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.

3 more instalments in the Evropaïki Dynamiki saga: one successful appeal (T-638/11)

Today, the General Court has issued three Judgments that add to the 'Evropaïki Dynamiki saga'. In two of them (T-474/10 and T-457/10), the famous challenger of EU Institutions' procurement decisions has lost the appeals and been condemned to bear the costs. Generally, none of this two cases raises signifcantly new issues (although one touches upon a complicated aspect of the prevention of fraud and corruption where a holding company of one of the members of the consortium was involved) and the GC is concerned once (actually, twice) more with the duties to state reasons and the contours of the manifest error of assessment of contracting authorities when they assess tenders and award contracts. However, in a third case (T-638/11 European Dynamics Belgium and Others v EMA), the appellant has been successful.

 

In the 'successful' case, the GC quashes EMA's decision on the basis of the poor explanations provided in the debriefing following the assessment of the tenders from a technical perspective. The GC finds that the reasons provided do not allow participating tenderers to understand the marks obtained for their technical proposals and make them unable to compare their assessment against that of the awardee (since the feedback received was vague and of a general nature).

 

Moreover, and maybe more interestingly, the GC engages in an analysis of the degree of disclosure that contracting authorities must ensure where there have been doubts as to the existence of an abnormally low tender. In the case at hand, the winning consortium had been requested to provide additional explanations and to justify that its tender was not abnormally low. The contracting authority was satisfied with those clarifications and proceeded to award the contract in those (not abnormally low) terms. The appellant sought to have access to those explanations and justifications in order to challenge the decision to finally award the contract to that particular consortium. However, the contracting authority had declined to disclose that information on the basis that it constituted a business secret of the winning tenderer.

The GC threads quite lightly and tries to establish an intermediate solution by stressing that:

In addition, EMA argues that by providing detailed information on compliance with the regulations for the protection of workers and working conditions or about the particular economy of the services offered by the consortium S., it would damage the legitimate commercial interests of the latter. However, to require the contracting authority to disclose the grounds upon which it has decided that an offer should not be considered abnormally low does not require it to disclose detailed information on the technical and financial aspects of the offer, such as the prices offered, the resources available to the contractor or the ways in which the successful bidder proposes to provide the services it offers. In order to provide sufficient motivation for this aspect of the tender, the contracting authority shall state the reasoning which led it to conclude that, on the one hand , given its main financial characteristics, such offer is in compliance with the laws of the country in which the services should be performed for staff salaries, contribution to social security and standards of safety and health at work; and, secondly, that it was verified that the proposed prices integrated all the costs generated by the technical aspects of the successful tender (T-638/11 at para 68, own translation from French).

Therefore, the GC does require some kind of 'high level' explanation as to why the contracting authority has been finally satisfied that the offer retained is not abnormally low, but always provided that it protects the confidentiality of the specific details that should remain under business secrecy. Surely, the test envisaged by the GC is not very clearly delineated and requires some further precision, but it is yet another push for the disclosure of information that may make tenderers reluctant to provide very specific information when they are being investigated for having submitted an apparently abnormally low offer (given that, even at some high level, certain information may still be commercial sensitive). I hope that future case law will offer more specific guidance as to how to strike this difficult balance.

Lack of an EU administrative #appeal does not broaden #GC and #CJEU review powers in #publicprocurement

In its Judgment of 24 April 2013 in case T‑32/08 Evropaïki Dynamiki v European Commission (Environment for Young Europeans), the General Court addressed a submission by (the ever more creative) Evropaïki Dynamiki whereby it was argued that the lack of a (pre-judicial) administrative appeal against the public procurement decisions of the EU Institutions required an extension of the scope of the judicial review conducted by the EU Courts.

According to Evropaïki Dynamiki, the procedure for the award of public contracts by the EU Institutions is different from the legislation applicable to the Member States, which provides for non-judicial remedies, thus reinforcing the principles of transparency and equal treatment between tenderers. And, consequently, the General Court should take account of the incomplete nature of the procedure for the award of public contracts by the EU Institutions by carrying out a thorough review of the assessments of the evaluation committee--since, otherwise, a restricted review, limited to declaring invalid manifest errors of assessment, diminishes the possibility of a detailed examination of the substance of the contested decision.

The GC clearly dismissed Evropaïki Dynamiki's contention and declared that:

The fact that the legislature did not establish an administrative appeal procedure, in the context of the procedure for the award of public contracts by the institutions of the European Union, cannot have any effect on the scope of the review carried out by the Courts of the European Union [which must be limited to checking that the rules governing the procedure and statement of reasons are complied with, the facts are correct and there is no manifest error of assessment or misuse of powers]. The existence or absence of such an appeal procedure is irrelevant to defining the scope of the Court’s review, since that review is different – both in its nature and the safeguards it presents – from an administrative appeal procedure (T-32/08 at 30).

