Monday, 27 April 2015

Labels under Reg. 43 Public Contracts Regulations 2015

As Pedro has already discussed (here), reg.43 of the Public Contracts Regulations 2015 (PCR2015) transposes the rules on the use of labels contained in Art 43 of Directive 2014/24. I agree with his general skepticism about the advantages that contracting authorities can actually derive from the use of labels, particularly in view of the need to always accept equivalents (as discussed at length regarding technical specifications, by Pedro as well). 

The following are my comments on Art 43 of Dir 2014/24 in my Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 332-334, which has been published today.


The Appropriate Use of Eco-Labels and other Labels Certifying Social or Other Product Characteristics.[1] On a related note, it is important to stress that Directive 2014/24 has gone beyond the limited rules of article 23(6) of Directive 2004/18 and put a clear emphasis on the possibility to use eco labels and labels certifying certain social aspects of products and services (such as fair trade, or sustainability)[2] as part of the process of detailing technical specifications and, generally, with the goal of creating some clear space for the introduction of environmental and social considerations in the drafting of technical specifications.[3] This was a highly contentious issue under the rules of Directive 2014/24 and required the intervention of the ECJ in order to interpret the limits in the incorporation of label-related requirements in procurement procedures.[4] Directive 2014/24 now aims at consolidating the guidance provided by the ECJ. As clearly stressed in recital (75),



Contracting authorities that wish to purchase works, supplies or services with specific environmental, social or other characteristics should be able to refer to particular labels, such as the European Eco-label, (multi-)national eco-labels or any other label provided that the requirements for the label are linked to the subject-matter of the contract, such as the description of the product and its presentation, including packaging requirements. It is furthermore essential that those requirements are drawn up and adopted on the basis of objectively verifiable criteria, using a procedure in which stakeholders, such as government bodies, consumers, manufacturers, distributors and environmental organisations, can participate, and that the label is accessible and available to all interested parties. … References to labels should not have the effect of restricting innovation (emphasis added).[5]



This general approach is later implemented in article 43 of Directive 2014/24, which sets clear restrictions on the types of labels that can be used by contracting authorities. From a competition perspective and particularly bearing in mind the general requirement of technical neutrality, it is important to stress that the label requirements can only concern criteria which are linked to the subject-matter of the contract and are appropriate to define characteristics of the works, supplies or services that are the subject-matter of the contract (art 43(1)(a) dir 2014/24)[6] and, more importantly, that ‘contracting authorities requiring a specific label shall accept all labels that confirm that the works, supplies or services meet equivalent label requirements’ (art 43(1)III dir 2014/24). This is in line with the position of the ECJ, which had clearly indicated that contracting authorities are banned from imposing compliance with a specific (eco)label rather than using the detailed specifications defined by that (eco)label[7] and, consequently, accepting all functional equivalents—as requested by the general rules controlling the setting of technical specifications and, more generally, the principles of non-discrimination, equal treatment and competition. This has now prompted the new rule under article 43(3) of Directive 2014/24, in virtue of which



Where a label … sets out requirements not linked to the subject-matter of the contract, contracting authorities shall not require the label as such but may define the technical specification by reference to those of the detailed specifications of that label, or, where necessary, parts thereof, that are linked to the subject-matter of the contract and are appropriate to define characteristics of this subject-matter (emphasis added).



Consequently, the rules on (eco)labels clearly follow the general criteria that regulate the establishment of technical specifications and particularly the prohibition of references to a specific make or source, or a particular process which characterises the products or services provided by a specific economic operator, or to trade marks, patents, types or a specific origin or production with the effect of favouring or eliminating certain undertakings or certain products of article 42(4) of Directive 2014/24. Moreover, as will happen with any other sorts of technical specifications (as discussed immediately below), contracting authorities are bound to adopt a possibilistic approach to the assessment of compliance with (eco)label requirements. This is particularly clear from the provision that, in cases where the tenderer has not been able to obtain the specific label indicated by the contracting authority or an equivalent label within the relevant time limits for reasons that are not attributable to that economic operator, requires contracting authorities to accept other appropriate means of proof, which may include a technical dossier from the manufacturer, provided that the economic operator concerned proves that the works, supplies or services to be provided by it fulfil the requirements of the specific label or the specific requirements indicated by the contracting authority (art 43(1) in fine dir 2014/24). In our view, this provision encapsulates the ultimate requirement of the principle of technical neutrality.





[1] Generally, see C Nouira, G Grolleau, and N Mzoughi, ‘Public Purchasing and Eco-labelling Schemes: Making the Connection and Reinforcing Policy Coherence’ (2004) 15(2) Journal of Interdisciplinary Economics 131–51.

