Friday, 19 December 2014

Happy holidays and all best wishes for 2015













Thank you all for reading during 2014, which has been an amazing year for public procurement development in the EU, and for this blog. I look forward to continuing the exchange of views in 2015. The blog will be quiet between now and early January. I hope this will give us all some time to rest and enjoy ourselves. All best wishes, Albert

CJEU supports interaction between competition and public procurement rules (C-470/13)

In its Judgment in case Generali-Providencia Biztosító, C-470/13, EU:C:2014:2469, the CJEU has adopted the very welcome position that sanctioned infringers of competition law can be excluded from public procurement procedures, even if those procedures are not covered by the EU Directives on procurement. More specifically, the CJEU has declared that arts 49 and 56 TFEU do not preclude the application of national legislation excluding the participation in a tendering procedure of an economic operator who has committed an infringement of competition law, established by a judicial decision having the force of res judicata, for which a fine was imposed.

In the case at hand, Generali was excluded from a procurement procedure for insurance services on the basis of a Hungarian domestic provision whereby contracting authorities "may provide in the contract notice that no one may take part in the procedure, as a tenderer, subcontractor or ancillary supplier seeking to take on more that 10% of the value of the public contract, or as a subcontractor ... who: a) has committed an infringement connected with his commercial or professional activity, established by court judgment having the force of res judicata given not more than five years ago" [Paragraph 61(1) of Law CXXIX of 2003 on public procurement]. Indeed, Generali was excluded as a result of its infringement of national competition law, which was confirmed by a court ruling having the force of res judicata, and for which a fine was imposed on it.

In my view, the issue should be uncontroversial and there is no reason to see any (unjustified) restriction of free movement rights in the debarment of competition law infringers, whether under the rules of the procurement Directives or otherwise [see A Sánchez Graells, "Prevention and Deterrence of Bid Rigging: A Look from the New EU Directive on Public Procurement" in G Racca & C Yukins (eds), Integrity and Efficiency in Sustainable Public Contracts (Brussles, Bruylant, 2014)]. However, the CJEU has felt the need to engage in a detailed reasoning that is worth looking at closely:
34 In relation to the exclusion of economic operators from a public contract in the context of freedom of establishment and the freedom to provide services under Articles 49 TFEU and 56 TFEU, it must be observed that Article 45(2)(d) of Directive 2004/18 makes it possible to exclude any operator who ‘has been guilty of grave professional misconduct proven by any means which the contracting authorities can demonstrate’.[This is now regulated in even clearer terms in art 57 dir 2014/24, see A Sánchez Graells, Albert, "Exclusion, Qualitative Selection and Short-listing in the New Public Sector Procurement Directive 2014/24" in F Lichere, R Caranta and S Treumer (ed) Novelties in the 2014 Directive on Public Procurement, vol. 6 European Procurement Law Series, (Copenhagen, Djøf Publishing, 2014)].
35 It must be observed that the concept of ‘professional misconduct’, for the purposes of that provision, covers all wrongful conduct which has an impact on the professional credibility of the operator at issue and not only the infringements of ethical standards in the strict sense of the profession to which that operator belongs (see, to that effect, judgment in Forposta and ABC Direct Contact, EU:C:2012:801, paragraph 27). In those circumstances, the commission of an infringement of the competition rules, in particular where that infringement was penalised by a fine, constitutes a cause for exclusion under Article 45(2)(d) of Directive 2004/18.
36 If such a cause for exclusion is possible under Directive 2004/18, it must a fortiori be regarded as justified in relation to public contracts which fall short of the threshold defined in Article 7 of that directive and which are consequently not subject to the strict special procedures laid down in that directive (see, to that effects, judgment in Consorzio Stabile Libor Lavori Pubblici, EU:C:2014:2063, paragraph 37).
37 Furthermore, recital 101 in the preamble to Directive 2014/24, adopted after the material time, which states that contracting authorities should be able to exclude economic operators, inter alia, for serious professional misconduct, such as infringement of the competition rules, as such misconduct may render an economic operator’s integrity questionable, shows that the cause for exclusion referred to in paragraph 35 above is considered to be justified in the light of EU law. Moreover, Article 57(4)(d) of that directive makes clear and precise provision for that cause for exclusion. [...]
39 In the light of the foregoing, the answer to the questions referred is that Articles 49 TFEU and 56 TFEU do not preclude the application of national legislation excluding the participation in a tendering procedure of an economic operator which has committed an infringement of competition law, established by a judicial decision having the force of res judicata, for which a fine was imposed (C-470/13, at paras. 34-39, emphasis added).
In my view this is a very clear cut Judgment and the CJEU's position should be welcome.

CJEU contributes to the blurring of public-private divide in public procurement (C-568/13)

In its Judgment in Data Medical Service, C-568/13, EU:C:2014:2466, the CJEU has reiterated very clearly that public procurement rules that exclude public hospitals from participation in tendering procedures for the award of public contracts as a result of their status as a public economic entity are contrary to the EU public procurement Directives, if and in so far as those entities are authorised to operate on the market in accordance with its institutional and statutory objectives.

