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procurement update

12 December 2018

This article is taken from December's public matters newsletter. Click here to view more articles from this issue.

There seems to have been a flurry of interesting procurement judgments from both European and English courts recently. Two of the European judgments raise some points worth noting.

Short and sweet

The first case is a preliminary judgment, requested by Italian Council of State, the body with oversight of decisions made by public administrative bodies. In brief, the facts are:

  • IBA is a pharmaceutical manufacturing company that has sole distribution rights in Italy for a particular drug, known as 18-FDG
  • Sacro Cuore (SC) is a private hospital that forms part of the public healthcare pathway in the Veneto region of Italy. It was directly awarded a contract by a local authority (simply known as Local Authority No 3!) and a local public hospital for the distribution of said 18-FDG
  • Under the contract SC did not receive payment for the distribution to 9 regional public hospitals, the hospitals simply paid a flat rate of 180 Euro per delivery
  • The Veneto regional government also paid a one-off grant of 700,000 Euro for the supply of 18-FDG free of charge to the hospitals.

So what sort of arrangement was this? A supply contract that should have been tendered since it was over the EU threshold even though consideration was from third parties and only to cover costs? A public to public cooperation that was exempt? The time of the action is pre-2014 Directive so the relevant provisions are the Hamburg Waste line of case law and the Commission’s non-working paper on public to public cooperation. The first judgment found in favour of the local authorities, saying that it met the Hamburg Waste principles and couldn’t be a supply contract as there was no direct consideration.

This was then appealed to the Council of State, who referred the above questions to the European Court of Justice (ECJ) for preliminary judgment. Firstly, the ECJ said that there was clearly a pecuniary interest in the contract, meaning that it could fall within the definition of a ‘public contract’. Pecuniary interest does not need to cover the full amount of the costs nor provide an element of profit. Financial reward can also come from third parties.

Secondly, could SC be classified as a public body because of its integral part in the regional healthcare system? The short answer was no. However, the court does helpfully give a short synopsis of both the Teckal principles and the Hamburg Waste test. Teckal is definitely ruled out as there is no ownership or control over SC by the local or regional government. As for the Hamburg Waste test, the ECJ does not consider SC a public body. SC was a ‘classified’ hospital, meaning that it could be part of the public healthcare system, but it was entirely privately managed in terms of funding, appointment of management, etc. This meant that it could not meet the test for a public body.

As this is a request for preliminary judgment we may never know the final outcome unless the Council of State’s final decision is again challenged by IBA. However, the commentary in the judgment is a helpful reminder of the strictness by which the Teckal and Hamburg Waste tests are judged.

A lengthy but useful judgment

The second case comes from Latvia and is a lengthy commentary on, as a bidder, how not to bring a challenge, and, as a contracting authority, how to ensure that your evaluation can stand up to scrutiny. The judgment is very lengthy as the court takes a keen interest in analysing the detail of the evaluation criteria, the responses and the evaluation commentary.

This was a challenge to a contract awarded by the European Institute for Gender Equality (EIGE) for online and website services. The challenge was brought on the basis that the evaluation criteria were imprecise and the evaluation methodology lacked transparency. In addition there was manifest error in the evaluation and a breach of equal treatment because the successful tenderer had knowledge from a previous contract.

The ECJ made some key points, which I have summarised down from the 213 paragraphs of the judgment:

  1. If a bidder is concerned about something in the tender documents then it must be raised at the time, it cannot wait until the results to see whether their concern was justified, nor can they retrospectively realise that there was a problem. In this case, the court said that in any event, the claims around imprecise evaluation. criteria could not be substantiated. It analysed each evaluation criterion and the sub-criteria and pointed out where there was clarity and detail.

  2. The commentary is a good summary of the case law around equal treatment of bidders and transparency, going all the way back to the original case of Succhi di Frutta. It reminds us that the contracting authority must be sure that all technical information relevant for the purpose of understanding the specification is available to all bidders and that this is doubly important where there is an incumbent provider bidding for the contract.

  3. It addresses the RWIND bidder principle, (reasonably well informed and diligent), meaning that when considering evaluation criteria the contracting authority needs to draft them from the point of someone that has received and absorbed all the information provided and is looking at the evaluation criteria in that context, not just anyone looking at them in isolation.

  4. The ECJ supported the view that contracting authorities have some leeway in how they evaluate and that the full evaluation and marking system does not need to be shared with bidders.

  5. The manifest error point was in relation to the complainant feeling that the feedback on its scoring didn’t reflect accurately the information that it had provided. The court made short work of that argument, highlighting a number of places in the responses where the bidder had not fully answered a question so as to meet all the points set out in the sub-criteria, or where the bidder had clearly misunderstood what was required.

  6. There is a reminder that bidders need to be careful to ensure that each response can be evaluated on its own and isn’t reliant on other parts of its tender.

  7. There is some commentary about comparative evaluation, which is interesting. Comparative evaluation is tricky to get right because you are comparing tenders rather than looking at each simply on the merits of their responses to the criteria. However, in some cases it is necessary when all bidders can meet the same technical requirements.

All in all this case is a good lesson for both sides of the tender process and can be put into practice when drafting tender documents and responses.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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