Electronic auctions under Reg.35 Public Contracts Regulations 2015

Reg.35 of the Public Contracts Regulations 2015 (PCR2015) transposes Art 35 of Directive 2014/24 and sets out rules for the conduct of electronic auctions, which consolidate current practice and clarify some aspects of their initial regulation in Directive 2004/18. Reg.35(8) PCR2015 also includes the further details provided in Annex VI of Dir 2014/24, which makes the rules more readily accessible. Pedro has focused on the relationship between electronic auctions and transparency here.

Indeed, as a specific method of price-setting, and as a novelty that tried to introduce additional flexibility in certain tendering procedures—particularly, follow-up tenders developed in relation with i) negotiated procedures following an event of irregular tenders or the submission of tenders which are unacceptable under national provisions, ii) the reopening of competition among the parties to a framework agreement, or iii) the opening for competition of contracts to be awarded under the dynamic purchasing system—and increase their economic efficiency, Directive 2004/18 allowed Member States to provide that contracting authorities may use electronic auctions (art 54(1) and 54(2) dir 2004/18) [for general discussion on eProcurement and electronic auctions, see G Racca, ‘The Electronic Award and Execution of PublicProcurement’ (2012) Ius Publicum Network Review; and DC Wyld, ‘Reverse Auctions: How Electronic Auctions Can Aid Governments in Significantly Cutting Their Procurement Spending and Introduce Greater Competition in Public Sector Contracting’ (2013) 151 Emerging Trends in Computing, Informatics, Systems Sciences, and Engineering 277–89. See also S Khorana, K Ferguson-Boucher and WA Kerr, ‘Governance Issues in the EU's e-Procurement Framework’ (2014) Journal of Common Market Studies 1–19].

This technique continues to be available under the rules of reg.35 PCR2015, which extend the intended use of the electronic auctions to a larger array of situations, including tenders in open or restricted procedures or competitive procedures with negotiation where technical specifications can be established with precision. In terms of scope of application, Directive 2014/24 has also clarified that certain public service contracts and certain public works contracts having as their subject-matter intellectual performances, such as the design of works, which cannot be ranked using automatic evaluation methods, shall not be the object of electronic auctions [reg.35(3) PCR2015]. It is also now clearer that the electronic auction shall be based either (a) solely on prices where the contract is awarded on the basis of price only; or (b) on prices and/or on the new values of the features of the tenders indicated in the procurement documents where the contract is awarded on the basis of the best price-quality ratio or to the tender with the lowest cost using a cost-effectiveness approach [reg.35(6) PCR2015].

In case contracting authorities decide to conduct electronic auctions, they must comply with the specific procedure , which determines in fairly precise detail the steps and rules to be followed in the conduct of the electronic auctions (in terms of disclosure of information, time limits, applicable criteria and formulae, etc) [reg.35(7) to (28) PCR2015). The use of electronic auctions for the award of the contract seems to be particularly prone to the generation of unacceptable changes in the subject-matter of the contract—particularly because of the ability of tenderers to alter significantly the terms of their offers during the auction phase—and, consequently, article 54(8) of Directive 2004/18 emphasised that contracting authorities may not use electronic auctions ‘to change the subject-matter of the contract, as put up for tender in the published contract notice and defined in the specification’. This restriction is now suppressed in the text of Directive 2014/24 (and hence, of the PCR2015), but the limitation seems to remain in place in view of the rules on irregular, unacceptable and unsuitable tenders [regs.35(9) to (13) PCR2015). In this regard, general restrictions on the need to prevent material changes in the original specifications of the (re-)tendered contract will apply, particularly in framework agreements and dynamic purchasing systems.

Of more interest, it is also important to stress that article 54(8) of Directive 2004/18 also seemed to have been drafted in the light of the potentially pro-collusive features of electronic auctions, which can increase the likelihood of distortions of competition [see C Kennedy-Loest and R Kelly, ‘The EC Competition Law Rules and Electronic Reverse Auctions: A Case for Concern?’ (2003) 12 Public Procurement Law Review 27; and, in more general terms, regarding electronic markets, PA Trepte, ‘Electronic Procurement Marketplaces: The Competition Law Implications’ (2001) 10 Public Procurement Law Review 260.]. In this regard, article 54(8) specified and strengthened the applicability of the principle of competition in the conduct of electronic auctions, by restricting the ability of contracting authorities to ‘use them in such a way as to prevent, restrict or distort 

competition’.

Once again, this specific requirement has been suppressed in the text of article 35 of Directive 2014/24 (and hence, of the PCR2015), but it is submitted that it remains in place as an implicit requirement derived from the principle of competition in reg.18(1). Therefore, contracting authorities should be particularly careful in the design of the specific rules applicable to the electronic auction, so as to prevent instances of collusion amongst tenderers—particularly, by restricting the information disclosed [although regs.35(23) & (24) PCR2015 allow them to do otherwise] which, however, cannot include the identities of the bidders in any circumstances [ex reg.35(25) PCR2015]. 

The same level of care should be put in ensuring equality of opportunity for all tenderers to place bids in each of the eventual rounds or phases of the electronic auction (so as not to distort competition within the auction) [reg.35(14) PCR2015], subject to rules restricting the number of tenderers that can advance from one phase to the next—which must be clearly specified in the tender documents and implemented in a transparent manner by the contracting authority [reg.35(15) PCR2015].

A final consideration regards the decisions made as to the electronic equipment used and the arrangements and technical specifications for connection—which, in order to prevent unnecessary restrictions of competition, should aim at choosing widely spread and easily accessible technologies, so as not to restrict the participation of less technologically advanced tenderers or to advantage unduly one or several tenderers by reason of their communications technology (which is unrelated to the subject-matter of the contract).

Dynamic purchasing systems under Reg. 34 Public Contracts Regulations 2015

Reg.34 of the Public Contracts Regulations 2015 (PCR2015) establishes rules for dynamic purchasing systems in transposition of those in Art 34 of Directive 2014/24. Dynamic purchasing systems are a type of two-tier multi-year scheme designed to simplify and reduce the administrative burden associated with the repeated procurement of standardised goods, works or services. The following comments are based on A Sanchez Graells, Public Procurement and the EU Competition Rules, 2nd ed (Oxford, Hart, 2015) 363-66]. Pedro's views are here.

Dynamic purchasing systems are governed by rules analogous to those applicable to framework agreements, albeit somewhat more stringent and always relying on the use of a restricted procedure. They shall be operated as a completely electronic processes [reg.34(2) PCR2015] and all communications in the context of a dynamic purchasing system shall only be made by electronic means [reg.34(13) PCR2015]. The setting up of dynamic purchasing systems by contracting authorities for commonly used purchases the characteristics of which, as generally available on the market, meet the requirements of the contracting authorities generates competition issues similar to the ones just analysed in relation to framework agreements [see comment to reg.33 PCR2015]. These and the remaining aspects of dynamic purchasing systems are discussed in the recent Crown Commercial Service Guidance document.

The general logic of this dynamic system is to allow contracting authorities to progressively include all interested economic operators that meet the established selection criteria and that have shown interest [reg.34(2) PCR2015], given that ‘the number of candidates to be admitted to the system shall not be limited in accordance with regulations 28(4) and 65’ [reg.34(6) PCR2015]. When a need arises, then, the contracting authority can invite all operators already included in the system—plus those that show last-minute interest in participating in the tender [see reg.34(15) PCR2015]—to submit a binding tender for the specific contract, which will generally be awarded according to the criteria set out generally for the dynamic purchasing system, unless adjusted or formulated more precisely for the specific contract [regs.34(23) & (24) PCR2015].

Hence, it is a system mainly oriented towards speeding up the procurement process and reducing the administrative burden in cases of repeated procurement of goods, works and services that can be specified in sufficient detail upfront and for which participating operators can easily submit a tender for each specific procurement. This can be further simplified by dividing the system into categories of products, works or services that are objectively defined on the basis of characteristics of the procurement to be undertaken under the category concerned. 

In order to set up a dynamic purchasing system, a contracting authority should issue a contract notice making it clear that it refers to a dynamic purchasing system and specify, amongst other matters, the nature of the purchases envisaged under the system and the basic information concerning the purchasing system itself, as well as indicate any division into categories of products, works or services and the characteristics defining them and offer unrestricted and full direct access, as long as the system is valid, to the procurement documents [reg.34(14) PCR2015]. As mentioned, the setting up of the dynamic purchasing system should follow the rules of the restricted procedure in all its phases up to the award of the contracts to be concluded under the system [reg.34(5) PCR2015].

However, the contracting authority has no possibility of restricting the maximum number of operators included in the system [reg.34(6) PCR2015]. Indeed, interested operators that meet the selection criteria set by the contracting authority can, at any point in time, request admission to the dynamic purchasing system by expressing interest in participating; they should, then, be admitted to the system without being subject to any further requirements. The contracting authority must review the request of participation and decide on the admission or rejection of the operator to the system within a maximum of 10 working days following its receipt. That deadline may be prolonged to 15 working days in individual cases where justified, in particular because of the need to examine additional documentation or to otherwise verify whether the selection criteria are met (which can only be extended if no invitation to tender is issued in the meantime). Contracting authorities shall inform the economic operator concerned at the earliest possible opportunity of whether or not it has been admitted to the dynamic purchasing system. Contracting authorities may not proceed with the tendering until they have completed the evaluation of all the indicative tenders received within the 10 working day (or extended) deadline [reg.34(15) to (20) PCCR2015]. 

Contracting authorities should then invite all tenderers admitted to the system to submit a tender for each specific contract to be awarded under the system within a specified time limit [For clarification regarding limitation periods, see Uniplex, C-406/08, EU:C:2010:45]. The award of the contract should then be made according to the award criteria set in general for the dynamic purchasing system, unless they have been formulated more precisely in the invitation to tender for the specific contract [reg.34(21) to (24) PCCR2015].

As general limitations to the setting up and running of these dynamic purchasing systems, they may not last for an indefinite period of time, and contracting authorities shall indicate the period of validity of the dynamic purchasing system in the call for competition [reg.34(27) PCR2015]. However, there is no need to cancel and restart dynamic purchasing systems if the contracting authority wishes to extend their initial validity. In that case, where the period of validity is changed without terminating the system, the authority must publish again the form used initially for the call for competition for the dynamic purchasing system [reg.34(28)(a) PCR2015]. Moreover, contracting authorities must run them for free—ie, no charges may be billed prior to or during the period of validity of the dynamic purchasing system to the economic operators interested in or party to the dynamic purchasing system [reg.34(29) PCR2015].

Again, as happened with framework agreements, under the 2004 rules, it was explicit that contracting authorities may not resort to this system to prevent, restrict or distort competition [art 33(7) dir 2004/18]. This latter restriction—which, as has already been argued in relation with equivalent clauses, is a specification or emphasis of the more general principle of competition [S Arrowsmith, ‘Dynamic Purchasing Systems under the New EC Procurement Directives—a Not So Dynamic Concept?’ (2006) 15 Public Procurement Law Review 16, 25] and continues to be relevant as an implicit requirement of reg.18(1) PCR2015—justifies the specific need to analyse the competition distortions that could arise from these dynamic purchasing systems, and also to assess the way in which their rules can be applied in a pro-competitive way, in order to avoid distortions of competition by the contracting authorities. In this regard, it should be stressed that certain of the specific, and arguably more stringent, rules that regulate dynamic purchasing systems make the probability of their having an anti-competitive impact lower than is the case with framework agreements. As emphasised in recital (63) of Dir 2014/24, indeed, dynamic purchasing systems allow the contracting authority to have access to a ‘particularly broad range of tenders and hence to ensure optimum use of public funds through broad competition in respect of commonly used or off-the-shelf products, works or services which are generally available on the market’.

Given that it should be conducted at all stages by the rules of the restricted procedure, but there is no possibility of limiting the number of participating economic operators, there does not seem to be scope for distortions concerning a limitation of the maximum number of participating tenderers [Arrowsmith (2006) 22]. Similarly, given its dynamic nature, neither the duration of the system nor any of the time limits involved seem to be a source of competition distortions. For the same reason, there is no danger of a system being set in excess of actual or reasonably estimated demands of the contracting authority or authorities. Also, the specifications and general terms of the system must be defined upfront, so there does not seem to be room for chilling effects or excesses of discretion associated with an excessive vagueness of the specification or terms that rule the dynamic purchasing system.

Therefore, the competition distortions that could be anticipated seem to refer, primarily, to issues that are not specific to this type of scheme, but to general issues, such as the grounds for the exclusion of tenderers, the qualitative selection requirements, the use of technical specifications, aggregation of contracts, etc. As regards the likelihood of collusion between tenderers, it seems initially reduced by the fact that a relatively large—in principle, unlimited—number of tenderers can take part in the bid for a given contract. Also, given that these schemes are to be run exclusively through electronic systems, contracting authorities might be in a better position to adopt measures that hinder and deter collusion, particularly through technical means or the adoption of relatively different rules for each of the specific contracts to be awarded [see OECD, Guidelines for Fighting Bid Rigging in Public Procurement. Helping Governments to Obtain Best Value for Money (2009) 7].

Rethinking the Law School and the way law academics publish (reference to @CarelStolker)

I have recently been flipping through the (electronic) pages of Prof. Carel Stolker's Rethinking the Law School. Education, Research, Outreach and Governance (Cambridge, CUP, 2014) and found some of the insights and views he expresses particularly stimulating. The chapter on "Lawyer's ways of publishing" is my pick of the day. 

