eu public procurement law 2011: lesson 7 – chapter 4, the contract documents – anders birkelund...

EU Public Procurement Law 2011: Lesson 7 – Chapter 4, The Contract Documents – Anders Birkelund Nielsen

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Where are we?

• Aim and principles (chapter 1)• Contracting authorities (chapter 2)• Contracts subject to the Procurement Directive (chapter 3)• The Contract Documents (chapter 4)• The Procurement Procedures (chapter 5)• Selection of Participants (chapter 6)• Award of Orders (chapter 7)• Enforcement (chapter 8)

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The Contract Documents

The contract documents form the basis of the award of any public contract:• Must describe the purchase

• Technical, economic and legal requirements• The process (for awarding the contract) itself

• The contract documents will most often consist of:• A contract notice• Specifications

• Procedure specifications (specifications to tenderers)• Technical specifications • Draft contract• Etc.

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C-87/94, Commission v. BelgiumFacts:• Open procedure regarding contract for the purchase of busses under the former Utilities

Directive• The “economically most advantageous tender” based on fixed sub-criteria, including a fixed

formula regarding maintenance costs based on: the tenderer’s prices and estimated time consumption per part and the contracting authority’s estimate regarding need for replacement

• The contracting authority evaluated the tenders and prepared a recommendation for the award decision

• A tenderer (EMI) forwarded additional information after the deadline for submitting tenders, including a revised fuel consumption, an estimate of the need to change spare parts and several proposal for savings the contracting authority considered the information and changed the award decision

• Complaint: The contracting authority 1) considered the change of tender after the deadline, 2) accepted a tender that did not comply with the contract documents, and 3) considered elements that were not included in the award criteria

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C-87/94, Commission v. Belgium (Wallon busses)The Court:• “When, as in the present case, a contracting entity opts for an open procedure [it must] set a

final date for receipt of tenders, so that all tenderers have the same period after publication of the tender notice within which to prepare their tenders, and set the date, hour and place of opening tenders, which also reinforces the transparency of the procedure, since the terms of all the tenders submitted are revealed at the same time.”

• “When a contracting entity takes into account an amendment to the initial tenders of only one tenderer, it is clear that that tenderer enjoys an advantage over his competitors, which breaches the principle of the equal treatment of tenderers and impairs the transparency of the procedure.”

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C-87/94, Commission v. Belgium (Wallon busses)The Court:• “It should be recalled that […] the special conditions did not ask tenderers to indicate the

frequency of spare part replacements for their buses. On the contrary, the [authority] had fixed a figure for that element in respect of each component in the table. Moreover, in […] the special conditions the [authority] had stated that a notional penalty would be applied to all tenders "in accordance with the table …". (par. 69)

• “… when a contracting entity had laid down prescriptive requirements in the contract documents, observance of the principle of equal treatment of tenderers required that all the tenders must comply with them so as to ensure objective comparison of the tenders.” (par. 70)

• “… the requirements [the special conditions] continued to be applicable to all the tenders and those tenders had to comply with them. It must therefore be held that EMI was not entitled to "amend" the terms of its initial tenders regarding those requirements and that [the authority] was not entitled to calculate EMI' s notional penalties by reference to its new figures, which did not correspond to the prescriptive requirements of the special conditions.” (par. 71)

• “… held […] that, by awarding the contract to EMI on the basis of figures which did not correspond to the prescriptive requirements of [the special conditions] for calculating its notional penalty for maintenance costs for engine and gear box replacement, the [authority] infringed the award criteria laid down in the special conditions and also the principle of equal treatment of tenderers.” (par. 74)

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C-87/94, Commission v. Belgium (Wallon busses)The Court:• “… the cost-saving features were not amongst the award criteria adopted by the [authority] for

the award of the contract.” (par. 85)• “… the [authority] itself defined all the technical criteria using a precise formula set out under

each heading […]. Accordingly, the scope of the technical criteria, whatever the wording of the headings, was restricted by the formulas used by the [authority] to define them.” (par. 87)

• “The requirement under [the Directive] for the contracting entities to state ’in the contract documents or in the tender notice all the criteria they intend to apply to the award, where possible in descending order of importance’ is intended precisely to inform potential tenderers of the features to be taken into account in identifying the economically most advantageous offer. All the tenderers are thus aware of the award criteria to be satisfied by their tenders and the relative importance of those criteria. Moreover, that requirement ensures the observance of the principles of equal treatment of tenderers and of transparency.” (par. 88)

