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2020 procurement case law in review – Part 1


Monday, March 1, 2021

With the other challenges that were posed last year – COVID-19 and Brexit– you would be forgiven for not paying as much attention to procurement cases in Ireland, the rest of the EU and the UK. This article focuses on the key issues raised in 2020 case law (and an opinion from Advocate General Campos Sánchez-Bordona), with a forthcoming article focusing upon some of the more interesting issues arising in procurement litigation for contracting authorities and the private sector. 

This article does not cover the important recent case Robert Owens v Kildare County Council, covered in a separate post on our website.

Abandoning procurementsRyhurst Ltd v Whittington Health NHS Trust [2020] EWHC 448

Ryhurst won a tender for a ten year strategic partnership contract with the NHS Trust. The NHS Trust subsequently cancelled the tender process, citing its improved financial position and strengthened relationship with partner organisations (that meant the need for strategic partnership was lessened). Ryhurst alleged discrimination by the NHS Trust, claiming that the NHS Trust’s real reason for abandoning the procurement was due to pressure exerted by local campaign groups, MPs and others due to its connection with the Grenfell Tower disaster. It claimed the NHS Trust has breached its duty to ensure equal treatment, transparency and proportionality and sought £14 million in damages.

The Court held that the NHS Trust had “genuine and rational reasons” for deciding to abandon the process and had not breached the Treaty principles. The High Court relied upon the recent Amey v West Sussex CC[1] case and EU case law (Embassy Limousines and Croce Amica One Italia SrL)[2] and indicated that, whilst any decision to cancel had to be made in compliance with public procurement law, there was no obligation to conclude a contract and that contracting authorities’ discretion to abandon a procurement process was not limited to exceptional cases nor serious grounds. The court contended that Ryhurst’s connection with Grenfell Tower had been a significant factor underlying political opposition, but it had not been the only reason and there were a number of rational reasons held by the NHS Trust to cancel the tender process.

Why is this important: This case demonstrates the discretion that a contracting authority has to meet to cancel a procedure, and the high bar that disgruntled tenderers need to meet if they believe a competition has been unfairly cancelled.

Disqualification of tenderersStagecoach East Midlands Trains Ltd & Ors v The Secretary of State for Transport [2020] EWHC 1568 (TCC)

Stagecoach submitted a bid in a tender process run by the Department for Transport (DfT) for three rail franchise contracts. The franchise contract accompanying the Instruction to Tender (ITT) placed the risk of pension liabilities on the successful bidder, and the ITT expressly stated that amending this risk allocation was forbidden. Stagecoach bid an alternative risk allocation and were subsequently disqualified from the procurement.

Stagecoach alleged that DfT had breached EU rules on transparency and fairness in the following two ways. Firstly, they claimed the discretion in the ITT was so broad that it effectively afforded DfT the power to rewrite the contract. Secondly, Stagecoach claimed that the uncertain risk allocation terms made it difficult to price the risk and to know the true value of the contract. The Court rejected the first argument, emphasising the wide margin of discretion afforded to contracting authorities, particularly concerning contractual allocation of risk. The Court held that where discretion is “arbitrary or excessive” it would amount to a breach of the principles of equal treatment, but that was not presently the case. The Court found the terms of the ITT to be “clear, precise and unequivocal” in asserting that reallocation of risk would amount to a non-compliant bid. In rejecting the second argument, the Court found no principle of EU law that limits the allocation of commercial risk.

The Court held there had been no breaches of transparency or fairness and that non-compliance on the pension issue was sufficiently serious to merit disqualification.

Why this is important: It confirms the wide margin of discretion granted to public bodies and provides further assurance to contracting authorities who carry out procurement processes fairly and transparently that non-compliance is a practicable reason to disqualify bidders. It also reminds the private sector of the consequences of qualified or conditional tenders.

Abnormally low tenders and “buying” workTax Fin Lex C-367/19

This case concerns the rejection by the Ministry of the Interior, Slovenia (‘the Ministry’) of the tender submitted by the Slovenian company Tax-Fin-Lex in a below threshold procurement.

The Ministry only received two tenders, including that of Tax-Fin-Lex, which proposed a price of €0.00. Tax-Fin-Lex was informed that its tender had been rejected on the ground that the final price of its tender was €0.00, which was contrary to the rules on public procurement in the view of the Ministry. The most interesting aspect of the case concentrates on the operation of Article 69 of the 2014 Directive, regarding abnormally low tenders.