As an academic blogger (blawgger?), some of his remarks could not be more central to my day-to-day activities and to the hopes I have for a renovation in the way academic outputs are produced, published, graded and recognised by Universities and the international community of scholars alike.

Prof. Stolker encapsulates the law blogging phenomenon and the challenges it puts to 'traditional academic publication' as follows 

An interesting development is the rise of blogs. Law blogs (‘blawgs’), sometimes complemented by online companions and other vehicles of ‘short form’ legal scholarship, may better serve the needs of the practitioners and enhance the scholarly debate among the academics. Their increasing popularity–especially in the US where law articles tend to be the very opposite of ‘short form’– raises new issues: might these blogs harm legal scholarship, or are they becoming a legitimate form of legal scholarship in their own right? Do blogs register intellectual property, as journal publications do? Will these blogs replace our thousands of law journals worldwide in the long term, and do libraries have a responsibility to preserve the blogs for future generations? All these new developments might even herald the coming of an era where legal scholarship will mainly be available online rather than in print … (pp. 233-34, footnotes omitted, emphasis added).

Prof. Stolker also links the raise of online access to content (not only in blogs) with the neighbouring issue of scholarship dissemination via the use of social networks, and rightly points out that

Overall, one-third of our scientists and scholars are reported to use LinkedIn and Twitter. Science and scholarship are rapidly transforming into a fascinating variety of digitally networked forms. Too often the distribution and communication of the products of legal scholarship are considered the exclusive responsibility of the publisher. However, making your work widely accessible is, as we have seen, primarily a duty of the scholars themselves. Until we make progress in this area, cross-border scholarly debate will continue to be seriously hampered (p. 260, emphasis added).

These two insights trigger some important questions for further reflection. In my opinion, the answers that Law Schools give (or not) to these questions will determine whether they manage to attract or retain innovative legal scholars--who wants to work at an Institution that considers blawgging something you do on your free time?--and, maybe more importantly from the institutional perspective, whether they maintain or develop an online reputation that allows them to attract the best students, particularly at postgraduate level.

In my personal view--the reader should bear in mind that I blog as a passion and that I am very fortunate of my scholarship being on the top 0.5% of SSRN authors by downloads, so I may quickly be seen as conflicted on this--blogging about legal developments and engaging in debates and dissemination of research in social media are truly valuable activities and they should be recognised as such. Blogs allow for an immediacy of academic debate that is impossible to match for any other platforms, either printed or online. Moreover, given the increasing constraints on publishing "proper", "printed" research [at least in the UK as an (undesired?) effect of the REF], some traditional sorts of legal scholarship such as case comments or book reviews are languishing as scholars are pressured into publishing (only) 4* outputs (which, almost by definition, cannot be of those sorts). Consequently, I do not think that they will substitute all other forms of legal scholarship, but they are bound to fill a gap that has existed for a long time and that may be (in part) responsible for the distance with which practitioners look at legal research (if they ever look into law books at all).

However, blogs remain at the margin (if not completely outside) of academic assessments and blawggers are simply aficionados that share their views out of personal interest, search for fame/impact, or boredom. In my view, this needs to change. Not because that would make the life of the academic blawgger easier (which it certainly would), but because more academics would feel tempted to "take the risk to go online" if the incentives were not so clearly against it. And that would benefit all of us, both when the quality of the blogging was good, and when it was bad, as I would expect that academic debate and peer-review would swiftly establish quality controls or, at least, interesting exchanges of ideas.

Overall, to keep this rant short, I would like to see all deans and heads of law school's reading Prof. Stolker's book, at least to get the conversation really started.

Framework agreements under Reg. 33 Public Contracts Regulations 2015

Framework agreements are subjected to the rules of reg.33 of the Public Contracts Regulations 2015 (PCR2015), which transposes Art 33 of Directive 2014/24 exactly. Framework agreements are those between one or more contracting authorities and one or more economic operators, the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged [reg.33(2) PCR2015]. 

Framework agreements are aimed at facilitating an increase in procurement effectiveness for repeated procurements [see McDermott, P et al, Effectiveness of frameworks - A report by the working group on the effectiveness of frameworks of the procurement and lean client task group, Final Report to Government by the Procurement/Lean Client Task Group (2012)]. Framework agreements have been widely used since their recognition in the 2004 rules and they have been the object of significant discussion, as the benefits they generate (in terms of administrative efficiency) come at a significant risk for competition, particularly if frameworks are too wide, too long, or cover a very large part of the public sector demand [for discussion, see A Sanchez-Graells, Public Procurement and the EU Competition Rules, 2nd ed (Oxford, Hart, 2015) 355-63, and here]. The need to assess carefully the trade-off between the advantages and the competition risks was stressed from their inception, and this is now stressed in recital (61) Dir 2014/24: "Framework agreements should not be used improperly or in such a way as to prevent, restrict or distort competition". Given the relevance of the principle of competition in reg.18(1) PCR2015, this bears some stress.

The rules applicable to framework agreements under reg.33 PCR2015 are relatively broad and flexible, and their complexity derives solely from the fact that they include specific requirements for framework agreements of different types: mono-provider/multi-provider, fully-specified/incomplete frameworks. In any case, the rules set out in reg.33 PCR2015 are insufficient to run a framework agreement, and they need to be complemented with the rest of the rules in Part 2 PCR2015 [see reg.33(1) PCR2015] [for further discussion, see C Risvig Hamer, "Regular purchases and aggregated procurement: the changes in the new Public Procurement Directive regarding framework agreements, dynamic purchasing systems and central purchasing bodies" (2014) 23(4) Public Procurement Law Review 201].

As detailed in recitals (60) to (62) of Dir 2014/24, the rules on framework agreements have been modified in three main respects: (a) to stress their closed nature, so that economic operators and contracting authorities cannot be added during their term; (b) to clarify the way in which call-offs under a framework agreement can be made (now, under direct call-off, mini-competition, or a new hybrid approach), as well as the objective conditions controlling them; and (c) to clarify the rules applicable to the duration of the framework agreements and its coordination with the duration of the contracts awarded within it. All these novelties deserve some comments. Pedro has also provided additional comments on the issues these rules create, well worth reading.

Regarding the closed nature of framework agreements

Reg.33(5) PCR2015 indicates that framework agreements may be applied only between those contracting authorities clearly identified for that purpose in the call for competition or the invitation to confirm interest and those economic operators party to the framework agreement as concluded. This rule would seem to impose very stringent limitations on the configuration of a framework agreement, with no flexibility whatsoever as its subjective scope (both on the supply and the demand side) are concerned. However, this is not the reality of things. As recital (61) Dir 2014/24 clarifies,

framework agreements should not be used by contracting authorities which are not identified in them. For that purpose, the contracting authorities that are parties to a specific framework agreement from the outset should be clearly indicated, either by name or by other means, such as a reference to a given category of contracting authorities within a clearly delimited geographical area, so that the contracting authorities concerned can be easily and unequivocally identified. Likewise, a framework agreement should not be open to entry of new economic operators once it has been concluded.

Given this possibility, it is rather obvious that framework agreements will tend to be concluded on the basis of "class descriptions" and that they will tend to be as broad as to possibly cover the entire public sector (see here for a previous comment on English practice). This raises a significant query as to the real closed-nature of framework agreements. Moreover, it seems clear that such class description can be dynamic, at least if we read between the lines of the final part of recital (61) Dir 2014/24, which expands the guidance in relation to central purchasing bodies

This implies for instance that where a central purchasing body uses an overall register of the contracting authorities or categories thereof, such as the local authorities in a given geographical area, that are entitled to have recourse to framework agreements it concludes, that central purchasing body should do so in a way that makes it possible to verify not only the identity of the contracting authority concerned but also the date from which it acquires the right to have recourse to the framework agreement concluded by the central purchasing body as that date determines which specific framework agreements that contracting authority should be allowed to use.

The only bit that is rather uncontroversial is that economic operators that were not included in the original framework should not be allowed to enter. However, even this needs further precision because framework agreements are not exempted from the rules on contract modification, including substitution of contractor, under reg.72 PCR2015. Hence, the closed nature of framework agreements may be just an illusion.

Regarding the rules and conditions applicable to call-offs within the framework

Regs.33(7) to (11) PCR2015 set out the specific rules for the call-off of contracts within a framework agreement. As regards framework agreements concluded with a single economic operator by one or more contracting authorities (reg.33(7) PCR2015), the rules are restricted to requiring that contracts based on that agreement should be awarded within the limits of the terms laid down in the framework agreement. Therefore, the contracting authority or authorities will have substantial flexibility to set contractual terms adjusted to its or their specific needs and, if necessary, may consult the operator party to the framework agreement in writing, requesting it to supplement its tender as necessary. In this regard, it may be important to emphasise that such consultations and supplements of the tender should not result in a substantial amendment of the terms of the framework agreement (reg.33(6) PCR2015).

The rules applicable to framework agreements concluded with several economic operators—who should be at least three, insofar as there is a sufficient number of economic operators to satisfy the selection criteria and/or of admissible tenders which meet the award criteria [by analogy with reg.65 PCR2015; in my opinion and to avoid uncertainty, the express requirement of art 32(4) dir 2004/18 that the minimum number was three should have been kept in art 33(4) dir 2014/24]—now set three separate procedures, depending on whether all the terms (of the ensuing contract) are laid down in the framework agreement or not. 

In the first clear instance, when all the terms (of the ensuing contract) are laid down in the framework agreement, a contract based on the framework can be awarded by application of the terms laid down in the framework agreement without reopening competition [reg.33(8)(a) PCR2015]. Therefore, contracting authorities enjoy a substantial degree of discretion to conclude the specific contract with any of the economic operators included in the framework agreement. It is true that the objective conditions for determining which of the economic operators party to the framework agreement shall perform the contract need to be indicated in the procurement documents for the framework agreement [reg.33(8)(a) PCR2015]. However, those conditions need not result in an automatic selection of a specific contractor.

As regards the second clear instance, where not all the terms (of the ensuing contract) are laid down in the framework agreement, contracting authorities should run a second competitive phase amongst the economic operators included in the framework agreement [reg.33(8)(c) PCR2015]. 

It is interesting to stress that, with the aim of providing even more flexibility, the rules establish a third (ambiguous) instance, whereby even in frameworks where all terms are set out from the beginning, contracting authorities can decide to open a second ‘mini-competition’ [reg.33(8)(b) PCR2015]. Indeed, contracting authorities are now given the choice to decide whether specific works, supplies or services shall be acquired following a reopening of competition or directly on the terms set out in the framework agreement, and it is indicated that such a decision ‘shall be made pursuant to objective criteria … set out in the procurement documents for the framework agreement [which] shall also specify which terms may be subject to reopening of competition’ [reg.33(9)(a) PCR2015]. 

This second competitive phase [see OGC's guidance on mini-competitions], applicable under regs.33(8)(b) and (c) PCR2015, should allow for as many specifications of the general terms included in the framework agreement (which, however, cannot be substantially modified) as the contracting authority sees fit, and the award of the contract should be conducted according to the further rules established in reg.33(11) PCR2015. These ultimately require that the result of the ‘mini-competition’ is determined on the basis of the award criteria set out in the procurement documents for the framework agreement—ie, contracting authorities cannot amend or establish new award criteria for each of the ‘mini–competitions’ within the framework agreement. In this case, therefore, contracting authorities seem to enjoy a more limited degree of discretion to conclude the specific contracts within the framework agreement with an economic operator of their choice.

Regarding the duration of framework agreements and the contracts awarded within them

Reg.33(3) PCR2015 establishes that the term of a framework agreement shall not exceed 4 years, save in exceptional cases duly justified, in particular by the subject-matter of the framework agreement—ie, according to the specific technical or commercial characteristics of the goods, works or services included in the framework agreement. This rule seems to provide full discretion to contracting authorities for the conclusion of framework agreements of durations of up to four years, and to impose a higher obligation to prove the necessity to conclude agreements with a duration in excess of that period—to ensure its feasibility from a technical, commercial or some other perspective.

Nonetheless, it is submitted that the discretion of the contracting authorities in determining the duration of these agreements must clearly be restricted by competition considerations [ex reg.18(1) PCR2015]. Therefore, even under the threshold of four years of duration, contracting authorities must set the validity of the agreement so as to avoid unnecessary restrictions and distortions of competition, based on a case by case analysis [along the same lines, S Arrowsmith, The Law of Public and Utilities Procurement. Regulation in the EU and the UK, Vol. 1, 3rd edn (London, Sweet & Maxwell, 2014) 1175–77. 

It is also important to stress that the duration of the framework agreement can de facto extend beyond the four year limit, given that the duration of the contracts awarded under the framework ‘does not need to coincide with the duration of that framework agreement, but might, as appropriate, be shorter or longer’ (rec 62 dir 2014/24). It is submitted that a strict proportionality assessment based on the competitive distortions that such longer duration could create is to be applied to the determination of the appropriate duration of the contracts derived from a previous framework agreement, particularly if they significantly overrun the term of the initial framework [cf Risvig Hamer, above].

