and Wienstrom (C-448/01, EU:C:2003:651), to which one of the English cases refers, though. A reference to EVN paras [50]-[51] would have sufficed to quash the award procedure (I am thankful to Karen Wontner and Erik Plas for having raised this point in private correspondence).

First, Lord Tyre relies on Public Interest Lawyers v Legal Services Commission [2012] EWHC 3277 (Admin), Cranston J at para [64] to justify the acceptability of self-certification. However, in my view, this precedent is inapplicable here. First, because it concerned an on-going requirement to be discharged during the execution of the contract (ie an element closer to a contract performance clause than a technical requirement) but, most importantly, because in the previous paragraph of that speech Cranston J stressed that 

... the principle behind its decision was the need to ensure the equal treatment of tenderers through the objective and uniform application of the criteria in their assessment. The principle applies whether or not the public authority is able to verify the criteria. If it is able but omits to do so, that is as much a breach of the duty as if it sets criteria which cannot be verified. That is because the outcome may be an inequality of treatment of tenderers through the equal treatment of unequals, i.e. the equal treatment of those meeting and those failing to meet the tender requirements. After all, it is trite law that equality of treatment means not only treating like cases alike but unlike cases differently [at 63].

And this led Cranston J [at para 65] to insist on the need for robust verification where the contracting authority relies on self-certification by the tenderers. This is important in the context of the Boston Scientific v Common Service Agency dispute because, this case, 'Although it was accepted that in some cases a contracting authority might have a duty to validate information provided by a tenderer, this was not such a case. The defender did not have the means to verify independently the figures for longevity provided by tenderers' [para 18]. The issue here would have been whether this inability of independent verification (a) covered a complete lack of engagement with existing technical information and (b) was not attributable to the contracting authority itself and its decisions on how to organise the procurement procedure. Generally, one would expect that the entity running framework contracts for medical supplies has (or has access to) necessary technical knowledge in any case. Thus, this point of the case remains obscure and, in my opinion, shows excessive deference to the contracting authority.

Second, Lord Tyre relies on Parker Rhodes Hickmotts Solicitors v Legal Services Commission [2011] EWHC 1323 (Admin), McCombe J at paras [35]-[40], which in turn refers back to Public Interest Lawyers v Legal Services Commission. The difficulty with this second case is that its ratio rests on the construction or interpretation of the tender documentation, rather than an assessment of the requirements of the principle of non-discrimination of tenderers--which was the legal basis for the challenge in Boston Scientific. Importantly, in Parker Rhodes, the relevant part of the Judgment focuses on the fact that the Information for Applicants (IFA) document had not indicated how the contracting authority would proceed to verifying specific aspects of the offers, which the Court considered to cover the possibility of relying on self-certification.

To me, this makes both precedents irrelevant for (if not contradictory to) the assessment of the claims raised by Boston Scientific, which aimed to strike down the procurement process on the basis that the contracting authority had appended a significant weight to a criterion it actually decided not to verify at all. In my view, there are good arguments under the principle of good administration (Art 41 CFR) to demand that contracting authorities only evaluate what they can assess and, even more, that they do not claim not to be in a position to assess technical characteristics of the products they are buying--if nothing else, by reliance on the rules on test reports, certification and other means of proof (now under Art 44 Dir 2014/24/EU). 

Longevity, price, both or none of the above?

Additionally, and focusing on the point of the need to construct or interpret the tender documents as published, the second argument raised by Boston Scientific deserves attention as well because, indeed, the criteria applicable to the evaluation of the longevity component were not all that clear. In that regard, it must be noted that the ITT had established that:

In relation to longevity, the tender receiving the highest total longevity score would receive 20 points.  Each other tender would receive “20‑X points where X = 0.2 x the percentage by which each price in each tender exceeded the lowest price tender achieving the lowest total price score” (Boston Scientific v Common Service Agency, para [5], emphasis added).

This seems odd because the criterion that is aimed at scoring longevity is (or, at least, seems to be) referential to the price of all tenders except that of the tender with (self-certified) longer individual device life. In my view, this is a breach of the general scoring rule included in the ITT, according to which price would carry a weight of 60%. This would not be true except for the tender self-certifying highest longevity, and all other offers' price would be taken into account twice (once for the price component itself, and a second time for the scoring of longevity). This is, simply, technically incorrect and, in my view, should have sufficed to cancel the tender.