In the case at hand, the CJEU followed its previous case law and stressed that
the possibility for public entities to participate in tendering procedures for public contracts, in parallel to the participation of private economic entities, is already evident from the wording of [the Directives] according to which ‘service provider’ is to mean any natural or legal person, including a public body, which offers services. Furthermore, such a possibility to participate was recognised by the Court in the judgment in Teckal, C‑107/98, EU:C:1999:562, paragraph 51, and was repeated in the subsequent judgments in ARGE, EU:C:2000:677, paragraph 40; CoNISMa, EU:C:2009:807, paragraph 38; and Ordine degli Ingegneri della Provincia di Lecce and Others, EU:C:2012:817, paragraph 26 (C-568/13 at para 33).
The only check and balance to the expansive interpretation of the criteria for participation in public contracts that the CJEU is willing to tolerate is based on the fact that 
Member States do, admittedly, have a discretion as to whether or not to allow certain categories of economic operators to provide certain services. They can regulate the activities of entities, such as universities and research institutes, which are non-profit-making and whose primary object is teaching and research. They can, inter alia, determine whether or not such entities are authorised to operate on the market, according to whether the activity in question is compatible with their objectives as an institution and those laid down in their statutes. However, if and to the extent that such entities are entitled to offer certain services in return for remuneration on the market, even occasionally, the Member States may not prevent those entities from participating in tendering procedures for the award of public contracts relating to the provision of those services. Such a prohibition would not be compatible with [the Directives] (see, in relation to the corresponding provisions of Directive 2004/18, the judgments in CoNISMa, EU:C:2009:807, paragraphs 47 to 49, and Ordine degli Ingegneri della Provincia di Lecce and Others, EU:C:2012:817, paragraph 27) (C-568/13 at para 36, emphasis added).
Consequently, the CJEU refers the issue to the regulation of specific activities or specific legal structures available to the public sector to organise the provision of services. In the absence of that sort of regulation (which would then be potentially subjected to the rules on freedom of establishment and free movement of services, where applicable), public procurement rules cannot be used to determine the remit of the economic activity of public entities.

That being said, the CJEU then proceeded to stress that, in case the public entity is in a position to offer contractual conditions impossible to match by private competitors--particularly in view of the funding it receives--then the contracting authority should scrutinise its offer under the general rules applicable to abnormally low offers (now in art 69 of Directive 2014/24). In the words of the CJEU:
the provisions of [the Directives] and in particular the general principles of freedom of competition, non-discrimination and proportionality which underlie that directive, must be interpreted as not precluding national legislation which allows a public hospital, such as that at issue in the main proceedings, participating in a tendering procedure to submit a tender which cannot be matched by any competitors as a result of the public funding which it receives. However, in the course of the examination of the abnormally low character of a tender on the basis of [the Directive], the contracting authority may take into consideration the existence of public funding which such an entity receives in the light of the option to reject that tender (C-568/13 at para 51, emphasis added). 
In my view, the Judgment in Data Medical Service simply consolidates the existing case law and prompts the contracting authority to assess the potential abnormality of the tender submitted by the public entity. The question that remains unanswered is whether there (actually) is a subsequent obligation to reject the tender, which is a particularly controversial point [for discussion, see A Sánchez Graells, "Rejection of Abnormally Low and Non-Compliant Tenders in EU Public Procurement: A Comparative View on Selected Jurisdictions", in M Comba & S Treumer (eds) Award of Contracts in EU Procurements, vol. 5 European Procurement Law Series (Copenhagen, DJØF, 2013) 267-302]. Arguably, in most of the cases, there can be an obligation to reject on the basis of the principle of competition stressed by the CJEU and now consolidated in Art 18(1) Dir 2014/24.

Moreover, one cannot discard the application of the EU and domestic rules on competition (arts 101 and 102 TFEU and their equivalents) to the public entities when they engage in such economic activity [hence, immediately deactivating the FENIN-Selex exemption; see A Sánchez Graells, "Distortions of Competition Generated by the Public (Power) Buyer: A Perceived Gap in EC Competition Law and Proposals to Bridge It" (August 21, 2009). University of Oxford, Center for Competition Law and Policy, CCLP (L). 23], or even the application of domestic unfair competition law rules if the activity is caught in their substantive scope. 

Hence, situations like the one that triggered the Data Medical Service simply blur the distinction between public and private in public procurement, but by no means make the participation of public entities in procurement bullet-proof in terms of the application of general competition rules. This is an area where significant developments can be expected in the immediate future, as the public sector seeks to find new sources of funding or revenue for its activities. Hence, this is an area where more definite answers from the CJEU would be welcome in the future.