In this regard, the nature of the goods or services procured might be a relevant element, to support the case for a shorter duration for frameworks (and ensuing contracts) concerning relatively new or innovative goods and services, and a relatively longer duration for framework agreements in mature or relatively less innovative markets. Also, the number of economic operators included in the agreement and the turnover of undertakings in the market concerned should be factored into the analysis of the appropriate duration of the framework agreement. It is arguable that the more limited the number of economic operators included in the framework agreement and the higher the turnover in the market, the stronger the argument favoring limited duration for these agreements, since they could generate larger exclusionary effects than in cases where the framework covered a larger number of undertakings in more stable markets. Similarly, the larger the number of contracting authorities involved in the framework agreement, the shorter the desirable period for the framework agreement. 

In general terms, it seems that the duration of these agreements should be determined by balancing the duration justified on administrative and commercial grounds, with the degree of potential restrictiveness of competition in the market concerned—and, where a clear conflict emerges, competition considerations should trump commercial justifications and impose a limitation of the duration of the framework—taking into due consideration, however, that framework agreements of a very short duration, eg, lasting for less than a year, probably lack interest (in which case, arguably, the contracting authority should refrain from resorting to this contractual arrangement).

Use of the negotiated procedure without prior publication under Reg. 32 Public Contracts Regulations 2015

Reg.32 of the Public Contracts Regulations 2015 (PCR2015) transposes Art 32 of Directive 2014/24 as the grounds for the use of the negotiated procedure without prior publication (aka direct award) can be used. It is worth reminding that according to Art 26(6) Dir 2014/24 (not transposed in reg.26 PCR2015), Member States may provide that contracting authorities may apply a negotiated procedure without prior publication of a call for competition only in the specific cases and circumstances referred to expressly in Art 32, and that Member States shall not allow the application of that procedure in any other cases. 

This is reiterated in reg.32(1) PCR2015 [and art 32(1) dir 2014/24], whereby contracting authorities may award public contracts by a negotiated procedure without prior publication in the specific cases and circumstances laid down in that regulation. The general restrictive tone should by now be obvious.

Reg.32 PCR2015 alters the order of Art 32 Dir 2014/24 significantly, but it does not expand any of the grounds for the use of the negotiated procedure without prior publication, which include some general grounds (derived from previous tenders where no or only unsuitable tenders or requests to participate where submitted, from exclusivity rights, or extreme urgency) [regs.32(2) to (4) PCR2015]; grounds relevant to public supply contracts (for R&D products under limited conditions, replacements required to avoid technical incompatibility or disproportionate technical difficulties in operation and maintenance, purchases from commodity markets, and advantageous purchases from bankrupt firms) [regs.32(5) & (6) PCR2015]; grounds relevant to public service contracts following a design contest [regs.32(7) & (8) PCR2015]; and grounds relevant to repeated works or services [regs.32(9) to (12) PCR2015].

It is important to stress that the eventual abusive recourse to negotiated procedures with no transparency requirement whatsoever constitutes a potential restriction of access to the tender procedure with very significant anti-competitive effects. This has been permanently stressed in the case law, and the CJEU has permanently stressed the strict requirements that control decisions to proceed to the direct award of contracts under this ‘non-procedure’, which are subject to a strict assessment of whether the contracting authority "acted diligently and whether it could legitimately hold that the conditions [for recourse to this procedure] were in fact satisfied" [Fastweb, C-19/13, EU:C:2014:2194, para 50]. Consequently, there is no doubt that this procedure must be understood as exceptional [Fastweb, para 106; see my comments on the case here]. 

As briefly mentioned, this is now (too?) clearly indicated in Art 26(6) Dir 2014/14, which establishes that Member States shall not allow the application of those procedures in any other cases than those referred to in Art 32. In turn, the numerus clausus of exceptions in Art 32/reg.32 PCR2015 must be interpreted strictly, in order to prevent competitive distortions [for an empirical approach to the use of negotiated procedures without prior transparency and their justification, see GS Ølykke, On Actual and Perceived Monopolies (Working Paper, 2013)].

Innovation partnerships under Reg. 31 Public Contracts Regulations 2015

Reg.31 of the Public Contracts Regulations 2015 (PCR2015) introduces the innovation partnership as a direct transposition of Art 31 of Directive 2014/24. It configures it as a multi-step process, both during the award phase [reg.31(18) PCR2015] and for the implementation of the innovation contract [reg.31(10) PCR2015]. See Pedro's technical remarks, explaining why this procedure is a 'Trojan horse', see here.

At this second stage, ie during the implementation of the innovation contract, it is a distinctive feature that the contracting authority can reserve for itself the right to terminate the innovation partnership at the end of each of the successive phases of the research and innovation process, which it should do on the basis of specific intermediate targets [reg.31(12) PCR2015]. This is bound to trigger interpretative difficulties concerning the general termination rules under reg.73 PCR2015, as it seems that innovation partnerships can be terminated without breach of contract on the side of the innovation partner, provided certain intermediate targets are not met, or if the contracting authority is not satisfied with the progress of the project. This will, no doubt, trigger litigation, particularly depending on the stage at which the partnership is terminated, or the possibility (or not) of the innovation partner to continue innovating on its own [all of which are contractual issues not covered by the PCR2015 or Dir 2014/24].

In terms of process, the innovation partnership procedure is a hybrid of the competitive procedure with negotiation and the competitive dialogue available when the contracting authority identifies the need for an innovative product, service or works that cannot be met by purchasing products, services or works already available on the market [reg.31(2)(a) PCR2015], and the main difference with those procedures is that the purpose of the innovation partnership must be "the development of an innovative product, service or works and the subsequent purchase of the resulting supplies, services or works, provided that they correspond to the performance levels and maximum costs agreed between the contracting authority and the participants" [reg.31(9) PCR2015]. Such development can be carried out by one partner, but the contracting authority can also decide to conclude an innovation partnership with several partners conducting separate research and development activities [reg.31(4) PCR2015].

In my personal view, this is a procedure designed for science fiction and its legal set-up masks the existence of a significant number of risks that contracting authorities should weigh before launching an innovation partnership. Moreover, it can create significant disruption of the innovation-related State aid rules, as recently recast in the 2014 Framework for State aid for research and development and innovation. 

The first reservation I have about the use of the innovation partnerships is that contracting authorities may not be in a good situation to assess the "need for an innovative product, service or works that cannot be met by purchasing products, services or works already available on the market" [reg.31(2)(a) PCR2015, emphasis added], either on their own or as a result of preliminary market consultations (carried out under reg.40 PCR2015, or otherwise).  Contracting authorities will in very limited circumstances have identified a need that has not been previously identified by the market at all. Moreover, it will be very rare that such a need cannot be satisfied by an adaptation of existing products or services, in which case the proper procedure would be a competitive procedure with negotiation or a competitive dialogue [reg.26(4)(a)(i) PCR2015], even if they require design or innovative solutions [reg.26(4)(a)(ii) PCR2015].

Moreover, if contracting authorities set out the project as an innovation partnership, they may fall into a self-selection or a confirmation bias. Given the requirement that "Only those economic operators invited by the contracting authority following its assessment of the requested information may submit research and innovation projects aimed at meeting the needs identified by the contracting authority that cannot be met by existing solution", the only offers that the contracting authority can expect to receive are those of economic operators that honestly think there is no existing solution to their needs (even if there is one) (self-selection bias), or of economic operators willing to play along and confirm to the contracting authority that it is right in its assessment of "inexistence" of a solution, and then offer an actually existing solution--either faking or duplicating the "innovation" process (confirmation bias). 

This would, in the end, facilitate the creation of situations in which the contracting authority sets out an innovation partnership procedure on an improper assessment of the market and any economic operator that is aware of an actually existing solution for the needs of the contracting authority only has two options. Either it judicially challenges the procedure (or does it informally directly with the contracting authority, but one can imagine how badly that conversation would go most of the times), so that a tender for a contract under a different procedure can take place; or it plays along and praises the contracting authority for its market savviness. As the story of the Emperor's New Clothes has been telling us for quite a long time, the likely result is quite obvious.

My second reservation has to do with the risks that the contracting authority may assume in relation to third party intellectual property, as reg.31(22) PCR2015 simply indicates that the contracting authority shall define the arrangements applicable to intellectual property rights in the procurement documents. This is a neutral formulation that does not prevent the contracting authority to obtain exclusive, shared or no IP rights on the innovation. However, even in the last scenario, the contracting authority may be exposed to the negative consequences of IP litigation, if nothing else, in case the innovation partnership had to be suspended or discontinued due to third party claims. Given the relevance of IP litigation in innovation-intensive markets, it is hard to see why would a contracting authority be willing to assume risks in this area. More generally, it is hard to see how would entering into an innovation partnership actually pursue a public interest related to the procurement function of a contracting authority.

Finally, to keep it relatively brief, I have reservations concerning the coordination of the tendering of innovation partnerships with the 2014 Framework for State aid for research and development and innovation. That Framework considers that there is no State aid prohibited by Art 107 TFEU in two cases: 

(a) "as long as an open tender procedure for the public procurement is carried out in accordance with the applicable directives" [para 32]; or
(b) where any other arrangement carried out by the contracting authority, including pre-commercial procurement, meets a series of conditions, amongst which "the procurement does not give any of the participant providers any preferential treatment in the supply of commercial volumes of the final products or services to a public purchaser in the Member State concerned" [para 33(c)], "without prejudice to procedures that cover both the development and the subsequent purchase of unique or specialised products or services" [fn 29]. Additional requirements concerning the IP rights (mentioned above) are applicable, as one of the following two conditions needs to be fulfilled [para 33(d)]: either (i) all results which do not give rise to IPR are widely disseminated, for example through publication, teaching or contribution to standardisation bodies in a way that allows other undertakings to reproduce them, and any IPR are fully allocated to the public purchaser, or (ii) any service provider to which results giving rise to IPR are allocated is required to grant the public purchaser unlimited access to those results free of charge, and to grant access to third parties, for example by way of non-exclusive licenses, under market conditions.

In my view, it is difficult to assume that an innovation partnership can be immediately fit into either (a) because it is not based on the rules of the open procedure, or (b) because it does create a preferential treatment for the supply of the results of the innovation, which may not necessarily remain unique or specialised products or services when it comes to their commercialization, particularly if the attribution of IP rights is to the contracting authority, or widely available through non-exclusive licenses, under market conditions. 

In that case, given the lack of immediate compatibility with the EU State aid rules under the 2014 R&D&I framework, the award of the innovation partnership can still go ahead, as Member States may rely on an individual assessment of the terms of the contract between the public purchaser and the undertaking, but that is without prejudice to the general obligation to notify R&D&I aid pursuant to Art 108(3) TFEU (which would paralise the project until the Commission clears the State aid).

Overall, then, I doubt that contracting authorities are in a good position to identify when an innovation partnership is justified or, even then, that they are in a situation where the pursuit of public interests (linked to the public procurement function) justifies the assumption of potentially significant IP and State aid risks. Consequently, I would not favor a significant uptake of the innovation partnership. If investment in R&D&I is to be pursued, it would be best channeled through regular awards of financial support as clear cut State aid.

Competitive dialogue under Reg. 30 Public Contracts Regulations 2015

Reg. 30 of the Public Contracts Regulations 2015 (PCR2015) sets up the specific rules that contracting authorities need to follow when they organise competitive dialogues, provided they are covered by the grounds specified in regs. 26(4) to (7) PCR2015 (which will not be too difficult, see here and here). The transposition follows closely the wording of Art 30 of Directive 2014/24, with minor drafting improvements and a more detailed structure. For Pedro's insightful, as well as incisive and provocative comments on this, his particular pet subject, see here.

The regulation of the competitive dialogue under the 2004 EU procurement rules (which created it) had given rise to significant academic debate and there was a general consensus about the legal uncertainty that the limited detail and the vagueness of the EU rules created [see S Arrowsmith & S Treumer (eds), Competitive Dialogue in EU Procurement (Cambridge, CUP, 2012)]. However, as recital (42) of Dir 2014/24 points out

[the] use of the competitive dialogue has significantly increased in terms of contract values over the past years. It has shown itself to be of use in cases where contracting authorities are unable to define the means of satisfying their needs or of assessing what the market can offer in terms of technical, financial or legal solutions. This situation may arise in particular with innovative projects, the implementation of major integrated transport infrastructure projects, large computer networks or projects involving complex and structured financing.

Hence, its practical relevance and the need to overcome previous regulatory uncertainty provided a good justification for a revision of the rules applicable to that procedure. In its post-2014 configuration, the competitive dialogue is structured as a multi-phase selective process based on the restricted procedure, which necessarily consists of at least three phases: expression of interest and short-listing, technical negotiation (or dialogue) leading to the specification of the technical and financial aspects of the procurement, and final tender (subjected to further fine-tuning and negotiations with best bidder).

In its configuration under reg.30 PCR2015, the competitive dialogue is quite difficult to distinguish from a competitive procedure with negotiation (reg.29 PCR2015) except for two issues: (a) the level of specification of the contracting authorities' needs and requirements under a competitive dialogue is (apparently) less demanding than that applicable to competitive procedures with negotiation; and (b) competitive dialogue cannot result in an award based on price or cost effectiveness only. 

Hence, these may be the two issues that contracting authorities may take into consideration when they opt for one over the other [but, admittedly, these are issues that remain at the margin and hardly justify the multiplication of procedures based on the restricted, but allowing for negotiations; see Telles and Butler, "Public Procurement Award Procedures in Directive 2014/24/EU", in F Lichere, R Caranta and S Treumer (ed) Modernising Public Procurement: the new Directive (Copenhagen, Djof Publishing, 2014) 131-184].