[2] See E Fisher and S Corbalán, ‘Fair trade and European public procurement: legal principles and governance dynamics’ (2013) 9(1) Social Enterprise Journal 11–27; C Weller and JM Pritchard, ‘Evolving ECJ Jurisprudence: Balancing Sustainability Considerations with the Requirements of the Internal Market’ (2013) European Procurement & Public Private Partnership Law Review 55; D Dragos and B Neamtu, ‘Sustainable Public Procurement in the EU: Experiences and Prospects’, in F Lichere, R Caranta and S Treumer (eds) Novelties in the 2014 Directive on Public Procurement, vol. 6 European Procurement Law Series, (Copenhagen, Djøf Publishing, 2014) forthcoming.

[3] For a recent case concerned with the balanve between environmental requirements and compliance with the rules on technical neutrality of technical specifications, see Case T-402/06 Spain v Commission [2013] pub. electr. EU:T:2013:445. Generally, for discussion, see R Caranta, ‘Sustainable Public Procurement in the EU’, in R Caranta and M Trybus (eds), The Law of Green and Social Procurements In Europe, vol. 2 European Procurement Law Series (Copenhagen, DJØF Publishing, 2011) 15–51;J Hettne, Legal Analysis of the Possibilities of Imposing Requirements in Public Procurement that Go beyond the Requirements of EU Law (2012) available at http://www.regeringen.se/content/1/c6/21/03/99/c9f52838.pdf; P Kunzlik, ‘Green Public Procurement—European Law, Environmental Standards and ‘What to Buy’ Decisions’ (2013) 25(2) Journal of Environmental Law 173–202; and A Wiesbrock, ‘An Obligation for Sustainable Procurement? Gauging the Potential Impact of Article 11 TFEU on Public Contracting in the EU’ (2013) 40(2) Legal Issues of Economic Integration 105–32.

[4] Case C-368/10 Commission v Netherlands [2012] pub. electr. EU:C:2012:284. For discussion, see T Kotsonis, ‘Commission v Netherlands (C-368/10): environmental and fair trade considerations in the context of a contract award procedure’ (2012) 21 Public Procurement Law Review NA234–NA244; A Semple, ‘Grounds for change: ECJ judgment in Dutch coffee case points to need for reform of procurement rules. Case C-368/10 Commission v Netherlands’ (2012) available at http://www.procurementanalysis.eu/resources/Grounds+for+change+-+Case+368+of+2010.pdf; and M Muller-Wrede, ‘Sustainable Purchasing in the Aftermath of the ECJ's Max Havelaar Judgment’ (2012) European Procurement & Public Private Partnership Law Review 110.

[5] For discussion on the last point, concerning innovation, see M Burgi, ‘Can Secondary Considerations in Procurement Contracts be a Tool for Increasing Innovative Solutions?’, in C Tvarnø, GS Ølykke & C Risvig Hansen, EU Public Procurement: Modernisation, Growth and Innovation (Copenhagen, DJØF Publishing, 2012) 275–90.

[6] M Martens and S de Margerie, ‘The Link to the Subject-Matter of the Contract in Green and Social Procurement’ (2013) European Procurement & Public Private Partnership Law Review 8.


[7] ibid 70.


2nd edn of Public Procurement and the EU Competition Rules (Hart, 2015) now available

The 2nd edition of my Public Procurement and the EU Competition Rules (Oxford, Hart, 2015) is now available. I would like to express my sincere thanks to the team at Hart-Bloomsbury for the effort they put into getting the book ready and available 3 months early. It may be "father-like" bias, but I think it looks as good as the 1st edition, if not better.

For those who know the book, the 2nd edition is an update to the 2014 Directives and chapters 5 to 7 are fundamentally different from those in the 1st edition. For those who do not know the book, the following is a short synopsis:
Public procurement and competition law are both important fields of EU law and policy, intimately intertwined in the creation of the internal market. Hitherto their close connection has been noted, but not closely examined. This work is the most comprehensive attempt to date to explain the many ways in which these fields, often considered independent of one another, interact and overlap in the creation of the internal market.

This process of convergence between competition and public procurement law is particularly apparent in the 2014 Directives on public procurement, which consolidate the principle of competition in terms very close to those advanced by the author in the first edition. This second edition builds upon this approach and continues to ask how competition law principles inform and condition public procurement rules, and whether the latter (in their revised form) are adequate to ensure that competition is not distorted. The second edition also deepens the analysis of the market behaviour of the public buyer from a competition perspective.

Proceeding through a careful assessment of the general rules of competition and public procurement, the book constantly tests the efficacy of these rules against a standard of the proper functioning of undistorted competition in the market for public procurement. It also traces the increasing relevance of competition considerations in the case law of the Court of Justice of the European Union and sets out criteria and recommendations to continue influencing the development of EU Economic Law. 

You can read an explanation of how it fits with existing literature and the major criticisms that the first edition received here. The full table of contents is available here. Thank you in advance to those of you who will browse the book at your library or buy it from Hart. As always, feedback will be appreciated: asanchezgraells@gmail.com.