• “.. by taking into account, in its comparison of tenders […], the cost-saving features suggested by EMI without having referred to them in the contract documents or in the tender notice, by using them to offset the financial differences between the tenders in first place and those of EMI placed second and by accepting some of EMI' s tenders as a result of taking those features into account, the Kingdom of Belgium failed to fulfil its obligations under the Directive.” (par. 94)

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General requirements:• Transparency

• Potential tenderers must be able to assess whether the contract is of their of interest

• Demands and conditions as to the competition and completion of the contract must be published

• The Directive calls for the publishing of a standard contract notice (article 35(1)) Publication in the supplement to the official journal of the European Union) (http://ted.europa.eu)

• ”All” information relevant for the assessment of the tenderers’ qualifications or the tenders must be published

• When assessing tenderers and tenders, the contracting authority may only take the published conditions into account

• Prohibition on negotiations

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General requirements:• Objectivity

• Equal treatment, transparency and the consequent effective competition are best ensured by using objective criteria

• Objective = unambiguous and verifiable (e.g. turnover or price in DKK or height, length, etc.)

• The objectivity requirement applies to several phases of a tender procedure • Especially important when determining the award criteria in which

complete objectivity is not always possible (e.g. assessment of aesthetics)

• Also relevant in relation to other parts of the contract documents, e.g. when preparing the technical specifications (e.g. use of standards)

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General requirements:• Written procedures

• The contract documents (rules, demands etc.) must be in writing• This requirement also applies to any additional information to the

tenderers (e.g. Q’s and A’s)• Clear, precise and sufficient description

• The contract documents must contain precise information on what is to be delivered and regarding requirements, award criteria, conditions and procedures

• The potential tenderer must be able to determine the technical, economic and legal elements of the contract

• Risk considerations tenderer/contracting authority

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The Danish Complaints Board for Public Procurement, decision of 5 September 2006, Joca Trading A/S v. Renosyd I/S

Facts:• Open procedure regarding contract for delivery of plastic containers• A number of complaint issues, including

• the fact that the draft contract stipulated that (i) the most extensive interpretation/wording was to apply if any discrepancy arose among the contract documents, and (ii) the defendant - in case of doubt - was to decide which wording was the correct wording

• the defendant’s statements regarding quantity was inconsistent as the contract notice stipulated that app. 6,000 containers were to be delivered whereas the contract documents stipulated that up to 71,800 containers were to be delivered

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The Danish Complaints Board for Public Procurement, decision of 5 September 2006, Joca Trading A/S v. Renosyd I/S

The Complaints Board:• ”According to EU’s transparency principle, an exact description of the items to be

delivered must be provided …”• ”The contract notice states that the total number of containers will amount to

appr. 6000 as the final number depends on what the citizens choose.”• ”The contract documents state that the estimated number of containers to be

delivered to the municipality of Silkeborg was 4.415. […] The contract documents state a total number of 71,800 containers corresponding to the maximum number of households that are to receive containers according to the table […].”

• ”The total number of containers that were to be delivered and the possibility for the call of the options are not stated in the description and is difficult to asses.”

• ”Therefore, the Complaints Board finds that the defendant has acted in violation of the transparency principle by stating the scope of the delivery as was the case. Thus, the Complaints Board emphasize that the scope of the delivery is of great importance to the tenderers.”

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Description of the object of the contract:• Practical point of view: The description must take into account (i) the public object,

(ii) the actual demand, and (iii) the economical scope.• In principle the contracting authority has a significant right to decide what is to be

bought, including the right to determine the object’s characteristics (quality, scope, price, etc.)

• E.g.: The municipality, running a school, need for cleaning, budget The municipality may choose (i) to describe how and when to clean, or (ii) how clean it has to be – and how often/where to clean, etc.

• Certain essential additional elements (contract requirements) must be publicized, e.g. options, special service requirements, requirements as to the qualifications of the employees on the assignment, commitment to take over employees, equipment, etc.

• Requirement to refer to the relevant CPV numbers in the CPV glossary (Common Procurement Vocabulary), classification system for goods, work and services

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Description of the object of the contract:• Competition criteria and fixed terms:

• The question is whether an element should be part of the award criteria (competition criterion) or should be an absolute condition for the award of the contract (fixed term)

• The contracting authority has the right to choose whether an element should be included in the competition• However, certain elements are obvious closed conditions, e.g.: the

contract’s formal requirements, an obligation to take over employees or equipment, etc.

