Prior involvement of candidates or tenderers under Reg. 41 Public Contracts Regulations 2015

As mentioned in relation to reg.40 of the Public Contracts Regulations 2015 (PCR2015), the treatment of the candidates or tenderers involved with the contracting authority prior to a specific procurement is covered by reg.41 PCR2015, which transposes the rules of Article 41 of Directive 2014/24 with some minor drafting changes that do not alter its content. The following comments are based on my assessment of Arts 40 and 41 of Dir 2014/24 in Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 373-78. Pedro's views are very complementary and focus on the burden imposed on contracting authorities by reg. 41 PCR2015.

The acceptability and the appraisal of bids submitted by advantaged parties and, particularly, the issue of the participation as bidders of consultants previously involved in the design of the tender process can generate a major (negative) impact on competition—especially as regards its technical specifications, the method for the evaluation of bids, and the award criteria [see S Arrowsmith, ‘The Problem of Discussions with Tenderers under the EC Procurement Directives: the Current Law and the Case for Reform’ (1998) 7 Public Procurement Law Review 65 and S Treumer, ‘Technical Dialogue Prior to Submission of Tenders and the Principle of Equal Treatment to Tenderers’ (1999) 8 Public Procurement Law Review 147; ibid, ‘Technical Dialogue and the Principle of Equal Treatment—Dealing with Conflicts of Interest after Fabricom’ (2007) 16 Public Procurement Law Review 99]. Such prior involvement is now expressly authorised and regulated under articles 40 and 41 of Directive 2014/24. Indeed, under the provisions of article 40, before launching a procurement procedure, contracting authorities may conduct market consultations with a view to preparing the procurement and informing economic operators of their procurement plans and requirements. For this purpose, they can seek or accept advice from independent experts or authorities or from market participants. That advice may be used in the planning and conduct of the procurement procedure, provided that ‘such advice does not have the effect of distorting competition and does not result in a violation of the principles of non-discrimination and transparency’ (emphasis added).

Article 41 then regulates the procedure for the contracting authority to assess the existence of such potential distortions of competition. To that effect, where an undertaking has advised the contracting authority or has otherwise been involved in the preparation of the procurement procedure, the contracting authority ‘shall take appropriate measures to ensure that competition is not distorted by its participation in the tender’. It is irrelevant that the prior involvement has taken place as part of the preliminary market consultations foreseen in article 40 of Directive 2014/24 or otherwise. Moreover, the special duty to avoid distortions of competition arises not only where the tenderer or candidate has directly advised the authority or been involved in the design of the tender, but also when the participating entity is related to it. On the basis of ensuring that the potential conflict of interest is transparent and in order to ensure equality of opportunity in the disclosure of all relevant documentation and to neutralise any time advantage, such measures shall include the communication to the other candidates and tenderers of relevant information exchanged in the context of or resulting from the involvement of the candidate or tenderer in the preparation of the procurement procedure and the fixing of adequate time limits for the receipt of tenders. The Directive relies on the use of these neutralisation measures as a first solution and reserves the exclusion of the advantaged tender to relatively extreme situations.

This issue is very closely related to the grounds for exclusion of potential tenderers, where it is now further dealt with under a relatively general clause excluding participation by operators in conflict of interest or otherwise advantaged in relation to the specific tender due to their prior involvement. Improving the rules under article 45 of Directive 2004/18, which did not include such elements amongst the criteria to be taken into account to appraise the personal situation of the candidate or tenderer at the stage of qualitative selection, Article 57(4)(f) of Directive 2014/24 establishes a discretionary exclusion ground applicable ‘where a distortion of competition from the prior involvement of the economic operators in the preparation of the procurement procedure … cannot be remedied by other, less intrusive measures’. In my view—given the existing case law, which will soon be discussed—rather than at selection stage, it might be more appropriate to deal with conflicts of interest at the stage of the evaluation of bids and, in any case, a substantive and detailed analysis needs to be undertaken by the contracting authority.

