reasons for the deduction of points at tender evaluation must be fully disclosed to their last detail: AG MENGOZZI ON DUTY TO MOTIVATE PROCUREMENT DECISIONS (C-376/16 P)

Image: Sébastien Thibault.

AG Mengozzi has put pressure on the Court of Justice (ECJ) to continue pushing for excessive transparency in the context of procurement litigation. On this occasion, the AG has invited the ECJ to establish an extremely stringent requirement for the disclosure of detailed comparisons of the evaluation reports to the level of award sub-criteria, without assessing the extent to which the contracting authority can have legitimate reasons to withhold parts of the evaluation.

In my view, this approach would create significant imbalances between the duty to provide reasons to disappointed tenderers and the duty to preserve competition for public contracts and sufficient protection of business and commercial information, which is problematic [for discussion, see K-M Halonen, 'Disclosure Rules in EU Public Procurement: Balancing between Competition and Transparency’ (2016) 16(4) Journal of Public Procurement 528; A Sanchez-Graells, ‘The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives’ (2013) Univ. of Leicester School of Law Research Paper No. 13-11]. Therefore, I argue that the ECJ should deviate from the Opinion of AG Mengozzi in its final Judgment in this case.

It is worth noting that the case is subjected to a previous version of the procurement rules in the EU Financial Regulation, but the ECJ's Judgment will be more generally relevant, both in the context of the current Financial Regulation controlling EU Institutional procurement and, more generally, for procurement controlled by the rules in the 2014 EU Public Procurement Package.

The AG Opinion

In his Opinion of 28 September 2017 in case EUIPO v European Dynamics Luxembourg and Others, C-376/16 P, EU:C:2017:729, AG Mengozzi has once more attempted a delineation of the obligation to state reasons for a decision to reject a tender and, in particular, "with regard to the correlation between the specific negative assessments set out in the evaluation report and the deductions of net points made by the contracting authority" (para 19). Or, in other words, AG Mengozzi has indicated the way in which the case law of the Court of Justice (ECJ) on the duty to provide justifications in the context of procurement debriefing applies to the reasons for the deduction of points on the basis of negative judgements of the evaluation committee [for general discussion of this obligation, see A Sanchez-Graells, “Transparency in Procurement by the EU Institutions”, in K-M Halonen, R Caranta & A Sanchez-Graells (eds), Disclosure Rules within Public Procurement Procedures and During Contract Period, vol 9 EPL Series (Edward Elgar, forthc.)].

This point of law was raised by EUIPO against the previous finding of the General Court (GC) that, despite the fact that contracting authorities are not required to provide unsuccessful tenderers with a detailed summary of how each aspect of their tenders was taken into account for its evaluation, however,

when the contracting authority makes specific assessments as to the manner in which the tender in question fulfils or otherwise [award] criteria and sub-criteria, which are clearly relevant to the overall score of the tender, the duty to state reasons necessarily includes the need to explain how, in particular, negative assessments gave rise to the deduction of points (Judgment of 27 April 2016 in European Dynamics Luxembourg and Others v EUIPO, T-556/11, EU:T:2016:248, para 250).

In the specific case, the GC considered it particularly important because the evaluation method included relative measures, so that "any deduction of net points in respect of certain sub-criteria automatically resulted, under the formula applied by the contracting authority, in the increase in the number of gross points to be allocated to the successful tenderers’ tenders in respect of their technical quality" (AGO C-376/16 P, para 24 & T-556/11, para 251).

The circumstances of the case where such that EUIPO disclosed the overall score for each of the three technical or qualitative criteria used in tender evaluation, but not the detailed breakdown for each of the award sub-criteria taken into consideration by the evaluation committee. In those circumstances, the GC found that "it was impossible, both for [the disappointed tenderer] and for the Court, to understand the calculation or precise breakdown of the points deducted for each sub-criterion, or even for each of the sub-points, and that it was therefore also not possible to verify whether and to what extent those deductions actually corresponded to the negative assessments made in the evaluation report and, accordingly, whether they were justified or not, or, at the very least, sufficiently plausible" (AGO C-376/16 P, para 26 & T-556/11, para 252).

EUIPO opposed that finding, and the more general point of law made by the GC, on the basis that neither the applicable rules, nor the case law of the CJEU required the debriefing information provided to a disappointed tenderer to include a demonstration of "which negative comment led to which deduction of points for each specific sub-criterion or sub-point" (AGO C-376/16 P, para 28 - for details of the reasons, see paras 29-31).

