Contact The Team


Subscribe to our mailing list


* indicates required

Public procurement and construction update


Friday, April 17, 2015

RECENT CASE LAW

Supreme Court delivers the reasons behind its ruling in the OCS case

In July 2014, the Supreme Court ruled that once an automatic suspension is in place following the initiation of proceedings pursuant to Regulation 8(1)(b) of the Remedies Regulations, Irish courts have no jurisdiction to lift the suspension prior to the determination of those proceedings. In January of this year, the Supreme Court delivered its long-awaited written judgment.

This judgment has led to a rise in applications for automatic suspensions and this trend may continue.

We refer readers to our 2014 Winter Newsletter which included a detailed summary of both the High Court and Supreme Court ruling in the OCS case.  (OCS – One Complete Solutions Ltd vs Dublin Airport Authority Plc (2014) IESC 6)

General Court ruling on what financial details of a successful tender should be disclosed

On 14 January 2015, the General Court of the EU (which hears actions taken against the institutions of the EU) handed down a judgment in an appeal against a decision of the European Parliament in a tender for the procurement of Greek translation services. The applicant’s tender was ranked in second place.  Under the Financial Regulation (which governs the award of all public contracts financed from the EU budget and which is similar to the Remedies Directive and the implementing Irish Remedies Regulations), the Parliament was obliged to notify the applicant, upon written request, of the characteristics and relative advantages of the successful tender. The Parliament provided the applicant with the successful tenderer’s total marks as well as the marks awarded for the qualitative criteria. However, it did not provide any information on the financial details of the successful tender.

The General Court found that the Parliament must inform the applicant of the price offered by the successful tenderer as this was one of the characteristics and one of the key advantages of the successful tender, particularly where that criterion accounted for 40% of the total marks. The General Court ultimately annulled the Parliament’s decision to rank the applicant in second place. However, it dismissed a claim for compensation as a causal link between the Parliament’s error and the alleged damage had not been shown.

This case is important in the context of what financial information should be disclosed in debrief letters and can be a sensitive area particularly in very high value infrastructure contracts.

(Case T 667/11 Veloss International SA and Attimedia SA v European Commission, judgment of 14 January 2015 (ECLI:EU:T:2015:5).

 

ECJ confirms that “quality” can be taken into account as an award criterion

On 26 March 2015, the European Court of Justice (ECJ) handed down a ruling, following a reference from a Portuguese court, as to whether the use of a contract award criterion relating to the qualifications of the team assigned to perform the contract is compatible with Directive 2004/18/EC and in particular article 53(1) of this directive. The Portuguese court found it necessary to refer this question due to the contradiction between the Lianakis case, which ruled on this issue in 2008, and the wording in the new public procurement directive (Directive 2014/24/EU). The new directive expressly provides for the use of an award criterion designed to assess the qualification and experience of staff assigned to the contract, where the quality of the staff can have a significant impact on the level of performance of the contract.

The ECJ distinguished Lianakis from the present case on the basis that the Lianakis case concerned the staff and experience of the tenderer in general, whereas this case concerned the staff and experience of the persons making up the particular team proposed to perform the contract.

The ECJ found that where a contract is intellectual in nature (which it found to be the case here), it is the abilities and experience of the team proposed that is decisive for the evaluation of the professional quality of the team. It found that this quality may be an intrinsic characteristic of the tender and linked to the subject matter of the contract for the purpose of Article 53(1) of Directive 2004/18/EC. Accordingly, it found that a contracting authority is entitled to take “quality” into account as an award criterion.  (Case C 601/13 Ambisig v Nersant, judgment of 26 March 2015.)

 

English High Court rules on varying existing agreements

In January 2015, the English High Court ruled that variations introduced by Winchester City Council to a 2004 development agreement were unlawful. The court applied the landmark Pressetext ruling and found that the variations “taken as a whole, resulted in a contract which was materially different in character, such as to demonstrate the intention of the parties to re-negotiate the essential terms of the contract”.

The variations to the development agreement included the removal of a requirement to provide 35% affordable housing, a 50% increase in retail space in place of a bus station, a reduction in the requirement to fund various civic amenities and the inclusion of an additional site which had not been part of the original scheme.

The test applied by the Court was whether on the balance of probabilities, a realistic hypothetical bidder would have applied for the contract, had it been advertised. However, the Court did not require the identification of actual potential bidders. Ultimately, the Court was satisfied that the more favourable terms would have enabled other realistic bidders to bid, because of the reduced costs and the increased opportunity for profit. It concluded that the decision to vary the agreement without carrying out a procurement process was unlawful.