(a) On the issue of the establishment of the contracting authorities' needs and requirements, it is worth stressing that reg.30(6) PCR2015 determines that contracting authorities shall set out their needs and requirements in the contract notice and shall define those needs and requirements in that notice or in a descriptive document. 

Those needs and requirements cannot be changed despite the technical dialogue in which the contracting authority must engage, given that reg.30(18) PCR2015 clearly demands that the tenders and any clarifications, specification or optimisation thereof, or any additional information, may not involve changes to the essential aspects of the tender or of the public procurement, including the needs and requirements set out in the contract notice or in the descriptive document, where variations to those aspects, needs and requirements are likely to distort competition or have a discriminatory effect. 

Even further, the final negotiations in which the contracting authority can engage with the best tenderer need to respect the limit that they cannot not have the effect of materially modifying essential aspects of the tender or of the public procurement, including the needs and requirements set out in the contract notice or in the descriptive document and does not risk distorting competition or causing discrimination [reg.30(20) PCR2015].

Consequently, even if reg.30 PCR2015 does not have a strict equivalent to the rule under regs.29(2)(b) and 31(2)(b)PCR2015, according to which the procurement documents of a competitive procedure with negotiation or an innovation partnership must "indicate which elements of the description define the minimum requirements to be met by all tenders," the combined effect of regs.30(6), 30(18) and 30(20) PCR2015 may be quite similar. 

The only advantage for the contracting authority may be to try to benefit from that (apparent) limited prescriptiveness by setting out its needs and requirements in vague terms, or by allowing for non-substantial modifications during the technical dialogue, tender or final negotiation phase. However, this will expose it to litigation based on discrimination and distortion of competition [reg.18 PCR2015], which does not seem a particularly desirable scenario. In the end, then, contracting authorities will be advised to draft their needs and requirements for a competitive dialogue as if the were "minimum requirements to be met by all tenders", and stick to them.

(b) As regards the difference in award criteria available under competitive procedures with negotiation and competitive dialogues, it is worth stressing that reg.30(5) PCR2015 expressly sets out that the contract shall be awarded on the sole basis of the award criterion of the best price-quality ratio. Conversely, contracting authorities retain the possibility to award the contract under a competitive procedure with negotiation on the basis of price or cost effectiveness only. 

Nonetheless, it would be very hard to square that possibility with the use of that procedure itself [other than in regard to works, supplies or services where, in response to an open or a restricted procedure, only irregular or unacceptable tenders are submitted; reg.26(4)(b) PCR2015], due the need to have a full set of completely closed technical specifications if the contracting authority only wants to negotiate on the basis of cost/price. Otherwise, engaging in technical and financial negotiations but only taking the latter into consideration for award purposes would in my view exceed the acceptable degree of discretion available to contracting authorities.

Overall, then, the actual advantages of the competitive dialogue over the competitive procedure with negotiation, or the differences between them, seem rather minimal--not least because contracting authorities could use the blueprint of the competitive dialogue to set out the rules and phases applicable to their competitive procedure with negotiation under reg.29(19) PCR2015 and, in that case, it would be almost impossible to distinguish between both procedures [except for the specific authorisation to engage in further negotiations with the best tenderer under reg.30(20) PCR2015, which could be accommodated by a delayed closure of the negotiations under reg.29(21) PCR2015.

A final remark that may be worth stressing is that reg.30(21) PCR2015 allows contracting authorities to specify prizes or payments to the participants in the dialogue. This could trigger State aid issues if the prizes were excessive or if they were not awarded in an objective and transparent manner.

Procurement tennis pauses for Easter break

Dr Pedro Telles and I are pausing procurement tennis we are playing for Easter break. We will resume our daily commentary of the Public Contracts Regulations 2015 on 8 April 2015. So far, we are surprised with the number of things we agreed and disagreed on regarding the 29 regulations we have covered so far. There are another 93 ahead of us, so we will have to refill our energies and get ready for that. We hope you will rejoin us after the hiatus. Happy Easter.

Public procurement in the CJEU's Annual Report 2014 Statistics

The Court of Justice of the European Union (CJEU) has published the full version of its 2014 Annual Report, which allows for an update of the statistics available two years ago (here). The 2014 report offers interesting data about the continued relevance of public procurement in the overall activities of the Court, as well as the evolution of the backlog in the docket, which seems to be needing attention at the highest level. I provide the new data first, both for the CJEU and the GC, and then update the time series I first prepared in 2012.

CJEU 2014 data

In 2014, the CJEU opened 21 new cases on public procurement (3.42% of all new cases), of which 20 were references for a preliminary ruling and the other case was an appeal. It adopted 13 decisions in public procurement cases (11 Judgments and 2 Orders) during the same period (which represent 2.08% of all cases closed). This clearly indicates that the CJEU has accumulated a (further) backlog of around 50% of the 2014 new procurement cases.

A cursory search on CURIA's case finder shows 9 pending procurement cases (below), which would track the 2014 mismatch (although two of them are 2015 cases)--but only assuming there was no backlog of procurement cases at the beginning of that year, which I do not think is correct (see below for some conjectures). In any case, more transparency on the backlog of cases would be desirable.

GC 2014 data

In 2014, the GC opened 17 new cases on public procurement, and it issued 18 decisions (16 Judgments and 2 Orders). The GC is managing to keep the number of pending cases stable at around 35. The fact that the GC publishes explicit statistics on pending cases by subject matter makes things easier.

Time series

The following is an update of the time series I prepared in 2012. Just like then, please note that unfortunately, prior to 2010, the data for the CJEU does not include a separate category for public procurement cases (they were likely to be classified under approximation of laws, or under the relevant fundamental freedom). Therefore, the actual numbers may be higher than the available statistics show but, in my view, the general trends remain clear: backlog is increasing and now reaches about 75 cases. As I mentioned above, more transparency (or a correction of incorrect classification of cases, if there is any) would be much desirable.

 

The CJEU's maximalism and minimalism in the treatment of experience as a procurement award criterion (C-601/13)

In Ambisig, C-601/13, EU:C:2015:204, the Court of Justice of the EU (CJEU) has been confronted again with the issue of the use of the experience and qualifications (ie academic and professional background) of the staff assigned to performance of the contract as an award criterion under EU public procurement rules (ie the Lianakis distinction of selection and award criteria). The Ambisig Judgment still applies the rules of Directive 2004/18, but the reasoning and principles will remain relevant for the interpretation of Directive 2014/24.

At first reading, and depending on one's view of the strictness of Lianakis, it may seem that Ambisig is fundamentally a repetition of the discussion on the assessment of staff's experience as an award criterion that was recently rehearsed in Spain v Commission (financial support for cuenca hidrográfica del Júcar), C-641/13, EU:C:2014:2264 (not available in English, see my comments here).

However, some close reading may lead to a different (or at least more nuanced) conclusion, given the tone that the CJEU has used in two such close cases. It may be worth reminding that the rhetoric used in Spain v Commission presented Lianakis as follows:

... as is apparent from paragraphs 30-32 of the judgment Lianakis and others (EU:C:2008:40) ... the Court has clearly distinguished award criteria from the selection criteria that are essentially linked to the assessment of the bidders' ability to perform the contract in question, and considered that the criteria relating to the experience, qualifications and means of ensuring proper performance of the contract in question belong to the latter category and, therefore, do not have the character of award criteria (C-641/13, para 36, own translation, emphasis added).

We could call this the maximalist reading/reporting of Lianakis. However, as we shall see below, this is not the position adopted in Ambisig, where the referring Portuguese court was concerned with two aspects that in its view seemed to make it difficult to apply such a maximalist reading of Lianakis: (1) that the contract was for intellectual services (ie training and consulting); and (2) that the 2011 proposal for a new Directive (now Dir 2014/24) "constitute[d] a new factor in relation to the case-law of the Court in this area".

In that regard, it is interesting to see how the CJEU has now adopted a minimalist approach to Lianakis that basically comes to read into the rules of Dir 2004/18 the content of the new rules under art 67(2)(b) Dir 2014/24. In the words of the CJEU in Ambisig

25 ... the case-law highlighted in the judgment in Lianakis and Others (C‑532/06, EU:C:2008:40) concerns the interpretation of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts (OJ 1992 L 209, p. 1), which was repealed by Directive 2004/18, and that that judgment does not rule out the possibility that the contracting authority may, in certain circumstances, fix and apply a criterion [enabling evaluation of the teams specifically put forward by the tenderers for the performance of the contract and which takes into consideration the composition of the team and the experience and academic and professional background of the team members] at the stage of awarding the contract.

26 That judgment concerns the staff and experience of the tenderers in general and not, as in present case, the staff and experience of the persons making up a particular team which must actually perform the contract.

27 It should be noted, in relation to the interpretation of Article 53(1)(a) of Directive 2004/18 which is the subject of the referring court’s question, that that directive introduced new elements into the Union legislation on public procurement in relation to Directive 92/50.

28 First of all, Article 53(1)(a) of Directive 2004/18 provides that ‘the tender most economically advantageous’ is to be identified ‘from the point of view of the contracting authority’, thereby giving the contracting authority greater discretion in its decision-making.

29 Secondly, the third paragraph of recital 46 in the preamble to Directive 2004/18 states that, where the contracting authorities choose to award a contract to the most economically advantageous tender, they are to assess the tenders in order to determine which one ‘offers the best value for money’, which tends to reinforce the importance of quality in the award criteria for public contracts.

30 Furthermore, Article 53(1) of Directive 2004/18 does not set out an exhaustive list of the criteria which may be used by the contracting authorities in determining the economically most advantageous tender, and therefore leaves it open to the authorities awarding contracts to select the criteria on which they propose to base their award of the contract. Their choice is nevertheless limited to criteria aimed at identifying the tender which is economically the most advantageous (see, to that effect, Lianakis and Others, C‑532/06, EU:C:2008:40, paragraphs 28 and 29 and the case-law cited). To that end, Article 53(1)(a) of Directive 2004/18 specifically requires that the award criteria be linked to the subject-matter of the contract (see judgment in Commission v Netherlands, C‑368/10, EU:C:2012:284, paragraph 86).

31 The quality of performance of a public contract may depend decisively on the ‘professional merit’ of the people entrusted with its performance, which is made up of their professional experience and background.

32 This is particularly true where the performance of the contract is intellectual in nature and, as in the main proceedings in the present case, concerns training and consultancy services.

33 Where a contract of this nature is to be performed by a team, it is the abilities and experience of its members which are decisive for the evaluation of the professional quality of the team. That quality may be an intrinsic characteristic of the tender and linked to the subject-matter of the contract for the purposes of Article 53(1)(a) of Directive 2004/18.

34 Consequently, that quality may be included as an award criterion in the contract notice or in the relevant tendering specifications (C-601/13, paras 25 to 34, emphasis added).

This is an interesting exercise of judicial rhetoric, which shows the CJEU's willingness to ensure certain cross-temporal validity of its case law in the area of public procurement, where change is a constant. This is not a bad thing in itself. However, it may be puzzling for observers (it definitely is for me) because I am not sure that many would have expected the CJEU to engage in such an explicit change of hats in the space of about 5 months in the way it reports its own previous case law, particularly in such a controversial and debated area [for very insightful discussion on this type of implications of Lianakis, see S Treumer, "The Distinction between Selection and Award Criteria in EC Public Procurement Law—A Rule without Exception" (2009) 18(3) Public Procurement Law Review 103-111]. 

In the end, it is worth reminding that one of the justifications for the revision/repeal of Dir 2004/18 by Dir 2014/24 was to address the "Lianakis issue" [see S Arrowsmith, "Modernising the European Union's public procurement regime: a blueprint for real simplicity and flexibility" (2012) 21(3) Public Procurement Law Review 71, 80; and rec (94) dir 2014/24]. To some extent, then, the Ambisig Judgment renders a significant (if relatively hidden) justification for the 2014 generation of EU public procurement rules useless.

This may have implications for the future, where the lack of clarity of the CJEU's case law in certain new/revamped areas of public procurement (let's just mention life-cycle costing or asymmetrical negotiations, for now) may trigger calles for further legislative reform--which should, in my view, be avoided to the extent that they rest on maximalistic interpretations of the CJEU's usually sparse and confusing passages, as we now know that it only (?) takes some adequate prompting for the CJEU to provide minimalistic twists that exclude the need for reforms.

Competitive procedures with negotiation under Reg. 29 Public Contracts Regulations 2015

Reg.29 of the Public Contracts Regulations 2015 (PCR2015) establishes rules for the conduct of competitive procedures with negotiation (formerly known as negotiated procedures with publication) and transposes the very similar requirements under Art 29 of Directive 2014/24 [although it lengthens and complicates its drafting by including unnecessary repetition of time limit-related rules in regs.29(6) to (10), which could have been minimised by a cross-reference to regs.28(6) to (10)]. 

As mentioned in relation to reg.26 PCR2015, one of the main changes in the new rules is that a lax interpretation of the grounds that justify the use of this procedure may transform it into the default procedure--or, in the case of the UK, as stressed by Pedro, consolidate its widespread use. Hence, the specific rules that are set out in reg.29 PCR2015 regarding the conduct of negotiations are bound to have a very significant practical impact.