Thus, the main point of contention concerns the limits of the duty to disclose details of the evaluation process and report. Or, as AG Mengozzi put it, the question is "in essence, whether the [GC] was right in holding that the decision to reject the tender did not satisfy the requirements to state reasons stemming from [the applicable rules], as interpreted by the case-law, or whether the [GC] applied an overly strict test compared with the aforementioned provisions and the relevant case-law of the [ECJ]" (AGO, C-376/16 P, para 32). 

After a short restatement of the ECJ case law on the limits of the obligation to provide reasons and disclose relevant parts of the evaluation report, and despite stressing that "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" (AGO, C-376/16 P, para 36), in short, AG Mengozzi has invited the ECJ to establish that the right disclosure standard is one where

(i) the extracts of the evaluation reports disclosed by the [contracting authority] [make] it possible to deduce the number of points obtained by the appellant in question in comparison with the successful tenderer, broken down each time for each sub-criterion, and the weight of each sub-criterion in the overall evaluation, and (ii), the comments of the evaluation committee which [are] disclosed [explain], for each award criterion, on the basis of which sub-criteria the [contracting authority] had found the tender of the successful tenderer or that of the appellant in question to be the best (AGO C-376/16 P, para 47, emphases in the original).

AG Mengozzi suggests that this would have already been implicitly established in the Judgment of 4 October 2012 in Evropaïki Dynamiki v Commission, C-629/11 P, EU:C:2012:617, para 11, where the circumstances of the case reflected this level of disclosure.

Criticism

In my view, this is not an adequate test.

First of all, I struggle to see where the boundary lies between having to disclose the evaluation report in full and having to provide an absolutely broken down comparative assessment of the evaluation of the disappointed tenderers' tender and that of the preferred tenderer. To be fair, the previous case law is riddled with such tensions and it is difficult to establish clear boundaries on the obligation to disclose information contained in the evaluation report. However, in my view, the step taken by AG Mengozzi (and previously by the GC) comes to nullify the general (minimum) safeguard that contracting authorities are not required to disclose the evaluation report in full.

Secondly, I am not sure that in the assessment of these issues enough consideration is given to the fact that the relevant rules allow contracting authorities not to disclose certain details 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 my view, there is a clear case to be made for restricting the level of disclosure of the points given to competing tenderers to a level of generality (eg award criteria rather than sub-award criteria) that strikes a balance between allowing for the review of the procurement decision while preserving competing interests. If the case law of the ECJ develop in the direction suggested by AG Mengozzi, it will be almost impossible for contracting authorities to protect legitimate interests in the context of procurement, and this will have chilling effects on participation.

Third, such a test would potentially make sense in terms of disclosure between the contracting authority and the review body or court, but not in relation to the disappointed tenderer. It would make much more sense to allow for disclosure limited to the level of award criteria at debriefing stage and, only in case the disappointed tenderer is not satisfied and launches an administrative or judicial review, for that information to be released to the review body of court, with stringent rules on access to that confidential information (for example, along the lines of the guidelines recently adopted in England). In the absence of this differential access to sensitive information, the adoption of the test proposed by AG Mengozzi is excessive and creates structural risks for abuse and competitive distortions--which makes it an undesirable test.

On the whole, I think that this Opinion and the previous decision by the GC show that the logic and operation of the rules on disclosure of information in the context of procurement litigation require a careful reassessment. In a case such as this one, where the record shows that EUIPO made significant efforts to disclose information to the disappointed tenderer, while still (maybe implicitly) aiming to protect sensitive information, the imposition of higher levels of disclosure obligations seems to me excessive. Once more, this militates in favour of the regulation of specific procedural steps to assess issues of confidentiality and, in particular, the need to create some asymmetrically opaque review mechanisms that allow for proper scrutiny of procurement decisions in a way that does not jeopardise competition in the market or anyone's legitimate business and commercial interests.

Transparency in Procurement by the EU Institutions

The next collaboration of the European Procument Law Group (EPLG) will be on 'Transparency in public procurement'. Thanks to Dr Kirsi-Maria Halonen, we will meet in Helsinki on 4-5 September 2017 to discuss comparative reports on 11 jurisdictions, including 10 EU Member States and the rules applicable to the procurement of the EU Institutions. I was tasked with the last topic, and my draft report on 'Transparency in Procurement by the EU Institutions' is here: https://ssrn.com/abstract=3020168. Comments most welcome: a.sanchez-graells@bristol.ac.uk.

A strange Scottish case on evaluation of tenders -- Boston Sci. Ltd v Common Service Agency [2016] CSOH 132

I find the recent Scottish case Boston Scientific Limited v The Common Service Agency [2016] CSOH 132 most confusing. This is a case of healthcare-related procurement whereby the Scottish NHS' central purchasing body, the Common Service Agency, was tendering framework contracts for the supply of certain types of medical equipment--for simplicity, pacemakers and implantable defibrillators.

