General principles in awarding contracts under Reg. 56 Public Contracts Regulations 2015

Reg.56 of the Public Contracts Regulations 2015 (PCR2015) opens the sub-section on rules governing the choice of participants and award of contracts with the general principles that need to be followed in the award of contracts, which transpose the same rules under Article 56 of Directive 2014/24, which expands and modifies significantly the rules in Article 44(1) of Directive 2004/18

Rather than general principles, Art 56 of Dir 2014/24 and reg.56 PCR2015 establish general rules concerning the process that needs to be followed in awarding contracts [for general discussion, see A Sanchez Graells, "Exclusion, Qualitative Selection and Short-listing”, in F Lichère, R Caranta & S Treumer (eds), Modernising Public Procurement. The New Directive, vol. 6 European Procurement Law Series (Copenhagen, DJØF, 2014) 97-129].

Reg.56 PCR2015 contains four rules worth discussing: (a) the requirement for cumulative compliance with exclusion and selection criteria by tenderers and award criteria by their tenders [reg.56(1)]; (b) the possibility to reverse the logical process of selection-evaluation in open procedures [reg.56(3)]; (c) the possibility for contracting authorities not to award a contract to the tenderer submitting the most economically advantageous tender where they have established that the tender does not comply with environmental, social or labour law requirements [reg.56(2)]; and (d) the possibility for contracting authorities to ask for clarifications where information or documentation seems to be incomplete or erroneous [reg.56(4)]. Pedro has focused on regs.56(2) and (3) PCR2015 and has provided some interesting different views, particularly regarding the inversion of selection and tender evaluation under 56(3).

(1) Cumulative compliance of criteria concerned with tenderers and their tenders...
Art 56(1) of Dir 2014/24 condenses the content of Art 44(1) of Dir 2004/18 and changes its drafting significantly in order to clarify that contracts can only be awarded where both the tenderer and its tender comply with all applicable requirements under the relevant procurement documents. 

Reg.56(1) PCR2015 indeed emphasises that contracts shall be awarded on the basis of criteria laid down in accordance with regs. 67 to 69 on award criteria, provided that the contracting authority has verified in accordance with regs. 59 to 61 that all of the following conditions are fulfilled: (a) the tender complies with the requirements, conditions and criteria set out in the contract notice or the invitation to confirm interest and in the procurement documents, taking into account, where applicable, reg. 45; and (b) the tender comes from a tenderer that is not excluded in accordance with reg. 57, and meets the selection criteria, and where applicable, the non-discriminatory rules and criteria referred to in reg. 65.

This clarification may not have been necessary, as the application of the rules under Dir 2004/18 surely led to the same conclusion. By the change of drafting, it also suppresses the reference to a mandatory sequence of evaluation that required that ‘Contracts shall be awarded after the suitability of the economic operators not excludedhas been checked’, which seemed to require that exclusion and qualitative selection of economic operators was conducted prior to the analysis of their tenders in accordance with award criteria. This is the logical sequence, in any case.

(2) ..., regardless of the order in which they are assessed
Nonetheless, in order to clarify this flexibility in the sequence of assessment of compliance with the applicable mandatory criteria, reg.56(3) PCR2015 follows Art 56(2) of Dir 2014/24 and expressly foresees the possibility for contracting authorities to ‘examine tenders before verifying the absence of grounds for exclusion and the fulfilment of the selection criteria’ but, in such case, ‘they shall ensure that the verification of absence of grounds for exclusion and of fulfilment of the selection criteria is carried out in an impartial and transparent manner so that no contract is awarded to a tenderer that should have been excludedor that does not meet the selection criteria set out by the contracting authority’. This rule, which had no equivalent under Dir 2004/18, will only be applicable in connection with open procedures because in the rest of the procedures, a reversal of the sequence selection-award is not feasible.