However, this does not seem to be the whole story and a mistake must have happened in the preparation of the ITT (there seems to be an obvious explanation if one thinks in terms of copy and paste ...) because, in a debriefing letter, the contracting authority had indicated to Boston Scientific that:

The weighting for Longevity was 20% therefore in each lot the longest longevity submitted received 20 points. The scoring guidance in section 3.3 clearly identifies the points allocated to longevity and how the tender would be scored ... (i.e. if one product had longevity or 100 months (longest) it would score 20 points and if a different product submitted had a longevity of 50 months it would score 10 points)  (Boston Scientific v Common Service Agency, para [10], emphasis added).

Now, this is the natural understanding of a relative scoring for longevity, but it happens not to be the scoring rule disclosed in the ITT, which made reference to relative prices rather than relative longevity. Such a substantial deviation between disclosed scoring rule (even if absurd) and its application seems to run against the basic requirements of the principles of transparency and equal treatment, as recently recast by the Court of Justice of the European Union in TNS Dimarso (for a comment, see here).

In my view, this should also have been taken into account by the Court and, rather than dismissing the challenge, Lord Tyre should have sought to understand better whether the longevity criterion had been assessed as the debriefing letter said, or rather as the ITT established (which could have led to abnormal results ultimately preventing Boston Scientific from making much sense of the scores obtained). Most likely, a divergence between the published scoring rules and the actual evaluation of the tender should have led to a cancellation of the award in any case.

Overall, I think that there are two main problems with the Judgment in Boston Scientific v Common Service Agency, and both of them seem to me to result from a lack of engagement with the case law of the Court of Justice of the European Union by the Scottish court. First, because it is truly abnormal to allow for self-certification of a technical requirement that can be assessed and verified by the contracting authority--at least, by reference to technical documents. Second, because it is also truly remarkable that a contracting authority can evaluate tenders in a way that deviates from the published criteria without the reviewing court picking up on this important aspect (or anomaly) of the process. Ultimately, in my opinion, this is a strange case. But also a very technically deficient Judgment and an incorrect decision.

The CJEU's maximalism and minimalism in the treatment of experience as a procurement award criterion (C-601/13)

In Ambisig, C-601/13, EU:C:2015:204, the Court of Justice of the EU (CJEU) has been confronted again with the issue of the use of the experience and qualifications (ie academic and professional background) of the staff assigned to performance of the contract as an award criterion under EU public procurement rules (ie the Lianakis distinction of selection and award criteria). The Ambisig Judgment still applies the rules of Directive 2004/18, but the reasoning and principles will remain relevant for the interpretation of Directive 2014/24.

At first reading, and depending on one's view of the strictness of Lianakis, it may seem that Ambisig is fundamentally a repetition of the discussion on the assessment of staff's experience as an award criterion that was recently rehearsed in Spain v Commission (financial support for cuenca hidrográfica del Júcar), C-641/13, EU:C:2014:2264 (not available in English, see my comments here).

However, some close reading may lead to a different (or at least more nuanced) conclusion, given the tone that the CJEU has used in two such close cases. It may be worth reminding that the rhetoric used in Spain v Commission presented Lianakis as follows:

... as is apparent from paragraphs 30-32 of the judgment Lianakis and others (EU:C:2008:40) ... the Court has clearly distinguished award criteria from the selection criteria that are essentially linked to the assessment of the bidders' ability to perform the contract in question, and considered that the criteria relating to the experience, qualifications and means of ensuring proper performance of the contract in question belong to the latter category and, therefore, do not have the character of award criteria (C-641/13, para 36, own translation, emphasis added).

We could call this the maximalist reading/reporting of Lianakis. However, as we shall see below, this is not the position adopted in Ambisig, where the referring Portuguese court was concerned with two aspects that in its view seemed to make it difficult to apply such a maximalist reading of Lianakis: (1) that the contract was for intellectual services (ie training and consulting); and (2) that the 2011 proposal for a new Directive (now Dir 2014/24) "constitute[d] a new factor in relation to the case-law of the Court in this area".

In that regard, it is interesting to see how the CJEU has now adopted a minimalist approach to Lianakis that basically comes to read into the rules of Dir 2004/18 the content of the new rules under art 67(2)(b) Dir 2014/24. In the words of the CJEU in Ambisig
25 ... the case-law highlighted in the judgment in Lianakis and Others (C‑532/06, EU:C:2008:40) concerns the interpretation of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts (OJ 1992 L 209, p. 1), which was repealed by Directive 2004/18, and that that judgment does not rule out the possibility that the contracting authority may, in certain circumstances, fix and apply a criterion [enabling evaluation of the teams specifically put forward by the tenderers for the performance of the contract and which takes into consideration the composition of the team and the experience and academic and professional background of the team members] at the stage of awarding the contract.