The litigation concerned the applicable award criteria and the ensuing evaluation of the tender submitted by Boston Scientific Limited. Even if the case seems to be decided mainly on procedural grounds (the claimant, or pursuer in Scottish terminology, seemed to have been time-barred in raising a challenge against the published award criteria), it raises substantive issues that, in my view, should have been dealt with differently by the Court.

The tender had been advertised and the relevant invitation to tender (ITT) had published the applicable award criteria. For each of the lots in which the framework agreement was to be divided, the tenders would be assessed against a pass/fail criterion of essential features (ie mandatory technical specifications) and then evaluated on a 60:20:20 split of the maximum score of 100. The offered price would carry a 60% weight, whereas two quality criteria would carry 20% each: (a) the inclusion of certain defined desirable features and (b) the longevity of the devices.

The challenge was based on Boston Scientific's submission that the assessment of the longevity of the pacemakers must have been wrong. In a nutshell, Boston Scientific claimed that their position as market leaders and the existence of independent tests that demonstrated that their devices had a very long individual life led them to the conclusion that 'there must have been a failure to compare like with like because if there had not been such a failure [Boston Scientific] would have had the highest longevity scores' [para 15]. In short, the tenderer was not convinced that its competitors could (truthfully) have offered devices with a superior longevity.

Boston Scientific's submission of improper technical evaluation of the tenders is complicated by two additional factors. First, that tenderers had only been asked to declare (or self-certify) the longevity of their devices without providing any supporting evidence. Second, that the criteria applicable to the evaluation of the longevity component were not all that clear.

Self-certification of verifiable technical characteristics?

On the first issue, the complaint considers that the contracting authority was not allowed to include as award criteria elements based on pure self-declaration and which it intended not to verify. Indeed, the case seems peculiar because the Common Service Agency 'had stated clearly prior to the date for submission of tenders that supporting evidence was not sought.  It had protected itself in a different way by making clear that the framework agreement would include a clawback provision if battery life fell short of the figure submitted in a tender' [para 18].

This seems to me to be a peculiar way of conducting business because the longevity of devices that need to be implanted in the human body seems a rather important technical characteristic (as submitted by Boston Scientific, but dismissed by Lord Tyre in his Opinion, despite the relevance of this issue for the purposes of EU consumer law as discussed here), and the abrogation of the power to check compliance with technical specifications in this regard seems odd, regardless of the inclusion of financial penalties in the contract. The Judgment relies on two English precedents that would support the legality of relying on self-certification of compliance with contractual terms. Most importantly, it ignores the EU precedent in EVN and Wienstrom (C-448/01, EU:C:2003:651), to which one of the English cases refers, though. A reference to EVN paras [50]-[51] would have sufficed to quash the award procedure (I am thankful to Karen Wontner and Erik Plas for having raised this point in private correspondence).

First, Lord Tyre relies on Public Interest Lawyers v Legal Services Commission [2012] EWHC 3277 (Admin), Cranston J at para [64] to justify the acceptability of self-certification. However, in my view, this precedent is inapplicable here. First, because it concerned an on-going requirement to be discharged during the execution of the contract (ie an element closer to a contract performance clause than a technical requirement) but, most importantly, because in the previous paragraph of that speech Cranston J stressed that 

... the principle behind its decision was the need to ensure the equal treatment of tenderers through the objective and uniform application of the criteria in their assessment. The principle applies whether or not the public authority is able to verify the criteria. If it is able but omits to do so, that is as much a breach of the duty as if it sets criteria which cannot be verified. That is because the outcome may be an inequality of treatment of tenderers through the equal treatment of unequals, i.e. the equal treatment of those meeting and those failing to meet the tender requirements. After all, it is trite law that equality of treatment means not only treating like cases alike but unlike cases differently [at 63].

And this led Cranston J [at para 65] to insist on the need for robust verification where the contracting authority relies on self-certification by the tenderers. This is important in the context of the Boston Scientific v Common Service Agency dispute because, this case, 'Although it was accepted that in some cases a contracting authority might have a duty to validate information provided by a tenderer, this was not such a case. The defender did not have the means to verify independently the figures for longevity provided by tenderers' [para 18]. The issue here would have been whether this inability of independent verification (a) covered a complete lack of engagement with existing technical information and (b) was not attributable to the contracting authority itself and its decisions on how to organise the procurement procedure. Generally, one would expect that the entity running framework contracts for medical supplies has (or has access to) necessary technical knowledge in any case. Thus, this point of the case remains obscure and, in my opinion, shows excessive deference to the contracting authority.

