Key Contacts: | Clare Cashin – Partner | Michael Cahill – Senior Associate
The High Court has delivered a landmark public procurement law judgment in the case of White Mountain Quarries Limited t/a Breedon v Mayo County Council [2024] IEHC 259 (the “White Mountain” case). As noted in our recent article, the area of abnormally low tenders in public procurement has traditionally been untested by the Irish Courts. However the White Mountain case, and the recent case of Killaree Lighting Services Limited v Mayo County Council [2024] IEHC 79 (the “Killaree” case), have brought some welcome clarity to the obligations on contracting authorities to investigate suspected abnormally low tender bids.
Background
The White Mountain case concerned a challenge by a tenderer (the “Applicant”) to Mayo County Council’s (the “Council”) decision to award a contract for the provision of public lighting services across seven counties in the north-west of Ireland to BAM KLS JV. The Council’s tender competition was announced in July 2022 and had an estimated contract value of €23.5 million.
The case was one of two procurement challenge proceedings initiated against the Council’s decision with the other case being brought by another tenderer, the Le Chéile Consortium.
The core issue in the White Mountain case was a claim that the Council had failed to recognise and/or consider that the successful tenderer’s tender appeared abnormally low and that the Council had failed to follow the requirements of Regulation 69 of the European Union (Award of Public Authority Contracts) Regulations 2016 (the “2016 Regulations”) that oblige contracting authorities to “require economic operators to explain the price or costs proposed in a tender which appears to be abnormally low” prior to making its decision to award the contract.
In his judgment, Mr Justice Quinn was required to consider EU and Irish legislation governing public procurement processes and the concept of an abnormally low tender, case law relating to abnormally low tenders, the chronology of events leading to the Council’s decision to award the contract to the successful tenderer and evidence relating to the terms of the Council’s Invitation to Tender (the “ITT”), the proposed form of contract and expert evidence adduced by both parties.
Abnormally Low
As a starting point, the Court confirmed that there is no general duty on a contracting authority to reject an abnormally low tender unless it violates applicable laws (such as labour laws). The Court then noted that the effect of Regulation 69(4) is that:
“[a contracting] authority may only reject such a tender, albeit abnormally low, after it has sought the information identified in Regulation 69(2), assessed it by consulting the tenderer, as provided for in Regulation 69(3), and determined that the evidence supplied does not satisfactorily account for the low level of price or costs proposed”.
In order to determine the case before him, Mr Justice Quinn was required to examine the legislation and European and English case law relating to abnormally low tenders. The Court noted that neither the 2016 Regulations nor the Public Procurement Directive 2014/24/EU contain a definition for the term “abnormally low”. The Court then proceeded to consider case law that examined a contracting authority’s obligations in circumstances where a tender “appears” to be abnormally low. Amongst the cases considered was the recent CJEU case, Veridos GmbH (Case 669/20) (the “Veridos” case), in which it was held that a contracting authority has to identify tenders which appear suspect and that where an authority fails to investigate tenders that appear to be abnormally low then its decision / failure may be subject to judicial review.
The Court also referred to the judgment in Sopra Steria Benelux v. European Commission, Case no. C 101/22 P (the “Sopra” case) and found that the use of the word “appears” in Regulation 69(1) means that although a contracting authority does not, in every case, need to carry out a detailed analysis to establish that a tender is not abnormally low, it must, in every case, carry out a “prima facie assessment of whether the tender is or arouses suspicion of being abnormally low”. The Court further remarked that the Sopra case makes clear that the reasons why a tender was not regarded as abnormally low “cannot be explained for the first time before the court”.
It is also of note that the Court was referred to and considered a briefing paper published jointly by the OECD and EU entitled “Brief 35 Public Procurement – Abnormally Low Tenders”.
Following its examination of the above, the Court made a number of findings in respect of abnormally low tenders to include that:
(i) there is no statutory definition for the term “abnormally low tender”;
(ii) a tender that does not comply with applicable statutory obligations (such as the payment of minimum wages) must be treated as abnormally low;
(iii) the expression “abnormally low tender” encompasses a tender bid that is “low (almost invariably lower than the other tenders)” and “beyond and below the range of anything which might legitimately be considered to be normal in the context of the particular procurement”;
(iv) where a price proposed in a tender is considerably lower than that of the other tenders or the normal market price then this is evidence that such a tender might be abnormally low; and
(v) there are methods that are frequently used for the identification of tenders that appear to be abnormally low which include the comparison of the tender price with the pre-tender estimate and the prices proposed in all other compliant tenders and an assessment of any deviations between these.
Core finding in the White Mountain case
As is set out in the detailed White Mountain judgment, both the Applicant and the Council produced extensive evidence concerning the contents of the Council’s ITT documents, the requirements of the proposed contract and the Council’s tender assessment documents to support their respective positions. The Court was also asked to consider various comparisons between the tender prices of the three tenderers, the commercial clarifications raised during the tender process and the expert evidence given on behalf of either party.
Although the Court in the White Mountain case was required to consider multiple strands to the proceedings, the Court’s core finding was that the Council was obliged to, and had failed to, require the successful tenderer to explain the prices and costs in its tender pursuant to Regulation 69 of the 2016 Regulations. The Court found that the prices in the preferred tender were “considerably lower than that of the other tenderers” and that the Council’s tender assessment process was critically flawed for a number of reasons.
The Court also rejected the Council’s arguments that the Applicant was time barred pursuant to Regulation 7(2) of the European Communities (Public Authorities’ Contracts) (Review Procedures) Regulations 2010 and found that even if the Court was incorrect in this regard, the award of the contract was suspended as a result of the commencement of separate proceedings by another tenderer meaning that no prejudice was caused to the Council by the later commencement of the White Mountain case.
Therefore the Court made an Order setting aside the Council’s decision to award the contract to the successful tenderer.
Conclusion
This landmark case can be seen as an endorsement of EU jurisprudence and reemphasises contracting authorities’ obligations in respect of tenders that appear abnormally low and the requirement to be alert to same.
Where there is a suspicion that a tender is abnormally low then a contracting authority must carry out an investigation and make enquiries in respect of the genuineness of the tender bid as contemplated by Regulation 69 of the 2016 Regulations. As noted in the Veridos case (and endorsed here in the White Mountain judgment and previously in the Killaree case) a failure to do so leaves a contracting authority’s tender award decision open to being judicially reviewed, bringing with it a possible lengthy automatic suspension to the conclusion of the contract.