Friday, 24 April 2015

Technical specifications under Reg. 42 Public Contracts Regulations 2015

Reg.42 of the Public Contracts Regulations 2015 (PCR2015) transposes the rules of Art 42 of Directive 2014/24 concerning the setting of technical specifications for public procurement purposes. The 2014/2015 provisions recast and recombine the rules previously scattered between specific regulations/articles and annexes and try to concentrate in a single provision all requirements applicable to the setting of technical specifications. They are free of difficulties, though, as Pedro has stressed here.

Regs.42(1) to (7) PCR2015 determine that the technical specifications need to lay down the characteristics required of works, services or supplies  and be set out in the procurement documents, and they describe the content the technical specifications may have (also that of Annex VII of Dir 2014/24), which includes an indication whether any transfer of intellectual property rights will be required. The main innovation in these rules is that, according to reg.42(6) PCR2015, technical specifications may also refer to the specific process or method of production or provision of the requested works, supplies or services or to a specific process for another stage of its life cycle even where such factors do not form part of their material substance provided that they are linked to the subject-matter of the contract and proportionate to its value and its objectives. This is a consolidation of the CJEU's case law in Commission v Netherlands (fair trade coffee), C-368/10, EU:C:2012:284 (for a comment, see here).

Regs.42(8) to (13) PCR2015 determine the ways in which technical specifications can be set: ie in terms of performance or functional requirements, by reference to technical specifications, or as a hybrid option mixing up performance and technical elements. Remarkably, the prohibition of making references to a specific make or source, or a particular process which characterises the products or services provided by a specific economic operator, or to trade marks, patents, types or a specific origin or production with the effect of favouring or eliminating certain undertakings or certain products is retained, and only exempted on an exceptional basis, where a sufficiently precise and intelligible description of the subject-matter of the contract is not possible without such reference, in which case it shall be accompanied by the words “or equivalent”.
 
Overall, and with the exception of specifications that do not form part of the material characteristics of the subject matter of the procurement, the rules governing the setting of technical specifications have not changed significantly in the PCR2015. Being provocative, however, one may consider that, despite its practical importance, the content of reg.42 PCR2015 is quite superfluous as a result of the principles of technical equivalence and competitive neutrality.

As recital (74) of Dir 2014/24 clearly stresses, 'the technical specifications drawn up by public purchasers need to allow public procurement to be open to competition as well as to achieve objectives of sustainability ... Consequently, technical specifications should be drafted in such a way as to avoid artificially narrowing down competition through requirements that favour a specific economic operator by mirroring key characteristics of the supplies, services or works habitually offered by that economic operator. Drawing up the technical specifications in terms of functional and performance requirements generally allows that objective to be achieved in the best way possible. Functional and performance-related requirements are also appropriate means to favour innovation in public procurement and should be used as widely as possible' (emphasis added).

This is stressed in reg.42(10) PCR2015, according to which "[t]echnical specifications shall afford equal access of economic operators to the procurement procedure and shall not have the effect of creating unjustified obstacles to the opening up of public procurement to competition." This is supported by detailed rules concerning the application of the technical specifications in regs.42(14) to (16) PCR2015, which prevent contracting authorities from rejecting offers that do not adhere to the published technical specifications if the tenderer can prove by any appropriate means (including those of reg.44 PCR2015), that the solutions proposed satisfy in an equivalent manner the requirements defined by the technical specifications, or that the technical specifications to which its tender adheres address the performance or functional requirements which the contracting authority had laid down.

Thus, as a consequence of this pro-competitive and technically neutral approach, the initial exercise of setting up technical specifications by the contracting authority should only be seen as an attempt to define its needs, which the marketplace can then propose to satisfy in a wide array of alternatives (including, where applicable, variant tenders under reg.45 PCR2015). However, for this open approach to be effective, contracting authorities need to ensure strict adherence to two issues:

(A) Guaranteeing Neutrality and Flexibility in the Determination of Technical and/or Functional Equivalence of Solutions and, particularly, as regards the Acceptable Means of Proof.
According to the rules of regs.42(14) & (15) and 44 PCR2015, the burden of proving equivalence of the submitted proposal with the technical and performance requirements of the tender lies with the tenderer, who has to discharge it to the satisfaction of the procuring entity, but can in principle choose at its own discretion any adequate means to fulfil this requirement—which mainly includes technical dossiers of the manufacturer and test reports from a recognised body. Therefore, while the discretion of the procuring entity as regards the admissible means of proof seems to be significantly constrained and all (objectively) adequate means should be available to the tenderer to prove that all technical and performance requirements are met, the contracting authority seems to retain a larger degree of discretion in deciding whether, in the light of the available evidence, the proposed solution is actually equivalent to the requirements of the technical specifications. To be sure, the decision regarding these two aspects of technical equivalence—ie, the admissibility or objective suitability of a given means to prove it, and the evaluation of the evidence put forward by those means—are hardly divisible, since the one will significantly affect the other.

