Abnormally Low Blow

Key Contacts: Clare Cashin – Partner   |  Cilian Macnamara – Associate

High Court confirms Council was entitled to reject bid for public works on the basis that the price was abnormally low. Contracting Authorities are obliged to investigate abnormally low bids.
Killaree Lighting Services Limited v Mayo County Council [2024] IEHC 79

The recent High Court judgment in the case of Killaree Lighting Services Limited v Mayo County Council has provided much needed guidance in an Irish context to contracting authorities and tenderers in the previously untested and uncertain area of abnormally low tenders. The decision, delivered on 13 February 2023 by O’Moore J., confirms that contracting authorities are under a legal obligation to investigate tenders that appear to be abnormally low and upheld Mayo County Council’s decision to reject a tender on the basis of abnormally low pricing.

Introduction

This decision relates to the award of a contract for the supply of public lighting works across Connacht (the “Contract”) by Mayo County Council (the “Defendant”) (on behalf of six County Councils). In August 2020, the Defendant contacted Killaree Lighting Services Limited (the “Plaintiff”) raising concerns that its tender included abnormally low amounts. The Defendant wrote to the Plaintiff on 9 October 2020 stating that, upon review, the tender submitted by the Plaintiff was abnormally low and, as a result, the Plaintiff was eliminated from the competition. On 27 October 2020, the Defendant entered into the contract with the successful tenderer, Electric Skyline (the “Notice Party”). The Plaintiff issued proceedings against the Defendant on 6 November 2020 alleging various breaches of procurement law.

While the decision deals with various aspects of public procurement law, including a finding that the Defendant’s purported standstill letter did not constitute a standstill letter within the meaning of the European Communities (Public Authorities’ Contracts) (Review Procedures) Regulations 2010 (as amended), its most impactful findings concern the area of abnormally low tenders.

Legal duty to investigate

Regulation 69 of the European Union (Award of Public Authority Contracts) Regulations 2016 obliges contracting authorities to “require economic operators to explain the price or costs proposed in a tender which appears to be abnormally low”. The Contract’s Invitation to Tender (the “ITT”), however, provided a great deal of discretion to the Defendant with regard to abnormally low tenders.

The crux of the Plaintiff’s case was that the Defendant was under no legal obligation to investigate tenders that appeared to be abnormally low; the Plaintiff maintained that the Defendant’s position that it was under such an obligation meant the Defendant had fettered the discretion offered to it in the ITT.

Ultimately, the Court followed a convincing line of CJEU case law clarifying that a contracting authority is under a legal obligation to:

  1. Identify tenders that are suspected of being abnormally low,
  2. Allow those tenders to demonstrate their “genuineness” by asking them to provide appropriate details,
  3. Assess the merits of those explanations, and
  4. Take a decision on whether to admit or reject the suspect tender.

The purpose of such an investigation is to establish that the tender is reliable and ensure that the low price will not impair the proper performance of the contract.

The Court found that these legal obligations outweigh any discretion offered by the ITT or other Contract documents, quoting from the CJEU case of TQ3 Travel Solutions where it was stated: “the fact that the applicant’s tender was considered to conform to the contract documents did not relieve the Council of its obligation… to check the prices of a tender if doubts arose as to their reliability”.

As a result of the finding that the contracting authority is under a legal obligation to investigate tenders that appear to be abnormally low, the Judge noted that it was unnecessary for him to decide whether or not the Defendant had, in fact, fettered its discretion.

Conclusion

The Court’s decision follows recent CJEU case law such as Veridos , which also held that a failure by a contracting authority to identify and investigate tenders that appear to be abnormally low may be subject to judicial review.

While the area of abnormally low tenders in public procurement is still largely untested and in need of further clarification, O’Moore’s J. decision is a very welcome development in the Irish Courts.

It is a landmark decision insofar as the Irish Courts are endorsing the CJEU jurisprudence and making it unequivocally clear that contracting authorities have legal obligations around identification, investigation and assessment of abnormally low tenders, regardless of any provisions in the ITT to the contrary.

 

 

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