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ICLG

A practical cross-border insight into public procurement

Published by Global Legal Group, with contributions from:

11th edition

Public Procurement 2019

A&L Goodbody ALFARO, FERRER & RAMIREZ Allen & Gledhill Anderson Mōri & Tomotsune Ashurst LLP Assegaf Hamzah & Partners BIGNON LEBRAY AVOCATS Blake, Cassels & Graydon LLP BLOMSTEIN Borenius Attorneys Ltd BTG Legal Fasken Fried, Frank, Harris, Shriver & Jacobson LLP Gorrissen Federspiel Holding Redlich

Legance Avvocati Associati Lenz & Staehelin Mamo TCV Advocates Mannheimer Swartling Advokatbyrå AB Michailopoulos & Associates Morais Leitão, Galvão Teles, Soares da Silva & Associados Pinheiro Neto Advogados Ramón y Cajal Abogados, S.L.P. Stibbe Tunde & Adisa Legal Practitioners VASS Lawyers Wikborg Rein Advokatfirma AS Wolf Theiss

The International Comparative Legal Guide to:

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The International Comparative Legal Guide to: Public Procurement 2019

General Chapter:

Country Question and Answer Chapters:

1 EU Public Procurement Rules – Euan Burrows & Edward McNeill, Ashurst LLP 1

2 Australia Holding Redlich: Andrew Hynd & Olivia Fielding 9

3 Belgium Stibbe: David D’Hooghe & Arne Carton 16

4 Brazil Pinheiro Neto Advogados: Ricardo Pagliari Levy &

Heloisa Figueiredo Ferraz 23

5 Canada Blake, Cassels & Graydon LLP: Clémentine Sallée & Marianne Smith 29

6 Denmark Gorrissen Federspiel: Erik Kjær-Hansen & Marie Berg Simonsen 36

7 England & Wales Ashurst LLP: Euan Burrows & Edward McNeill 43

8 Finland Borenius Attorneys Ltd: Ilkka Aalto-Setälä & Henrik Koivuniemi 55

9 France BIGNON LEBRAY AVOCATS: Kévin Holterbach &

Jean-Baptiste Dubrulle 63

10 Germany BLOMSTEIN: Dr. Pascal Friton & Rita Zuppke 71

11 Greece Michailopoulos & Associates: Greg Michailopoulos & Marios Markatos 78

12 India BTG Legal: Prashant Mara & Devina Ramakant Deshpande 88

13 Indonesia Assegaf Hamzah & Partners: Farid Fauzi Nasution &

Berla Wahyu Pratama 97

14 Ireland A&L Goodbody: Anna-Marie Curran & Jessica Egan 103

15 Italy Legance Avvocati Associati: Filippo Pacciani & Ada Esposito 117

16 Japan Anderson Mōri & Tomotsune: Reiji Takahashi & Makoto Terazaki 130

17 Luxembourg Stibbe: Benjamin Marthoz 138

18 Malta Mamo TCV Advocates: Dr. Joseph Camilleri & Dr. Matthew Cutajar 146

19 Nigeria Tunde & Adisa Legal Practitioners: Ayobami Tunde &

Ifeoluwa Gbarada 155

20 Norway Wikborg Rein Advokatfirma AS: Alf Amund Gulsvik &

Hanne Zimmer 162

21 Panama ALFARO, FERRER & RAMIREZ: Annette Bárcenas Olivardía &

Paulette Michineau 168

22 Poland Wolf Theiss: Peter Daszkowski & Marcin Rudnik 174

23 Portugal Morais Leitão, Galvão Teles, Soares da Silva & Associados:

Margarida Olazabal Cabral & Ana Robin de Andrade 181

24 Romania VASS Lawyers: Iulia Vass & Bianca Bello 190

25 Singapore Allen & Gledhill: Kelvin Wong & Tan Wee Meng 202

26 South Africa Fasken: Lara Bezuidenhoudt & Bontle Pilane 210

27 Spain Ramón y Cajal Abogados, S.L.P.: Pablo Silván Ochoa &

Carlos Melón Pardo 217

28 Sweden Mannheimer Swartling Advokatbyrå AB: Johan Carle &

Sven Vaxenbäck 223

29 Switzerland Lenz & Staehelin: Astrid Waser & Benoît Merkt 229

30 USA Fried, Frank, Harris, Shriver & Jacobson LLP: James J. McCullough &

Michael J. Anstett 236

Contributing Editors

Euan Burrows & Edward McNeill, Ashurst LLP

Sales Director

Florjan Osmani

Account Director

Oliver Smith

Sales Support Manager

Toni Hayward

Senior Editors

Caroline Collingwood Rachel Williams CEO

Dror Levy

Group Consulting Editor

Alan Falach Publisher

Rory Smith

Published by

Global Legal Group Ltd. 59 Tanner Street London SE1 3PL, UK Tel: +44 20 7367 0720 Fax: +44 20 7407 5255 Email: [email protected] URL: www.glgroup.co.uk

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Ashford Colour Press Ltd. January 2019 Copyright © 2019 Global Legal Group Ltd. All rights reserved No photocopying ISBN 978-1-912509-54-6 ISSN 1757-2789

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Disclaimer

This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations.