• Choice between a (very) detailed technical specification/no alternative tenders, or specification of (less restricting) function requirements/possibility for alternative tenders

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The contract Documents

Description of the object of the contract:• The contracting authority’s right to describe the object of the contract is modified

by the prohibition against trade barriers and discrimination• The prohibition includes (i) any kind of discrimination of producers or service

providers in other member states, and (ii) any restriction that might prevent – or be a disadvantage for – the business activity exercised by a service provider in another member state or makes such activity less attractive.

• If elements of the contract documents have as their purpose or effect the restriction of trade between member states, they are, in principle, in violation of the Treaty unless they fulfil a number of requirements:• No discrimination due to nationality• Due to necessary considerations for the public• Appropriate measure (to realize the object)• Proportionality

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Description of the object of the contract:Technical specifications (art. 23)

• Defined in appendix VI of the Directive• Can be constituted by (i) detailed, technical specifications or (ii) functional

requirements or (iii) a combination of the two• E.g.: Purchase of (i) x white double coated soft paper rolls, which must be 12

centimetres wide, 75 meters per roll, perforated to be torn every 14 centimetres, the paper must be wrapped round a cardboard tube with a diameter of 5 to 6 centimetres or (ii) toilet/wiping paper or (iii) toilet/wiping paper, white and double coated

• Objectivity requirements The tenderers must be given equal options (art. 23(2))

• MR: The specifications cannot indicate a specific product, brand, origin, production process or the like (art. 23 (8))

• E: The purchase cannot be described in other manners (it is required that the expression “or similar” is added)

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Description of the object of the contract:Technical specifications (art. 23) (continued)

• Standards etc.• ”a technical specification approved by a recognized body for

repeated and continuous application…”• Standards must be used to the widest extent possible when

identifying the technical specifications (art. 23(3))• Order of preference:

1. National standards transposing European standards2. National standards (remember: ”or equivalent”)

• There is a lot of standards, e.g. INSTA 800 (cleaning – way of measuring/describing the level of cleanliness required)

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Description of the object of the contract:Technical specifications (art. 23) (continued)

• Documentation with regards to fulfillment of technical specifications (mutual recognition):• Main rule: The contracting authority decides what kind of

documentation that is acceptable• Exception: The contracting authority must (no matter if the purchase

is described using detailed technical specifications or functional requirements) assess and evaluate a tender even though the tender does not include the required documentation …

• …if the tenderer in the tender “to the satisfaction of the contracting authority and by any appropriate means” proves that the offered solution meets the performance or functional requirements of the contracting authority

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Economy• The contracting authority must describe the procedure, including the

award criteria (which will be described further in chapter 7)• A choice between “lowest price” or “the economically most

advantageous tender”• Economy is not necessarily only the offered price

• Terms of payment (period of credit, time of payment etc.), transport and consequential expenses (fuel, service, removal etc.)

• The contract documents should describe these conditions/ elements if you want to take be able to take onto consideration

• Assessment of overall economy → “lowest price” or “the economically most advantageous tender”?

• Price does not need to be a competition parameter (economic frame)

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Draft agreement:• The transparency requirement entails that potential tenderers – based on

the contract documents – must be able to assess whether or not the contract is interesting

• Prohibition on negotiations no/small possibility of individual adjustments

• A draft agreement in the contract documents ensures that “the frame” of the tenders is established (different conditions are easily/best described in the draft agreement) • delivery, payment, risk, guarantees, liquidated damages, provisions

on remedies for breach of contract etc.• In principle, all elements that are not open to competition should appear

from the tender documents (draft agreement)• The contracting authority’s preparation of the draft agreement may lead

to an unfair contract risk of bad/no tenders

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Variants (article 24):• Background: It is assumed that the contracting authority sees the broader

perspective of all the technical solution possibilities on the market and their suitability in relation to the contracting authority’s specific needs → The contracting authority determines technical specifications

• Modification: The contracting authority assesses that there could be several suitable solutions on the market

• The contracting authority can allow variants (tenders that differ from the specification of requirements etc.) if …• the award criteria is “the economically most advantageous tender”• the possibility of submitting variants is stated in the tender documents, and • the contracting authority determines minimum requirements for the variants

in the tender documents.• E.g.: The contracting authority can demand the same solution in another material

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The Danish Complaints Board for Public Procurement, decision of 16 December 2004, Brunata A/S v. Aalborg BoligselskabFacts:•Complaint about award of contract regarding delivery of energy and water meters for departments of different general housing organisations.•Obscurity in the contract documents’ demand for the water meters having the counter separated from the meters•Possibility of submitting “variants”•Various other claims

