Many service providers and construction companies in the offshore energy business regularly participate in public tender proceedings, because many such tendered projects are owned and financed either directly by public authorities, state-owned entities or by private companies bound by public procurement law. In the energy industry you will typically come across private companies that are bound by EU Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors. This “Sector Directive”, as it is commonly abbreviated, mandates that private companies providing essential services to the national production of energy and power, such as constructing and maintaining the grid connections for offshore wind farms, are bound by public procurement law. This Directive was enacted into national German law in the form of the “Sector Regulation”, which gives full effect to the EU Directive.
As companies bound by the Sector Regulation are privately or partially-privately owned companies, many bidders are unaware of the strict public regulation of tender proceedings conducted by these companies. Whilst their tenders might appear to be usual private tenders for a contract for works or services, their tender proceedings are in fact subject to a large number of public procurement law provisions. This has a significant impact on the required content of the tender documents, on the way these tender proceedings have to be formally conducted, on how the successful bidder must be chosen and on the legal remedies bidders may have if these provisions are not adhered to.
Required content of tender documents
When initiating tender proceedings that are subject to the Sector Regulation, the tendering company needs to provide a number of tender documents to all potential bidders. These documents must contain details of how the tender will be conducted, what type of tender proceeding is being used, what the criteria for selection of the successful bidder are and what contract conditions the tendering company is proposing. Since the documents to be provided are quite elaborate, it is easy for tendering companies to make mistakes, rendering them in breach of the Sector Regulation right from the start of the tendering process. For potential bidders it is essential to note that they only have 10 calendar days, starting from the publication of the tender documents, to notify and object to any mistakes, omissions or inaccuracies in the documents, after which their right to object lapses. Even if a mistake becomes apparent later and the tendering company does not correct that voluntarily, a bidder can no longer raise a formal objection with the local Procurement Chambers or the courts based on such mistake.
To give an example, the tender documents must not only specify the criteria according to which the successful bidder is chosen, they must also specify how these criteria are weighed in relation to each other and the standards by which it will be determined whether and to what extent a criterion is fulfilled. Some criteria (such as the requirement to provide certificates which are specific to the country in which the tendering company is incorporated or carries on its business, but are unavailable in other EU countries) are inadmissible and including them would thus amount to a mistake in the tender documents (sections 28, 29, 31 and 32 of the Sector Regulation). The same applies to certain requirements as to the quality of the works provided, which would be considered discriminating in accordance with section 46 of the Sector Regulation and thus also inadmissible.
Formalities of the tender proceedings
As a next step, the tendering company must strictly adhere to the type of proceeding it chose to employ. The whole process must be completely transparent and all bidders must be given equal opportunity to take part and be given equal access to information. The tendering company must also adhere to statutory deadlines (such as deadlines for receipt of the bidder’s questions, offers or side offers), which may only be shortened under very specific circumstances.
In our experience, many tendering companies use the complicated requirements and specific provisions of public tender proceedings to their advantage when dealing with bidders who are unfamiliar with the details of German and EU public procurement law. Quite frequently a bidder realises that he has been unlawfully excluded from the tendering process or been discriminated against in favour of another bidder after the deadline for an objection has already passed. Since these deadlines are so short and there is a myriad of mistakes to be made or opportunities to be missed, we would always advise to consult with lawyers experienced in the field of public procurement from the start when taking part in a tender, whether in Germany or elsewhere in the EU.