Conflicts of interest in the tendering process – does a service provider’s prior involvement with a project preclude it from bidding?

A recent case heard by the European Ombudsman decided that the European Commission’s actions constituted maladministration in the running of a tender, as it had failed properly to handle an issue of apparent conflict of interest. It emerged that the team leader of one of the bidder’s had been involved in drafting at least part of the terms of reference for the new project being tendered.

The Ombudsman noted that the Commission’s own Practical Guide states, that: "any firm or expert participating in the preparation of a project (eg, drafting of the Terms of Reference) must be, as a rule, excluded from participating in tenders based on this preparatory work, unless they can prove to the Contracting Authority that the involvement in previous stages of the project does not constitute unfair competition". This clearly put the burden of proof on the incumbent bidder to prove that there was no conflict. The bidder had stated in its tender submission that there was no conflict of interest and the Commission should not have accepted that declaration without further investigation. This was notwithstanding that the role of the team leader in putting together the current tender documents may have been limited and may not in the event have conferred any material advantage on his company.

The Commission’s record keeping was also criticised as it was unable to provide any written evidence confirming the extent of the team leader’s prior involvement.

The case acts as a reminder to contracting authorities to think laterally about conflicts of interest (actual, apparent or potential), and to be wary of accepting at face value a bidder’s response that no conflict exists. While the prior involvement of a bidder should not automatically result in its exclusion, the position must be investigated including a requirement for the bidder to explain why no conflict of interest exists and the steps and measures it has taken to ensure that its participation does not preclude a fair competition. This might include, for example, how the bidder has implemented and maintained strict information barriers and other separation measures in relation to members of the bidding team and those of the bidder’s staff who have had prior involvement with the authority. The authority should also remember the importance of keeping complete and accurate records to evidence: the extent of any prior involvement by a bidding company (including any information which the bidding company may have received), the investigations the authority has undertaken, and the justification for its decisions.