1

Chapter 1

Ashurst LLP

Euan Burrows

Edward McNeill

EU Public Procurement Rules

1 Introductory Comments

1.1 Public procurement is about how public authorities spend public money. The total expenditure of government, the public sector and utilities on works, goods and services currently represents an estimated 14% of the EU’s GDP, i.e. approximately €2,015 billion [see Endnote 1]. Nearly 173,000 contracts were advertised EU-wide in 2015 [see Endnote 2].

1.2 However, for all its laudable aims of opening up national markets to EU-wide competitive tendering, most EU procurement markets remain substantially “national” in scope. The European Commission (“Commission”) estimates that the total value of invitations to tender for contracts subject to the EU rules in 2015 was approximately €450 billion, i.e. 3.1% of the EU’s GDP [see Endnote 3]. Direct cross-border procurement (i.e. public contracts awarded to operators from other EU Member States) accounts for 3.5% of the total value of awards between 2009 and 2015. Indirect cross-border procurement, via corporate affiliates or partners situated in the Member State of the contracting authority, is more frequent (more than 20% of awards by value between 2009 and 2015) [see Endnote 4].

2 Historical Background and the

Legislation in Force Today

2.1 EU public procurement law is based upon certain general principles derived from the Treaty on the Functioning of the European Union (“TFEU”) [see Endnote 5], and is aimed at ensuring equal access for all operators within the EU internal market to procurement opportunities in other EU Member States, as well as fair competition for public contracts.

2.2 The first EU public procurement directive was adopted in July 1971 and covered public works contracts. Supply and service contracts were added in separate 1976 and 1992 directives, with a 1990 directive covering entities operating in the water, energy, transport and telecommunications sectors. The remedies directives, covering the procedures for challenging the award of contracts under these various directives, date from 1989 (public sector) and 1992 (for utilities) (respectively, the Public Sector Remedies Directive (89/665) and the Utilities Remedies Directive (92/13)).

2.3 In April 2004, two new public procurement directives came into force:

(a) Directive 2004/18 which applied to service, supply or works contracts entered into by public bodies other than utilities in relation to a utility activity (the “2004 Public Sector Directive”).

(b) Directive 2004/17 which applied to service, supply or works contracts entered into by utilities (i.e. public and certain private bodies operating in the water, energy, transport and postal services sectors) which relate to a utility activity (the “2004 Utilities Directive”).

Together, these are known as the “2004 Directives”.

2.4 Following a consultation process and legislative proposals, three new public procurement directives came into force in April 2014 with a requirement that they be implemented into the national law of all EU Member States by April 2016:

(a) The Directive on public procurement (2014/24) (the “2014 Classic Directive”), which repeals the 2004 Public Sector Directive.

(b) The Directive on procurement by entities operating in the water, energy, transport and postal services sectors (2014/25) (the “2014 Utilities Directive”), which repeals the 2004 Utilities Directive.

(c) The Directive on the award of concession contracts (2014/23) (the “2014 Concessions Directive”), which sets out new rules for the award of concession contracts.

Together, these are known as the “2014 Directives”.

2.5 The 2014 Directives set out the rules on the award of contracts but do not provide a complete public procurement law or code covering all elements of procurement. Member States have some scope for policy choices in national implementing legislation. There is much that is not clear, and the Court of Justice of the EU (“CJEU”) delivers regular judgments in procurement cases, which are binding on the EU Member States.