This provision seems to anticipate itself the problems that such sequence can generate, given that contracting authorities will always have an incentive to ‘twist’ exclusion and selection criteria to be able to retain the best offer they have received. Moreover, unless the procurement is carried out under rare circumstances that make the assessment of the tender (both in technical and economic terms) simpler and quicker than the general assessment of the tenderers, there seems to be an advantage in proceeding first to exclude non-suitable or non-qualified tenderers in order to avoid the costs (in terms of time, at least) of evaluating their tenders. Moreover, the contracting authority can significantly reduce the cost of exclusion and selection analyses both for tenderers and for itself by resorting to the acceptance of the European Single Procurement Document and other facilitating measures under Article 59 of the new Directive (below section 4.5). Therefore, the practical impact of this new provision can be doubted, as contracting authorities may only find an advantage in the reversal of the assessment sequence in a limited number of open procedures and, even in those cases, they may want to avoid any potential challenge on the basis of discrimination derived from the ex post assessment of the tenderer that has submitted the best tender against exclusion grounds and qualitative selection criteria.

(3) Possible exclusion and rejection possible on the basis of non-compliance with (EU, domestic and international) social, labour and environmental law
It is worth noting that Art 56(1) in fine of Dir 2014/24 opens the door to the use of public procurement decisions as a lever to promote enforcement of (or sanction the lack thereof) social, labour and environmental law—thereby strengthening the possibilities to use procurement for the pursuit of such ‘secondary’ or ‘horizontal policies’ [see S Arrowsmith, ‘Horizontal Policies in Public Procurement: A Taxonomy,’ (2010) 10(2) Journal of Public Procurement 149 and the various contributions to S Arrowsmith and P Kunzlik (eds) Social and Environmental Policies in EC Procurement Law (Cambridge, Cambridge University Press, 2009)]. Reg.56(2) PCR2015 contains the same rule.

In more detail, the provision contemplates that ‘Contracting authorities may decide not to award a contract to the tenderer submitting the most economically advantageous tender where they have established that the tender does not comply with the applicable obligations referred to in Article 18(2)’ of Dir 2014/24—that is, ‘obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X’—which can be modified by the Commission from time to time, according to Art 56(4) of Dir 2014/24.

This should be connected to the provision of Art 57(4)(a) of Dir 2014/24 [see comment to reg.57 tomorrow], which indicates that ‘Contracting authorities may exclude or may be required by Member States to exclude from participation in a procurement procedure any economic operator (a) where [they] can demonstrate by any appropriate means a violation of applicable obligations referred to in Article 18(2)’. It is important to stress that such exclusion could take place at any moment, which includes the exclusion right at the point of making an award decision.

In my view, both Art 56(1) in fine and 57(4)(a) of Dir 2014/24 serve exactly the same function—ie the strengthening of the social, labour and environmental aspects of the public procurement function, although in a manner that can seriously diminish its economic effectiveness and that can impose a burden difficult to discharge on contracting authorities (which could now be in a difficult position where they will need to assess tenderers’ and tenders’ compliance with an increased set of diverse rules of a social, labour and environmental nature). 

Indeed, both provisions aim at the same outcome, with the only apparent difference that Art 56(1) in fine is concerned with the tender specifically, whereas Art 57(4)(a) is concerned with the tenderer more generally—and, consequently, Art 57(4)(a) may be seen as a rule that looks at the past and present general compliance of the economic operator with social, labour and environmental law, whereas Art 56(1) in fine allows the contracting authority to make a prognosis of compliance and reject a tender if its future implementation would imply non-compliance with social, labour and environmental law requirements. In any case, their effectiveness will largely depend on the transposition decisions of the Member States and, ultimately, on the actual capacity of contracting authorities to engage in such possibly complex assessments of compliance with EU, domestic and international social, labour and environmental rules.
(4) More scope for a power / duty to seek clarifications and additional information from tenderers
On a different note (but possibly related if the contracting authority needs further information to assess compliance with eg social, labour or environmental rules, above), it is also relevant that Art 56(3) of Dir 2014/24, as transposed literally by reg.56(4) PCR2015, is extending the powers of contracting authorities to seek clarifications or additional information from candidates and tenderers. Previously, Art 51 of Dir 2004/18 simply foresaw that contracting authorities ‘may invite economic operators to supplement or clarify the certificates and documents’ concerned with their personal situation—ie the documents and certificates concerned with the (lack of) grounds for exclusion and compliance with qualitative selection criteria (including their suitability to pursue a professional activity, their economic and financial standing, their technical and/or professional ability, or their systems to ensure compliance with quality assurance and environmental management standards). Interestingly, the Court of Justice of the European Union has strengthened this possibility in its recent Judgments Case C-599/10 Slovensko and C-336/12 Manova.