Friday, 12 December 2014

Contracting authorities should not be scared to exclude misbehaving tenderers, for the CJEU has their back (C-440/13)

In its Judgment in Croce Amica One Italia, C-440/13, EU:C:2014:2435, the Court of Justice of the EU (CJEU) has decided a complex situation concerning the exclusion of a tenderer based on an on-going criminal investigation derived from an allegation of fraud and misrepresentation in the submission of the documentation for that specific tender (ie an, 'intra-tender' ground for exclusion). The reasoning of the CJEU is complex because it conflates the application of exclusion grounds and the withdrawal of an invitation to tender under Directive 2004/18 and its interpreting case law--and, consequently, deserves some close consideration.

In the case at hand, the contracting authority announced an open procedure for certain specialist transportation services and received four offers. Three of the four offers where rejected on technical grounds. The contract was provisionally awarded to the fourth tenderer (Croce Amica One), but an investigation was initiated due to the evaluation scores being seemingly too high (ie carrying more than 80% of the maximum points in both the technical and the economic evaluation, which triggers specific scrutiny under the applicable Italian rules). As a result of the inquiry, the evaluation team determined that the tender was anomalous. Simultaneously, a preliminary criminal law investigation for fraud and intentional false statements was launched concerning, among others, the legal representative of Croce Amica One. It is not relevant for the assessment (as it comes ex post facto), but the investigation actually found that there had been fraud.

In view of all this, the contracting authority decided to cancel the tender. Its reasoning was as follows: given the circumstances described, apart from the anomalous nature of the tender, the [contracting authority] [could] not in any event, for evident reasons of expediency and reasons connected with the principle of sound administration, proceed to award the services contract to the tenderer Croce Amica One … nor, given the vital nature of the services in question, [could] it postpone the award of the contract pending the outcome of the criminal proceedings or even the conclusion of the investigations currently under way’ (para 17, emphasis added).

One of the difficulties in the case concerned the 'timing' of the application of the exclusion ground by the contracting authority. Implicitly, the allegation was that the contracting authority could only have applied the exclusion ground prior to deciding on the (provisional) award of the contract--following the logical sequence of exclusion, selection, award that Directive 2004/18 seemed to impose. By deviating from that apparently mandatory sequence or, in other words, by applying the exclusion ground at an inappropriate moment (ie too late in terms of the procurement procedure, and too early in terms of the parallel criminal investigation, which was on-going), the contracting authority would have breached the EU rules. Those rules would have been furthermore breached due to the unjustified cancellation of the tender--which, however, derives from the fact of excluding the only tenderer left and, consequently, it is hard to see why this second dimension would be (independently) relevant.

Unfortunately, and due to some procedural restrictions derived from the mechanics of the preliminary reference mechanism (para 28), the CJEU does not focus on the timing for the application of the exclusion ground (it simply mentions that the circumstances of the case are clearly covered under art 45(2) dir 2004/18, para 28) and, instead, looks at whether the cancellation of the tender (or the implicit withdrawal of the invitation to tender) is justified (paras 29-37). Hence, the reasoning of the CJEU in Croce Amica One does not seem very helpful in establishing whether, under the rules in dir 2004/18, exclusion grounds can be applied by contracting authorities after completing the initial selection screening , or whether they can base the exclusion on (suspected) breaches that occur during the tender procedure.

Thus, the Croce Amica One Judgment may at first sight seem to come too late or be of limited temporary relevance because this situation is now expressly regulated in art 57(5) of Directive 2014/24, which allows contracting authorities to apply the revised exclusion grounds 'at any time during the procedure' and 'in view of acts committed or omitted either before or during the procedure'. However, even if based on the (not necessarily) inter-linked point of the cancellation of the tender, the reasoning of the CJEU in Croce Amica One should remain valid after the entry into force of dir 2014/24 as a clear back-up to contracting authorities that decide to exercise their discretion and apply art 57(5) in view of exclusion grounds based on concurrent tendering (mis)behaviour. 

Indeed, it is worth stressing that the CJEU has clarified that:
EU law does not preclude Member States from providing in their legislation for the possibility of adopting a decision to withdraw an invitation to tender. The grounds for such a decision may thus be based on reasons which reflect, inter alia, the assessment as to whether it is expedient, from the point of view of the public interest, to carry an award procedure to its conclusion, having regard, among other things, to any change that may arise in the economic context or factual circumstances, or indeed the needs of the contracting authority concerned (C-440/13, para 35, emphasis added).
In my view, this reinforces the powers that art 57(5) dir 2014/24 gives to contracting authorities to 'self-protect' from entering into contracts with (potentially) unreliable suppliers. This will have to be coupled with certain procedural guarantees (as the CJEU stresses in paras 38-46), but the general principle is, in my view, that contracting authorities need to feel empowered to react to their informed and demonstrable suspicions by excluding tenderers affected by exclusion grounds.

However, there is also a final caveat in the Croce Amica One line of reasoning that looks very dangerous to me because of its potentially misleading content. Continuing with the exploration of the reasons that can justify the cancellation of a tender, the CJEU indicates that: The grounds for such a decision may also relate to there being an insufficient degree of competition, due to the fact that, at the conclusion of the award procedure in question, only one tenderer was qualified to perform the contract (C-440/13, para 35, emphasis added). 