2.6 As explained in more detail below, in January 2008, a new directive dealing with remedies under the public procurement rules (2007/66) came into force (the “2008 Remedies Directive”). The 2008 Remedies Directive applies to awards made under the 2014 Directives, and amends both the Public Sector Remedies Directive and the Utilities Remedies Directive, which were criticised for not providing an adequate level of protection of contractors’ rights; in particular, in the areas of injunctive relief and remedies post-contract award (it being recognised that damages could not, as a rule, match the commercial benefits of winning a contract).

3 The Parallel Application of the EU

General Principles

3.1 Public sector contracting authorities are subject to certain general principles derived from the TFEU (“EU General Principles”), even if a particular procurement falls outside the 2014 Directives; for example, because: (i) the value of the contract to be

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awarded is below the relevant financial threshold; or (ii) the contract relates to one of the defined categories of services which are subject to a lighter regime (see Section 7 below) and there is a potential “cross-border interest” (i.e. a procurement in relation to which it is reasonably foreseeable that there might be interest from non-national contractors). In many respects this is unwelcome, since it is not always easy to be certain of complying with the EU General Principles without engaging in a full public procurement legal regime process. In practice, contracting authorities frequently elect to discharge their obligations by submitting voluntarily to the full public procurement legal regime process as if the 2014 Directives (as implemented in national law) applied. Where an authority engages in such a “voluntary” application of the 2014 Directives, the view is that it must then comply with the rules fully (i.e. it cannot “mix and match”). Thus, the application of the EU General Principles can, in practice, significantly extend the scope of coverage of the public procurement regime.

3.2 The main EU General Principles at issue are non-discrimination and equal treatment, transparency, proportionality, mutual recognition, free movement of goods, right of establishment and freedom to provide services. The Commission has published guidance on how these principles will apply throughout all of the stages of an award procedure [see Endnote 6]. Therefore, with regard to public sector procurements which fall outside of the strict application of the 2014 Directives, the principles of transparency and equal treatment generally will require potential bidders to have access to suitable information about the intent of a contracting authority to award a procurement. This means that there generally needs to be some form of advertising at the outset of the essential details of the contract to be awarded and of the award method to ensure that the opportunity is opened up to competition.

4 International Dimension

4.1 There are several “international” (i.e. extra-EU) elements to the public procurement rules as they apply in the EU and to EU entities. The revised WTO Agreement on Government Procurement (“GPA”), which entered into force on 6 April 2014, has the widest scope. It is a plurilateral treaty between a limited number of WTO Members (Armenia, Aruba, Canada, the EU (for its 28 Member States), Hong Kong (China), Iceland, Israel, Japan, Republic of Korea, Liechtenstein, Republic of Moldova, Montenegro, New Zealand, Norway, Singapore, Switzerland (pending), Chinese Taipei, Ukraine, and the United States of America). The GPA is intended to make laws, regulations, procedures and practices regarding government procurement more transparent, and to prevent the protection of domestic products or suppliers, or the discrimination against foreign products or suppliers. The GPA has two elements: (i) general rules and obligations; and (ii) schedules listing the national entities in each WTO Member State that are covered by the GPA.

4.2 In addition, the EU rules apply to Norway, Iceland and Liechtenstein directly by virtue of the European Economic Area (“EEA”) Agreement. Furthermore, the EU has entered into several free trade agreements which cover aspects of public procurement (namely, with Central America, Chile, Colombia, Iraq, Korea, Mexico and Peru). The EU is currently engaged in negotiations with respect to opening up procurement markets with a number of countries and regions, including Armenia, Canada, Georgia, India, Malaysia, Mercosur, Moldova, Morocco, Singapore, Ukraine and Vietnam.