26 That judgment concerns the staff and experience of the tenderers in general and not, as in present case, the staff and experience of the persons making up a particular team which must actually perform the contract.

27 It should be noted, in relation to the interpretation of Article 53(1)(a) of Directive 2004/18 which is the subject of the referring court’s question, that that directive introduced new elements into the Union legislation on public procurement in relation to Directive 92/50.

28 First of all, Article 53(1)(a) of Directive 2004/18 provides that ‘the tender most economically advantageous’ is to be identified ‘from the point of view of the contracting authority’, thereby giving the contracting authority greater discretion in its decision-making.

29 Secondly, the third paragraph of recital 46 in the preamble to Directive 2004/18 states that, where the contracting authorities choose to award a contract to the most economically advantageous tender, they are to assess the tenders in order to determine which one ‘offers the best value for money’, which tends to reinforce the importance of quality in the award criteria for public contracts.

30 Furthermore, Article 53(1) of Directive 2004/18 does not set out an exhaustive list of the criteria which may be used by the contracting authorities in determining the economically most advantageous tender, and therefore leaves it open to the authorities awarding contracts to select the criteria on which they propose to base their award of the contract. Their choice is nevertheless limited to criteria aimed at identifying the tender which is economically the most advantageous (see, to that effect, Lianakis and Others, C‑532/06, EU:C:2008:40, paragraphs 28 and 29 and the case-law cited). To that end, Article 53(1)(a) of Directive 2004/18 specifically requires that the award criteria be linked to the subject-matter of the contract (see judgment in Commission v Netherlands, C‑368/10, EU:C:2012:284, paragraph 86).

31 The quality of performance of a public contract may depend decisively on the ‘professional merit’ of the people entrusted with its performance, which is made up of their professional experience and background.

32 This is particularly true where the performance of the contract is intellectual in nature and, as in the main proceedings in the present case, concerns training and consultancy services.

33 Where a contract of this nature is to be performed by a team, it is the abilities and experience of its members which are decisive for the evaluation of the professional quality of the team. That quality may be an intrinsic characteristic of the tender and linked to the subject-matter of the contract for the purposes of Article 53(1)(a) of Directive 2004/18.

34 Consequently, that quality may be included as an award criterion in the contract notice or in the relevant tendering specifications
(C-601/13, paras 25 to 34, emphasis added).
This is an interesting exercise of judicial rhetoric, which shows the CJEU's willingness to ensure certain cross-temporal validity of its case law in the area of public procurement, where change is a constant. This is not a bad thing in itself. However, it may be puzzling for observers (it definitely is for me) because I am not sure that many would have expected the CJEU to engage in such an explicit change of hats in the space of about 5 months in the way it reports its own previous case law, particularly in such a controversial and debated area [for very insightful discussion on this type of implications of Lianakis, see S Treumer, "The Distinction between Selection and Award Criteria in EC Public Procurement Law—A Rule without Exception" (2009) 18(3) Public Procurement Law Review 103-111]

In the end, it is worth reminding that one of the justifications for the revision/repeal of Dir 2004/18 by Dir 2014/24 was to address the "Lianakis issue" [see S Arrowsmith, "Modernising the European Union's public procurement regime: a blueprint for real simplicity and flexibility" (2012) 21(3) Public Procurement Law Review 71, 80; and rec (94) dir 2014/24]. To some extent, then, the Ambisig Judgment renders a significant (if relatively hidden) justification for the 2014 generation of EU public procurement rules useless.

This may have implications for the future, where the lack of clarity of the CJEU's case law in certain new/revamped areas of public procurement (let's just mention life-cycle costing or asymmetrical negotiations, for now) may trigger calles for further legislative reform--which should, in my view, be avoided to the extent that they rest on maximalistic interpretations of the CJEU's usually sparse and confusing passages, as we now know that it only (?) takes some adequate prompting for the CJEU to provide minimalistic twists that exclude the need for reforms.