I find this last bit of the reasoning potentially dangerous for two reasons. Firstly, because economics tells us that this is not a situation that per se can be interpreted as evidencing insufficient competition [see JM Keisler & WA Buehring, ‘How Many Vendors Does It Take To Screw Down A Price? A Primer on Competition’ (2005) 5 Journal of Public Procurement 291]. And, secondly, because it is prone to abuse in cases where the contracting authority is left with only one tenderer that it simply dislikes or does not want to engage with for reasons not covered by exclusion grounds or qualitative selection criteria. In such case, the random result that only one tenderer (of many participating) can actually perform the contract would be the (unexpected) perfect excuse to discriminate against it by cancelling the tender.

Hence, I would urge for a very restrictive interpretation of this last part of para 35 of the Croce Amica One Judgment, particularly in view of a proper interpretation of the principle of competition embedded in art 18(1) dir 2014/24--ie because the blank rejection of the only tender that meets all the requirements of the contracting authority would, if not otherwise justified, be an artificial restriction of the (outcome of) the competition actually materialised in the procedure.

Thursday, 11 December 2014

Is Altmark not applicable to ambulance services? Or is San Lorenzo & Croce Verde not very clear? (C-113/13)

In view of the Judgment in San Lorenzo and Croce Verde Cogema, C-113/13, EU:C:2014:2440, the rules applicable to the provision of emergency ambulance services is definitely clear as mud. In the case at hand, the applicants challenged an Italian law whereby emergency ambulance services must be awarded on a preferential basis and by direct award, without any advertising, to certain voluntary bodies (such as the Red Cross). This rule has, ultimately, constitutional protection in Italy, as 'the Italian Republic has incorporated into its constitution the principle of voluntary action by its citizens. Thus, the last paragraph of Article 118 thereof provides that citizens, acting individually or in an association, may participate in activities of public interest with the support of the public authorities, on the basis of the principle of subsidiarity' (para 9).

The applicants' argument was not necessarily of a constitutional level, but rather that freedom of establishment is unduly restricted by a preferential scheme that excludes the tendering out of those ambulance services. They brought forward arguments based on general free movement provisions, public procurement rules and competition rules. The latter are not examined because the CJEU considered that the public procurement analysis makes it unnecessary (para 64).

In my view, if read paragraph by paragraph, the reasoning of the CJEU is accurate and technically precise, but the overall Judgment is too timid in spelling out the conditions for the application of the 'public service exception' under art 106(2) TFEU (or otherwise) tot he direct award of emergency ambulance services to voluntary action associations. I will try to summarise my criticism and doubts as succinctly as possible. This is an area where more considered research is definitely needed.

On the bright side, I think that some positions of the CJEU can be clearly spelled out. 

(1) When fully applicable, both Dir 2004/18 and Dir 2014/24, preclude legislation such as that at issue in the main proceedings which provides that the local authorities are to entrust the provision of urgent and emergency ambulance services on a preferential basis and by direct award, without any advertising, to the voluntary bodies mentioned in the agreement (para 44). However, Dir 2004/18 does not automatically apply to ambulance services (see 2 below) and art 10(h) Dir 2014/24 clearly excludes these contracts from its scope of application (para 8). Hence, this clear position is not that useful in practice.

(2) Where the Directives are not fully applicable (ie where contracts can be tendered under part B services rules under dir 2004/18, or under the special regime for social services under arts 74-77 dir 2014/24), the general principles of transparency and equal treatment flowing from articles 49 TFEU and 56 TFEU would be applicable (para 45) if the contract is of cross-border interest (paras 46-50). In that case, it is also clear that such a preferential scheme would run contrary to the Directives, which are: 'intended to ensure the free movement of services and the opening-up to competition in the Member States which is undistorted and as wide as possible' (para 51). 

(3) Implicitly, then, where the Directives do not apply at all but the contract is still of cross-border interest (ie the new likely situation under art 10(h) dir 2014/24), the award of the contract is 'merely' subjected to the (residual/general) requirements of articles 49 TFEU and 56 TFEU. In that case (not expressly assessed in the San Lorenzo & Croce Verde Judgment), the contracting authority still would need to go through the applicable assessment under the market access test generally applicable to restrictions of freedom of establishment [for two thought provoking attempts to rationalise this test, see E Christodoulidis, 'The European Court of Justice and Total Market Thinking' (2013) 14 German Law Journal 2005; and MS Jansson & H Kalimo, 'De minimis meets “market access”: Transformations in the substance – and the syntax – of EU free movement law?' (2014) 51(2) Common Market Law Review 523].

Hence, there are always concerns and constraints derived from EU law (either general, or the specific rules of public procurement) if the contract is of cross-border interest. Nonetheless, they are of varying degrees of intensity and it looks as if upon the entry into force of Directive 2014/24, the award of service contracts for emergency ambulance services  (either exclusively, or for most of their value if the contracts include other sorts of ambulance services) will exclusively be governed by the general rules on freedom of establishment.