The general design of the procedure is a variation of the restricted procedure [reg.28 PCR2015] that allows for two main adjustments: (1) the negotiated procedure does not necessarily have to be two-stage, but it can be multi-stage [reg.29(19) PCR2015]; and (2) the object of the procurement does not need to be completely defined from the time the negotiations start, but can evolve provided some minimum requirements are not subject to negotiation [reg.29(14) PCR2015]. 

These will, in my view, be the two main criteria that can justify resorting to a competitive procedure with negotiation instead of a restricted procedure, given that these are the areas where increased flexibility can provide advantages to the contracting authority [however, the significant flexibility of using rough documents at the first stage and detailed requirements at the second stage of a restricted procedure somehow close this gap as (2) is concerned].

However, contracting authorities need to be mindful of two main risks created by the rules applicable to competitive procedures with negotiation. The first risk is strictly legal and derives from the strange particularisation of the principle of equal treatment [reg.18(1) PCR2015] in connection with reg.29(13) PCR2015, which requires contracting authorities to "negotiate with tenderers the initial and all subsequent tenders submitted by them, except for the final tender, to improve their content". The immediate question is whether they have to negotiate with all tenderers and whether they have to do it simultaneously (if at all possible) and with the same intensity. As Pedro rightly stressed in his entry today, "more negotiations mean as well plenty of scope for unequal treatment" and, in my own view, the key is not whether there is actually more unequal treatment, but whether there is more scope for litigation on that basis.

These are very difficult issues (and proving the underlying issues to any acceptable procedural standard in case of judicial review of award decisions will be even more difficult), but I would not be surprised if tenderers started challenging contracting authorities' negotiating strategy on the basis that they were not negotiating in good faith or with best efforts (should they? must they?), or that there has been more interest in concluding an agreement with a competing tenderer. 

The best way out will be for contracting authorities to disclose more specific rules, such as sequential negotiations whereby they engage with negotiations with one tenderer (eg the one with the highest score for the initial offer) and, failing an agreement within a set deadline, they move on to the next, and so on and so forth--this may be difficult to square with a strictly literal interpretation of reg.29(19) PCR2015 on staging the negotiations, but it seems like the most functional interpretation. Otherwise, they are exposing themselves to significant litigation risks (which can be compounded by the difficulties in the rules on record-keeping under reg.22 PCR2015].

The second risks is not legal, but strategic. Reg.29(15) PCR2015 allows contracting authorities to award contracts on the basis of the initial tenders without negotiation where they have indicated, in the contract notice or in the invitation to confirm interest, that they reserve the possibility of doing so. This does not seem to restrict the options of the contracting authority to the moment prior to engaging in negotiations. 

That is, a literal interpretation supports that contracting authorities, at any point prior to concluding the negotiations [reg.29(21) PCR2015] can decide to go back to the original tender and award the contract. This is a risky strategy, particularly if the negotiations are bound to repeat themselves in time, as it would create a very limited incentive for tenderers to actually engage in meaningful negotiations if the contracting authority can at any point dismiss the process and hence render the transaction costs derived from the negotiations useless. 

Moreover, it is hard to see whether this clause actually makes much economic sense, even if interpreted as limiting the options of the contracting authority to the initial decision. If the negotiation game is one in which the contracting authority can (freely) decide to award or negotiate, tenderers may have an incentive to provide their absolute best conditions as the initial offer to try to deactivate the negotiation bit. However, they will only do that if they perceive the contracting authority as a tough negotiator and a well-informed evaluator of the initial tenders. Otherwise, tenderers will have an incentive to offer non-optimal initial tenders in the hope of keeping some surplus during the negotiations (ie they do not need to offer their absolute best, but just a condition that is slightly better than the next most efficient competitor). 

Hence, it seems obvious that in view of the informational asymmetry and the difficulties that contracting authorities face when it comes to negotiating [see Telles and Butler, "Public Procurement Award Procedures in Directive 2014/24/EU", in F Lichere, R Caranta and S Treumer (ed) Modernising Public Procurement: the new Directive (Copenhagen, Djof Publishing, 2014) 131-184], this clause will rarely result in the initial offers reflecting the absolute best available conditions. If this is true (certainly, a difficult empirical question), then it would always be inefficient to award on the basis of the initial tenders, unless the negotiation costs where very high and could offset any loss of efficiency derived from second-best contract terms. 

In short, I fail to see how the use of this clause can be made economically efficient in the generality of cases, particularly if contracting authorities do not have strong in house negotiation teams or are subjected to (political) constraints that prevent them from developing a credible long-run strong negotiation reputation. And, if its use it carries no clear economic advantage, then contracting authorities may be better off ignoring the clause in reg.29(15) PCR2015, as its weak use would open yet another opportunity to challenge award decisions on the basis of excess of discretion or failure to provide reasons where the contracting authority chooses not to negotiate for undisclosed (or inexistent) reasons.

Restricted procedures under Reg. 28 Public Contracts Regulations 2015

Reg.28 of the Public Contracts Regulations 2015 deals with restricted procedures and transposes the rules in Art 28 of Directive 2014/24. As Pedro has indicated, it has a similar content as reg.27 PCR2015 regarding the open procedure (ie focusses on minimum time limits and their potential shortening) and, consequently, it is open to similar comments. I do not have anything to add on that front.

In my view, there are two issues that are not explicitly regulated in reg.27 PCR2015 that require careful consideration by contracting authorities. 

First, given that resorting to this procedure increases the minimum time needed to award a contract if compared to an open procedure (from a bare minimum of 25 v 15 days, to a maximum difference at the longest end of 35 v 60 days), the decision to resort to a restricted procedure instead of an open procedure should take into account the potential gains (in terms of reduced evaluation costs, but not in terms of qualitative selection) and the potential losses (particularly in terms of competition if the number of invited tenderers is limited after the first stage), and be proportionate.

Second, restricted procedures may be used efficiently in cases where not all contract documents are ready at the time of the call for tenders. This is particularly the situation in the procurement of works, where the call for tenders may be published before the detailed plans and specifications are ready, so that finalisation of the project and selection of the tenderers is run in parallel to win time. 

In my view, this remains possible and is probably the preferable option for the procurement of complex projects without negotiation. Some may express concern in view of the rules on disclosure of documents under reg. 53 PCR2015 (to be commented in due course), but I do not think that such rule can impose any restriction on this use of restricted procedures. Even if this implies advancing some comments that may be more pertinent regarding reg.53 PCR2015, these are the reasons I can provide for this approach, which come from an exchange of emails with a practitioner (if authorised, I will disclose its identity).

Firstly, I think that nothing in the EU Directive has changed the documentary requirements as such (and, hence, nothing in the PCR2015 by implication: see explanatory memorandum, where it is clearly indicated that reg.53 is a copy-out of art 53 Dir 2014/24). All provisions on electronic communication are ... about process/technology but not substance (see recital 52 of Dir 2014/24). Hence, they should not alter existing lawful practice.

Secondly, from a strictly technical perspective in terms of statutory interpretation of reg.53 PCR2015, I think there is a good systematic point to support this interpretation in reg.53(6) itself, as it clearly shows that further documentary disclosure (beyond the tender documents initially made available) is possible—up until 6 days before tender submission. In my view, given the general possibility to disclose detailed technical plans, drawings and specifications not originally included in the tender documents, the issue then rests on two points: transparency and equal treatment.

On transparency, if the contracting authority clearly in the pre-PQQ contract notice that the detailed plans will be made available only to shortlisted tenderers, this should create no problems provided that the information disclosed at that stage allows potentially interested bidders to have a rough idea of the project and its requirements, and to complete satisfactorily the PQQ phase. This was clearly the position of the ECJ: ‘all technical information relevant for the purpose of a sound understanding of the contract notice or the tendering specifications must be made available as soon as possible to all the undertakings taking part in a public procurement procedure’ [Case T-345/03 Evropaïki Dynamiki v Commission (CORDIS) [2008] ECR II-341 145. See also Case T-297/05 IPK International v Commission [2011] ECR II-1859 124]. 

On equal treatment, ... the key issue involves the need to make sure that no undertaking is advantaged (because they are involved in the planning, fundamentally) as ‘the unequal treatment consisting in a delay in making certain technical information available to the tenderers, with the exception of the successful tenderer, constitutes a procedural defect’ [Case T-345/03 Evropaïki Dynamiki v Commission (CORDIS) [2008] ECR II-341 160 and ff. See also Case T-50/05 Evropaïki Dynamiki v Commission (ECMS) [2010] ECR II-1071, where delays in disclosure of source code to tenderers other than the incumbent are discussed].

All that is just to indicate that the contracting authority should clarify why it is necessary and proportionate for it to use this two-stage disclosure process (expediency, cost, etc – the fact that it is a consolidated practice under the pre-existing regulations may also help) and then avoid restricting access to any information that would have allowed specific tenderers to participate (such as the need to carry out specialist work, for instance), or that advantages specific undertakings. If those risks are covered, I see no problem in ... carrying on as they used to under the PCR2006 [ie, to use the restricted procedure to carry out a two part procurement process that enables the contracting authority to progress procurement whilst still working on the drawings and detailed specifications etc. that will form the tender documents after invitation].

Duty to state reasons for the ranking of tenders in public procurement: Evropaïki Dynamiki strikes back (T-297/09)

In its Judgment in Evropaïki Dynamiki v EASA, T-297/09, EU:T:2015:184, the General Court (GC) has assessed once more the contours of the obligation to state the reasons underlying public procurement decisions, this time regarding the classification of a tenderer in second or third position in a cascade procedure leading to the conclusion of 'ranked' framework contracts--and, once more, upon a challenge of a procurement decision by an EU Institution (this time, the European Aviation Safety Agency, EASA) by Evropaïki Dynamiki. On this occasion, the GC annuls some of EASA's Decisions classifying Evropaïki Dynamiki's tenderer in second or third position in the cascade procedure, but it does not award damages and imposes a 25/75 split of costs between the parties. The reasoning of the GC deserves some close attention and it is worth reminding that the case was on procurement controlled by Financial Regulation (EC, Euratom) No 1605/2002. 

The case is interesting and rather unconventional because it is concerned with framework agreements that EASA planned to conclude with the 3 top tenderers for each of the 5 lots tendered. Evropaïki Dynamiki's tenders being ranked second and third for different lots, then, did not exclude the undertaking from the framework agreements--which thus reduced the challenge to the ranking itself, but not to the conclusion of the ensuing framework agreements or the call-offs within them. Consequently, the challenge is actually concerned with the inclusion in the framework agreements of other tenderers, which looks like a rather uncommon setting for a procurement dispute.

This triggered an objection of inadmissibility by EASA, on the grounds that Evropaïki Dynamiki is one of the tenderers to which framework contracts were awarded for four lots, so it cannot be precluded that it will conclude specific contracts with EASA; and, second, that Evropaïki Dynamiki cannot challenge the award decisions, since it signed four framework contracts for the four lots in question and annulment of the contested decisions would serve no useful purpose. The GC rejected these arguments and declared the action admissible on the following grounds:

41 According to settled case-law, an action for annulment brought by a natural or legal person is admissible only in so far as that person has an interest in the contested measure being annulled (judgments of 14 September 1995 in Antillean Rice Mills and Others v Commission, T‑480/93 and T‑483/93, ECR, EU:T:1995:162, paragraph 59; 25 March 1999 in Gencor v Commission, T‑102/96, ECR, EU:T:1999:65, paragraph 40; and 14 April 2005 in Sniace v Commission, T‑141/03, ECR, EU:T:2005:129, paragraph 25). That interest must be vested and present (judgment of 17 September 1992 in NBV and NVB v Commission, T‑138/89, ECR, EU:T:1992:95, paragraph 33) and is evaluated as at the date on which the action is brought (judgment of 16 December 1963 in Forges de Clabecq v High Authority, 14/63, ECR, EU:C:1963:60, p. 357, at 371, and judgment in Sniace v Commission, cited above, EU:T:2005:129, paragraph 25).

42 In the present case, as EASA observes, each framework contract is implemented by specific contracts concluded according to the cascade mechanism. According to Section 2.7.1 of the tender specifications, when more than one contractor is nominated, EASA determines the specifications of the services required and will first address its request to the contractor who has been ranked first. If this contractor is unable to meet any of the criteria, EASA will address the same request to the contractor who has been ranked second. This process will end with conclusion of a specific contract with one of the contractors who were ranked among the top three and who can meet all the specifications of the services. It follows that if the applicant had been ranked first according to the cascade, this might have secured an advantage for it and that its ranking in a lower position amounts to a significant loss of opportunity. Such a ranking decision therefore produces legal effects vis-à-vis the applicant.

43 Moreover, the fact that the framework contracts which are the subject of the call for tenders at issue have been signed and implemented does not call into question the applicant’s legal interest in bringing proceedings. It is settled case-law that, even where a decision to award a contract has been fully implemented for the benefit of other competitors, a tenderer retains an interest in the annulment of such a decision; such interest consists either in the tenderer’s being properly restored by the contracting authority to his original position or in prompting that authority to make suitable amendments in the future to the tendering procedure if that procedure is found to be incompatible with certain legal requirements (see, to that effect, judgments of 6 March 1979 in Simmenthal v Commission, 92/78, ECR, EU:C:1979:53, paragraph 32, and of 14 October 1999 in CAS Succhi di Frutta v Commission, T‑191/96 and T‑106/97, ECR, EU:T:1999:256, paragraph 63). In the present case, the applicant retains at least an interest in the tenderers’ being correctly ranked according to the cascade (T-297/09, paras 41 to 43, emphasis added).