In this regard, and in order to prevent the adoption of administrative practices that could jeopardise the objectives of the anti-formalist and functional approach adopted by the directives, an obligation to be neutral and flexible as regards the means of proof and the assessment of the functional and performance equivalence of the bids should be imposed on contracting authorities. This is not intended to mean that they need to be lax in their assessments or waive any of the technical specifications governing the tender, but that they should undertake the equivalence evaluation with a ‘possibilistic approach’ and abandon excessively rigid or formal positions. In this sense, nothing prevents contracting authorities from indicating what means of proof and what kinds of evidence will be of particular importance in conducting this assessment, but they must accept any alternative equivalent means of proof and be prepared to rely on different types of evidence put forward by the tenderers, without restriction and without attaching higher value to the former over the latter. In any case, if contracting authorities decide to set particular means by which functional equivalence or performance suitability can be proven, they must ensure that they are not restrictive and do not discriminate amongst tenderers; and, in any case, they must be prepared to accept alternative means and to attach them with the same evidentiary value.

Regardless of the general approach adopted by contracting authorities in assessing technical and functional equivalence, there are additional restraints on the exercise of such discretion that derive from more general rules and, particularly, from the general principles of non-discrimination and transparency, and from the duty to give reasons [it is noteworthy to stress that the CJEU emphasised that this duty to give reasons must be discharged in a timely manner; see Case C-250/07 Commission v Greece [2009] ECR I-4369 67–72. See also Case T-465/04 Evropaïki Dinamiki (DG FISH) [2008] ECR II-154; and Case C-456/08 Commission v Ireland [2010] ECR I-859.]. As regards the requirements of transparency and non-discrimination, it should be stressed that

in order to be effective, [these principles] must therefore cover not only the initial definition of technical specifications and award criteria by contracting authorities, but also the way in which those specifications and criteria are interpreted and applied during an award procedure [Opinion of AG Sharpston in case C-6/05 Medipac-Kazantzidis 77].
As regards the obligation to provide reasons, it is expressly established in reg.55(2)(b) PCR2015 that this specific obligation includes the reasons for a decision of non-equivalence or a decision finding that the works, supplies or services do not meet the performance or functional requirements set by the technical specifications. Therefore, contracting authorities will need to provide specific reasons as regards their assessment of the evidence presented by tenderers and, more importantly, decisions on the equivalence of these solutions shall be based on objective and non-discriminatory criteria, and fully disclosed to the tenderer—in accordance with the transparency obligations. 
(B) Stressing the Prohibition on Discriminating against ‘Equivalent’ Solutions in the Evaluation of Tenders and Award of Public Contracts.
Finally, as yet another requirement of the principles of equality and competition, it should be stressed that the criteria established for the evaluation of bids and the award of the contract cannot directly or indirectly discriminate against solutions that do not comply strictly with the technical specifications (‘original solutions’) but that meet their requirements by way of performance or functional equivalence (‘equivalent solutions’). Therefore, all solutions able to satisfy the performance requirements established or derived from the technical specifications, regardless of the specific solutions adopted by the tenderer to reach these output requirements, must be evaluated in the same way.

Evaluation criteria can only treat more favourably solutions that provide additional or enhanced functional and performance characteristics—as long as they are set as such from the outset and duly publicised by the contracting authority—or solutions that refer to derived costs or technical implications of the proposed solutions, such as maintenance costs or expected reliability of the technology, and therefore two solutions that satisfy the same function under equivalent performance terms can be graded differently if they impose different costs or guarantee different levels of availability or produce different levels of errors or failures—but not otherwise. Therefore, award criteria that discriminate between technical solutions as such—ie, that do not rely on additional factors duly set, communicated and applied by the contracting authority—are banned by the consistent application, and the need to guarantee the effectiveness, of the rules of the directives on technical specifications not only at the phase of their setting, but throughout the tender.

Thursday, 23 April 2015

Prior involvement of candidates or tenderers under Reg. 41 Public Contracts Regulations 2015

As mentioned in relation to reg.40 of the Public Contracts Regulations 2015 (PCR2015), the treatment of the candidates or tenderers involved with the contracting authority prior to a specific procurement is covered by reg.41 PCR2015, which transposes the rules of Article 41 of Directive 2014/24 with some minor drafting changes that do not alter its content. The following comments are based on my assessment of Arts 40 and 41 of Dir 2014/24 in Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 373-78. Pedro's views are very complementary and focus on the burden imposed on contracting authorities by reg. 41 PCR2015.


