Insights

In the case C-737/22, the applicant, Staten og Kommunernes Indkobsservice A/S (“SKI”) brought a case before the High Court of Eastern Denmark (the “Referring Court”) against BibMedia A/S (“BIB”). However, in December 2022, the Referring Court decided to stay the proceedings in Denmark and refer the following question to the Court of Justice of the European Union (the “CJEU”) for a preliminary ruling:

“Do the principles of transparency and equal treatment in Article 18^[1] of Directive 2014/24 (the “Directive”) and the consequent ban on negotiations preclude a tenderer who has submitted the second most economically advantageous tender in connection with an open procedure for separate lots (see Article 27 and 46 of that directive) from being given the opportunity after the deadline for submission of the tender has expired, and in accordance with the predetermined terms in the specifications, to supply the proposed services within a lot under the same terms as a tenderer who has submitted the most economically advantageous tender and who, therefore, is awarded another lot put out to tender at the same time?”

Article 267 of the Treaty on the Functioning of the European Union (the “TFEU”) regulates preliminary rulings. These have often been described by the CJEU in various judgments as an instrument of cooperation between the Court of Justice and the national courts, through which the Court provides the national courts with the points of interpretation of EU law which they require in order to decide the disputes before them with the justification for such reference being that it is necessary for the effective resolution of a dispute.

Background to the case

SKI is a central purchasing body owned by the Danish State and Kommunernes Landsforening (Association of Danish Municipalities) which was set up to streamline public procurement through the award and implementation of framework agreements on behalf of the state and municipalities.

On 4 February 2020, a tendering procedure was launched by SKI with a view to conclude a framework agreement relating to the provision of library materials and preparatory services. Although this agreement provided for 8 lots, Lots 1 and 2 were the principle point of interest. While Lot 1 related to Danish books and sheet music to be provided in Eastern Denmark, Lot 2 related to the same matter however in Western Denmark.

Paragraph 3.1 of the Tender Specifications provided as follows: “Lot 1 and Lot 2 are interdependent and if a tenderer submits a tender for 1 of those lots, that tender will automatically be deemed to have been submitted for both lots.”

SKI’s intention was to have one supplier control the market in Eastern Denmark and another control the market in Western Denmark, on the condition that the prices would be the same across all borders, regardless of whether that customer was located in Eastern or Western Denmark.

The idea behind this public procurement procedure was for the tenderer who submits the most economically advantageous tender to be awarded Lot 2 while the second most economically advantageous tenderer would be awarded Lot 1, should that tenderer accept. If that tenderer chooses not to accept, Lot 1 is then offered to the third most economically advantageous tenderer and so on. However, this was on the condition that the tenderer who is awarded Lot 1, must supply products to Eastern Denmark at the same rates as those offered in Western Denmark.

Once the procurement process was closed, SKI had two bids, one from Audio Visionary Music A/S (“AVM”) and another from BIB, both of whom submitted bids for all tenders, with BIB being the most economically advantageous tenderer. In view of this, BIB was awarded Lot 2 while AVM, as the second most economically advantageous tenderer, was offered Lot 1. AVM accepted such an offer and agreed to deliver supplies and perform services at the same rates offered by BIB.

On the 21 April 2020, SKI issued their contract award decision. Just a week later, AVM lodged a complaint to the Public Procurement Complaints Board (the “Board”) in Denmark. In January 2021, the Board found that SKI had infringed Paragraph 2(1)^[2] of the Udbudsloven (Law on Public Procurement) by applying a procedure where the tenderer who submitted the second-best offer, could modify its tender, even after the submissions period had expired. This way, the tenderer would be in a more advantageous position to be awarded Lot 1 (the “Decision”).

The Board justified the Decision by stating that the tenderer had the opportunity to amend essential terms of its tender, namely the price, in a way which is favorable to the Contracting Authority while giving the tenderer the opportunity to improve its tender. This approach goes contrary to the ban on negotiations which derives from the principles of equal treatment and transparency.

Later, on 9 July 2021, SKI brought an action before the District Court in Denmark against the Decision. On 7 December 2021, this same action was sent to the High Court of Eastern Denmark who decided to stay the proceedings and refer this matter to the CJEU for a preliminary ruling.

Analysis of the CJEU’s Preliminary Ruling

The CJEU explored the meaning behind both the principle of equal treatment and the principle of transparency. With respect to the former, the Court held that the objective behind the principle of equal treatment is “to encourage the development of healthy and effective competition between undertakings taking part in a public procurement procedure and lies at the very heart of the EU rules on public procurement procedures.” It went on to provide that tenderers must be on an equal footing, both when they formulate their tenders as well as when those tenders are being assessed by the contracting authority.

As to the principle of transparency, the CJEU held that such a principle is “intended to preclude any risk of favoritism or arbitrariness on the part of the contracting authority.” Furthermore, and in accordance with this principle, conditions and detailed rules of the award procedure must be drawn up in a clear, precise and unequivocal manner in the contract notice or tender specifications so that:

1. All reasonably informed tenderers exercising ordinary care can understand their exact significance and interpret them in the same way; and
2. The contracting authority is able to ascertain whether the tenders submitted, satisfy the criteria applying to the relevant contract.

The CJEU held that as a rule, a tender cannot be amended after it has been submitted, whether it is at the request of the Contracting Authority or the tenderer itself. The Court further held that in such a public procurement procedure, it is the prices being offered before the expiry of the period for the submission of tenders which directly and definitively determined the ranking of the tenderers. In such a ranking, the tenderer which offered the lowest price takes first place, and that tenderer’s price is that at which the entirety of the contract will be concluded. It further considered that no tender had the possibility of changing, by amending its tender or by any negotiation, its position in the ranking or the price at which the contract relating to a given lot will be concluded.

Concluding Remarks

The CJEU, in its final considerations provided that it was evident that a contract award procedure such as this, comes without breaching the principles of equal treatment and transparency. It further held that such principles do not preclude, in such a procedure for the award of a public contract divided into lots, the tenderer who submitted the second most economically advantageous tender from being awarded a lot at the same price as that offered by the tenderer who submitted the most economically advantageous tender and which was therefore awarded another, larger lot, of that contract.

Disclaimer: Ganado Advocates is responsible for contributing to this law report but was not in any way involved as legal advisor for the parties in the judgement being covered in this law report. This article was first published in The Malta Independent on 07/08/2024.

[1] Article 18: Contracting authorities shall treat economic operators equally and without discrimination and shall act in a transparent and proportionate manner.

[2] “In public procurement [..] a Contracting Authority shall comply with the principles of equal treatment, transparency and proportionality.”