Second, Lord Tyre relies on Parker Rhodes Hickmotts Solicitors v Legal Services Commission [2011] EWHC 1323 (Admin), McCombe J at paras [35]-[40], which in turn refers back to Public Interest Lawyers v Legal Services Commission. The difficulty with this second case is that its ratio rests on the construction or interpretation of the tender documentation, rather than an assessment of the requirements of the principle of non-discrimination of tenderers--which was the legal basis for the challenge in Boston Scientific. Importantly, in Parker Rhodes, the relevant part of the Judgment focuses on the fact that the Information for Applicants (IFA) document had not indicated how the contracting authority would proceed to verifying specific aspects of the offers, which the Court considered to cover the possibility of relying on self-certification.

To me, this makes both precedents irrelevant for (if not contradictory to) the assessment of the claims raised by Boston Scientific, which aimed to strike down the procurement process on the basis that the contracting authority had appended a significant weight to a criterion it actually decided not to verify at all. In my view, there are good arguments under the principle of good administration (Art 41 CFR) to demand that contracting authorities only evaluate what they can assess and, even more, that they do not claim not to be in a position to assess technical characteristics of the products they are buying--if nothing else, by reliance on the rules on test reports, certification and other means of proof (now under Art 44 Dir 2014/24/EU). 

Longevity, price, both or none of the above?

Additionally, and focusing on the point of the need to construct or interpret the tender documents as published, the second argument raised by Boston Scientific deserves attention as well because, indeed, the criteria applicable to the evaluation of the longevity component were not all that clear. In that regard, it must be noted that the ITT had established that:

In relation to longevity, the tender receiving the highest total longevity score would receive 20 points.  Each other tender would receive “20‑X points where X = 0.2 x the percentage by which each price in each tender exceeded the lowest price tender achieving the lowest total price score” (Boston Scientific v Common Service Agency, para [5], emphasis added).

This seems odd because the criterion that is aimed at scoring longevity is (or, at least, seems to be) referential to the price of all tenders except that of the tender with (self-certified) longer individual device life. In my view, this is a breach of the general scoring rule included in the ITT, according to which price would carry a weight of 60%. This would not be true except for the tender self-certifying highest longevity, and all other offers' price would be taken into account twice (once for the price component itself, and a second time for the scoring of longevity). This is, simply, technically incorrect and, in my view, should have sufficed to cancel the tender.

However, this does not seem to be the whole story and a mistake must have happened in the preparation of the ITT (there seems to be an obvious explanation if one thinks in terms of copy and paste ...) because, in a debriefing letter, the contracting authority had indicated to Boston Scientific that:

The weighting for Longevity was 20% therefore in each lot the longest longevity submitted received 20 points. The scoring guidance in section 3.3 clearly identifies the points allocated to longevity and how the tender would be scored ... (i.e. if one product had longevity or 100 months (longest) it would score 20 points and if a different product submitted had a longevity of 50 months it would score 10 points)  (Boston Scientific v Common Service Agency, para [10], emphasis added).

Now, this is the natural understanding of a relative scoring for longevity, but it happens not to be the scoring rule disclosed in the ITT, which made reference to relative prices rather than relative longevity. Such a substantial deviation between disclosed scoring rule (even if absurd) and its application seems to run against the basic requirements of the principles of transparency and equal treatment, as recently recast by the Court of Justice of the European Union in TNS Dimarso (for a comment, see here).

In my view, this should also have been taken into account by the Court and, rather than dismissing the challenge, Lord Tyre should have sought to understand better whether the longevity criterion had been assessed as the debriefing letter said, or rather as the ITT established (which could have led to abnormal results ultimately preventing Boston Scientific from making much sense of the scores obtained). Most likely, a divergence between the published scoring rules and the actual evaluation of the tender should have led to a cancellation of the award in any case.

Overall, I think that there are two main problems with the Judgment in Boston Scientific v Common Service Agency, and both of them seem to me to result from a lack of engagement with the case law of the Court of Justice of the European Union by the Scottish court. First, because it is truly abnormal to allow for self-certification of a technical requirement that can be assessed and verified by the contracting authority--at least, by reference to technical documents. Second, because it is also truly remarkable that a contracting authority can evaluate tenders in a way that deviates from the published criteria without the reviewing court picking up on this important aspect (or anomaly) of the process. Ultimately, in my opinion, this is a strange case. But also a very technically deficient Judgment and an incorrect decision.

