Trowers & Hamlins

Sign up

Home » Resources » Blog » CEL Annual Lecture - Current issues in public procurement: a view from Luxembourg

CEL Annual Lecture - Current issues in public procurement: a view from Luxembourg

CEL Annual Lecture - Current issues in public procurement: a view from Luxembourg

Solicitors from Trowers & Hamlins LLP's Public Sector Commercial department attended the Annual Lecture of the Centre of European Law at The Dickson Poon School of Law, King's College London on the evening of Monday 2 November 2015.

The 2015 Lecture was delivered by Judge Christopher Vajda of the European Court of Justice (ECJ).  Mr Vajda considered current issues in public procurement by way of exploring a selection of case law which addresses apparent tensions between general principles of the Treaty on the Functioning of the European Union (TFEU) on the one hand, and public procurement legislation under European Directives and the statutory instruments in the Members States implementing those Directives on the other hand. 

Mr Vadja explored recent ECJ cases which consider a number of issues, including in particular the following: (1) the right of unsuccessful tenderers to an effective remedy where a contract award is correctly challenged, (2) the distinction between selection and award criteria since Lianakis and (3) distortion of competition between public and private tenderers.  These are useful reminders for public authorities wishing to put contracts out to tender or those bidding for them.  We provide a summary here of the relevant cases and their implications for contracting authorities.

Effective remedy – Italian Interior Ministry v Fastweb SpA (C-19/13)

Does the publication of a voluntary ex ante transparency notice (or VEAT Notice) provide contracting authorities with protection against ineffectiveness proceedings, even where the contracting authority knows is it has infringed public procurement rules?  No.

The Italian court made a reference to the ECJ to interpret Directive 89/665, as amended by Directive 2007/66, also known as the Remedies Directive, in answer to a two-part question.  If Article 2d(4) of the Directive is strictly satisfied, is it impossible for a review body to find a contract ineffective, even if the award of the contract infringes other provisions of the Directive, and even in light of the Charter of Fundamental Rights of the European Union?

Article 2d(4) of the Directive applies in certain circumstances to prevent a review body from finding that a directly awarded contract is ineffective, where the contracting authority has awarded a contract without prior publication of a contract notice in the Official Journal of the European Union (OJEU) and such failure to publish is not permissible in accordance with Directive 2004/18/EC. 

To satisfy the conditions of Article 2d(4) of the Directive, a contracting authority must have: (1) considered and taken the view that such failure to publish is permissible in accordance with Directive 2004/18/EC, (2) subsequently published in the OJEU a notice expressing its intention to conclude the contract, and (3) allowed at least 10 calendar days from the day following the date of the publication of the notice before concluding the contract.

Article 47 of the Charter of Fundamental Rights of the European Union provides for the right to an effective remedy.  The Directive has as its objective the guaranteeing, in all member states, of effective remedies for infringements of public procurement law.
The ECJ held that the review body must maintain the effects of the contract if it finds that the three conditions of Article 2d(4) are met, however this is subject to the review body's examination of the conduct of the contracting authority, distinguishing any error committed in good faith from an intentional breach of the public procurement rules.

This ruling effectively adds a requirement of justification to the satisfaction of Article 2d(4), which does not entirely remove the uncertainty of ineffectiveness in the direct award of contracts but does add clarity to what constitutes illegal direct award of contracts.

Selection and award criteria –  Ambisig v Nersant (Case C 601/13)

Can the quality of a team which has been created to deliver a contract under procurement be evaluated at award stage in the procurement?  Yes.

The Portuguese court made a reference to the ECJ to answer the question of whether the use of a contract award criterion relating to the qualifications of the team assigned to perform the contract can be compatible with Directive 2004/18/EC and in particular Article 53(1). 

The reference sought to address the contradiction between the Lianakis case, and the wording in Directive 2014/24/EU.  That wording states (at recital paragraph 94) that "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."  It adds that this "might be the case, for example, in contracts for intellectual services such as consultancy or architectural services".

The ECJ distinguished Lianakis from the present case on the basis that in Lianakis the tenderer's general level of staff and experience was at issue, whereas here it was the staff and experience of the persons making up the particular team proposed to perform the contract.  The ECJ therefore ruled in line with the wording of Directive 2014/24/EU that a contracting authority is entitled to take specific technical and professional quality into account as an award criterion, and hence the abilities and experience of the particular team proposed could be a quality linked to the subject matter of the contract for the purpose of Article 53(1) of Directive 2004/18/EC.

This ruling, and Directive 2014/24/EU, clearly give contracting authorities greater discretion in awarding contracts.

Distortion of competition – Azienda Ospedaliero-Universitaria di Careggi-Firenze v Data Medical Service Srl (Case C‑568/13)

Is it lawful for public sector bodies subsidised by public money to bid in competition with private sector counterparts?  Yes.

The Italian court made a reference to the ECJ to answer the questions of whether a public body may participate in a tendering procedure and may submit a tender which cannot be matched by any competitors as a result of the public funding which it receives, in circumstances in which corrective measures have not been put in place in order to prevent possible resulting distortions of competition.  Directive 2004/18/EC had not been transposed into Italian law at the material time.

Although it is clear from Directive 92/50/EEC and ECJ case law that a public body may participate in a tendering procedure as it is a service provider, which means any natural or legal person which offers services, less clear is the proper treatment within the general principles of the TFEU of abnormally low tenders which are explained by the grant of State Aid which may also be unlawful or incompatible with the internal market.
The requirement of Article 37 of the earlier Directive is that contracting authorities must investigate tenders which appear to be abnormally low in relation to the service to be provided "before it may reject those tenders".  There is no obligation to reject such tenders; merely an obligation to request details in writing and to verify those details "taking account of the explanations received". There is also no obligation for Member States to legislate for corrective measures to prevent distortion of competition beyond Article 37.

Directive 2004/18/EC expressly states "the possibility of the tenderer obtaining State Aid" as a detail for investigation, and that a contracting authority may only reject such a tender "after consultation with the tenderer where the latter is unable to prove, within a sufficient time limit fixed by the contracting authority, that the aid in question was granted legally".  There is an obligation inform the Commission of such a rejection in that scenario.

In the present case (which post-dates Directive 2004/18/EC), the ECJ ruled in line with Article 37 and in favour of an interpretation of the general principles of the TFEU that a public body may submit a tender which cannot be matched by any competitors as a result of the public funding which it receives.

This ruling refuses the introduction into public procurement of corrective mechanisms to counteract State aid, and upholds that State Aid rules and the rules on public procurement have different aims and scope.  State Aid rules are concerned with preventing distortions of competition caused by favouring certain undertakings or the production of certain goods, whereas procurement legislation concerns the conditions for awarding contracts to operators.

Comments

1 comment

Public procurement can be regarded as quite a convoluted topic but is possible to work it out logically like the Public Procurement Authority at http://ppa-or.gov The p.urpose of the PPA (like http://ppa-or.gov/) is to improve efficiency in the procurement process and reduce solicitation and procurement costs. They are supposed to provide a mechanism for increased standardization of industry tools, equipment and technology. This allows other public agencies to benefit from Master Price Agreements secured by PPA.

Add your comment Please login or register to comment on this post.