CJEU keeps Lianakis interpretation relevant under Directive 2014/24 (C-641/13)


In its Judgment in Spain v Commission (financial support for cuenca hidrográfica del Júcar), C-641/13, EU:C:2014:2264 (not available in English), the Court of Justice of the EU has reiterated in very clear terms the currency of its Lianakis case law [C-532/06, EU:C:2008:40]. Indeed, in Spain v Commission (paras 33-41), the CJEU has clearly stressed that Lianakis (paras 30-32) and Commission v Greece [C-199/07, EU:C:2009:693, paras 55-56] prevent the past experience of the tenderer being used as an award criterion. Given the brevity and clarity of the reasoning of the CJEU, few doubts can remain as to the rather absolute character of the prohibition.
 
This should come as no suprise, as this was the majoritarian interpretation of the Lianakis Judgment [for a possibilistic interpretation seeking flexibility, though, see S Treumer, ‘The Distinction between Selection and Award Criteria in EC Public Procurement Law—A Rule without Exception’ (2009) 18 Public Procurement Law Review 103, and A Sanchez Graells, Public procurement and the EU competition rules (Oxford, Hart Publishing, 2011) 310-12]. Moreover, this was precisely one of the points in which the 2011 proposals for new EU public procurement Directives aimed to deviate (or fine-tune) the case law of the CJEU [for discussion, see M Orthmann, 'The experience of the Bidder as Award Criterion in EU Public Procurement Law' (2014) 1 Humboldt Forum Recht 1 ff].
 
With this in mind, it is worth stressing that Directive 2014/24 now (well, as soon as the Member States transpose it, which they must do by 18 April 2016) deviates from the standard reading of the Lianakis case law. Directive 2014/24 decouples the treatment of the general experience of the tenderer as a qualitative selection criterion [art 58(4), where Lianakis applies full-force] from the assessment of more limited and specific aspects of experience evaluation clearly linked to the subject-matter of the contract, which allow for the specific experience of staff assigned to performing the contract to be taken into consideration at award stage, 'where the quality of the staff assigned can have a significant impact on the level of performance of the contract' [art 67(2)(b), which restricts, specifies of modifies Lianakis].
 
The justification given by Directive 2014/24 for this change is that
Wherever the quality of the staff employed is relevant to the level of performance of the contract, contracting authorities should also be allowed to use as an award criterion the organisation, qualification and experience of the staff assigned to performing the contract in question, as this can affect the quality of contract performance and, as a result, the economic value of the tender. This might be the case, for example, in contracts for intellectual services such as consultancy or architectural services. Contracting authorities which make use of this possibility should ensure, by appropriate contractual means, that the staff assigned to contract performance effectively fulfil the specified quality standards and that such staff can only be replaced with the consent of the contracting authority which verifies that the replacement staff affords an equivalent level of quality [rec (94), emphasis added].
In my view, all of this indicates that the use of staff (specific) experience at award stage will need to be assessed under strict proportionality terms (particularly as the 'significance' of its impact on the level of performance of the contract is concerned), given that exceptions[art 67(2)(b)] to the general rules [art 58(4)] of Directive 2014/24 and the applicable interpretative case law need to be constructed strictly. Moreover, recourse to this sort of award criterion will still need to comply with general requirements and, in my view, avoid distortions of competition such as first comer advantages for incumbent contractors.

Rejection of Abnormally Low and Non-Compliant Tenders in EU Public Procurement: A Comparative View on Selected Jurisdictions

In this new paper, I attempt a concise comparison of the rules applicable to the rejection of abnormally low and non-compliant tenders in a number of EU jurisdictions (namely, Denmark, France, Germany, Italy, Poland, Romania, Spain and the United Kingdom). 

In order to set the common ground for the analysis of such domestic rules, which are solely applicable to non-negotiated procedures, the paper first offers a description of the rules in the EU public procurement Directives and the case law of the European Courts (ie GC and CJEU), and then proceeds to compare them against this benchmark and amongst themselves. Where possible, the paper highlights innovative or different solutions, as well as potential deviations from EU law.

  • Sánchez Graells, Albert, Rejection of Abnormally Low and Non-Compliant Tenders in EU Public Procurement: A Comparative View on Selected Jurisdictions (April 11, 2013). European Procurement Law Series, Vol 6 (forth). http://ssrn.com/abstract=224859

Summum ius, summa iniuria? GC supports a very narrow approach to the dismissal of non-fully compliant tenders (T-216/09)

In it Judgment of 25 October 2012 in case T-216/09 Astrim SpA and Elyo Italia Srl v European Commission, the General Court has backed up the Commission in its decision to dismiss a tender offer where 0,33% of the itemised prices required by the tender documents were not provided by the tenderers. 