The acceptability and the appraisal of bids submitted by advantaged parties and, particularly, the issue of the participation as bidders of consultants previously involved in the design of the tender process can generate a major (negative) impact on competition—especially as regards its technical specifications, the method for the evaluation of bids, and the award criteria [see S Arrowsmith, ‘The Problem of Discussions with Tenderers under the EC Procurement Directives: the Current Law and the Case for Reform’ (1998) 7 Public Procurement Law Review 65 and S Treumer, ‘Technical Dialogue Prior to Submission of Tenders and the Principle of Equal Treatment to Tenderers’ (1999) 8 Public Procurement Law Review 147; ibid, ‘Technical Dialogue and the Principle of Equal Treatment—Dealing with Conflicts of Interest after Fabricom’ (2007) 16 Public Procurement Law Review 99]. Such prior involvement is now expressly authorised and regulated under articles 40 and 41 of Directive 2014/24. Indeed, under the provisions of article 40, before launching a procurement procedure, contracting authorities may conduct market consultations with a view to preparing the procurement and informing economic operators of their procurement plans and requirements. For this purpose, they can seek or accept advice from independent experts or authorities or from market participants. That advice may be used in the planning and conduct of the procurement procedure, provided that ‘such advice does not have the effect of distorting competition and does not result in a violation of the principles of non-discrimination and transparency’ (emphasis added).

Article 41 then regulates the procedure for the contracting authority to assess the existence of such potential distortions of competition. To that effect, where an undertaking has advised the contracting authority or has otherwise been involved in the preparation of the procurement procedure, the contracting authority ‘shall take appropriate measures to ensure that competition is not distorted by its participation in the tender’. It is irrelevant that the prior involvement has taken place as part of the preliminary market consultations foreseen in article 40 of Directive 2014/24 or otherwise. Moreover, the special duty to avoid distortions of competition arises not only where the tenderer or candidate has directly advised the authority or been involved in the design of the tender, but also when the participating entity is related to it. On the basis of ensuring that the potential conflict of interest is transparent and in order to ensure equality of opportunity in the disclosure of all relevant documentation and to neutralise any time advantage, such measures shall include the communication to the other candidates and tenderers of relevant information exchanged in the context of or resulting from the involvement of the candidate or tenderer in the preparation of the procurement procedure and the fixing of adequate time limits for the receipt of tenders. The Directive relies on the use of these neutralisation measures as a first solution and reserves the exclusion of the advantaged tender to relatively extreme situations.

This issue is very closely related to the grounds for exclusion of potential tenderers, where it is now further dealt with under a relatively general clause excluding participation by operators in conflict of interest or otherwise advantaged in relation to the specific tender due to their prior involvement. Improving the rules under article 45 of Directive 2004/18, which did not include such elements amongst the criteria to be taken into account to appraise the personal situation of the candidate or tenderer at the stage of qualitative selection, Article 57(4)(f) of Directive 2014/24 establishes a discretionary exclusion ground applicable ‘where a distortion of competition from the prior involvement of the economic operators in the preparation of the procurement procedure … cannot be remedied by other, less intrusive measures’. In my view—given the existing case law, which will soon be discussed—rather than at selection stage, it might be more appropriate to deal with conflicts of interest at the stage of the evaluation of bids and, in any case, a substantive and detailed analysis needs to be undertaken by the contracting authority.

When this issue was not expressly addressed by the EU public procurement directives, the EU judicature offered guidance that remains valuable in order to assess the competitive position of tenderers previously involved in the design of the tender. According to the relevant case law, EU public procurement directives
preclude a rule … whereby a person who has been instructed to carry out research, experiments, studies or development in connection with public works, supplies or services is not permitted to apply to participate in or to submit a tender for those works, supplies or services and where that person is not given the opportunity to prove that, in the circumstances of the case, the experience which he has acquired was not capable of distorting competition (emphasis added) [Joined Cases C-21/03 and C-34/03 Fabricom [2005] ECR I-1559 36].
This has now been codified in article 41 of Directive 2014/24, which is in line with article 57(4)(f) and foresees that the candidate or tenderer concerned ‘shall only be excluded from the procedure where there are no other means to ensure compliance with the duty to observe the principle of equal treatment’. Moreover, and similarly to what happens in relation to candidates that have submitted apparently abnormally low tenders, prior to any such exclusion, advantaged candidates or tenderers shall be given the opportunity to prove that their involvement in preparing the procurement procedure is not capable of distorting competition. Therefore, national legislation or contracting authorities’ decisions cannot impose the automatic exclusion of apparently advantaged parties and, more specifically, of project consultants—but must provide such candidates with the opportunity to prove that competition has not been distorted as a result of their previous involvement in the project and, particularly, by the experience thereby acquired [rather obviously, the practical implications of such an opportunity to rebut an implicit presumption of distortion of competition will be largely determined by the way in which the criterion of ‘distortion of competition’ is shaped and applied].