GC opens dangerous door to post-challenge / after-the-fact 'rationalisation' of public procurement evaluations (T-349/13)

In its Judgment of 4 July 2016 in case Orange Business Belgium SA v Commission, T-349/13, EU:T:2016:385, the General Court (GC) dealt with a highly technical challenge of a procurement decision concerning IT services. The GC Judgment is interesting in a broader context, though, as it deals with the very tricky question of the level of precision that evaluation teams need to employ when they draft evaluation documents and the possibility to take into account post-challenge (after-the-fact) 'rationalisations' of the original tender evaluations.

In the case at hand, the relevant dispute concerned the misapplication of an award sub-criterion for the assessment of IT network performance (service level agreement, or SLA). In my view, the relevant points to note are that:

1. According to the tender documentation, as clarified by a "Questions and Answers" document published by the contracting authority following a request for clarification of the applicable award criteria and sub-criteria, the specific sub-criterion 6b was to be assessed as follows: "Points will be granted for the [RTD] and the [MF] separately, comparing the results of all bidders. To obtain the overall evaluation both points will be multiplied. To obtain the overall points, the evaluation result will be multiplied by a factor and rounded in order to obtain 10 points for the best bidder" (T-349/13, para 62; NB: what RTD and MF means is not relevant for our discussion).
2. As regards award sub-criterion 6b, the applicant’s tender was evaluated as follows: ‘The provided [MF] [confidential] for the calculation of network performance [SLA] liquidated damages was considered EXCELLENT’ (T-349/13, para 64).
3. According to the extract from the evaluation report concerning the successful tender, ‘the provided [MF] (redacted data) for the calculation of network performance SLA liquidated damages was welcomed and therefore the evaluation committee quoted the quality of the network performance SLA as VERY GOOD’ (T-349/13, para 65).

Thus, in basic terms, the main ground underlying the applicant's challenge is that the contracting authority deviated from its disclosed award criteria. Specifically, '[t]he main point of disagreement between the parties relates to whether the Commission [as contracting authority] had taken into account not only the information concerning the MF, but also the information concerning the RTD for the evaluation of the tenders in the light of award sub-criterion 6b' (T-349/13, para 69).

Remarkably, the GC establishes that '[i]t is apparent from reading the extract of the evaluation report which referred directly to award sub-criterion 6b that the information concerned indeed only the MF ... The Commission [as contracting authority] indeed accepts this moreover'. In my view, this would (and should) be sufficient to end the legal analysis and move on to whether the deviation from the disclosed award criteria is material and, if so, whether sticking to the disclosed criteria would have altered the award decision. However, this is not the analytical route followed by the GC.

Controversially, in order to assess this claim, the GC relies on the additional examination report (a further evaluation document) prepared by the contracting authority after the initial challenge of the evaluation by the disappointed bidder. Indeed, the GC takes into account that

it is expressly apparent from the additional examination report that the RTD was taken into consideration in order to evaluate the tenders in the light of award sub-criterion 6b. The fact that that report is subsequent to the award decision cannot affect either the validity or reliability of the comments set out therein (sic). It must be noted that Article 171(1) of the Rules of Application provides for the possibility of carrying out an additional examination if expressly requested by the unsuccessful tenderers. That provision would be rendered inoperative if every additional examination of that type were automatically deemed biased or subject to caution (T-349/13, para 75, emphasis added, emphasis added).

The GC also relies in a table produced by the contracting authority only in its defence document, which the contracting authority confirmed 'had been drawn up during the administrative procedure and before the present action was brought' (T-349/13, para 75, paras 76-78).

Overall, then, the GC's dismissal of this specific ground for challenge rests (at least partially) on reliance on a post-challenge additional examination report and an undated evaluation table self-certified to pre-date the challenge by the defending contracting authority. There are more issues concerning both the facts of the evaluation process and the debriefing meetings, but I do not think it is necessary to focus on them to discuss the GC approach from a general standpoint.

In my view, it is very dangerous to open the door to post-challenge (after-the-fact) rationalisations of evaluation documents. It is also evidentiary very weak to accept a document produced by one of the parties and take it at face value to have been prepared at an indetermined time 'during the administrative procedure and before the present action was brought'. The same way that significant restrictions have been developed in the case law to ensure that tenderers do not alter their tenders under the excuse that they are actually only 'clarifying' them (which has admittedly resulted in a grey zone that still requires further guidance), one would expect the same level of scrutiny for evaluation documents.

I am not advocating for absolute strictness in the interpretation of the evaluation reports, as the information they convey is oftentimes complex and open to (re)interpretation, but I think that the GC has moved way too far in granting such a degree of deference to the contracting authority in this case.