In the invitation to tender, the Commission had indeed expressly stressed "the importance of completing all sections of files", and specifically mentioned that" [t]he omission of one or more of [the itemised prices] may result in the exclusion of the bidder from the tender". On the basis of this clear warning, the GC finds no fault in the decision of the Commission to dismiss the tender submitted by the appellants--which, as mentioned, failed to indicate prices for 7 of the 2091 items included in the contractual object.

According to the GC (only French and Italian versions available):
97 L’article 148 du règlement n° 2342/2002 prévoit, quant à lui, que, « [a]près l’ouverture des offres, dans le cas où une offre donnerait lieu à des demandes d’éclaircissement ou s’il s’agit de corriger des erreurs matérielles manifestes dans la rédaction de l’offre, le pouvoir adjudicateur peut prendre l’initiative d’un contact avec le soumissionnaire, ce contact ne pouvant conduire à une modification des termes de l’offre ». 
98 Il y a donc lieu de considérer que, en l’espèce, le pouvoir adjudicateur, après avoir constaté l’omission affectant certaines rubriques et avoir vérifié qu’il ne s’agissait pas d’erreurs matérielles manifestes dans la rédaction de l’offre, n’était tenu ni d’apprécier la gravité de l’omission ni, par conséquent, de consacrer une motivation spécifique à l’importance des rubriques non complétées
99 Il s’ensuit que la Commission n’a pas enfreint le point 17 de la lettre d’invitation en décidant d’exclure les requérantes au motif que certaines rubriques des listes de prix n’avaient pas été complétées
100 Troisièmement, s’agissant de la prétendue violation de l’article 89 du règlement n° 1605/2002 en ce qui concerne le principe de proportionnalité, il suffit de rappeler que le point 17 de la lettre d’invitation souligne « l’importance de remplir toutes les rubriques des fichiers » et indique que « l’omission d’une ou de plusieurs d’entre elles pourrait avoir pour effet d’exclure le soumissionnaire de l’appel d’offres »
101 Le point 17 de la lettre d’invitation indique donc clairement que l’omission d’une seule rubrique peut entraîner l’exclusion d’un soumissionnaire de l’appel d’offres. À cet égard, il convient de relever que cette disposition de la lettre d’invitation vise à fournir au pouvoir adjudicateur, en l’occurrence à la Commission, une explication détaillée quant à la manière selon laquelle le prix global offert pour le marché public en cause par chaque candidat se décompose en des prix individuels pour les différents produits et services inclus dans ce marché public
102 En outre, l’obligation de chaque candidat de mentionner un prix pour toutes les rubriques de la liste des prix vise à permettre la vérification aisée, par la Commission, du caractère exact du prix global offert par chaque soumissionnaire ainsi que du caractère normal de ce prix, conformément à l’article 139, paragraphe 1, du règlement n° 2342/2002 (voir, en ce sens, arrêt Antwerpse Bouwwerken/Commission, précité, point 62). 
103 Enfin [...] il y a lieu de rappeler que, si l’un des prix composant une offre n’est pas indiqué et que cette absence d’indication n’est pas le fruit d’une erreur matérielle manifeste et mineure qui permette, même grâce à des précisions et des explications du soumissionnaire, de déduire le prix de l’offre de manière facile et certaine, le pouvoir adjudicateur ne peut qu’exclure ladite offre
104 Dans ces circonstances, contrairement à ce que soutiennent les requérantes, la Commission n’a pas violé le principe de proportionnalité en décidant d’exclure leur offre sans tenir compte de l’incidence des rubriques non complétées sur la valeur de cette même offre. (GC T-216/09 at paras 97 to 104, emphasis added).

Even if the legal reasoning followed by the GC is formally sound, in my opinion, it sets a negative precedent that potentially restricts the possibilities to take into account marginally-faulty tenders, particularly in its paragraphs 98 and 103, where the GC adopts an absolute approach to the duty to dismiss incomplete or faulty bids (ie non-fully compliant tenders), regardless of the material relevance of the defects--which the contracting authority would be under no obligation to assess. I think that an alternative approach would be preferable.