4.3 The Commission is concerned that, in contrast to the EU’s policy favouring greater openness, many third countries are reluctant to open their public procurement markets to international competition. In March 2012, the Commission proposed a new EU regulation [see Endnote 7] which aims at increasing the incentives for the EU’s trading partners to open up their public procurement markets to EU bidders and ensuring that EU companies can compete in the internal market with foreign companies on an equal footing. On 15 January 2014, the European Parliament voted to support the proposal for a regulation. However, the text adopted by parliament revised the European Commission’s proposal by stipulating the parameters within which EU Member States may restrict market access to third- country suppliers. On 29 January 2016, the European Commission adopted an amended proposal for a regulation on access of EU goods and services to the public procurement markets of third countries [see Endnote 8]. It aims to establish an instrument which will set new rules relating to international public procurement and provide access to public procurement markets around the world. The Commission has proposed the following key measures:

(a) the Commission may investigate alleged restrictive and/or discriminating measures or practices by third countries with a view to identifying restrictions on access to their public procurement markets by economic operators from the EU;

(b) where the Commission has found, as a result of an investigation that restrictive and/or discriminatory procurement measures or practices have been adopted or maintained by a third country and the Commission considers it is in the EU’s interest, the Commission shall invite the country in question to enter into consultations aimed at ensuring that economic operations from the EU can participate in tendering procedures for the award of public contracts; and

(c) where the third country does not cooperate with the Commission or the consultations do not lead to satisfactory results, the Commission may take appropriate measures restricting access of goods and/or services from the relevant third country to EU public procurement markets, such as applying price adjustment measures on those goods and/or services until the country concerned takes satisfactory remedial or corrective actions.

4.4 Finally, there are at present five candidate countries seeking to join the EU: Albania; the Former Yugoslav Republic of Macedonia; Montenegro; Serbia; and Turkey. Countries which apply for EU membership become fully subject to EU law, including EU public procurement law.

5 Brief Overview of the EU Institutional

and Enforcement Structure

5.1 The Commission is one of the four main institutions of the EU, the others being the European Parliament (comprising elected representatives from the Member States of the EU), the Council of the EU (representing national governments, also known as the EU Council) and the Court of Justice of the EU in Luxembourg (“CJEU”) (made up of the Court of Justice, the General Court and the Civil Service Tribunal).

5.2 In terms of public procurement law, the Commission has four main roles. Firstly, it proposes legislation and engages in related consultations. Secondly, it provides guidance on EU law through, for example, publishing explanatory notes or communications. Thirdly, it enforces EU law using its legal powers under the TFEU. Fourthly, it negotiates international agreements.

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5.3 The Commission’s enforcement powers in this area are directed against Member States and it regularly makes use of these powers to investigate potential infringements of the EU public procurement rules (following complaints or at its own-initiative). The powers it uses are contained in Article 258 of the TFEU, and the procedure is referred to as the “infringement procedure”. That procedure provides the Commission with powers to take enforcement action before the CJEU against Member States that fail to comply with EU law. The CJEU may in parallel grant an injunction to suspend execution of a contract pending judgment on the merits of the case (even after it has been awarded), but in practice this is unlikely unless the infringement is blatant and the matter comes before the court quickly.

5.4 Member States are, in theory, obliged to comply with CJEU judgments by taking “necessary measures” pursuant to Article 260 of the TFEU. However, if the Member State fails to do so, the Commission has the power to take further action before the CJEU. This action takes the form of a request to the CJEU to impose fines on the Member State for non-compliance with the CJEU’s judgment.

6 Entity Coverage

6.1 The 2014 Classic Directive applies to “the State, regional or local authorities, bodies governed by public law, associations formed by one or several of such authorities or one of several of such bodies governed by public law”, unless the body in question is engaged in a utility activity (see below). Annex I of the 2014 Classic Directive provides an “indicative” list of central government authorities. In essence, all public bodies that spend public money are covered.

6.2 There has been a large amount of EU case law on this definition of “body governed by public law” and the CJEU has consistently taken a broad view as to which bodies are covered. The 2014 Directives codify EU case law and define “bodies governed by public law” as: “bodies that have all of the following characteristics: (a) they are established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; (b) they have legal personality; and (c) they are financed, for the most part, by the State, regional, or local authorities, or other bodies governed by public law; or are subject to management supervision by those authorities or bodies; or have an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities, or by other bodies governed by public law.”

6.3 The 2014 Utilities Directive applies to the same list of public bodies operating in the water, energy, transport, and postal services sectors, but to this is added “public undertakings” (separate legal entities owned or controlled by a public body) and entities which “operate on the basis of special or exclusive rights granted by a competent authority of a Member State”. In all cases, the entity or public body must be active in relation to one of the utility activities covered by the 2014 Utilities Directive.

