In its judgment C-267/18 of 3 October 2019, the Court of Justice of the European Union clarified the exclusion ground of the 2014 EUR Public Procurement Directives in relation to “significant or persistent deficiencies” in the performance of a prior public contract. It also highlighted the importance for tenderers to be transparent when completing the ESPD.
The case related to the question whether a contracting authority could exclude a tenderer for having employed subcontractors in a previous contract without the contracting authority’s permission. Important to note is that the previous contract was terminated by the competent contracting authority at that time.
The CJEU confirmed that it is the contracting authority which launched the tender, that decides if a tenderer is excluded at the selection stage. A contracting authority must itself investigate whether the facts are sufficiently serious to justify an exclusion. A mere reference to another contracting authority’s decision to terminate a previous contract is therefore not sufficient.
At the same time, tenderers have an active obligation to cooperate with the contracting authority. A tenderer must inform the contracting authority of all elements that can have a decisive influence on the selection decision in accordance with the requirements of transparency and loyalty. This means that tenderers are not only obliged to share correct information but may also not withhold relevant information. According to the CJEU, the ESPD standard form provides specific room to notify (possible) concerns regarding the optional grounds for exclusion (Part III, point C of the ESPD standard document which relates to “Grounds relating to insolvency, conflicts of interest or professional misconduct”).
In the present case, the tenderer should have notified the contracting authority of the early termination of its previous contract by another contracting authority, especially since the decision to terminate had already been formally confirmed. According to the CJEU, the obligation to be transparent on potential grounds for exclusion does not only benefit the contracting authority, but also the tenderer. It allows the tenderer to demonstrate its reliability, for example by providing elements proving that it had not failed to fulfil its obligations in the previous contract or by providing evidence of any corrective measures it has taken following the events.
Clearly, a failure on one public procurement contract may have a negative impact on any future tenders. Tenderers should not speculate on the fact that a contracting authority may not necessarily be aware of past events. The CJEU seems to suggest that they must actively disclose past events in the ESPD and at the same time provide elements demonstrating their reliability despite these events.