As indicated elsewhere [A. Sanchez Graells, Public Procurement and the EU Competition Rules (Oxford, Hart Publishing, 2011) pp. 318-323]:

During the tender evaluation process, and as a result of applying the evaluation rules […] contracting authorities can determine that a given tender is not fully compliant with the technical specifications or other requirements regulating the tender. This deviation from the tender requirements should be determined in accordance with the mandate to accept functional and performance equivalents and, consequently, cannot be justified on purely formal terms or by relation to a given standard—at least if alternative standards are available and if the tenderer has proven the equivalence of the proposed solution under the latter (art 23(4) and 23(5) dir 2004/18). In any case, deviations from the requirements set by the contracting authority in the tender documents can still take place under the test of functional or performance equivalence, and a determination that a bid is not fully compliant with the tender requirements can clearly take place under the regime regulating technical specifications. In that situation, however, there is room for significant variation as regards the degree of non-compliance of bids. At the one extreme, bids can be completely unsuitable for the purposes intended by the contracting authority and, at the other extreme, tenders can be merely non-compliant with marginal or secondary issues that would not significantly alter the ability of the tender to satisfy the contracting authorities’ needs. Any imaginable situation lying in the middle of these two extremes is possible and, consequently, a rigid rule applicable equally to all instances of formal non-compliance seems to offer relatively limited results. In this regard, contracting authorities might be willing to accept relatively minor deviations from the tender requirements provided that, overall, the tender is beneficial to their interests. Therefore, an automatic and non-waivable requirement to reject non fully compliant bids could limit unnecessarily the alternatives of the contracting authority.
[…] 
Non-Fully Compliant Tenders and Non-Fully Compliant Variants. Regardless of whether contracting authorities authorise or not the submission of variants, the issue of the treatment of non-fully compliant bids remains largely open. On the one hand, where no variants are authorised, bids can be non-fully compliant with the general requirements included in the tender documents. Similarly, where variants are accepted, both ‘standard’ and ‘variant’ tenders can be non-fully compliant with the ‘minimum’ requirements contained in the tender documents. In either case, contracting authorities could have an interest in accepting non-fully compliant bids that, however, are substantially suited to satisfying their needs, and prove to be superior to fully compliant bids in some relevant respects—ie, bids that would be considered the most economically advantageous under the relevant award criteria (even taking into consideration their partial or non-full compliance with one or several criteria) and which might not be admissible precisely (or only) because of such partial or non-full compliance. As suggested, these decisions on the treatment granted to non-fully compliant bids can alter the outcome of the tender and can have an impact on competition and, consequently, merit further scrutiny. 
Directive 2004/18 does not contain express rules determining whether contracting authorities are bound to reject non-fully compliant bids in all cases or, on the contrary, whether they can retain a certain degree of discretion to accept them. Nonetheless, this issue has been addressed by the case law of the EU judicature, which has determined that ‘the principle of equal treatment of tenderers requires that all the tenders comply with the tender conditions so as to ensure an objective comparison of the tenders submitted by the various tenderers’ and that ‘[t]hat requirement would not be satisfied if tenderers were allowed to depart from the basic terms of the tender conditions … except where those terms expressly allow them to do so’. In principle, it might seem that—unless contract documents expressly allow for specific departures from the basic requirements (ie, unless variations are authorised)—there is an absolute obligation to dismiss non-fully compliant bids as a requirement or corollary of the principle of equality of treatment. Therefore, it might seem that, other than according to the rules on variants, the acceptance or rejection of a non-fully compliant bid is not within the discretion of the contracting authority—which must automatically reject all non-fully compliant bids in order to guarantee equality of treatment. However, it is hereby submitted that such a reading of the interpreting case law is unnecessarily restrictive and might lead to excessive limitations of competition based solely on largely formalistic criteria that might also diminish the ability of contracting authorities to obtain value for money. Consequently, while complying with the requirements of the principle of equal treatment, an alternative reading might give leeway to more pro-competitive results. 
In this regard, it seems compatible with the abovementioned case law to allow contracting authorities to include in the tender documents a rule allowing for the acceptance of non-fully compliant bids—and, therefore, to make known to all potentially interested tenderers right from the beginning that such a possibility exists—where certain stringent conditions are met, so that i) the partial non-compliance does not materially affect the ability of the tender to satisfy the needs of the contracting authority and/or does not grant the tenderer a material advantage over other competing bidders (which, in the case of quantitative criteria could be limited by authorising a given percentage of deviation from the set requirements)—ie, where the tender is not unsuitable, but merely non-fully compliant; ii) the tender is superior to fully compliant bids in some relevant respects—ie, it is the most economically advantageous under the relevant award criteria— even taking into account the partial and non-material non-compliance with one or various requirements included in the tender documents; and iii) the rules do not confer on the contracting authority unrestricted freedom of choice amongst tenderers. Such rules could be supplemented by setting a penalisation system for non-fully compliant bids (either fixed, or varying with the number of criteria with which the tender is non-fully compliant), in order to ensure that their overall superiority compensates for and exceeds the potential deficiencies derived from partial non-compliance with one or several tender requirements. Also, contracting authorities could always establish that certain tender requirements are not subject to partial compliance (ie, awarding constraints). 
In our view, effective competition for the contract could be fostered by allowing tenderers that cannot fully comply with the specifications to submit tenders for the contract and, as long as the rules applicable to non-fully compliant tenders were clearly set in the tender documents ex ante, no breach of the principle of non-discrimination or the ensuing transparency obligation would arise. Therefore, it seems justified to require contracting authorities to adopt such an approach, whenever clear rules and criteria for the appraisal of non-fully compliant rules permit it. Once again, implementing this approach might raise the complexity and costs of the tender procedure and, consequently, should be subjected to a proportionality test.
Hence, I submit that a more flexible approach should have been adopted by the GC in T-216/09 or that, at least, future developments of EU public procurement law should not be restricted by the very tight corset created by the GC in paras 98 and 103 of the Astrim SpA and Elyo Italia v Commission Judgment. As the classics said, summum ius, summa iniuria...