In this regard, it seems appropriate to require contracting authorities to pay special attention when appraising bids submitted by potentially advantaged parties and, particularly, by incumbent operators or by consultants previously involved in project design—be it directly or indirectly, through parties connected to those undertakings. Such an approach would not run against the principle of non-discrimination since, as also expressly found by the CJEU, a person who has carried out certain preparatory work
is not necessarily in the same situation as regards participation in the procedure for the award of that contract as a person who has not carried out such works [and, consequently] it cannot be maintained that the principle of equal treatment requires that that person be treated in the same way as any other tenderer [Joined Cases C-21/03 and C-34/03 Fabricom [2005] ECR I-1559 28 and 31].
Two options seem to be compatible with the finding of the CJEU. On the one hand, the analysis of the (in)existence of a distortion of competition can be conducted in the abstract, focusing on formal criteria relating to the garden-fencing of the information acquired during the preparatory works, the establishment of so-called Chinese walls, or other criteria regarding the control or decisive influence that might exist between the seemingly advantaged party and any other party with which it is connected. This analysis, however, seems to give scope to rather limited inquiries and to give leeway to potentially substantial distortions of competition—especially because it ‘is virtually impossible to envisage any means of ensuring that the information and experience acquired during the preparatory stage will not operate to the advantage of the person concerned when he submits a tender’ [Opinion of AG Léger in joined cases C-21/03 and C-34/03 Fabricom 42].

On the other hand, a more in-depth control of the potential use of information, time or experience advantages at the tender evaluation stage might yield superior—albeit still limited, results. The control should be based on an analysis of the terms of the tender submitted by the apparently advantaged party against several specific and cumulative criteria. First, this should be against the information made public or disclosed to the rest of the candidates. If there are aspects of the tender that could not have been developed on the basis of that information by a diligent and well-informed average tenderer knowledgeable in that field (admittedly, an open standard not exempt from interpretative difficulties), then, sufficient indicia of an advantage should be found (and, consequently, the contracting authority should reject the tender). A second criterion, which is, however, more difficult to appraise, should focus on the time advantage potentially enjoyed by the apparently advantaged party, and so the contracting authority should determine whether the tender submitted could have been developed, to the same level of detail and development, by a similarly average tenderer that had received the information when it was made available by the contracting authority. Nonetheless, admittedly, such a test is very hard to implement to a satisfying degree of predictability and objectiveness—and, consequently, it seems preferable not to pursue this kind of analysis except in very exceptional cases where (probably due to specially tight timelines for the development and submission of the offer) it is evident that the apparently advantaged tenderer must have had significantly more time for the preparation of its tender (for instance, as compared to the level of development and detail of the rest of the offers received). Third, the tender of the apparently advantaged operator should be compared against the degree of compliance of the rest of the tenderers with the specifications and their evaluation against the award criteria. In this regard, if the tender submitted by the apparently advantaged party is one amongst a few (not to mention if it is the only one) that complies with the technical specifications and/or obtains significantly better scores under most or all of the award criteria applicable in the tender, once again, it is important to stress that sufficient indicia of an advantage—or of the previous ‘steering’ of the preparation of the public contract in a favourable direction—should be found and its tender should be rejected. However, this last criterion should be applied with special care, so as to avoid unduly handicapping more efficient or better prepared apparently advantaged tenderers.

In both cases, rejection of the tender following the described indicia of advantage on the part of the apparently advantaged tenderer seems justified by the almost impossible proof of alternative explanations that would neutralise such strong indications of an effective distortion of competition by that tenderer. Nonetheless, for the sake of promoting procedural rights, apparently advantaged parties should be given the opportunity to provide reasons and alternative explanations to the indicia found—albeit, in this case, a very stringent analysis should be applied by the contracting authorities in view of the potential jeopardy of undistorted competition.

To be sure, this approach rests on the transparency of the conflict of interest and can only tackle instances of submission of offers directly by the apparently advantaged tenderer, or indirectly by any other party that discloses the participation or advice given by the potentially advantaged party. In other cases—where the participation of the potentially advantaged party is not disclosed to the contracting authority—the proposed solution will be largely inoperative, but will constitute a potential case of fraud or misrepresentation that should be controlled by other means.

As regards the timing for the control of actual or effective advantages that have benefitted the apparently advantaged operator, it is relevant to note that the CJEU had precluded a contracting authority from excluding a tenderer at any point along the tender process ‘until the end of the procedure for the examination of tenders’, on the grounds that doing so would restrict the effectiveness of the remedies available to the apparently advantaged operator now excluded from the tender [Joined Cases C-21/03 and C-34/03 Fabricom [2005] ECR I-1559 41–45]. However, it is argued here that a proper reading of the finding of the CJEU did not preclude the analysis at the stage of tender evaluation because the reasoning applied by the Court is clearly dependent on the assumption that the contracting ‘authority has before it all the information which it needs in order to take that decision’ and, therefore, should not delay its decision unduly until the procedure has reached a very advanced stage and, therefore, deprives the undertaking concerned of the opportunity to rely on the EU rules on remedies [ibid]. Therefore if, as hereby held, the proper test depends on the analysis of the tender submitted by the apparently advantaged operator—because, before that, the contracting authority does not have the relevant information to reach a meaningful conclusion on the actual or effective existence of an advantage—the abovementioned case law should not be considered an impediment. Moreover, in view of the specific rules now introduced in article 57(5) of Directive 2014/24—which expressly indicate that exclusion based on discretionary grounds can take place ‘at any time during the procedure’ and based on facts or ‘acts committed or omitted either before or during the procedure’—there should be no restriction whatsoever to the application of the ground for the exclusion of the tenderer (and implicitly, the rejection of its tender) on the basis of the advantage derived from its prior involvement at any point of the procedure and, particularly, at the stage of bid assessment.