6.4 Under the 2014 Utilities Directive, “special or exclusive rights” are defined as the rights granted by a Member State by way of any legislative, regulatory or administrative provision, the effect of which is to limit the exercise of utility activities to one or more entities, and which substantially affects the ability of other entities to carry out such activity. However, entities which enjoy rights based on objective criteria and obtained pursuant to a competitive tender process will not be said to hold “special and exclusive rights” – meaning that such entities will not be caught by the procurement regime.

6.5 The “special or exclusive rights” provision is broadly intended to cover private entities which act as utilities. The Commission’s guidance states that the existence of such rights must be considered on a case-by-case basis. This analysis will include, in particular: (i) how the rights have been obtained; (ii) on what basis the selection was made; (iii) what the rights allow for; and (iv) how the rights restrict the activities of third parties and the ability of others to obtain the same rights in the future. The list of relevant entities is not closed and will change over time in any particular Member State.

7 Contract Coverage

7.1 The 2014 Classic Directive applies to “public contracts”, which have to be for “pecuniary interest” and “in writing” between a public body (or bodies) and a provider (or providers) and relate to the execution of works, the supply of products or the provision of services.

7.2 These three types of contract (works, supplies, services) are mutually exclusive; a contract can be only one type even if it includes a combination of elements. In order to determine the appropriate classification, it is first necessary to determine whether the contract is a works contract, which requires a consideration of whether the main object of the contract is the works to be carried out. If the contract is not a works contract, it may be a supply or service contract, and in this case, the classification is expressly based on the element which has the greater value. The classification is important for various reasons, including the threshold value to be applied to it (see the table below), the designation of the contract in the public notices which are required to be published and, if the contract is a concession, in which case the 2014 Concessions Directive will be relevant (see further at Section 14 below). The position under the 2014 Utilities Directive is essentially the same.

7.3 As regards services contracts, a further level of categorisation is necessary. This is on the basis that (a) the 2014 Directives provide for a “lighter touch” regime in respect of “social and other specific services” (listed in Annex XIV of the 2014 Classic Directive and Annex XVII of the 2014 Utilities Directive), and (b) certain types of services have been excluded altogether from the scope of the 2014 Directives (see further at Section 8 below).

7.4 The 2014 Directives only apply to contracts with a value above certain financial thresholds, which differ according to the classification of the procurement. The value of a contract for the purposes of the thresholds is its estimated value net of value added tax, at the time at which the contract notice is sent or, in circumstances where such a notice is not required, at the moment when the contracting authority commences the contract award procedure. The calculation of the estimated value must take account of the expected total value of the consideration (including, for example, options, renewals, insurance or banking payments and the value of any supplies made available to the contractor) even though this may be difficult to determine. It is, therefore, necessary to make a reasonable and genuine estimate, based upon the information that is currently available.

7.5 The financial thresholds function as a filter to identify those contracts which, in principle, are capable of having an impact on competition and affecting trade between EU Member States, as such contracts are more likely to attract bidders from other Member States. The EU’s policy is to keep the financial thresholds in line with those set in the WTO GPA. The Commission revises the EU thresholds accordingly from time to time, with the current thresholds becoming applicable on 1 January 2018. In addition, non-eurozone EU Member States receive a revision of the financial

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thresholds every two years converted into their national currencies, based on the exchange rate published in the OJEU. The current contract value thresholds denominated in Euros are set out in the table below.

7.7 Although value estimates are, in principle, confined to the value of each single procurement, the 2014 Directives contain an express “splitting” prohibition, which requires the aggregation of the values of a number of similar procurements in certain circumstances. The aim is to prevent the artificial splitting-up of procurements into lower-value procurements, which would fall below the relevant thresholds and, thus, outside the scope of the 2014 Directives. In practice, this means that in circumstances in which a contracting authority/utility intends to award more than one procurement for a single overall requirement (for example, in phased construction projects), the value of these procurements must be added together. The aggregate figure will determine whether or not the relevant threshold has been met.

7.8 Although the 2014 Directives do not apply to low-value contracts below the thresholds, the EU General Principles will apply if the procurement has a potential cross-border interest (see above at Section 3).