This is an interesting point to take into consideration. In my view, the implication of the reasoning of the GC is that, should a framework agreement not carry any of the rankings into the call-off phase (ie where the call-offs are either based on a free choice of the contracting authority, or based on a mini-competition), there seems to be no legitimate interest for a contractor included in the framework agreement to challenge the inclusion of other competitors in the contract--that is, the contractor does not have a right to determine whose competitors to face within the framework agreement. 

 

In my view, though, that is not necessarily the case, particularly if the exclusion of a given tenderer would have resulted in a framework including a more limited number of contractors. Hence, a case by case approach seems necessary in all instances, and no a contrario interpretation of the GC's reasoning in Evropaïki Dynamiki v EASA should be made.

The second part of the Judgment that I consider relevant concerns the award for damages. Given that the GC had determined that the admissibility of the claim rested on the fact that being ranked higher "secured an advantage ... and that ... ranking in a lower position amounts to a significant loss of opportunity", it would have seemed logical to expect a claim for compensation due to such "significant loss of opportunity" to be accepted and compensation, at some level, to be granted to Evropaïki Dynamiki. 

 

In that regard, I find it internally inconsistent that the GC has contrarily determined that 

As regards lots 2, 3 and 5, it is true that the contested decisions are vitiated by an inadequate statement of reasons and must be annulled for that reason. However, the inadequacy of the statement of reasons does not mean that the award of the contracts to the tenderers ranked higher in the cascade constitutes wrongful conduct or that there is a causal link between that fact and the loss alleged by the applicant (see, to that effect, judgment of 25 February 2003 in Renco v Council, T‑4/01, ECR, EU:T:2003:37, paragraph 89). It follows that the application for damages in respect of the alleged harm suffered as a result of the contested decisions in the context of lots 2, 3 and 5 of the call for tenders at issue must be dismissed as unfounded in so far as it is based on the inadequate statement of reasons for those decisions (T-297/09, para 185, emphasis added).

In my view, if the rankings were set out in a way that failed to state adequate reasons and Evropaïki Dynamiki has prevailed in getting those decisions annulled, then the preference given to the first ranked contractor should also have been annulled or, at least, compensated for. 

The decision of the GC makes some more sense if one takes into account that Evropaïki Dynamiki decided to limit the challenge to the decision on ranking itself (as set out in para 39, it withdrew "its application for annulment of all further related decisions contained in its first head of claim; that head of claim concerned only the decisions to rank its tenders second or third in the cascade. It follows that this action relates only to the contested decisions. Accordingly, the scope of the present application for annulment must be restricted to an examination of the lawfulness of those decisions."). 

However, the internal consistency of the consideration of a "significant loss of opportunity" regarding the admissibility of the claim is hard to reconcile with the apparent neutrality that the annulment of the decisions seems to have on the financial interests of Evropaïki Dynamiki in the view of the GC.

Open procedures under Reg. 27 Public Contracts Regulations 2015

Open procedures are regimented in reg.27 of the Public Contracts Regulations 2015 (PCR2015), which transposes the rules in Art 27 of Directive 2014/24--once again, altering the order of its contents without substantive changes. The rules are quite straightforward (but not free from criticism, as Pedro has shown). 

Firstly, given the open nature and the one-stage design of these procedures, any interested economic operator may submit a tender in response to a contract notice [reg.27(1) PCR2015], and the tender shall be accompanied by the information for qualitative selection that is requested by the contracting authority [reg.27(3) PCR2015]. 

Secondly, the general minimum time limit for the he receipt of tenders shall be 35 days from the date on which the contract notice was sent [reg.27(2) PCR2015], which can be reduced by 5 days the time limit for receipt of tenders where it accepts that tenders may be submitted by electronic means in accordance with reg.22 PCR2015 [reg.27(6) PCR2015].

Thirdly, this time limit can be reduced to 15 days in two cases: (a) where contracting authorities have published a prior information notice which was not itself used as a means of calling for competition between 35 days and 12 months before the date on which the contract notice was sent, and included all the information required for the contract notice [reg.27(4) PCR2015]; or (b) where a state of urgency duly substantiated by the contracting authority renders impracticable the 35-day time limit [reg.27(5) PCR2015].

Consequently, the range of minimum time limits applicable to open procedures will be of 15-30-35 days, depending on the circumstances of the case [see Annex B of the Crown Commercial Service, A brief guide to the EU Public Contracts Directive (2014, updated Feb 2015)]. This does not mean that this is always or necessarily the adequate time span that contracting authorities should allow for tender preparation, and that time limit should be set in accordance with the principles of proportionality and competition [see reg.18 PCR2015].

Choice of procedures under Reg. 26 Public Contracts Regulations 2015

Reg.26 of the Public Contracts Regulations 2015 (PCR2015) transposes Art 26 of Directive 2014/24 and establishes rules on the choice of procedures for the tendering of public contracts, which have now been increased to a total of 6 options: open, restricted, competitive with negotiations, competitive dialogue, negotiated without prior publication and innovation partnership. This is a topic that Pedro discussed in detail in his paper with our colleague and common friend Luke Butler ["Public Procurement Award Procedures in Directive 2014/24/EU", in F Lichere, R Caranta and S Treumer (ed) Modernising Public Procurement: the new Directive (Copenhagen, Djof Publishing, 2014) 131-184], so I expect him to provide us with interesting insights in his comment today (as he actually has).

Reg.26(1) and (2) PCR2015 depart significantly from the drafting of Art 26(1) Dir 2014/24 and, in my view, improve their drafting significantly by establishing that contracting authorities shall apply procedures that conform to this Part and that they can only award contracts if a call for competition has been published, except where reg.32 PCR2015 permits contracting authorities to apply a negotiated procedure without prior publication. This establishes a clear link to Art 2d(1)(a) of Directive 89/665 on remedies (as amended), according to which Member States shall ensure that a contract is considered ineffective if the contracting authority has awarded a contract without prior publication of a contract notice in the Official Journal of the European Union without this being permissible in accordance with Directive 2014/24. And, in general, it comes to require Member States to resort to a specific procedure within the catalogue foreseen in Dir 2014/24, unless they can dispense with a negotiated award without prior publication.

Reg. 26(3) conflates Arts 26(2) and 26(3) Dir 2014/24 and establishes two redundant rules, whereby contracting authorities can apply open or restricted procedures or innovation partnerships as regulated in its Part 2.

Regs.26(4) to (7) PCR2015 then go on to establish the grounds for the use of either a competitive procedure with negotiation or a competitive dialogue. They reorder the content of Art 26(4) Dir 2014/24, but they do not deviate therefrom. In my view, this is one of the criticisable novelties of Dir 2014/24, which has created a scenario where it can almost always be justified to resort to a procedure involving negotiations. This is in line with the main goals of the 2011 reform proposal, but it creates significant issues. I provide my comments below.

Regs.26(8) to (10) establish precise rules on the way in which the call for competition needs to be carried out for the procedure to comply with the requirement of reg.26(2) PCR2015, and establishes a primary rule (need to publish a contract notice) and a secondary rule (concerning the publication of prior information notices). 

It is worth stressing that reg.26 PCR2015 does not transpose Art 26(6) Dir 2014/24, which establishes the unnecessary and redundant rule that "In the specific cases and circumstances referred to expressly in Article 32, Member States may provide that contracting authorities may apply a negotiated procedure without prior publication of a call for competition. Member States shall not allow the application of that procedure in any other cases than those referred to in Article 32". Economising this paragraph is a positive contribution to simplification of the rules on choice of procedures.

Going back to the issue of the increased scope for the use of procedures involving negotiations, ie competitive procedures with negotiation and competitive dialogue, I consider the rules in Art 26(4) Dir 2014/24, and those in regs.26(4) to (7) PCR2015 by implication, very unsatisfactory. The following is extracted from Public procurement and the EU competition rules, 2nd edn (Oxford, Hart, 2015) 272-278, where I provide a fuller account of my views on the rules on choice of procedures. I am only focusing on Art 26(4) Dir 2014/24 here, and only from the perspective of the impact on competition that resorting to negotiated procedures can have, particularly if they become the norm.

Recourse to Competitive Dialogue and Competitive Procedure with Negotiation. Directive 2014/24 establishes common grounds for the contracting authorities to resort to either of these two procedures and, consequently, to engage in significant negotiations with candidates.[1] The European Commission has clarified that ‘the competitive dialogue has been simplified and made more practicable. It is now accessible under the same conditions as the competitive procedure with negotiation giving the contracting authority full choice’.[2] According to article 26(4) of Directive 2014/24, there is a numerous clausus of situations that justify recourse to these procedures. However, in view of the lack of precision of some of the grounds, it is hard to argue that contracting authorities are actually constrained not to resort to them.

Indeed, on the one hand, article 26(4)(a) sets out grounds based on project complexity or the existence of special needs of the contracting authority, and makes both procedures available if (i) the needs of the contracting authority cannot be met without adaptation of readily available solutions; (ii) they include design or innovative solutions; (iii) the contract cannot be awarded without prior negotiations because of specific circumstances related to the nature, the complexity or the legal and financial make-up or because of the risks attaching to them; or (iv) the technical specifications cannot be established with sufficient precision by the contracting authority.[3] These grounds absorb the justification for the use of the competitive dialogue in article 29 of Directive 2004/18, but expand it significantly (partially, in line with the interpretative case law) and, more importantly, extend it to the use of a competitive procedure with negotiation that under its form of ‘negotiated procedure with prior publication’ was much more limited in article 30 of Directive 2004/18. Such an expansion in the availability of procedures involving negotiation can potentially give rise to significant restrictions of competition and will be assessed in detail below.

On the other hand, article 26(4)(b) makes these procedures available where, in response to an open or a restricted procedure, only irregular or unacceptable tenders are submitted. The Directive further clarifies both concepts indicating that irregular tenders will, in particular, be those that do not comply with the procurement documents, which were received late, where there is evidence of collusion or corruption, or which have been found by the contracting authority to be abnormally low. On its part, unacceptable tenders will in particular cover those submitted by tenderers that do not have the required qualifications, and tenders whose price exceeds the contracting authority’s budget as determined and documented prior to the launching of the procurement procedure. This possibility was already present in article 30(1) of Directive 2004/18 and it seems fundamentally in line with the interpreting case law.[4]

Consequently, from a competition perspective, the analysis needs to focus fundamentally on the potential expansion in the use of competitive dialogue and competitive procedure with negotiation in situations justified on the basis of project complexity or the existence of special needs of the contracting authority (art 26(1)(a) dir 2014/24).

(a) Consolidation and expansion of the criteria authorising the use of competitive dialogue.As mentioned in passing, the aim of the competitive dialogue procedure introduced by Directive 2004/18 and now regulated in article 30 of Directive 2014/24 is to allow for a close cooperation between undertakings and public agencies in the definition of particularly complex projects and serves the primary objective of guaranteeing that the undertakings involved in the phase of project definition will not be excluded from the subsequent tender for the implementation or construction of the same on grounds of equal treatment.[5]

It is important to note that this objective was warranted by recent developments in the case law of the EU judicature, which prevented the automatic exclusion of undertakings that had been instructed to carry out research, experiments, studies or development in connection with public works, supplies or services from the subsequent tender procedure for those works, supplies or services; and limited the cases for exclusion from the subsequent tender to those in which, under the specific circumstances, the experience acquired by those undertakings is capable of distorting competition[6] (which is now regulated in art 41 dir 2014/24, see below §II.B.ii). In this regard, and taking the argument further, the EGC held that if the exceptional knowledge acquired by a tenderer as a result of work directly connected with the preparation of a tendering procedure by the contracting authority itself could not lead to its automatic exclusion from that procedure, there is even less ground for excluding that tenderer from participating where such exceptional knowledge derives solely from the fact that it participated in the preparation of the call for tenders in collaboration with the contracting authority.[7]

Therefore, on hindsight, the need for the competitive dialogue procedure in order to allow for pre-tender involvement of undertakings that are potentially interested in participating in the subsequent procedure can be put in doubt.[8] Nevertheless, the procedure was adopted in Directive 2004/18 and probably constitutes one of the fields where the main developments in public procurement practice and jurisprudence are taking place.[9] It is indeed one of the procedures that has attracted significant discussions during the recent reform of the rules leading to the approval of the 2014 Directives.