To sum up, as a mandate of the principles of non-discrimination and competition, particularly as specified in articles 41 and 57(4)(f) of Directive 2014/24, contracting authorities are under a special responsibility to assess tenders submitted by apparently advantaged tenderers—and, particularly, by project consultants—in order to ensure that competition has not been altered. Such an analysis seems to be better performed at the tender evaluation stage and according to non-formalistic criteria, mainly based on a comparison of the tender submitted by the apparently advantaged tenderer against the relevant tender documents and against the rest of the tenders received from tenderers not involved in the preparatory work.

Wednesday, 22 April 2015

Preliminary market consultations under Reg. 40 Public Contracts Regulations 2015

Reg. 40 of the Public Contracts Regulations 2015 (PCR2015) transposes Article 40 of Directive 2014/24 as preliminary market consultations are concerned, and determines that,  before launching a procurement procedure, contracting authorities may conduct market consultations with a view to preparing the procurement and informing economic operators of their procurement plans and requirements. For this purpose, contracting authorities may seek or accept advice from independent experts or authorities or from market participants, and that advice may be used provided that it does not have the effect of distorting competition and does not result in a violation of the principles of non-discrimination and transparency.

This is an issue closely linked to the treatment of the prior involvement of candidates or tenderers in such preliminary market consultations or otherwise, which is covered by reg.41 PCR2015. Hence, I will comment on both provisions together (here). Pedro has in the meantime offered an insightful tackle on reg. 40 PCR2015 here.

Tuesday, 21 April 2015

Procurement involving contracting authorities from other Member States under Reg. 39 Public Contracts Regulations 2015

Beyond the rules applicable to centralised and occasional joint procurement, and still focusing on issues concerning the allocation of responsibility/liability between contracting authorities, reg.39 of the Public Contracts Regulations 2015 (PCR2015) is dedicated to procurement involving contracting authorities from other Member States and sets 'conflict-of-law-like' rules to determine the procurement regime applicable to  cross-border cooperation, in the same terms of Article 39 of Directive 2014/24. Pedro has encapsulated its content very clearly here.

Reg.39(1) PCR2015 opens with a reference to public-public and in-house cooperation  (for critical remarks, see here, here, here and here) by determining that "[w]ithout prejudice to regulation 12, contracting authorities may act jointly with contracting authorities from other member States in the award of public contracts by using one of the means provided for in this regulation". One option is to interpret this as allowing for contracting authorities to set up cross-border in-house/public house schemes, in which case it is to be deferred to the general legal requirements of the chosen vehicle to determine which procurement system controls its activities (which is, by no means, necessarily obvious). However, in view of regs. 30(10) to (14) PCR2015, the relationship between cross-border in-house and other types of cross-border joint entities is not easy to fathom.

In any case, reg.39 PCR2015 goes on to establish a significant number of cross-border cooperation possibilities, subject to the general requirement that contracting authorities shall not use them for the purpose of avoiding the application of mandatory public law provisions in the law of the jurisdiction to which they are subject, where those provisions are in conformity with EU law [reg.39(2) PCR2015], which of course may impose significant restrictions once budgetary and other sets of public sector laws are considered.

The three main options foreseen in reg.39 PCR2015 are cross-border centralised purchasing, cross-border joint procurement and cross-border procurement through joint entities (other than in-house ?, see above). Each of them prompt significant questions.

Cross-border centralised purchasing
Regs.39(3) to (5) PCR2015 deal with cross-border access to centralised procurement bodies and determine that contracting authorities are free to use centralised purchasing activities offered by central purchasing bodies located in a Member State other than the UK. The PCR2015 has not restricted the sort of activities carried out by the non-UK CPB, which can then take either of the following forms: (a) the acquisition of supplies and/or services intended for contracting authorities, or (b) the award of public contracts or the conclusion of framework agreements for works, supplies or services intended for contracting authorities. In either case, the provision of centralised purchasing activities shall be conducted in accordance with the national provisions of the Member State where the central purchasing body is located; which rules will also apply to direct call-offs or awards of contracts under framework agreements and dynamic purchasing systems organised by the central purchasing body. So far, so good.

This is quite interesting because it creates a situation where, for example, an English contracting authority that conducts a mini-competition within a framework set up by an Italian central purchasing body is acting with subjection to Italian public procurement law. The likelihood that this actually happens in practice seems small, as the English contracting authority will most likely prefer the Italian CPB to conduct the mini-competition and choose the specific provider of the given goods or services in order to avoid such extraterritorial application of Italian public procurement rules. In that case, though, the initial act whereby the English contracting authority approaches the Italian CPB is not covered by the 'conflict-of-law-like' rules in regs.39(4) & (5) PCR2015, which creates a legal vacuum concerning that specific act.