8 Principal Exclusions

8.1 Certain procurements may be excluded from the scope of the 2014 Directives on the grounds of secrecy and security. For instance, this exclusion can be used in the context of procurements relating to military security or anti-terrorist measures. In principle, derogations from the general rules must be narrowly interpreted. However, contracting authorities have a margin of discretion in determining whether the exclusion is necessary in the light of the extent of any potential security and secrecy concerns.

8.2 Procurements of defence equipment (and services related to such equipment) can also be excluded based upon the general exemption set out in Article 346 of the TFEU. A specific directive, Directive 2009/81/EC on defence and sensitive security procurement (the “Defence Directive”), which entered into force on 21 August 2009 and was due to be transposed by Member States by 21 August 2011, sets out specific rules for the procurement of arms, munitions and war material (plus related works and services) for defence purposes, as well as for the procurement of sensitive supplies, works and services for non-military security purposes. The Defence Directive is in force alongside the 2014 Directives.

8.3 The Defence Directive was adopted due to concerns that EU Member States were avoiding the application of EU public

Contracting entity

Supplies € Services €

Social and other specific services €

Works €

Public sector bodies subject to the WTO GPA [see Endnote 9]

144,000 144,000 750,000 5,548,000

Other public sector bodies [see Endnote 10]

221,000 221,000 750,000 5,548,000

Utilities (public or private)

443,000 443,000 1,000,000 5,548,000

procurement rules in the defence sector by too frequently relying on the national security exemption under Article 346 of the TFEU. In practice, most defence contracts are awarded to national suppliers, allowing EU governments to protect their domestic markets (the EU defence equipment market is estimated to be worth approximately €90 billion annually). The Defence Directive’s aim is to open up to competition the EU’s largely fragmented defence sector, while safeguarding Member States’ control over essential defence and security interests. Due to the sensitivity and complexity of defence and security procurements, the Defence Directive:

(a) allows EU Member States to use the simplified negotiated procedure and publish a contract notice without providing a specific justification;

(b) contains specific provisions on security of information and security of supply;

(c) sets out several safeguards and exemptions to ensure the protection of vital national security interests or public security; and

(d) excludes certain contracts altogether from the new regime (for example, contracts related to intelligence activities).

8.4 The applicable financial thresholds are €443,000 for supply/services procurements and €5,548,000 for works procurements. The Defence Directive is complementary to the European Defence Agency’s Code of Conduct on Defence Procurement, launched in July 2006.

8.5 The acquisition or rental of land, existing buildings or interests therein are also, in principle, excluded from the 2014 Classic Directive. Nevertheless, despite this exclusion, some land development agreements (such as, for example, where a developer erects a building to a contracting authority’s requirements on the developer’s own land, and then transfers the land (plus building) to the authority) are still subject to the 2014 Classic Directive upon the basis that they amount to public works contracts. The CJEU rendered two significant judgments relating to land developments in 2007 and 2010. The first case, Auroux v. Commune de Roanne [see Endnote 11], concerned the construction of a leisure centre and related facilities around a railway station. The contracting authority engaged a semi-public development company to acquire the land, obtain funding, carry out studies, organise an engineering competition, undertake the construction works, coordinate the projects and liaise with the authority. The authority itself was not intending to become the owner of the various facilities, apart from elements such as the public spaces and the car park. The CJEU held that the project was a public works contract, which fulfilled an economic function and corresponded to the requirements of the contracting authority, and was therefore, regardless of whether the contracting authority would own or even use the completed works, subject to the public procurement rules. The second, more recent judgment, Helmut Müller GmbH v. Bundesanstalt für Immobilienaufgaben [see Endnote 12], concerned the sale to a private party by a German federal agency of land which had been used formerly as a barracks. The sale contract did not contain any reference to the land’s future use. The CJEU ruled that the sale contract did not qualify as a public works contract because there was no “direct economic benefit” to the local authority, and, further, the mere fact that the local authority, in the exercise of its urban-planning powers, had examined certain building plans presented to it did not mean that the local authority had specified requirements attached to the redevelopment works. The two judgments have added legal clarity on the dividing line between land transactions falling outside the public procurement rules and the procurement of works subject to the public procurement regime, and confirmed that the CJEU will take a broad purposive approach.