When this issue was not expressly addressed by the EU public procurement directives, the EU judicature offered guidance that remains valuable in order to assess the competitive position of tenderers previously involved in the design of the tender. According to the relevant case law, EU public procurement directives
preclude a rule … whereby a person who has been instructed to carry out research, experiments, studies or development in connection with public works, supplies or services is not permitted to apply to participate in or to submit a tender for those works, supplies or services and where that person is not given the opportunity to prove that, in the circumstances of the case, the experience which he has acquired was not capable of distorting competition (emphasis added) [Joined Cases C-21/03 and C-34/03 Fabricom [2005] ECR I-1559 36].
This has now been codified in article 41 of Directive 2014/24, which is in line with article 57(4)(f) and foresees that the candidate or tenderer concerned ‘shall only be excluded from the procedure where there are no other means to ensure compliance with the duty to observe the principle of equal treatment’. Moreover, and similarly to what happens in relation to candidates that have submitted apparently abnormally low tenders, prior to any such exclusion, advantaged candidates or tenderers shall be given the opportunity to prove that their involvement in preparing the procurement procedure is not capable of distorting competition. Therefore, national legislation or contracting authorities’ decisions cannot impose the automatic exclusion of apparently advantaged parties and, more specifically, of project consultants—but must provide such candidates with the opportunity to prove that competition has not been distorted as a result of their previous involvement in the project and, particularly, by the experience thereby acquired [rather obviously, the practical implications of such an opportunity to rebut an implicit presumption of distortion of competition will be largely determined by the way in which the criterion of ‘distortion of competition’ is shaped and applied].

In this regard, it seems appropriate to require contracting authorities to pay special attention when appraising bids submitted by potentially advantaged parties and, particularly, by incumbent operators or by consultants previously involved in project design—be it directly or indirectly, through parties connected to those undertakings. Such an approach would not run against the principle of non-discrimination since, as also expressly found by the CJEU, a person who has carried out certain preparatory work
is not necessarily in the same situation as regards participation in the procedure for the award of that contract as a person who has not carried out such works [and, consequently] it cannot be maintained that the principle of equal treatment requires that that person be treated in the same way as any other tenderer [Joined Cases C-21/03 and C-34/03 Fabricom [2005] ECR I-1559 28 and 31].
Two options seem to be compatible with the finding of the CJEU. On the one hand, the analysis of the (in)existence of a distortion of competition can be conducted in the abstract, focusing on formal criteria relating to the garden-fencing of the information acquired during the preparatory works, the establishment of so-called Chinese walls, or other criteria regarding the control or decisive influence that might exist between the seemingly advantaged party and any other party with which it is connected. This analysis, however, seems to give scope to rather limited inquiries and to give leeway to potentially substantial distortions of competition—especially because it ‘is virtually impossible to envisage any means of ensuring that the information and experience acquired during the preparatory stage will not operate to the advantage of the person concerned when he submits a tender’ [Opinion of AG Léger in joined cases C-21/03 and C-34/03 Fabricom 42].

On the other hand, a more in-depth control of the potential use of information, time or experience advantages at the tender evaluation stage might yield superior—albeit still limited, results. The control should be based on an analysis of the terms of the tender submitted by the apparently advantaged party against several specific and cumulative criteria. First, this should be against the information made public or disclosed to the rest of the candidates. If there are aspects of the tender that could not have been developed on the basis of that information by a diligent and well-informed average tenderer knowledgeable in that field (admittedly, an open standard not exempt from interpretative difficulties), then, sufficient indicia of an advantage should be found (and, consequently, the contracting authority should reject the tender). A second criterion, which is, however, more difficult to appraise, should focus on the time advantage potentially enjoyed by the apparently advantaged party, and so the contracting authority should determine whether the tender submitted could have been developed, to the same level of detail and development, by a similarly average tenderer that had received the information when it was made available by the contracting authority. Nonetheless, admittedly, such a test is very hard to implement to a satisfying degree of predictability and objectiveness—and, consequently, it seems preferable not to pursue this kind of analysis except in very exceptional cases where (probably due to specially tight timelines for the development and submission of the offer) it is evident that the apparently advantaged tenderer must have had significantly more time for the preparation of its tender (for instance, as compared to the level of development and detail of the rest of the offers received). Third, the tender of the apparently advantaged operator should be compared against the degree of compliance of the rest of the tenderers with the specifications and their evaluation against the award criteria. In this regard, if the tender submitted by the apparently advantaged party is one amongst a few (not to mention if it is the only one) that complies with the technical specifications and/or obtains significantly better scores under most or all of the award criteria applicable in the tender, once again, it is important to stress that sufficient indicia of an advantage—or of the previous ‘steering’ of the preparation of the public contract in a favourable direction—should be found and its tender should be rejected. However, this last criterion should be applied with special care, so as to avoid unduly handicapping more efficient or better prepared apparently advantaged tenderers.