Under the rest of the rules of Dir 2004/18, clarifications were only allowed in competitive dialogues and always provided that ‘this does not have the effect of modifying substantial aspects of the tender or of the call for tender and does not risk distorting competition or causing discrimination’ [art 28(7) dir 2004/18; for discussion of the rules under Directive 2004/18 and their implementation, see A Sanchez Graells, “Rejection of Abnormally Low and Non-Compliant Tenders in EU Public Procurement: A Comparative View on Selected Jurisdictions”, in M Comba & S Treumer (eds), Award of Contracts in EU Procurement, European Procurement Law Series, Vol. 5 (Copenhagen, DJF , 2013) 289-293].

On its part, Art 56(3) of Dir 2014/24/reg.56(4) PCR2015 go well beyond the current rules and empower contracting authorities to adopt a more proactive role. Specifically, these provisions foresee that ‘Where information or documentation to be submitted by economic operators is or appears to be incomplete or erroneous or where specific documents are missing, contracting authorities may, unless otherwise provided by the national law implementing this Directive, request the economic operators concerned to submit, supplement, clarify or complete the relevant information or documentation within an appropriate time limit, provided that such requests are made in full compliance with the principles of equal treatment and transparency’. 

This should be seen as a codification of the case law of the Court of Justice of the European Union (CJEU) concerned with the duty of good administration [J Mendes, ‘Good Administration in EU Law and the European Code of Good Administrative Behaviour’, EUI Working Paper Law 2009/09] in the area of public procurement and need to be read in conjunction with its interpretation of the limits imposed by the principles of transparency and equal treatment [see Case T-19/95 Adia interim v Commission , and Case T-195/08 Antwerpse Bouwwerken v Commission]. Despite being concerned with the tender phase rather than the selection of candidates itself, the closest ‘precedent’ to this rule should be found in the Slovensko Judgment, where the CJEU clearly indicated that EU procurement law ‘does not preclude a provision of national law according to which, in essence, the contracting authority may ask tenderers in writing to clarify their tenders without, however, requesting or accepting any amendment to the tenders. In the exercise of the discretion thus enjoyed by the contracting authority, that authority must treat the various tenderers equally and fairly, in such a way that a request for clarification cannot appear unduly to have favoured or disadvantaged the tenderer or tenderers to which the request was addressed, once the procedure for selection of tenders has been completed and in the light of its outcome’[case C-599/10 Slovensko, para 41].

After the proposal for the new 2014 Directive was already being discussed, the CJEU clarified that Slovensko provided 'guidance in relation to tenders [that] can also be applied to applications filed at the screening stage for candidates in a restricted procedure' [case C-336/12 Manova, para 38], hence suppressing any doubts as to the applicability of the rule throughout the tender procedure and not only in any specific phase. 

Even more specifically, it clarified that 'a contracting authority may request the correction or amplification of details of such an application, on a limited and specific basis, so long as that request relates to particulars or information, such as a published balance sheet, which can be objectively shown to pre-date the deadline for applying to take part in the tendering procedure concerned', but bearing in mind that 'this would not be the case if the contract documents required provision of the missing particulars or information, on pain of exclusion' [ibid, paras 39 and 40].

Moreover, an interpretation of this clause in view of the CJEU case law may result in a positive obligation to contact tenderers and seek clarification or additional information (given that contracting authorities do not have an unfettered discretion not to exercise their power to seek clarification; see case T-211/02 Tideland Signal v Commission), at least under certain conditions, such as when ‘the circumstances of the case, of which [the contracting authority] is aware, suggest that the ambiguity probably has a simple explanation and is capable of being easily resolved’ [see case T-195/08 Antwerpse Bouwwerken v Commission]

Therefore, Art 56(3) of Dir 2014/24/reg.56(4) PCR2015 should be welcome inasmuch as they can contribute (through the interpretation to be given by the CJEU) to the development of a common (minimum) standard of ‘good administration’ in public procurement across all EU Member States—regardless of the requirements of their domestic codes of administrative procedure or similar provision.