Who should prove whether evaluators have a conflict of interest?

Unsuccessful bidders sometimes seek to allege that evaluators were biased against them or had a conflict of interest which favoured another tenderer.

In eVigilo (Case C-538/13) the European Court has provided guidance on how alleged conflicts of interest are to be dealt with in the context of procurement challenges.

The contracting authority employed university experts to draw up tender documents and evaluate tender responses. In its tender submission, the successful bidder referred to a number of experts from the same university as being part of its team. eVigilo challenged the award, alleging that the evaluators were biased towards the successful bidder because of the professional relationship they had with the experts engaged by that bidder.

Interestingly, the Court held that the contracting authority is required to determine whether any conflicts of interests exist and to take appropriate measures in order to prevent and detect conflicts of interests and remedy them. It would be incompatible with that ‘active role’ for the challenger to bear the burden of proving, in the context of the appeal proceedings, that the experts appointed by the authority were in fact biased, particularly given that tenderers generally do not have access to evidence which proves such bias. According to the Court, if an unsuccessful tenderer presents objective evidence calling into question the impartiality of one of the contracting authority’s experts, it is for that authority to examine all the relevant circumstances having led to the adoption of the decision relating to the award of the contract in order to prevent and detect conflicts of interests and remedy them, including, where appropriate, requesting the parties to provide certain information and evidence.

In this particular case, the connections between the experts appointed by the authority and the specialists of the undertakings awarded the contract (and in particular, the fact that those persons work together in the same university, belong to the same esearch group or have relationships of employer and employee within that university) if proved to be true, would constitute such objective evidence. 

Ultimately it remains a question of national law as to what ‘bias’ means and what the legal effects of a finding of ‘bias’ are. It is for national law to determine whether, and if so to what extent, the Courts must take into account the fact that possible bias on the part of the experts had no effect on the decision to award the contract.

It is worth noting that subsequent to the initiation of these proceedings Directive 2014/24/EU on public procurement has come into force, Article 24 of which requires contracting authorities to “effectively prevent, identify and remedy conflicts of interest”. This judgment will provide some guidance on how Article 24 may be interpreted in the future.

Amending technical specifications

The European Court has given a preliminary ruling on a reference from a Romanian court regarding the use of references to branded products in the technical specifications of a tender.

In SC Enterprise (Case C-278/14), the contracting authority rejected a bidder on the basis that the product it offered was not equivalent to a particular branded product (an Intel processor) specified in the tender documentation. This was despite the fact that the product offered was in fact superior to the product referred to in the tender documents. The authority reached its conclusion after finding out that the branded products it had specified were no longer in production or supported by their manufacturer, although they were still commercially available; having established this, the authority judged the unsuccessful bidder’s tendered product by reference to a different Intel product, whose performance was superior to that of the processor offered by the bidder.

The Court considered that the relevant question was whether a contracting authority which has defined a technical specification by reference to a branded product may, where that product is no longer in production, modify that specification by referring to a comparable product of the same brand which is now in production but which has different characteristics. Unsurprisingly, the Court held that it could not.

It is notable that the value of the contract was below the financial thresholds required for the application of Directive 2004/18, and the Court considered that the fundamental principles of equality, non-discrimination and transparency provided in the EU Treaty would only apply if the contract had a crossborder interest. That was a matter for the national court to determine but the Court decided to provide a ruling to assist the national court if it were to find that the contract was of cross-border interest. The Court also strongly hinted at the presence of a cross border interest in this case because the contract concerned the supply of computing systems and equipment with the reference processor being that of an international brand (a relatively low threshold one might have thought).

The obligation of transparency is, in particular, intended to preclude any risk of arbitrariness on the part of the contracting authority. That objective would not be achieved if the authority were able to disregard the conditions it had itself imposed in the tender documents. Consequently, the principle of equal treatment and the obligation of transparency prohibit the contracting authority from rejecting a tender which satisfies the requirements of the invitation to tender, on grounds which are not set out in the published tender specifications.

Meaning of a service concession

On 21 May 2015, the European Court handed down a ruling on a preliminary reference from a Finnish court on the meaning of service concessions under Directive 2004/18.

The Court (Kansanelakeleitos, Case C-269/14) considered the definition of a service concession in Directive 2004/18: “a contract of the same type as a service contract except for the fact that the consideration for the provision of services consists either solely in the right to exploit the service or in that right together with payment.”

The Court held that in order to decide whether a contract is in fact a service concession it must be established that the service provider takes all or at least a significant share of the risk of operating the service from the contracting authority. This risk is to be understood as the risk of exposure to the variable market conditions such as the risk of competition, supply and demand fluctuations, bad debts or the risk of liability for harm or damage caused by inadequate provision of the service.

The Court stated that when the agreed method of remuneration is the right for the service provider to exploit the service it is providing, that method of remuneration means that the provider takes the risk of operating the services in question. In this case, the Court observed that the service providers were exposed to the risk of non-payment and that they were also responsible for the management of the contracts with their individual staff.

However, the Court stated that it was for the national court to assess whether there has been a sufficient transfer of risk faced by the contracting authority to meet the standard required to satisfy the definition of a service concession in the Directive.

Proving availability of third party resources

It is well established in European law that tenderers can rely on the resources of third parties when tendering for public contracts, provided that they establish that those resources are actually available to them. Directive 2004/18 states that economic operators must be able to prove this, although it does not specify any particular method for to demonstrate this proof.

A Latvian authority stipulated in its tender documents that winning tenderers had to prove they had resources available by entering into a co-operation or partnership agreement before the public contract was awarded. Advocate General Wathelet recently took the view that such a stipulation is unlawful in the case of Ostas Celtnieks (Case C-234/14).

AG Wathelet opined that the Directive does not specify any method for showing proof and stipulating only one method for proving the availability of resources was in breach of the proportionality principle.

The procurement rules are aimed at opening up competition as far as possible and such a stipulation would limit the number of operators who will be able to bid on the contract. The AG considered that tenderers must be allowed to choose the method of cooperation with other undertakings they seek to rely upon.

The AG also considered that a stipulation in the tender documents that the winning tenderer and the third parties upon which it relies must agree to joint and several responsibility in their co-operation or partnership agreement would dissuade operators from getting involved in such arrangements. This view is particularly interesting given that the new Directive 2014/24 expressly permits authorities to require joint liability for the contract.