In both cases, rejection of the tender following the described indicia of advantage on the part of the apparently advantaged tenderer seems justified by the almost impossible proof of alternative explanations that would neutralise such strong indications of an effective distortion of competition by that tenderer. Nonetheless, for the sake of promoting procedural rights, apparently advantaged parties should be given the opportunity to provide reasons and alternative explanations to the indicia found—albeit, in this case, a very stringent analysis should be applied by the contracting authorities in view of the potential jeopardy of undistorted competition.

To be sure, this approach rests on the transparency of the conflict of interest and can only tackle instances of submission of offers directly by the apparently advantaged tenderer, or indirectly by any other party that discloses the participation or advice given by the potentially advantaged party. In other cases—where the participation of the potentially advantaged party is not disclosed to the contracting authority—the proposed solution will be largely inoperative, but will constitute a potential case of fraud or misrepresentation that should be controlled by other means.

As regards the timing for the control of actual or effective advantages that have benefitted the apparently advantaged operator, it is relevant to note that the CJEU had precluded a contracting authority from excluding a tenderer at any point along the tender process ‘until the end of the procedure for the examination of tenders’, on the grounds that doing so would restrict the effectiveness of the remedies available to the apparently advantaged operator now excluded from the tender [Joined Cases C-21/03 and C-34/03 Fabricom [2005] ECR I-1559 41–45]. However, it is argued here that a proper reading of the finding of the CJEU did not preclude the analysis at the stage of tender evaluation because the reasoning applied by the Court is clearly dependent on the assumption that the contracting ‘authority has before it all the information which it needs in order to take that decision’ and, therefore, should not delay its decision unduly until the procedure has reached a very advanced stage and, therefore, deprives the undertaking concerned of the opportunity to rely on the EU rules on remedies [ibid]. Therefore if, as hereby held, the proper test depends on the analysis of the tender submitted by the apparently advantaged operator—because, before that, the contracting authority does not have the relevant information to reach a meaningful conclusion on the actual or effective existence of an advantage—the abovementioned case law should not be considered an impediment. Moreover, in view of the specific rules now introduced in article 57(5) of Directive 2014/24—which expressly indicate that exclusion based on discretionary grounds can take place ‘at any time during the procedure’ and based on facts or ‘acts committed or omitted either before or during the procedure’—there should be no restriction whatsoever to the application of the ground for the exclusion of the tenderer (and implicitly, the rejection of its tender) on the basis of the advantage derived from its prior involvement at any point of the procedure and, particularly, at the stage of bid assessment.

To sum up, as a mandate of the principles of non-discrimination and competition, particularly as specified in articles 41 and 57(4)(f) of Directive 2014/24, contracting authorities are under a special responsibility to assess tenders submitted by apparently advantaged tenderers—and, particularly, by project consultants—in order to ensure that competition has not been altered. Such an analysis seems to be better performed at the tender evaluation stage and according to non-formalistic criteria, mainly based on a comparison of the tender submitted by the apparently advantaged tenderer against the relevant tender documents and against the rest of the tenders received from tenderers not involved in the preparatory work.