At the end of the day, if the evaluation audit trail cannot be guaranteed and challengers of procurement decisions can be undermined by the production of additional 'rationalisations' of defective evaluation reports, the remedies system will be severely damaged and the integrity of public procurement processes put at risk. Thus, a much tighter approach to the dating/timing of documents (one of the much awaited advantages of eProcurement and time-stamping), and an analysis of the evaluation reports that recognises obvious limitations and omissions as insufficient to support any 'reinterpretation' seems much preferable. Particularly because such an approach would provide evaluation teams the right incentives to do a proper job documenting their decisions from the outset and throughout the procurement procedure, which can only result in strengthened procedural robustness and (hopefully) improved decision-making.

For these reasons, at least from the perspective of the first principles applicable to a robust bid protest system capable of ensuring an acceptable level of procedural integrity, I consider the GC Judgment in Orange Business Belgium SA v Commission a very dangerous decision and would very much favour its annulment in case it got further appealed.

GC gets it totally wrong and pushes once more for excessive price transparency in public procurement (T-667/11)

The General Court (GC) recently issued Judgment in Veloss and Attimedia v Parliament, T-667/11, EU:T:2015:5, and annulled an award decision (actually, a ranking of tenderers decision) on the basis of the European Parliament's resistance to disclose the price of the highest ranking bid to the disappointed tenderer that was ranked second. 

In the GC's view, such deliberate omission of the price information requested during the debriefing phase amounts to a breach of Art 100(2) of the applicable Financial Regulation, which established that: "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" (emphasis added). 

Following its previous case law on this topic (criticised here, here, here and here), the GC shows no flexibility whatsoever and determines that

the Parliament was required to inform them of the price offered by the successful tenderer, which was one of the characteristics and one of the key advantages of the successful tender, especially since, in the circumstances of the present case, that criterion counted for 40% in the evaluation of tenders and the applicants’ tender was the first on the list of tenderers following the evaluation of the qualitative criteria.

That finding is not called into question by the argument put forward by the Parliament at the hearing that the applicants could have established the minimum price offered by one of the tenderers and the price offered by the tenderer ranked first on the basis of the information available to them and deducing it through working backwards on the basis of the [award] formula

suffice it to note that it is clear from settled case-law that, in order to comply with the obligation to state reasons enshrined in Article 296 TFEU, the reasoning of the author of the act must be shown clearly and unequivocally (see, to that effect, judgments in Koyo Seiko v Council, paragraph 42 above, EU:T:1995:140, paragraph 103, and Evropaïki Dynamiki v Commission, paragraph 42 above, EU:T:2010:101, paragraph 134). The Parliament’s argument that the applicants could, through working backwards, have deduced the minimum price offered by one of the tenderers and, therefore, the price offered by the tenderer ranked first cannot be accepted. It must be considered that, even if the applicants had made such a deduction, they would have had no certainty regarding the correct application of that formula and the accuracy of the result obtained. That finding is corroborated by the Parliament’s attitude, which raised the possibility of such a deduction being carried out only at the hearing and not during the written procedure. (T-667/11, paras 60, 64 & 65, emphasis added).

It is worth stressing, however, that the requirement to disclose the (exact) price of the highest ranking tender is not explicit in Art 100(2) of the Financial Regulation and, as argued repeatedly, it is not a desirable feature of any debriefing process because it creates excessive transparency [see A Sanchez-Graells, The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives (Nov 2013). University of Leicester School of Law Research Paper No. 13-11]. 

Hence, the fact that the GC reads an obligation to explicitly disclose the price offered by the successful tenderer and rejects an argument based on the fact that the disappointed tenderer could ascertain the relative advantage (in terms of price) on the basis of indirect information disclosed by the contracting authority (which, again, reinforces the obligation to disclose the price explicitly) is a very unwelcome development in the interpretation of Article 100(2) of the Financial Regulation (which can have a clear impact on the interpretation of Art 55 of Directive 2014/24, with further reaching consequences).

Moreover, it is shocking that there is no discussion at all about the second paragraph of Art 100(2) of the Financial Regulation, which expressly indicates that, notwithstanding the general obligation discussed above, "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". This safeguard clause makes a lot of sense and their ineffective use (or its total disregard) must be lamented.

It is not clear whether the European Parliament expressly relied on this exception (from reading the Judgment, it would seem not), but it is unacceptable that the GC completely excluded such considerations in its Veloss and Attimedia Judgment. Disclosure of explicit prices can have clear negative impacts on competition and should be covered (always, or at least in the vast majority of cases, by the safeguard clause in Art 100(2) of the Financial Regulation, as well as by Art 55(3) Dir 2014/24]. 