On the shady side, though, once the potential incompatibility with EU public procurement or general free movement law is established (and, really, there seems to be no escape to 1-3 above except if the contract has no cross-border interest whatsoever--and, on that, see the  Ancona issue here), the CJEU will apply a Sodemare-like test because the provision of ambulance services falls within the (very broad) remit of the organisation of healthcare and social security systems (paras 55-59). In that case, then, it will particularly important that "EU law does not detract from the power of the Member States to organise their public health and social security systems" (para 55), but that "it is for the Member States, which have a discretion in the matter, to decide on the degree of protection which they wish to afford to public health and on the way in which that degree of protection is to be achieved" (para 56). So far, so good.

On the dark side, however, and significantly departing from the more developed approach in Altmark for SGEIs (is the CJEU implicitly recognising--without analysis--that ambulance services are per se SSGIs?), the CJEU has created an economically oriented safeguard that leaves too much room for maneuver by ruling that
Having regard to the general principle of EU law on the prohibition of abuse of rights (see, by analogy, judgment in 3M Italia, C‑417/10, EU:C:2012:184, paragraph 33), the application of that legislation cannot be extended to cover the wrongful practices of voluntary associations or their members. Thus, the activities of voluntary associations may be carried out by the workforce only within the limits necessary for their proper functioning. As regards the reimbursement of costs, it must be ensured that profit making, even indirect, cannot be pursued under the cover of a voluntary activity and that volunteers may be reimbursed only for expenditure actually incurred for the activity performed, within the limits laid down in advance by the associations themselves (C-113/13, para 62, emphasis added).
In my view, this is way too timid. Indeed, the CJEU constructs a rather weak safeguard by not focussing at all in the economic efficiency of the voluntary activities (which, even on a non-profit, reimbursement basis can be extremely inefficient) and imposes a sort of 'anti-fraud' test that, in my view, misses the point. In order to ensure compatibility with State aid provisions (which should not have been set aside so quickly in para 64), an efficiency based test like the one existing in the fourth condition of Altmark should have been imposed [for discussion, see A Sanchez Graells, “The Commission’s Modernization Agenda for Procurement and SGEI”, in E Szyszczak & J van de Gronden (eds) Financing SGEIs: State Aid. Reform and Modernisation, Legal Issues of Services of General Interest Series (The Hague, TMC Asser Press / Springer, 2012) 161-181]. 

Indeed, the analysis of the applicability of Art 106(2) TFEU to the case is totally missing and this is strange. It looks like the difference between SGEIs and SSGIs will haunt all of us also under the 2014 Directives and revised guidance from the European Commission is becoming urgently needed, given the implicit vacuum that can exist if Member States maximise the possibilities of direct award under art 10(h) dir 2014/24, but equally under its arts 74-77 (and particularly, the latter).

As briefly mentioned, this is an area where more research is needed. I hope I can convince some colleagues to put together a research project on this soon. Interested contributors, please feel free to contact me at asanchezgraells@gmail.com.

Teaser: Why are ambulance services different, and why is it so complicated to procure them? (C-113/13)

In its Judgment in San Lorenzo and Croce Verde Cogema, C-113/13 (only press release available for now), the CJEU seems to have ruled that emergency ambulance services "may be entrusted on a preferential basis and by direct award to voluntary associations. In order to do so, the system must actually contribute to the pursuit of the objectives of the good of the community and budgetary efficiency". 

Without knowing the details of the full Judgment, it is hard to see the exact space for such direct award and all the caveats implicit in it. However, as a first reaction, it seems clear that this adds yet another layer of complication to the procurement regime applicable to ambulance services under the EU public procurement rules. Recital (28), art 74 and annex XIV of Directive 2014/24 will need to be reconciled with the Judgment in San Lorenzo and Croce Verde Cogema, which may result in some legal uncertainty as to whether direct award is really possible or the simplified regime in art 74 (or even art 77) trump the position of the CJEU.

I will look at this in detail once the full Judgment is available, but the application of EU procurement rules to ambulance services seems to be unnecessarily complicated.

Tuesday, 9 December 2014

Justifications for apparently abnormally low tenders need to be in sync with original tender (T-422/11)

In its Judgment in Computer Resources International (Luxembourg) v Commission, T-422/11, EU:T:2014:927, the General Court (GC) has clarified (although limited if any doubt could be bharboured) that the reasons provided by tenderers to justify the viability of their apparently abnormally low tenders need to be compatible with the terms of their initial tender.
 
In the case at hand, the apparent abnormality of the offer derived from the low manpower costs offered in relation to the provision of IT services in Luxembourg. Upon request of the contracting authority, the participating consortium tried to justify the low cost included in the tender on the basis that the services would (actually) be provided as a mix of presential support in Luxembourg and remote support from Romania. The contracting authority rejected this explanation as inadmissible and rejected the offer for being abnormally low. The GC has confirmed this decision (paras 53-55 and 82 and ff).
 