It would be tempting to assume that it would be English law, but that is by no means the only possible option
or the strongest in law. If the "entrustment"/"collaboration" act was considered a commercial contract (the public-public cooperation element indeed seems rather limited as far as that transaction is concerned), the rules of the Rome I Regulation would most likely be engaged, in which case the several criteria in Art 4 would point towards Italian law, unless there were some serious overriding mandatory provisions that could trigger the application of English law instead under Art 9. In any case, it seems clear that there is either a requirement or a risk that the English contracting authority would have to comply with Italian law, which seems a serious limitation of the system.

Moreover, the law applicable to the (public) contract with the ultimate supplier/contractor would also be Italian law in almost all cases, except if the Italian CPB (with amazing foresight) had introduced compliance with the law of the 'client' contracting authority as a contractual condition in the relevant tender documentation. All in all, it looks like this sort of cross-border activity would create a significant need for the English contracting authority to obtain advice on foreign (EU) domestic procurement and contract law, which make well erode any economic advantages derived from the recourse to the CPB of a different Member State.

Cross-border joint procurement
Regs.39(6) to (9) PCR2015 establish the conditions under which an English or Welsh contracting authority may, together with contracting authorities from different Member States, jointly award a public contract, conclude a framework agreement or operate a dynamic purchasing system, or award contracts based on a framework agreement or on a dynamic purchasing system. For this to be possible, and unless the necessary elements have been regulated by an international agreement concluded between the Member States concerned, the contracting authorities involved need to conclude an agreement that determines: (a) the responsibilities of the parties and the relevant applicable national provisions; and (b) the internal organisation of the procurement procedure, including the management of the procedure, the distribution of the works, supplies or services to be procured, and the conclusion of contracts. In any case, it is clear that a participating contracting authority fulfils its obligations when it purchases works, supplies or services from a contracting authority which is responsible for the procurement procedure.

This is a group of rules and requirements that fundamentally superfluous. I would have expected this scenario to be covered by reg.9 PCR2015 (art 9 dir 2014/24) on public contracts awarded and design contests organised pursuant to international rules, particularly given the need for an (international) agreement to be reached prior to the cross-border cooperation--either in general terms, or for the specific case. Moreover, the rules in reg.39(6) to (9) leave all decisions to the agreement between the Member States and simply impose a transparency obligation whereby the allocation of responsibilities and the applicable national law must be referred to in the procurement documents [reg.39(7)(b) PCR2015]. However, this does not sort out any of the practical problems derived from joint procurement (see comment to reg.38 PCR2015), which are potentially magnified by the cross-border nature of the rules under reg.39 PCR2015. Hence, this is another area where uptake in practice seems likely to be limited, unless contracting authorities invest significant resources in legal advice.

Cross-border procurement through joint entities
Regs.39(10) to (14) PCR2015 establish rules for contracting authorities of different Member States to set up a joint (in-house?) entity, including European Groupings of territorial cooperation under Regulation 1082/2006 or other entities established under Union law. This raises the already mentioned question whether other sorts of joint entities (ie other than those established under EU law) can be created under the general clause of reg.39(1) PCR2015 or not. 

In any case, for the purposes of the joint entities established under EU law, by a decision of the competent body of the joint entity, the participating contracting authorities shall agree on the applicable national procurement rules of one of the following Member States: (a) the national provisions of the Member State where the joint entity has its registered office; or (b) the national provisions of the Member State where the joint entity is carrying out its activities. Such agreement may either apply for an undetermined period, when fixed in the constitutive act of the joint entity, or may be limited to a certain period of time, certain types of contracts or to one or more individual contract awards.

In this case,  there is no specific transparency requirement to the effect of imposing disclosure of such agreement in the relevant procurement documents, but the joint entity would be well advised to do so. In this scenario, the same issues concerning the conflict-of-law-like issues discussed above also apply.

Overall impression
In my view, all of the above creates the impression that these rules will be applicable in a marginal set of cases where contracting authorities of different Member States engage in long-term cooperation for public procurement purposes, which seems most likely in frontier areas. In any case, the rules in reg.39 PCR2015 (art 39 dir 2014/24) are mostly limited or completely open to agreement between the Member States/contracting authorities involved, so they can hardly be seen as much more than enabling provisions and, in that case, their relationship (or distinction) with reg. 9 PCR2015 (art 9 dir 2014/24) is unclear. 

I would personally not expect a very significant practical implementation of these rules in the short term, with the only possible exception of cross-border centralisation. That is an issue briefly explored in A Sanchez-Graells and I Herrera Anchustegui, 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, and one which we aim to explore further in a forthcoming paper.