The case serves as a reminder of the risks associated with varying existing agreements. However, the parameters of the “material variations” test as laid down in the Pressetext case has changed significantly under the new procurement directive (Directive 2014/24/EU).  (Gottlieb, R (On the Application Of) v Winchester City Council [25] EWHC 231 (Admin))

 

Other Developments

New EU Directive

On 26 February 2015, regulations to implement the new EU procurement directive (Directive 2014/24/EU) came into force in the UK. This is over a year in advance of the EU’s deadline for transposition of the new directive,(April 2016). The UK Cabinet Office carried out an extensive consultation process and the responses to this process informed the policy approach taken by the UK government in implementing the optional provisions of the Directive. The Cabinet Office and Crown Commercial Service have already published a number of standalone guidance notes on the new requirements introduced by the UK 2015 Regulations.

In Ireland, the Office of Government Procurement (“OGP”) carried out a consultation process seeking the views of public sector users, private sector tenderers, relevant representative bodies and other interested parties in relation to the key policy choices for Ireland. It is anticipated that the OGP will publish draft regulations later this year.

Tender Advisory Scheme

The OGP has introduced a new Tender Advisory Service (TAS) Pilot Scheme for SMEs. The service provides a forum for potential suppliers to informally raise concerns about a particular live tender process carried out by the OGP or other public sector contracting authority (excluding the commercial semi-state bodies). The pilot service became operational on 1 February 2015 and applies to tenders published on or after that date.

TAS will liaise with potential suppliers and contracting authorities to clarify or query tender documentation and, where necessary, will make suggestions to contracting authorities aimed at resolving the concerns that have been raised.

The service can only be used up to six days before the closing date for receipt of tenders.   The OGP recommends that the service be availed of as early as possible. Before availing of the TAS service, the tenderer must first have raised its concern with the contracting authority by way of the query/clarifications options provided for in the relevant tender document. Where the supplier is not satisfied with the response from the contracting authority, TAS may then be availed by way of the Standard Enquiry Form which is available for download on www.procurement.ie. The OGP t envisages that the service should take no more than 3 working days.

It is important to note that availing of this service does not preclude tenderers from formally pursuing their concerns under the Remedies legislation. However, the strict 30 day time limit for review of infringements of procurement procedures will not be suspended if the TAS service is initiated.

 

Report on the Review of the Public Works Contracts December 2014

Background

In recognition of the changed economic climate since the introduction of the Public Works forms of Contract (“PWC”) under the Capital Works Management Framework and the intervening economic downturn, the Government Construction Contracts Committee (“GCCC”) commenced a review of the PWC in December 2013. A number of industry groups, private individuals and public sector bodies have contributed to the review.  The findings of the review were published by the GCCC in December 2014.

Recommended Interim Measures

In its findings, the GCCC has recommended the following interim measures to be implemented by all government departments, bodies under their aegis, local authorities and non-commercial semi–states by mid-2015.  They are as follows:

– Make the bill of quantities the primary reference document for the pricing of public works tenders for projects designed by the contracting authority;

– Introduce a separate tender and subcontract for specialist works contractors;

– Require all projects with a value in excess of €2m to be awarded on the basis of Most Economically Advantageous Tender (MEAT) with a significant weighting for quality; and

– Overhaul the dispute resolution procedures for all public works contracts.

Medium Term Strategy

Following the implementation of these recommended interim measures, it is proposed by the GCCC that a medium term strategy then be put in place by the contracting authorities to deal with the Capital Works Management Framework under the following headings:

  • Risk management;
  • Life Cycle Costing;
  • Building Information Modelling (BIM);
  • Encouragement of co-operative behaviour; and
  • Introduction of performance evaluation and alternative forms of contract.

 

Next Steps

The above measures are proposed to be implemented over a 6 month period once the interim recommendations have been implemented. At the conclusion of this period the OGP, together with the GCCC, is to prepare a report to Government setting out further recommendations.  These recommendations will then be implemented subject to Government approval. The full report can be found.

Review of Building Control (Amendment) Regulations, 2014

Government has recently announced the commencement of the review of the Building Control (Amendment) Regulations, 2014 following the first anniversary of the commencement of the legislation.  Hugh Cummins, Senior Associate in the Projects and Construction team at Philip Lee, has outlined the scope of the review with the strategy for its implementation in a separate piece can be found here on our website.

 


Author

Kerri Crossen

PARTNER


Top.