Maybe more interestingly, the GC also rejected an argument based on a sort of estoppel, whereby the participating consortium challenged the abnormally low consideration of costs that had, however, been accepted by the same contracting authority in a different procurement exercise. As a general point, the GC determined that the contracting authority
correctly took the view that a comparison of the prices proposed in the applicant’s tenders with the prices proposed within the context of other tendering procedures was irrelevant. Contrary to the applicant’s claim that no precedent is irrelevant when it is in the ‘same market’, the content of a tender must be examined in the light of the call for tenders to which it responds (T-422/11, para 69, emphasis added).
In my view, this is the only criticisable point in the Judgment (and an unnecessary one, given the lack of support for the applicant's arguments) and should be limited to the obiter dictum character it has in the specific circumstances of the case. Indeed, looking at the prices the contracting authority has accepted in contemporaneous and comparable procurement exercises would be relevant to the assessment of abnormality--not so much in order to create a (constructive) estoppel, but as an economic benchmark.

Other than that, the Judgment of the GC in Computer Resources International is an interesting summary and case study of the specific obligations imposed on contracting authorities that suspect that an offer (or some of its components) is abnormally low. This should serve as guidance in the interpretation and enforcement of article 69 of Directive 2014/24.

The best way to deal with a petition to the European Parliament? Admit it and then we'll see (C-261/13)

In its Judgment in case Schönberger v Parliament, C-261/13, EU:C:2014:2423, the CJEU has assessed the limits of the right to petition the European Parliament under art 227 TFEU, as informed by art 44 of the EU Charter of Fundamental Rights. In a case that confirms a previous Judgment by the GC [EU:T:2013:111, not available in English], the CJEU has clarified the controls, checks and balances applicable to a rejection of a petition and, maybe more counterintuitively, the lack of controls applicable to the admission of a petition. This may sound absurd and unnecessary, given that there would seem to be no need to control the reasons why the European Parliament admits petitions.
 
However, the discussion seems to actually not have been about how to control de admission of petitions, but the actions that the European Parliament decides to engage in once the petition is admitted. On this point, and showing a very clear deference for the political process involved in the right to petition, the CJEU has stressed that
it is clear from the provisions of the TFEU and from the rules adopted by the Parliament for the organisation of the right of petition that, where the Parliament takes the view that a petition meets the conditions laid down in Article 227 TFEU, it has a broad discretion, of a political nature, as regards how that petition should be dealt with. It follows that a decision taken in that regard is not amenable to judicial review, regardless of whether, by that decision, the Parliament itself takes the appropriate measures or considers that it is unable to do so and refers the petition to the competent institution or department so that that institution or department may take those measures (C-261/13, para 24, emphasis added).
The question at this point is how to interpret this passage, which seems to either not require any reaction at all from Parliament, or a very minimum 'referral' of the petition to a different institution or department. Ie, in the best case scenario, all the Parliament needs to do is to pass the hot potato onto somebody else. In the worst case, it may just decided that there is nothing that can be done.
 
 
The lack of appetite for a control of the actions that follow a petition is understandable. However, an extreme reading of Schönberger v Parliament would simply result in the European Parliament never rejecting any petition in the future (that would be open to judicial review) and instead admitting them and immediately declaring that there is nothing they can do (with, or without further referral). Whether this provides any meaningful effectiveness to art 44 EUCFR and art 227 TFEU is at least debatable. However, there is nothing I can say about this. Hopefully the experts will.

Friday, 5 December 2014

Paper on centralisation of procurement and competition law

Ignacio Herrera Anchustegui, from BECCLE - University of Bergen, and I have just completed a working paper on the new rules on centralisation and occasional procurement under articles 37-39 of Directive 2014/24. The paper assesses the risks, rationale and justification for the rules on centralisation and aggregation of public procurement in Directive 2014/24. The paper is entitled "Impact of public procurement aggregation on competition. Risks, rationale and justification for the rules in Directive 2014/24" and is now part of the University of Leicester School of Law Research Paper Series.
 
The paper explores the justifications advanced for the aggregation of purchasing and the countervailing risks it generates. In both cases, it focusses in economic and administrative aspects. It then proceeds to a summary overview of the new rules for the aggregation of public procurement in Directive 2014/24, and emphasised how the Directive is expressly recognising possibilities that clearly exceed the more modest approach in Directive 2004/18. Moving on, it then focusses on the potential justification for certain activities now permitted by the 2014 rules, and engages in a critical assessment of their competitive impact. The paper briefly highlights the far-reaching and not necessarily positive implications that a maximisation of the centralisation and aggregation possibilities under Directive 2014/24 could have, and proposes that strict competition law enforcement will be necessary to avoid undesired consequences. Some suggestions for further research are provided by way of conclusions.
 
The full paper is available for download on SSRN. Its full citation is:

Sánchez Graells, Albert and Herrera Anchustegui, Ignacio, Impact of Public Procurement Aggregation on Competition. Risks, Rationale and Justification for the Rules in Directive 2014/24 (December 5, 2014). University of Leicester School of Law Research Paper No. 14-35. Available at SSRN:  
http://ssrn.com/abstract=2534496.
 