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The Danish Complaints Board for Public Procurement, decision of 16 December 2004, Brunata A/S v. Aalborg Boligselskab

The Danish Complaints Board for Public Procurement:• “The mentioned requirements in the contract documents could be

interpreted in different ways and the most natural way is as mentioned contrary to the contract documents’ requirement for the water meters being EU approved. These conditions are caused by the defendant not having formulated the demand precisely enough. As a result of the equal treatment principle, the defendants were obliged to seek technical clarification…”

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The Danish Complaints Board for Public Procurement, decision of 16 December 2004, Brunata A/S against Aalborg BoligselskabThe Danish Complaints Board for Public Procurement:•“The contract documents’ statement of the possibility of submitting variants was misleading as the documents apparently did not aim at what is normally considered as variants, that is to say tenders referring to another service than the one specified in the contract documents. This appears from the building case description using the expression “Alternative tenders covering the tender documents’ demands”. Furthermore, it appears from the fact that it was not stated in the contract documents which minimum requirements variants should comply with. Against this background, The Danish Complaints Board assesses that the technical description’s statement of the possibility of submitting variants being should be understood as a possibility for the tenderers to offer various energy meters and various water meters.”

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The Danish Complaints Board for Public Procurement, decision of 4 August 2009, Mölnlycke Health Care ApS mod Region Hovedstaden

Facts:• Public tender of 43 framework agreements regarding delivery of wound treatment products • Complaint:

• The evaluation was based on a point model not included in the contract documents

• The contract documents did not state precisely enough what elements the contract authority would attach weight to in relation to the subcriteria “functionality” and “quality”

• A revision sheet expanded the tender to include another (44th) framework agreement not mentioned in the contract notice

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The Danish Complaints Board for Public Procurement, decision of 4 August 2009, Mölnlycke Health Care ApS v. Region Hovedstaden

The Danish Complaints Board for Public Procurement:• “Article 53 includes no direction about the contract authority – if it in the

assessment of the tenders wants to apply an assessment model – describing this assessment model in the contract documents.”

• ”From the equal treatment principle or the transparency principle, see article 2 of the public procurement directive, or from the EU Public Procurement it cannot be concluded that a contract authority […] has to work out and apply an assessment model, and it can neither […] be concluded that a contract authority who wants to apply an assessment model must work out this assessment model at a time early enough for the assessment model to be included in the contract documents […].”

• “[…] From the principles in article 2, there is no basis of concluding that the contract authority – besides the demands determined in article 53 – is responsible for including the assessment model in the contract documents if it has been completed […]”.

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The Danish Complaints Board for Public Procurement:• ”In the contract documents, the defendant has next to each of the 44

positions determined a number of subcriteria describing the characteristics which the defendant will attach importance to in the assessment of the offered products regarding the relevant position. However, the defendant has not stated in the contract documents which of the two subcriteria “B. Functionality” or “C. Quality” the relevant subcriteria are related to, and in this way the tenderers have not been able to conclude from the contract documents which subcriteria that were determined as subcriteria “B. Functionality”, and which subcriteria that were determined as subcriteria “C. Quality”. By this, the defendant has acted contrary to the transparency principle of the public procurement directive.”

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The Danish Complaints Board for Public Procurement:

• ”In the contract notice, the defendant has next to each of the 43 positions given a “short description” of the product which each of the 43 parallel tenders are related to, and this detailed description […] gives the readers of the contract notice a basis for supposing that it is a complete statement of the offered product line. Companies that sell this product which the defendant afterwards included in the parallel tenders [….] has in this way on the basis of the contract notice been able to conclude that the parallel tenders do not include this product not included in any of the other 43 positions. The defendant has in this way by including position 44 and entering into a contract hereof acted contrary to the public procurement directive.”

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Control questions:

1. Why do (all) tender documents have to be in writing?2. Why are there so many requirements for the detail level in the tender

documents?3. Why is it important to include a draft agreement in the tender

documents?4. Which advantages and disadvantages are connected to the use of

alternative tenders?5. Is the contract authority allowed to apply “voluntary options” and/or

options not included in the assessment?

eu public procurement law 2011: lesson 7 – chapter 4, the contract documents – anders birkelund...

Documents

contract documents chapter

public contract

award criteria

initial tenders

receipt of tenders

award of orders chapter

contracting entity

special conditions