Indeed, the problem of excessive pricing transparency and its negative effects for competition in public procurement markets is very important and the scholarly consensus is that transparency needs to be reduced, particularly when it comes to price signals in procurement settings [for a recent discussion, see C Estevan de Quesada, ‘Competition and transparency in public procurement markets’ (2014) 23 Public Procurement Law Review 229-244]. Consequently, the Veloss and Attimedia Judgment is a step in the wrong direction and it starts to be hard to believe that the case law on transparency can make a turn towards economic wisdom.

On a more positive note, another important point to stress focuses on the possibilistic approach adopted by the GC when it comes to deciding what sorts of procurement decisions are amenable to judicial review. In that regard, it bears some stress that the GC found that

according to settled case-law and having regard to the objective of effective and rapid judicial protection, in particular by interlocutory measures, the possibility of review cannot be subject to the fact that the public procurement procedure in question has formally reached a particular stage. On the basis of the consideration that compliance with the procurement rules must be ensured in particular at a stage at which infringements can still be corrected, it must be concluded that an expression of the will of the contracting authority in connection with a contract, which comes in any way whatever to the knowledge of the persons interested, is amenable to review, provided that that expression has passed the stage of acts which constitute a mere preliminary study of the market or are purely preparatory and form part of the internal reflections of the contracting authority with a view to a public award procedure and is capable of producing legal effects (see, to that effect and by analogy, judgment of 11 January 2005 in Stadt Halle and RPL Lochau, C‑26/03, ECR, EU:C:2005:5, paragraphs 38 and 39) (T-667/11, para 47, emphasis added).

This, the GC got right.

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.

One more #publicprocurement Judgment in the Evropaïki Dynamiki Saga (T-9/10)

The General Court's Judgment of 21 February 2013 in case T-9/10 Evropaïki Dynamiki v Commission (Microsoft SharePoint) is a new addition to this seemingly never-ending saga of cases where the Greek IT company challenges procurement award decision on the two-fold basis of failure to state reasons and presence of manifest errors of assessment.

This Judgment basically reiterates the position of the EU Courts on the duty to state reasons but, interestingly, includes an obiter paragraph that is not always expressly mentioned in the growing case law in this area of EU public procurement. 

In my opinion, paragraph 26 of this latest Evropaïki Dynamiki Judgment deserves emphasis, as the GC indicates that

It should also be borne in mind that the requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations (see Case C‑367/95 P Commission v Sytraval and Brink’s France [1998] ECR I‑1719, paragraph 63 and case-law cited, and Case T‑465/04 Evropaïki Dynamiki v Commission, paragraph 49) (emphasis added).

This offers the basis for a far more restricted disclosure of information to unsuccessful candidates and disappointed bidders than usually provided by contracting authorities, and could (should) be used as the basis to rationalise this area of the law--where contracting authorities are indeed under significant pressure to provide excessive information during debriefing and bid protest procedures. 

In fact, in the case at hand,  

the Commission considers that it provided a statement of reasons exceeding that laid down in Article 100(2) of [the Financial Regulation] by informing the applicant of the reasons why its tender had been rejected as well as providing the scores obtained by the tenderers at the award stage, even though the applicant had not passed the selection phase (T-9/10 at para. 24, emphasis added). 

Situations such as this should be avoided, given the negative impacts that excessive transparency can generate in terms of potential collusion and access to confidential information and business secrets of competitors. Therefore, once again, it seems desirable to clarify and rationalise this area of EU public procurement law in the current process of revision of the EU Directives on public procurement.

Again on procurement debriefing and its excesses: Extent of the duty to give (very detailed) reasons to bidders and right to a fair trial (T-183/10)

In its Judgment of 10 October 2012 in case T‑183/10 Sviluppo Globale GEIE v Commission, the General Court has issued a new decision concerned with the extent of the duty to provide reasons to disappointed tenderers 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’) [for another recent case on debriefing, see my comments here]. Interestingly, the GC expressly highlights the link between the duty to give reasons and the right to effective judicial protection under Article 47 of the Charter of Fundamental Rights of the European Union.

In the case at hand, the disappointed tenderer received a debriefing letter from the European Commission where the reasons for its non-invitation to present a full bid in a restricted procedure were limited to indicate "failure to comply with the criteria listed in point 23.1.a)" of the call for expressions of interest. According to those requirements, potential tenderers had to justify that, at the time of tendering, they would have completed at least two international projects worth €3.5mn or more, in areas covered by the object of the future contract (ie technical services to support central and local government in Syria).