 

Thursday, 4 December 2014

Is the flexibilisation of formal requirements in public procurement going both ways? (T-394/12)

In its Judgment in Alfastar Benelux v Council, T-394/12, EU:T:2014:992, the General Court (GC) resolved a dispute concerning public procurement activity of the European Institutions (in this case, the Council). One of the main claims of the disappointed bidder was that the Council had failed to discharge its obligation to state reasons because one of the sentences of the extracted evaluation report that was made available to it by the Council was incomplete.
 
In the applicant's view, the incompleteness of the extract prevented it from assessing the reasons that justified the Council's decision to award the contract to another tenderer. The applicant submitted that the fact that the Council had complemented the extract at a later stage did not overcome the initial ommission and that the Council should be made liable for damages. The GC rejected the claim. The reasoning of the GC in dismissing the action triggers some comments.
 
Firstly, it is worth emphasising that the GC has continued pushing for a strengthening of the duty to provide reasons in abstracto (and, indirectly, as a result of the bindingness of the right to good administration as recognised in Art 41(2)(c) of the EU Charter of Fundamental Rights). Indeed, the GC emphasised that, as a general point of law,
since infringement of the obligation to give reasons is a matter of public interest, the European Union judicature must raise it of its own motion and, therefore, the fact that the applicant raised it belatedly does not render such a plea inadmissible (see, to that effect, BP Products North America v Council, T-385/11, EU:T:2014:7, paragraph 164) (T-394/12 at para 25, emphasis added).
This creates a strong incentive for contracting authorities to 'err on the side of excessive disclosure' when it comes to the reasons for the adoption of a procurement decision, which may be detrimental for competition and for the protection of the legitimate commercial interests of other tenderers (as clearly recognised in art 55(3) Dir 2014/24 and art 113(2)II Financial Reg, but not always properly understood or applied). This also follows on the GC's previous tough approach and continues to create excessive incentives towards transparency in public procurement (as criticised here, here and in A Sánchez 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', University of Leicester School of Law Research Paper No. 13-11). Hence, the general approach continues to create the wrong incentives and should be reassessed.
 
Secondly, however, when it comes to the specifics of the case, the GC adopts a very sensible and reasonable approach to the assessment of the claim of breach of the duty to state reasons in particular. Indeed, the GC dismisses the claim on the basis that the incomplete sentence only omitted a limited amount of information concerning the general comments of the evaluators and, additionally, the tenderer had been provided with more details in the remainder of the extract from the evaluation report. Interestingly, the GC stressed that
The general comments may easily be inferred from the detailed technical evaluations of the successful tenderer’s bid which are not concerned by the formatting error, since the general comments constitute a succinct summary of material contained in the contested decision (T-394/12 at para 30, emphasis added).
As such, this reasoning should not be surprising and the GC could hardly be expected to have decided otherwise. Having adopted a more formalistic approach would not only have annulled a procurement decision for no good reason, but would also have opened the floodgates to an unforeseeable volume of litigation (particularly if one takes into account that the guarantees provided by Art 41 EUCFR are applicable in all procurement covered by Dir 2014/24). Hence, it is a sensible decision.
 
However, the better question seems to be whether this same 'anti-formalistic' approach will hold when the clerical mistakes and partial ommissions affect the documentation submitted by the tenderers. Functionally, the rules applicable to the interpretation of documents and the avoidance of formal requirements where the parties engaged in the procurement process 'can make sense' of the documentation exchanged should go both ways. However, this is not necessarily the case yet, as recently discussed regarding Cartiera dell’Adda and Cartiera di Cologno, C-42/13, EU:C:2014:2345 (see here).
 
Hence, it will be interesting to see if the incipient push towards a more functional approach to public procurement takes root and ends up creating a system that is less 'based on rights' and more oriented towards good procurement outcomes [a problem that also affects 'the other side of the Atlantic', as discussed in S Schooner & P Kovacs, "Affirmatively Inefficient Jurisprudence?: Confusing Contractors’ Rights to Raise Affirmative Defenses with Sovereign Immunity" (2012) 21 Federal Circuit Bar Journal 686].

Friday, 21 November 2014

Short procurement reflection

I am teaching an undergraduate module on EU Public Procurement Law as an option for the LLB students at Leicester. One of the activites I have designed consists in asking students to submit short (500-word) 'reflection papers' assessing streamlined cases. The objective of this activity is to make sure that they have a strong hold of the mechanics of the system and the basic elements that contracting authorities need to take into account when making procurement decisions.
 
The first exercise asked them to “Highlight the advantages and the legal risks of resorting to a competitive procedure with negotiation instead of an open procedure for the supply of medical supplies such as vaccines.” They submitted some interesting reflections and, on that basis and with my own views, I have prepared the following model answer to give them feedback. I thought it could be of interest, despite its simplicity, so I am posting it here for your consideration. Comments welcome!
 