I agree with the general principle that the existence or not of a prior administrative appeal does not alter the scope of judicial review, but I do not share the GC's (almost) obiter dictum that judicial review is that different from an administrative appeal procedure, at least as the substantive review tests go. I tend to disagree particularly because, even within administrative appeals, challenges against the assessments of the evaluation committees rarely imply a second assessment by a different team or by an independent adjudicator and, consequently, all public procurement litigation tends to be bound to the initial evaluation carried out by the evaluation committees.

Moreover, (administrative) judges are not in a good position to directly carry out technical assessments (afresh) and they must, by necessity, defer (at least to some extent) to the technical discretion of the evaluation committee / contracting authority--unless they can identify factual mistakes or manifest errors of assessment, in which case they tend to strike out the administrative decision, rather than substituting the incorrect technical assessment with their own. Courts cannot really use a finer sieve to separate gold from rocks. And that is why, even within administrative appeals systems, roughly the same standards of (gross) misrepresentation of the facts or the extraction of unsound conclusions / assessments are applied. 

Overall, in my opinion, the GC Judgment should be welcome and not seen as an attempt to duck its review responsibilities, nor as a source of defencelessness for tenderers for contracts of the EU Institutions. I think that few doubts can seriously be harboured as to the effectiveness of the review mechanisms already in place (as the long Evropaïki Dynamiki saga shows for itself).

Still an excessive level of transparency in public procurement debriefing? C-629/11 P Evropaïki Dynamiki v Commission

In its Judgment of 4 October 2012 in case C‑629/11 P Evropaïki Dynamiki v Commission (ESP-ISEP), the Court of Justice has issued another interesting decision on what should be considered sufficient debriefing of disappointed bidders in public procurement procedures.

The Evropaïki Dynamiki (ESP-ISEP) Judgment has been issued on the basis of Article 100(2) of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ 2002 L 248, p. 1) (‘the Financial Regulation’). However, a 'twin' provision can be found in Article 41 of  Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 2004 L 134, p. 114) ('Directive 2004/18'). Consequently, the Judgment is of relevance in all areas of public procurement, and not only to that of the EU Institutions.

According to Article 100(2) of the Financial Regulation,

‘The contracting authority shall notify all candidates or tenderers whose applications or tenders are rejected of the grounds on which the decision was taken, and all tenderers whose tenders are admissible and who make a request in writing of the characteristics and relative advantages of the successful tender and the name of the tenderer to whom the contract is awarded.

However, certain details need not be disclosed where disclosure would hinder application of the law, would be contrary to the public interest or would harm the legitimate business interests of public or private undertakings or could distort fair competition between those undertakings’.

In this case (and furthering an unsuccessful strategy to challenge adverse award decisions that, however, has made a fundamental contribution to the development of the case law in this area), Evropaïki Dynamiki challenged the debriefing received from the European Commission both on the grounds that it was 8 days late (although both the GC and the CJEU dismiss this procedural deffect easily on the basis that the delay did not however restrict the undertaking's opportunity of asserting its rights and could not, by itself, lead to the annulment of the contested decisions) and that it was insufficient--ie that the Commission had not provided sufficient reasons to justify the award of the contract to another bidder.

Reading the Evropaïki Dynamiki (ESP-ISEP) Judgment, one cannot but wonder if EU public procurement rules do not still impose an excessive degree of transparency in the debriefing of disappointed bidders. According to the CJEU in Evropaïki Dynamiki (ESP-ISEP) 

20 [...] according to the first subparagraph of Article 100(2) of the Financial Regulation, the contracting authority is required to notify all candidates or tenderers whose applications or tenders are rejected of the grounds on which the decision was taken, and to notify all tenderers whose tenders are admissible and who make a request in writing of the characteristics and relative advantages of the successful tender and the name of the tenderer to whom the contract has been awarded.

21 However, it is apparent from the case-law that the Commission cannot be required to communicate to an unsuccessful tenderer, first, in addition to the reasons for rejecting its tender, a detailed summary of how each detail of its tender was taken into account when the tender was evaluated and, second, in the context of notification of the characteristics and relative advantages of the successful tender, a detailed comparative analysis of the successful tender and of the unsuccessful tender (see, to that effect, order of 29 November 2011 in Case C‑235/11 P Evropaïki Dynamiki v Commission, paragraphs 50 and 51 and the case-law cited).

22 Similarly, the contracting authority is not under an obligation to provide an unsuccessful tenderer, upon written request from it, with a full copy of the evaluation report (see order of 20 September 2011 in Case C‑561/10 P Evropaïki Dynamiki v Commission, paragraph 25).

23 Furthermore, it must be noted that, according to settled case-law, the statement of reasons required under the second paragraph of Article 296 TFEU must be assessed in the light of the circumstances of each case, in particular the content of the measure in question and the nature of the reasons given (see, inter alia, Case C‑367/95 P Commission v Sytraval and Brink’s France [1998] ECR I‑1719, paragraph 63, and judgment of 28 February 2008 in Case C‑17/07 P Neirinck v Commission, paragraph 52).

24 In the present case, it is apparent from paragraphs 8 and 37 of the judgment under appeal that the [debriefing] letter [...] contained the names of the tenderers selected as first contractor for each of the two lots of the call for tenders at issue.