How precisely must evaluation rules be described in procurement documents? According to the GC, not that precisely

In yet another public procurement case derived from a complaint by the Greek company Evropaïki Dynamiki, the General Court has analysed the issue of the degree of precision required in the description of evaluation methods for contract award purposes in its Judgment of 12 July 2012 in case T-476/07 Evropaïki Dynamiki v Frontex.

Regarding the degree of precision in the publication of the award criteria and the evaluation methods to be used by the contracting authority, the GC has adopted a lenient approach that seems questionable, since it may result in leaving excessive discretion in the hands of evaluation teams. It is worth stressing that the GC in Frontex considers that:
the fact that a precise scale of the calculation of the tenders with regard to that award criterion [multiplication of efficiency by effectiveness] was not given cannot constitute a breach of the tendering specifications consisting in the introduction, by the contracting authority, of a new award criterion. The calculation used to arrive at a well defined score does not constitute an evaluation criterion of the proposed hypothetical IT solution, but rather a consequence of that evaluation (case T-476/07, at para 106, emphasis added).
This seems to me as a highly controversial finding, which may run contrary to the case law of the Court of Justice of the EU, particularly in Lianakis (C-532/06 [2008] ECR I-251), where the CJEU clearly indicated that it is settled case law that: "potential tenderers should be aware of all the elements to be taken into account by the contracting authority in identifying the economically most advantageous offer, and their relative importance, when they prepare their tenders" and that "[p]otential tenderers must be in a position to ascertain the existence and scope of those elements when preparing their tenders" (paras 36 and 37, emphasis added). Even further, the CJEU stressed that "tenderers must be placed on an equal footing throughout the procedure, which means that the criteria and conditions governing each contract must be adequately publicised by the contracting authorities" (para 40, emphasis added).
If evaluation methods do not include the scales to be used by evaluation teams when they assess the tenders submitted by bidders, it is hard to see how all transparency requirements will be made operational and how applicants can effectively tailor their offers to the actual (preferred) requirements of the contracting authority or entity. 

Unless there is a good overriding reason to keep the evaluation methodologies and scales secret or undefined in contract notices and documents, it seems clearly desirable that evaluation methods AND scales are published and available to bidders when preparing their tenders. In the end, it is not very useful to know that your tender will be assessed under a criterion of 'efficiency' or 'effectiveness' if there is no indication whatsoever how such requirements will be operationalized by the evaluation team. 

Therefore, I think that the position of the GC in Frontex clashes with the more general case law highlighted by the CJEU in Lianakis, and that Frontex reflects a too lenient approach towards unjustified restrictions in the transparency of evaluation tools and procedures in public procurement. 

In this regard, it seems desirable that the current revision of the EU Directives further details the obligations of contracting authorities to specify evaluation methods and scales in contract notices (e.g. in article 66 of the proposal for a Directive replacing 2004/18).