The disappointed tenderer considered that the mere indication of a 'generic' or 'unspecific' failure to comply with point 23.1.a) of the call for expressions of interest fell short from the duty to give reasons incumbent upon the contracting authority and violated its procedural rights. On the contrary, the European Commission took the view that, given the objective nature of the criteria included in point 23.1.a) of the call, the disappointed tenderer should have been able to understand the reasons behind the decision not to shortlist her for the presentation of a full bid by a simple comparison of its tender with the contractual object.

The GC disagrees with the position of the Commission and finds that:

27 [...] despite the information contained in [debriefing] letters, and taking into account the relevant case law [Evropaïki Dynamiki/OEDT, T-63/06 at para 112, and Evropaïki Dynamiki/Commission, T-300/07 at para 50] the applicant has not received a response from the Commission showing in a clear and unequivocal fashion the reasoning followed in the adoption of the contested decision. [...]

30 [...] the Commission has not made a formal comparison of the projects described by the applicant in its expression of interest against the benchmark of the three criteria set out in paragraph 21.3.a) of the contract notice. In particular, it did not explain which of these three criteria was not satisfied by the projects [submitted by the applicant]. In these circumstances, the applicant was not able to know if the reason for the rejection of her expression of interest in the procurement in question concerned the minimum number of projects implemented, their budget, their completion in a timely manner or the areas in which they were executed. [...]

35 It should be recalled in this connection that when, as in this case, a European institution has a wide discretion, the guarantees conferred by the Community legal order in administrative procedures is of an even more fundamental relevance. Those guarantees include, in particular, the duty of the competent institution to state sufficient reasons for its decisions (Technische Universität München, C-269/90 at para 14; Le Canne v Commission, T-241/00 at paras 53 and 54, and Evropaïki Dynamiki v Commission, T-300/07  at para 45). [...]

40 In light of the foregoing, it must be held that the applicant properly submits that, to the extent that the Commission has not developed further the reasons why her candidacy did not meet the technical selection criteria set in the contract notice, it has not received in a clear and unequivocal fashion the reasoning of the Commission, which would have allowed her to know the reasons for the decision not to be included in the shortlist of the contract at issue. Moreover, she could not sue without knowing what those reasons are. It is noteworthy in this regard that the right to good administration under Article 41 of the Charter of Fundamental Rights of the European Union (OJ 2007 C 303, p. 1) sets an obligation on the administration to justify its decisions and that this motivation is not only in general, the expression of the transparency of administrative action, but it must also allow the individual to decide, with full knowledge of the facts, if it is useful for her to apply to a court. There is therefore a close relationship between the obligation to state reasons and the fundamental right to effective judicial protection and the right to an effective remedy under Article 47 of the Charter of Fundamental Rights. (GC T-183/10, at paras 27 to 40, own translation from French).

The GC then complements this analysis by underlining the relevance of the motivation provided by the European institutions (in general, by the contracting bodies) for the purposes of judicial review and considers that the scant justification provided by a mere reference to some unfulfilled criteria required by the tender documents falls short from ensuring effective judicial review (GC T-183/10, at paras 41 to 46). In view of all those shortcomings in the motivation provided by the Commission, the GC annuls the decision not to invite the applicant to the submission of a full bid in the relevant procurement process.

In my view, this case generates a significant risk of hypertrophy of bid protest mechanisms in cases where contracting authorities use short or not overly detailed explanations in their debriefing correspondence [in my personal view, the Commission was right to assume that a reference to a specific set of objective criteria clearly indicated in the tender documents should provide the disappointed tenderer with sufficient information to, eventually, challenge the decision]. This can simply open a very dangerous door to strategic litigation and to an excessive broadening of 'fair trial' guarantees in an area where the financial drivers of tendering companies can generate perverse incentives to challenge. 

At the very least, the decision of the GC in Sviluppo Globale will increase the red tape and administration costs of the public procurement system, since contracting authorities will have a powerful incentive to be extremely cautious in the level of detail they provide in debriefing letters and meetings and, in case of doubt, they may feel that the safer position is to err on the side of providing excessive rather than insufficient information. As recently stressed in relation to case C-629/11 P, 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.

However, this message seems not to be reaching the adequate ears and disclosure and transparency requirements are just being significantly expanded in the recent case law of the EU Courts. In my view, this is a dangerous development of EU public procurement law, which may lead to excessive litigation and to a strengthening (or facillitation) of collusion in some public procurement markets. I am just hoping that future practice proves me wrong.

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.