Medical supplies are highly commoditised goods[1] and relatively easy to subject to strict technical specifications (art 42(3)(b) dir2014/24), particularly when EU standards exist and may limit the ability of the contracting authority to reject standardised and CE-marked products (Medipac-Kazantzidis, C-6/05, EU:C:2007:337). This is particularly clear in the case of vaccines, given the very stringent processes that regulate their commercialisation.[2] Their supply can consequently be procured through open procedures (art 27 dir2014/24) and, possibly, even focus on cost-efficiency only (art 67(2) dir2014/24).
However, such a procurement strategy is likely to trigger a significant number of offers, which can result in significant evaluation and administrative costs for the contracting authority (CA). Hence, resorting to other procedures (or framework agreements) could be in the CA’s interest if it can limit the costs linked to the administration of the procedure without sacrificing technical or commercial advantages derived from significant competition.
A competitive procedure with negotiation (art 29 dir2014/24) would be available in this case if the CA can justify that it meets one of the grounds for its use (art 26(4) dir2014/24), and probably if it can justify the need for negotiations prior to award (art 26(4)(iii)). However, resorting to this procedure can be risky if avoidance of other options (mainly, a restricted procedure, art 28 dir2014/24) is seen as a circumvention of the applicable rules. The use of negotiated procedures has been limited in the case law (Commission v Italy, 199/85, EU:C:1987:115) and the changes introduced by Directive 2014/24 create uncertainty regarding CA’s actual freedom to negotiate.[3] However, this risk can be minimised by shortlisting in a transparent manner (art 65 dir2014/24).
The second main risk derives from the negotiation capacity of the CA. If the CA is inexperienced in negotiations, it can incur in both commercial risks derived from its inability to obtain the best possible economic conditions, and legal risks derived from an improper or discriminatory development of the negotiations (art 29(5) dir2014/24). It could also create risks if it does not have solid management procedures for confidential information and business secrets (idem).
Hence, in order to reap the benefits derived from the lower cost of the competitive procedure with negotiations, the CA needs to have strong legal and commercial expertise. If it does, this is a procedure from which it can benefit. Otherwise, the CA will be better off with the open procedure.

[1] EY, Pulse of the industry: Differentiating differently, Medical technology report 2014, 5. http://www.ey.com/Publication/vwLUAssets/ey-pulse-of-the-industry-report/$FILE/ey-pulse-of-the-industry-report.pdf (Accessed: 21.11.2014).
[2] For background information, see http://www.vaccineseurope.eu/about-vaccines/eu-regulatory-framework-for-vaccines/ (Accessed: 21.11.2014).
[3] For discussion, see P Telles and L Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’, in F Lichère, R Caranta and S Treumer (eds), Novelties in the 2014 Directive on Public Procurement, vol. 6 European Procurement Law Series, (Copenhagen, DJØF Publishing, 2014). http://ssrn.com/abstract=2443438 (Accessed: 21.11.2014).

Thursday, 20 November 2014

"Monitor and the Competition and Markets Authority": My new paper on health care, procurement and competition in the UK

I have just uploaded my new piece "Monitor and the Competition and Markets Authority" as the University of Leicester School of Law Research Paper No. 14-32. The paper looks at the institutional design for the enforcement of competition and public procurement rules in the health care sector in the UK and criticises the concurrency regime developed in 2013. It is linked to my previous paper on the substantive aspects of the NHS Competition, Choice and Procurement Regulations 2013 (about to be published in the Public Procurement Law Review and available here).

I will be presenting this new paper at the EUI (Florence), at a workshop on Antitrust Law in Healthcare organised by Prof Giorgio Monti. Comments welcome!
Abstract 
As part of its enforcement duties under the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013, and in exercise of the powers assigned to it by the Health and Social Care Act 2012, the health care sector regulator for England (Monitor) is co-competent with the competition watchdog (Competition and Markets Authority) to enforce competition law in health care markets. Oddly, though, unlike other sector regulators, Monitor does not have a duty to promote competition but ‘simply’ to prevent anti-competitive behaviour. Monitor is also competent to carry out reviews and to decide bid disputes concerning procurement carried out by health care bodies, provided there is no formal challenge under the Public Contracts Regulations 2006.
This paper contends that such a concentration of regulatory, competition enforcement and procurement review powers puts Monitor in a unique situation of (potential) structural conflict of interest that can diminish significantly its ability to act as an effective (co-competent) competition authority. This paper focusses on this difficult structure for the enforcement of competition law in the health care sector in England, in particular due to the asymmetrical, sui generis concurrency regime created by the Enterprise and Regulatory Reform Act 2013 and the Concurrency Regulations 2014. As examples of such conflict of interest and its implications, the paper assesses Monitor’s incentives to bend the interpretation of both art.101(3) TFEU and the new special regime on procurement of social services (arts.72-77 dir 2014/24). The paper concludes that this situation requires regulatory reform to devolve powers to the Competition and Markets Authority.
A Sánchez Graells, 'Monitor and the Competition and Markets Authority' (November 20, 2014). University of Leicester School of Law Research Paper No. 14-32. Available at SSRN: http://ssrn.com/abstract=2528569.