It is worth recalling that the circumstances and conditions under which a contracting authority could use the competitive dialogue procedure remained largely unclear, both as a result of the broad (and to a certain point, inconsistent) terms used in Directive 2004/18 and of the complete lack of case law on this issue.[10] In a preliminary approach, recourse to competitive dialogue might have seemed to be relatively straightforward. Article 29 of Directive 2004/18 expressly established that Member States could allow their contracting authorities to resort to this procedure when dealing with particularly complex contracts, but only if they considered that the use of the open or restricted procedure would not allow the (proper) award of the contract (which has now been suppressed as a requirement under art 26(1)(4) dir 2014/24). According to article 1(11)(c) of Directive 2004/18, particularly complex contracts were those where the contracting authorities were not objectively able to define according to the relevant rules (arts 23(3)(b), (c) or (d) dir 2004/18) the technical means capable of satisfying their needs or objectives, and/or were not objectively able to specify the legal and/or financial make-up of a project. Further interpretative criteria could be found in recital (31) of Directive 2004/18.[11] However, the joint reading of these provisions generated significant doubts as regards the threshold of technical, legal or economic complexity (or complexity test)[12] that had to be met to justify recourse to this procedure under the 2004 rules, as well as the degree of discretion that the contracting authority enjoyed to assess these circumstances in the context of a specific tender.[13] Unfortunately, these issues are not fully resolved by the drafting of article 26(1)(a) of Directive 2014/24, which (iii) and (iv) indents basically replicate and consolidate the scant guidance available under the previous rules. The fact that the use of the competitive dialogue is now a free alternative to the use of a competitive procedure with negotiation also comes to undermine the need for the maintenance of the competitive dialogue as a separate procedure—given that the creation of this special process was strongly reliant on the prevention of abusive resort to negotiated procedures[14] (as well as to overcome the mentioned issue of the exclusion of undertakings involved in the design stages of the procurement cycle).

Regardless of the specific bounds that practice and future developments in the case law of the EU judicature[15] impose on the exercise of discretion related to recourse to competitive dialogue procedures, the decision should be informed by the likely effect that recourse to this procedure could generate on competition (even if that means limiting the flexibility generally provided to the contracting authorities, as they continue to be bound to respect the general principles of the TFEU, as well as the principle of competition embedded in art 18 dir 2014/24, also in relation with this special procedure). Directive 2014/24 seems to provide a clear interpretative argument along these lines, given that article 65(3) requires that the number of candidates invited to participate in the competitive dialogue (with a minimum of three) be sufficient to ensure genuine competition. Therefore, recourse to competitive dialogue might be banned when, under the circumstances of the case, the public authority finds itself in a situation where competition cannot be preserved or is likely to be altered or distorted. An analogical argument can be found in articles 30(6) in fine and 30(7) in fine of Directive 2014/24 as regards the prohibition of running the competitive dialogue in a such a manner that competition is likely to be distorted. It is hereby submitted that contracting authorities must refrain from having recourse to any of the procedures or other instruments and institutions regulated in the Directive—and, particularly, the competitive dialogue procedure—if doing so would prevent, restrict or distort competition.[16] In those instances, alternative arrangements could be required in order to pursue the specific project. As regards the case of competitive dialogue, breaking down the project into smaller parts, or the internalisation of certain functions or phases by the contracting authority, could sometimes dissipate the potential distortions of competition likely to arise from the conduct of a competitive dialogue.

(b) Flexibilisation in the Scope and Availability of the Competitive Procedure with Negotiation (former Negotiated Procedure with Prior Publication of a Notice). It is important to stress that the 2014 rules have transformed the nature and availability of the traditionally labelled as negotiated procedure, now competitive procedure with negotiation. Under the applicable rules in Directive 2004/18 (art 30), this was clearly a special procedure that could only be used in the numerus clausus of situations expressly foreseen (ie, had exactly the same treatment as negotiated procedures without prior publication, discussed below). Remarkably, the ECJ had repeatedly stressed that the derogations from the rules intended to ensure the effectiveness of the rights conferred by the TFEU in relation to public contracts are exhaustive[17]and must be interpreted strictly.[18] Indeed,

awarding contracts without a prior call for tenders may harm not only potential tenderers but also the public, which pays for procurement projects through taxation, and may distort the competitive nature of the public procurement market, undermining the effectiveness of the Treaty rules on fundamental Community freedoms. For this reason, a provision which allows a contracting authority to dispense with a call for tenders should be narrowly construed.[19] (emphasis added)

Therefore, the list of circumstances contained in article 30 of Directive 2004/18 constituted a numerus clausus of exceptions to the general rule of recourse to open or restricted procedures (see above), which must be interpreted strictly in order to prevent competitive distortions.However, as mentioned in passing, this is no longer necessarily the case. Despite the fact that article 26(4) of Directive 2014/24 presents the rules in a similar manner and tries to set up a revised numerus clausus of grounds determining the availability of the procedure, a cursory look at them clearly indicates that their drafting is too open-ended to achieve such a goal. Indeed, this competitive procedure with negotiation will be available for complex projects (as discussed for the competitive dialogue) but, most importantly, also where ‘the needs of the contracting authority cannot be met without adaptation of readily available solutions’ (art 26(4)(a)(i)) or ‘they include design or innovative solutions’ (art 26(4)(a)(ii)). Recital (43) of the Directive provides some limited additional guidance indicating that

For works contracts, such situations include works that are not standard buildings or where [the] works includes (sic) design or innovative solutions. For services or supplies that require adaptation or design efforts, the use of a competitive procedure with negotiation or competitive dialogue is likely to be of value. Such adaptation or design efforts are particularly necessary in the case of complex purchases such as sophisticated products, intellectual services, for example some consultancy services, architectural services or engineering services, or major information and communications technology (ICT) projects. In those cases, negotiations may be necessary to guarantee that the supply or service in question corresponds to the needs of the contracting authority. In respect of off-the-shelf services or supplies that can be provided by many different operators on the market, the competitive procedure with negotiation and competitive dialogue should not be used. (emphasis added)

However, even if interpreted narrowly, these are two new grounds that make procedures involving negotiations available and that, in our view, come to destroy the logic of the limited availability of these procedures (and, equally, of the competitive dialogue), unless a very restrictive objective assessment of the actual need to procure not-readily available or innovative solutions is carried out by the European Courts[20]—which seems an almost impossible exercise.[21] In that regard, it is submitted that an effects-based approach should be undertaken on the basis of article 18 of Directive 2014/24, so that resort to the competitive procedure of negotiation is not possible if that would artificially narrow competition. This is partially supported by the further clarification offered by recital (45) of the Directive, which stresses some obvious requirements to the effect that

The competitive procedure with negotiation should be accompanied by adequate safeguards ensuring observance of the principles of equal treatment and transparency. In particular, contracting authorities should indicate beforehand the minimum requirements which characterise the nature of the procurement and which should not be changed in the negotiations. Award criteria and their weighting should remain stable throughout the entire procedure and should not be subject to negotiations, in order to guarantee equal treatment of all economic operators. Negotiations should aim at improving the tenders so as to allow contracting authorities to buy works, supplies and services perfectly adapted to their specific needs. Negotiations may concern all characteristics of the purchased works, supplies and services including, for instance, quality, quantities, commercial clauses as well as social, environmental and innovative aspects, in so far as they do not constitute minimum requirements. It should be clarified that the minimum requirements to be set by the contracting authority are those conditions and characteristics (particularly physical, functional and legal) that any tender should meet or possess in order to allow the contracting authority to award the contract in accordance with the chosen award criteria. In order to ensure transparency and traceability of the process, all stages should be duly documented. Furthermore, all tenders throughout the procedure should be submitted in writing (emphasis added).

It is submitted that this additional guidance misses the point, given that it basically foresees an only partially-negotiated procedure that would not diverge significantly from an open or restricted procedure with the acceptance of variants (see below §II.B.iv). In that regard, it is important to stress that contracting authorities will still need to respect the conditions of the tenders they publish, which can significantly limit their ability to engage in technical negotiations with tenderers in a way that resorting to variants would not. In that regard, the ECJ has recently stressed that

even though the contracting authority has the power to negotiate in the context of a negotiated procedure, it is still bound to see to it that those requirements of the contract that it has made mandatory are complied with. Were that not the case, the principle that contracting authorities are to act transparently would be breached … [the applicable EU rules do] not allow the contracting authority to negotiate with tenderers tenders that do not comply with the mandatory requirements laid down in the technical specifications of the contract.[22]

More generally, in practice, it is unlikely that contracting authorities will respect those requirements and implement effective safeguards that prevent excesses in the scope of the negotiations and the way in which they are carried out. More importantly, the use of these procedures should not be solely assessed against the principles of transparency and equal treatment, but most importantly, against the requirements of the principle of competition (as further elaborated below). Generally speaking, it would not be surprising if competitive procedures with negotiation became the most used procedure after the implementation of the 2014 rules. However, it would also be equally unsurprising that old problems linked to an abusive use of these procedures were to be revived and constitute the object of significant litigation in the coming years. In that regard, the regulation of negotiated procedures without prior notice may become less relevant, given the permissibility and flexibility that the competitive procedure with negotiations seems to come wrapped in.

---

[1] For a critical view of this development and the underlying rationale, see L Chever and J Moore, ‘Negotiated Procedures Overrated? Evidence from France Questions the Commission's Approach in the Latest Procurement Reforms’ (2012) European Procurement & Public Private Partnership Law Review 228.
[2] European Commission, Public Procurement Reform Factsheet No. 3: Simplifying the Rules for Contracting Authorities (2014) 1.
[3] Such impossibility of drafting precise technical specifications should be assessed with reference to a standard, European technical assessment, common technical specification or technical reference within the meaning of points 2 to 5 of Annex VII of Directive 2014/24.
[4] Indeed, the definitions are fully in line with the European Commission’s long standing interpretation, see eg the Guide to the Community rules on public supply contracts other than in the water, energy, transport and telecommunications sectors, Directive 93/36/EEC (1997) 23 et seq.
[5] See: A Rubach-Larsen, ‘Competitive Dialogue’ in R Nielsen and S Treumer (eds), New EU Public Procurement Directives (Copenhagen, DJØF Publishing, 2005) 67, 68; S Treumer, ‘Competitive Dialogue’ (2004) 13 Public Procurement Law Review 178, 179; and Bovis (n 23) 171 and 239–43. The basis for this finding can be found in the positions of the Green paper of the Commission—Public procurement in the European Union: “Exploring the way forward” [COM(96) 583] (at 5.23); and Communication from the Commission—Public procurement in the European Union [COM(98) 143] (at 2.1.2.2). For a fuller discussion of the justification see S Arrowsmith and S Treumer, ‘Competitive Dialogue in EU law: a critical review’ in ibid (eds), Competitive Dialogue in EU Procurement (2012) 3, 16–25.
[6] Joined Cases C-21/03 and C-34/03 Fabricom [2005] ECR I-1559 36. However, an alternative and broader reading of this finding has been conducted by the EGC, that has considered that the ECJ ‘held that a candidate or tenderer cannot automatically be excluded from a tendering procedure without having the opportunity to comment on the reasons justifying such exclusion’; Joined Cases T-376/05 and T-383/05 TEA–CEGOS [2006] ECR II-205 65. Along the same lines, using the findings at Fabricom to ban general clauses that impose the automatic exclusion of potential tenderers on the basis of their shareholding structure or their affiliation with other undertakings, see Case C-213/07 Mikhaniki [2008] ECR I-9999 45–48 and 62.
[7] Case T-345/03 Evropaïki Dynamiki v Commission (CORDIS) [2008] ECR II-341 72.
[8] Contra: Rubach-Larsen, Competitive Dialogue (2005) 71–72. See also A Brown, ‘The Impact of the New Procurement Directive on Large Public Infrastructure Projects: Competitive Dialogue or Better the Devil you Know?’ (2004) 13 Public Procurement Law Review 160, 161.
[9] Arrowsmith and Treumer, ‘Competitive Dialogue in EU law’ (2012) 3–143.
[10] The scope of the provisions regulating competitive dialogue in Directive 2004/18 was unclear and future guidance from the EU judicature was thought to be required to delimit more precisely the field of application of this procedure; see generally S Arrowsmith, The Law of Public and Utilities Procurement, 2nd edn (London, Sweet & Maxwell,2005)Arrowsmith (n 28) 629–67. On the scope of this new procedure, see Treumer, The Field of Application of Competitive Dialogue (2006) 310–15; contra Arrowsmith Law of Public and Utilities Procurement, 2nd (2005) 634. See also MCJ Nagelkerke et al, ‘Competitive Dialogue Abyss or Opportunity?’ in G Piga and KV Thai (eds), International Public Procurement Conference Proceedings—Enhancing Best Practices in Public Procurement (2008) 275. For an update of the discussion, see Arrowsmith (n 28) 859–82.
[11] However, some of the criteria included in recital (31) and not in arts 1(11)(c) and 29 might have reduced value as a legal source when analysed according to relevant ECJ case law (Case 215/88 Casa Fleischhandels v BALM [1989] ECR 2789 31); see Treumer (n 3358) 308 and Arrowsmith and Treumer (n 117) 38.
[12] M Burnett, ‘Developing a Complexity Test for the Use of Competitive Dialogue for PPP Contracts’ (2010) European Public Private Partnership Law Review 215.
[13] Arrowsmith and Treumer (n 117) 36-50. It is important to stress their second proposition that ‘competitive dialogue can be used when contracting authorities cannot define the best technical means for meeting their needs or the best legal or financial make-up for the project’ (id, 43).
[14] Arrowsmith and Treumer (n 117) 37.
[15] So far, the ECJ has considered the nature of the competitive dialogue in several cases, but it has not issued significant guidance as regards its scope of application. See Case C-299/08 Commission v France [2009] ECR I-11587.
[16] See: ch 5, §II (public procurement must not distort competition between undertakings) and, specifically, the proposed interpretation of the principle of competition in art 18 dir 2014/24.
[17] Case C-399/98 Ordine degli Architetti [2001] ECR I-5409 101.
[18] Case 199/85 Commission v Italy [1987] ECR 1039 14; Case C-57/94 Commission v Italy [1995] ECR I-1249 23; Case C-318/94 Commission v Germany [1996] ECR I-1949 13; Joined Cases C-20/01 and C-28/01 Commission v Germany [2003] ECR I-3609 58; Case C-26/03 Stadt Halle [2005] ECR I-1 46; and Case C-480/06 Commission v Germany [2009] ECR I-4747 34–35. See also Opinion of AG Mazák in case C-480/06 Commission v Germany 51. See also SE Hjelmborg et al, Public Procurement Law—The EU Directive on Public Contracts (Copenhagen, DJØF Publishing, 2006) 58.
[19] Opinion of AG Poiares Maduro in case C-250/07 Commission v Greece 12 and 16. See also Case C-394/02 Commission v Greece [2005] ECR I-4713 33.
[20] See Davey, ‘Procedures involving negotiation in the new Public Procurement Directive (n 50) 105–06; and Telles and Butler (n 49) 13, who clearly indicate that although ‘Article 26(4)(a)(iii) appears to be similar to the previous requirement of Article 1(11)(c) of Directive 2004/18/EC, it does not in fact require a degree of particular complexity as had previously been the case’.
[21] Along the same lines, but option for a proposal of an alternative subjective test that could generate significant complications, see Telles and Butler (n 49) 13, who indeed find that ‘Under Directive 2014/14/EU, the test should essentially be subjective in nature: the contracting authority must justify why, in that specific situation, it needs to use either of these procedures. This should not depend on any external unit of measurement or comparison, i.e what the reasonable contracting authority would do in that situation. By “subjective”, it is meant the actual situation being faced at that moment by that specific contracting authority. In any event, the authors are of the view that the availability of broader grounds will enable easier reliance on any of the requirements set forth in Article 26(4)(a)’. It is submitted here that such an approach would be excessively lenient and that a degree of proportionality or reasonableness of the sort included in a reasonable contracting authority test would be preferable. For a similar proposition regarding the competitive dialogue rules in Directive 2014/24, see Arrowsmith and Treumer (n 117) 46, who argued that ‘in deciding whether an authority is “objectively” able to define the technical, financial, or legal composition of the contract it is to be judged against a “reasonable” contracting authority of the same size and nature’.
[22] Case C-561/12 Nordecon and Ramboll Eesti [2013] pub. electr. EU:C:2013:793 37 and 39. Cf. art 29(7) dir 2014/24 for a different approach.