25 In addition, [...] the Commission enclosed as annexes to that letter extracts from the two evaluation reports [...]

26 It is apparent therefrom that those extracts contained tables relating, in particular, to the technical evaluation of the tenders for both of the lots and indicating, for each award criterion, the number of points obtained by Evropaïki Dynamiki in comparison with the successful tenderer, broken down each time into sub-criteria, as well as the maximum number of points attainable per sub-criterion and the weighting of each of those sub-criteria in the overall evaluation. Summary tables showed, on the basis of the results of the technical and financial evaluation, the final ranking for each of the two lots.

27 It is also apparent therefrom that, according to the information communicated in the [debriefing] letter [...], Evropaïki Dynamiki’s tender was ranked higher than the successful tender solely under the fourth award criterion regarding the quality of the service and the methodological proposal in the domain of Lot No 2. It was also only with regard to the fourth criterion relating to the quality of the technical offer in the domain of Lot No 1 that its tender obtained the same number of points as the successful tender. On the other hand, for all other criteria, Evropaïki Dynamiki’s tender was less well ranked than that of the successful tenderer.

28 Furthermore, the comments of the evaluation committee which were also disclosed indicated, for each award criterion, the sub-criteria on the basis of which the Commission found the successful tenderer’s offer or that of Evropaïki Dynamiki to be the best.

29 Finally, the method applied by the Commission for the technical evaluation of the tenders was clearly set out in the tendering specifications relating to the call for tenders at issue. As is apparent in particular from paragraph 3 of the judgment under appeal, they specified, for each lot, the various award criteria, their respective weighting in the evaluation, that is to say in the calculation of the total score, and the minimum and maximum number of points for each criterion.

30 Accordingly, [...] in view of all the information supplied to Evropaïki Dynamiki, as well as the specifications contained in the call for tenders, including the weighting relating to the award criteria for each of the lots, Evropaïki Dynamiki had sufficient information to enable it, for each lot, to identify the characteristics and relative advantages of the best ranked tenderer’s offer.

31 It follows that, in the light of all of the elements of the present case [...]  Evropaïki Dynamiki’s argument alleging that the statement of reasons for the contested decisions was inadequate had to be rejected.

From the Judgment, it is not only clear that the Commission debriefed Evropaïki Dynamiki in full, but also that the current rules require the disclosure of certain information (of most relevance, the name of the winning bidder) that may be excessive. In that regard, the second paragraph of Article 100(2) of the Financial Regulation [or the equivalent Article 41(3) Directive 2004/18] deserve more attention, as regards the caveat that some information may (rectius, should) not be disclosed if such disclosure might prejudice fair competition between economic operators.

As pointed out elsewhere, contracting authorities and review courts should be particularly careful in not imposing excessive disclosure when there are actual risks of strategic use of challenge procedures or the market structure is such that the increased degree of transparency could (inadvertently) facilitate or reinforce collusion  [Sanchez Graells, A. Public Procurement and the EU Competition Rules (Oxford, Hart Publishing, 2011) 358-9].

It should be taken into consideration that there is a risk for a strategic use of bid protest mechanisms seems at least twofold. On the one hand, tenderers could try to gain access to confidential information which could be used later to compete unfairly with the affected tenderers. On the other hand, excessive disclosure of information can increase market transparency and be used as a means to collude or to reinforce collusion by tenderers. Therefore, rules on disclosure of information should take into account their potentially restrictive or distortive effects on competition. Interestingly, Directive 2004/18 contains a specific rule addressing this issue. Article 41(3) of Directive 2004/18 allows contracting authorities to withhold certain information

regarding the contract award, the conclusion of framework agreements or admittance to a dynamic purchasing system where the release of such information would impede law enforcement, would otherwise be contrary to the public interest, would prejudice the legitimate commercial interests of economic operators, whether public or private, or might prejudice fair competition between them [see also art 29(3), art 32(4)(c), and art 35(4) dir 2004/18, emphasis added].

Therefore, in the exercise of such discretionality and as a mandate of the principle of competition, contracting authorities are bound to restrict the disclosure of information given to tenderers to prevent instances of subsequent unfair competition or collusion—and, in order to do that properly, must identify and properly justify the negative effects which the withholding of the information seeks to avoid.

Along the same lines, and although there is no equivalent provision in Directive 89/665 and Directive 92/13 (both as amended by dir 2007/66), it is submitted that the same restrictions to the disclosure of information apply in bid protests and review procedures, so that contracting authorities (in the case of mandatory reviews prior to challenges, or otherwise) and independent review bodies are bound to prevent disclosures of information that could result in restrictions or distortions of competition. In such cases, limiting the access of information to the minimum extent required to ensure the effective protection of the rights of the applicants in review procedures will require a balancing of interests by the competent authority—which, in our view, should take into due consideration the potential impact on competition of the disclosure of certain information. Such an obligation can be stressed or reinforced by general rules on the treatment of business secrets and other commercially sensitive information of general application according to Member State domestic legislation.