The Court determined that where a contract can be classified as abnormally low within the meaning of Article 69 of the 2014 Directive, such as the proposed price of €0.00 in the present case, the appropriate procedure under that provision must be followed by the contracting authority and the tenderer must be asked to explain the low price of the tender. The explanation provided is to be used in assessing whether the tender is reliable. The European Court of Justice (ECJ) determined that “the contracting authority may reject such a tender only where the evidence supplied does not satisfactorily account for the low level of price or costs proposed”. Tax-Fin-Lex bid €0.00 to obtain a greater foothold in the market.

The ECJ went on to say that “the explanation provided is thus to be used in the assessment as to whether the tender is reliable and enables the contracting authority to establish that, although the tenderer proposes a price of EUR 0.00, the tender at issue will not impair the proper performance of the contract…… the contracting authority must assess the information provided by consulting the tenderer and it may reject such a tender only where the evidence supplied does not satisfactorily account for the low level of price or costs proposed”.

Why is this important: This confirms the two-step approach for contracting authorities in assessing abnormally low tenders and the importance of following the procedures set out in Article 69 of the 2014 Directive. It also reflects the judgments in SRCL[3] and Word Perfect Translation Services[4] that bidding a low price or cost price to obtain a greater foothold in a competitive market does not necessarily mean that a tender is abnormally low.

Land deals and development agreements – Commission v Austria C-537/19

This case concerned the award by a public body linked to the City of Vienna, of a contract for the construction of an office building without competitive tendering or a contract notice. The parties declared this a property lease and therefore excluded from the requirement to tender because this was an acquisition or rental of an existing building under Article 16(a) of the 2014 Directive.

In his Opinion, Advocate General Campos Sánchez-Bordona concluded that the control exercised by the public body over the construction of the premises it had agreed to lease was sufficient to trigger application of the EU public procurement rules.

The Advocate General concluded that the City of Vienna exercised a decisive influence over the plan for the works. The original architectural plan was subjected to significant modifications by the City of Vienna, which had (and exercised) a contractual right to incorporate its design requirements into the construction. The City of Vienna was entitled as part of its purported lease to require the construction of two extensions to the building, and the contracting authority appointed supervisors to the construction.

The Advocate General determined that the Contracting Authority was the “project owner” and not a “mere tenant”.

Why is this important: the Advocate General’s Opinion reflects once again the issues with land transactions and how a public body can be shown to exercise a “dominant influence” over the construction of a building. This Opinion is in line with the Pizzarotti judgment (Case C‑213/13) dealing with a similar agreement for lease and the well documented Faraday judgment in the UK.

Duty to give reasons and commercial pricing information Intercontact Budapest v Translation Centre for the Bodies of the European Union Case T-640/18 (not yet available in English)

The Translation Centre for Bodies of the European Union (CdT), launched a call for tenders for a framework contract for translation services, separated into lots. Intercontact Budapest submitted a bid but was unsuccessful. CdT informed Intercontact Budapest of the identity of the bidders that were ranked above them, as well as the scores they had each received for the qualitative criteria. Intercontact Budapest sought further information under a number of headings, including the details of prices submitted by the other bidders. CdT refused to do so claiming that commercial interests of the other bidders would be compromised.

The Court asked CdT to demonstrate how, in a concrete and precise manner, communication of the price of the tenders ranked higher than the applicant would prejudice the legitimate commercial interests of the tenderers or harm fair competition between them. CdT argued that it had complied with the obligation of transparency by publishing in the Official Journal the relevant commercial information.  In this instance, the arguments put forward by CdT were not substantial enough to withhold this information and the Court ordered the detailed pricing information to be provided.

Why is this important:  A number of contracting authorities have withheld pricing information in standstill letters for reason of “commercial sensitivity” (in accordance with Regulation 6(7) of the Remedies Regulations).  Whilst this may in some instances be acceptable, this case demonstrates the high bar that contracting authorities need to meet to withhold pricing information in standstill letters.

 

[1] Amey Highways Ltd v West Sussex County Council [2019] EWHC 1291 (TCC)

[2] Embassy Limousines v European Parliament [1999] CMLR 667 and Croce Amica One Italia SrL v Azienda Regionale Emergenza Urgenza (AREU) [2015] PTSR 600)

[3] SRCL Limited v NHS England [2018] EWHC 1985 (TCC)

[4] Word Perfect Translation Services Limited v Minister for Public Expenditure and Reform [2018] IEHC 1

 

For further information in relation to the above article, please contact Kerri Crossen or Patrick Kane.

Article written with the assistance of Chloe Flynn, Sallie Shipsey and Charlotte Bowen.


Author

Kerri Crossen

PARTNER


Patrick Kane

SENIOR ASSOCIATE

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