Conditions relating to the GPA and other international agreements under Reg. 25 Public Contracts Regulations 2015

Reg.25 of the Public Contracts Regulations 2015 (PCR2015) follows closely the drafting of Art 25 of Directive 2014/24 and imposes the duty of equal treatment (ie treatment no less favourable than than accorded to EU operators) to the works, supplies, services and economic operators of the signatories of the World Trade Organisation's Government Procurement Agreement (GPA), and other international agreements by which the EU is bound. 

The only difference between Art 25 Dir 2014/24 and reg.25 PCR2015 is that the former refers to "annexes 1, 2, 4 and 5 and the General Notes to the European Union’s Appendix I to the GPA", whereas the UK's domestic rule extends the non-discrimination obligation to "annexes 1, 2 and 4 to 7 and the General Notes to the EU’s Appendix 1 to the GPA". Hence, there seems to be a discrepancy between both rules, and the PCR2015 seem to include more parts of the GPA's annexes than Dir 2014/24. However, on closer look, it is clear (?) that there is no such difference on substance. 

Understanding why there is no actual difference requires some digging on the scope of coverage of the GPA and its very recent modification, which entered into force in April 2014 (ie after dir 2014/24 was adopted). In the 1994 version of the GPA, the coverage was structured in 5 annexes plus general notes (*). In the revised 2011 version (effective 2014), the coverage was reorganised in 7 annexes, the last being the general notes themselves (**). Both annex structures however have in common that Annex 3 deals with the coverage of "other entities". 

Directive 2014/24 refers to the 1994 version of the GPA (still in force when it was approved), whereas the PCR2015 refer to the 2011 GPA [see definition in reg.2(1) PCR2015, according to which “GPA” means the Agreement on Government Procurement between certain parties to the World Trade Organisation signed in Marrakesh on 15th April 1994 as amended--with reference to Council Decision 2014/115/EU on the conclusion of the Protocol Amending the Agreement on Government Procurement]. Hence, the drafting difference derives from the modification of the GPA between the approval of Dir 2014/24 and the PCR2015. Ultimately, though, reference to "annexes 1, 2, 4 and 5 and the General Notes to the European Union’s Appendix I to the [1994] GPA" in Art 25 Dir 2014/24 and to "annexes 1, 2 and 4 to 7 and the General Notes to the EU’s Appendix 1 to the [2011] GPA" in reg.25 PCR2015 means the same: "everything but Annex 3 on other entities".

Regardless of this drafting complication, there is not much more to say regarding the transposition of this provision. The more interesting outlook refers to the eventual completion of the European Commission's project on restricting access to public procurement by third country undertakings (ie non-EU, non-GPA, not-covered by other treaties), which seems to be gaining traction after some hiatus [for background discussion, see K Dawar, The "Proposed ‘Buy European’ Procurement Regulation: An Analysis" (2012) CEPR Global Trade Alert 89-98]. However, that exceeds the purpose of this comment.

For Pedro's interesting complementary views, mainly linked to the TTIP, see here.

(*) Annex 1: central government entities; Annex 2: sub-central government entities; Annex 3: other entities; Annex 4: services; and Annex 5: construction services. These were accompanied by unnumbered general notes.
(**) Annex 1: central government entities; Annex 2: sub-central government entities; Annex 3: other entities; Annex 4: goods; Annex 5: services; Annex 6: construction services; and Annex 7: general notes. This makes the reference to both annex 7 and general notes an unnecessary repetition.

New paper on the continuing relevance of general principles of EU public procurement after the Concessions Directive

I have just uploded on the University of Leicester School of Law Research Paper SSRN series a new article on "The Continuing Relevance of the General Principles of EU Public Procurement Law after the Adoption of the 2014 Concessions Directive", which follows up on my criticism of the adoption of this regulatory instrument when it was first proposed [see A Sanchez-Graells, "What Need and Logic for a New Directive on Concessions, Particularly Regarding the Issue of their Economic Balance?" (2012) 2 European Public Private Partnership Law Review 94-104].

This new paper aims to offer some further reflections on the legal relevance of general principles of EU public procurement law after the adoption of the 2014 package of substantive Directives on public procurement. It focusses on the field of concession contracts because one of the explicit justifications for the adoption of Directive 2014/23 was to achieve a "uniform application of the principles of the TFEU across all Member States and the elimination of discrepancies in the understanding of those principles … at Union level in order to eliminate persisting distortions of the internal market". 

The paper claims that Directive 2014/23 has failed on three grounds. Firstly, because it has not created any relevant substantive harmonisation of tender requirements for concessions that fall within its scope of application. Secondly, because it cannot limit the CJEU’s extension of obligations derived from general principles beyond its scope of application. And, thirdly, because it fails to acknowledge all general principles of EU public procurement law and, in particular, the principle of competition—creating a risk of inconsistency with the rest of the 2014 Procurement Package.

The full citation for the paper is A Sanchez-Graells, "The Continuing Relevance of the General Principles of EU Public Procurement Law after the Adoption of the 2014 Concessions Directive" (March 20, 2015). University of Leicester School of Law Research Paper No. 15-12. Available at SSRN: http://ssrn.com/abstract=2581683. I will be preseting it at the Public Procurement: Global Revolution VII conference in June 2015 at the University of Nottingham.

Conflicts of interest under Reg. 24 Public Contracts Regulations 2015

Reg.24 of the Public Contracts Regulations 2015 (PCR2015) establishes specific rules on conflicts of interest that follow closely those of Article 24 of Directive 2014/24, although it alters its structure and reorders its content. 

Under these rules, contracting authorities shall take appropriate measures to effectively prevent, identify and remedy conflicts of interest arising in the conduct of procurement procedures so as to avoid any distortion of competition and to ensure equal treatment of all economic operators [reg.24(1) PCR2015]. 

Moreover, a minimum definition of conflicts of interest is provided, so that "conflicts of interest" shall at least cover any situation where relevant staff members have, directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement procedure [reg.24(2) PCR2015]. Those relevant members of staff are further defined to include members of the contracting authority, or of a procurement service provider acting on behalf of the contracting authority, who are involved in the conduct of the procurement procedure or may influence the outcome of that procedure [reg.24(3) PCR2015].

Quite conveniently, the CJEU decided last week the case eVigilo [C-538/13, EU:C:2015:166] on the treatment of conflicts of interest in public procurement, which gave me the opportunity to express my views on this topic. They are available here. See Pedro's further comments here.

GC supports exercise of discretion in the assessment of technical compliance in public procurement (T-30/12)

In its Judgment in IDT Biologika v Commission, T-30/12, EU:T:2015:159 (only available in DE and FR and involving public procurement by the EU Institutions), the General Court (GC) has decided on an issue involving the contracting authority's discretion to assess the sufficiency of technical reports and certificates submitted by the tenderer in order to proof conformity of its offer with requirements set out in the technical specifications. This is an important case because it supports the exercise of technical discretion in the assessment of compliance with specifications in public procurement processes and, in my view, consolidates a welcome anti-formalistic development of this area of EU public procurement law.

In the case at hand, there was a tender for the supply of anti-rabies vaccines to a region in Serbia. The technical specifications determined that the vaccines had to meet certain conditions, amongst which it was necessary to demonstrate that the vaccine had been registered by the European Medicines Agency or equivalent agency of an EU Member State, and that its use was also authorised by the Serbian medicines agency prior to its distribution.

Bioveta made an offer to supply anti-rabies vaccines based on a type of virus ("SAD-Bern MSV Bio 10") that differed from the one included in the registration and the authorisation documents it submitted as part of the technical documentation (referring to "SAD-Bern"), which had been obtained for commercialisation in both Serbia and the Czech Republic. 

In view of that discrepancy, the contracting authority required Bioveta to clarify and confirm that, despite the use of a different virus, the vaccine it offered did not require a new registration with a medicines agency, and that the commercialisation under a different name did not breach the initial authorisation to distribute the product in the Serbian market. 

In simple terms, Bioveta explained that the virus had been changed in 1992 and that the "SAD-Bern MSV Bio 10" was the virus used when the product had been authorised for distribution in Serbia. It also submitted a written explanation of the mere commercial orientation of the change of name (implemented to distinguish Bioveta's vaccines from those of competitors that also sold solutions based on the "SAD-Bern" virus), and submitted that it did not require new registration. It also furnished a report by the Czech medicines agency that confirmed that the products were equivalent and the name "SAD-Bern MSV Bio 10" had been used in all registrations and renewals that had taken place since 1992. 

The contracting authority considered that the clarification was sufficient and the contract was eventually awarded to Bioveta. The decision was subsequently challenged by the competing bidder IDT Biologika on several grounds (some of them very technical in veterinary terms). In my view, the interesting ground for challenge rests on the discretion of the contracting authority when it comes to the assessment of technical aspects of a tender for a contract to be awarded on the basis of the lowest price (or in post-2014 terms, to the most cost-effective offer).  

IDT Biologika fundamentally submitted that the explanations and certificates provided by Bioveta had been improperly assessed and taken into consideration by the contracting authority, and that the award decision was flawed due to the exercise of excessive discretion in accepting them--as, in IDT Biologika's view, the contracting authority should have taken a formalistic approach and rejected Bioveta's tender.

In order to resolve this issue, the GC builds on CMB and Christof v Commission, where it was established that "in the context of a public procurement procedure where ... the contract is awarded to the tenderer who has submitted the lowest priced administratively and technically compliant tender, the contracting authority limits its margin of discretion with regard to the award of the contract to the lowest priced tender among the compliant tenders. However, its margin of discretion must remain broad with regard to the evaluation of the conformity of the tenders presented, and in particular the documentation provided in that regard" (T-407/07, EU:T:2011:477, para 116, emphasis added). It then goes on to determine that, in view of the information supplied by Bioveta, it was not unreasonable or manifestly wrong for the contracting authority not to reject the tender.

In my view, this is a significant consolidation of the case law and, under the CMB and Christof v Commission and IDT Biologika v Commission line of case law, contracting authorities and their evaluation teams should be confident in sticking to a possibilistic approach towards the assessment of the tenders--so as to move past strict formalities and accept sufficient technical evidence as to ensure compliance with the technical specifications.

This is certainly the correct approach from the perspective of maximization of competition and the assessment of technical requirements from a functional perspective--and, consequently, the one that best fits the framework set by Art 44 of Directive 2014/24 on test reports, certification and other means of proof of conformity with requirements or criteria set out in the technical specifications, the award criteria or the contract performance conditions (in particular, art 44(2) dir 2014/24 on alternative means of proof).

Nomenclatures under Reg. 23 Public Contracts Regulations 2015

Reg.23 of the Public Contracts Regulations 2015 (PCR2015) is probably one of the shortest and most straightforward ones, as it merely replicates Article 23 of Directive 2014/24 and indicates that any references to nomenclatures in the context of public procurement shall be made using the CPV, which is in turn defined in reg.2 PCR2015 as the Common Procurement Vocabulary as adopted by Regulation (EC) No 2195/2002 of the European Parliament and of the Council as amended from time to time. Nothing to add (on my part; Pedro did find some things to say).