8.6 The procurement by a utility of water, energy or fuel for the production of energy is also excluded. Furthermore, a procurement awarded by a utility to an affiliated undertaking or by a joint venture utility to one of its members or an affiliated undertaking of those members may be excluded, provided the undertaking in question essentially exists to provide services/supplies/works to that group and not to the open market. Finally, Member States may apply for a general sector exemption (pursuant to Article 34 of the 2014 Utilities Directive) where the market has been liberalised and opened up to competition. The Commission will consider whether the required competitive market conditions are met in that particular Member State and confirm whether the exemption applies by way of a formal decision. Even if an exemption is in place, public utilities (but not private utilities) will still have to observe the EU General Principles in undertaking procurements. The existing national exemptions pursuant to the current Article 30 of the 2004 Utilities Directive remain in place under the 2014 Utilities Directive.

8.7 Certain types of services have been excluded altogether from the scope of the 2014 Directives, such as certain audio-visual and radio media services, legal services designated by a court or tribunal, financial instruments and public passenger transport services by rail or metro (such services being covered by sector-specific legislation, namely Regulation 1370/2007). Moreover, the exploration of oil and gas has been added to the existing exclusions from the utilities regime (namely, contracts awarded by certain contracting entities for the purchase of water and for the supply of energy or of fuels for the production of energy).

9 In-house Awards

9.1 In its judgment in Teckal [see Endnote 13], the CJEU recognised that, in some situations, a contracting authority may directly award a contract to a legally distinct third party who, in practice, is not an independent body, without a competitive tendering process. The applicable test is twofold. Firstly, the “control test” requires that the authority exercise over the third party awarded the contract “a control which is similar to that which it exercises over its own departments”. Secondly, the “function test” requires that the third party “carries out the essential part of its activities” for the authority (the controlling entity). When these two conditions are met, the contract will be treated as an “in-house” administrative arrangement which falls outside the scope of the 2014 Directives. The CJEU has also held that these principles apply to contracts subject only to the EU General Principles (Parking Brixen [see Endnote 14]).

9.2 This exemption is strictly interpreted, and in a national court, it would usually be for the contracting authority to establish its application to a particular procurement. For the first condition (control) to apply, there must be a power of decisive influence over both the strategic objectives and significant decisions of the body awarded the contract. It is not enough that a contracting authority, together with other contracting authorities, owns all of the share capital in a company awarded a contract: all of the relevant legislative provisions and surrounding circumstances will be taken into account. However, even a minority interest in the third party held by a private entity rules out the Teckal exemption. The second condition has been interpreted as essentially requiring that the activities of the third party are devoted principally to the contracting authority, and that any other activities are only marginal. The Commission Staff Working Paper on public-public cooperation [see Endnote 15] offers useful guidance on the application of the in-house Teckal test.

9.3 The 2014 Directives essentially codify the Teckal test, and provide that a contract awarded by a contracting authority to another legal person governed by private or public law will fall outside the procurement regime if the following cumulative conditions are met: (a) the contracting authority exercises over the legal person concerned a control which is similar to that which it exercises over its own departments; (b) more than 80% of the activities of that legal person are carried out in the performance of tasks entrusted to it by the controlling contracting authority or by other legal persons controlled by that contracting authority; and (c) there is no direct private capital participation in the controlled legal person.

10 Award Procedures

10.1 The fundamental principle underlying the EU public procurement rules is that a qualifying contract must be opened up to an EU-wide competitive tender. As a result, in most circumstances, a contract notice must be published in the Official Journal of the EU (the “OJEU”) in the standard form [see Endnote 16] at the outset of a tender process. In some situations, set out in the 2014 Directives, a contract, although falling subject to the rules, does not have to be advertised and can be negotiated directly with a chosen provider. For instance, where, “for technical or artistic reasons, or for reasons connected with the protection of exclusive rights”, there is only one possible provider.

10.2 Contracting authorities are obliged to follow one of five types of tender procedure (which will be identified in the contract notice). The first type of procedure is the “open procedure”, under which the procurement is advertised and all interested providers tender a single, fully priced offer. The second type of procedure is the “restricted procedure”, which requires interested bidders to “pre-qualify” before being invited to submit a fully priced tender. The third type of procedure under the 2014 Classic Directive is the “competitive procedure with negotiation”, while the 2014 Utilities Directive provides for the “competitive negotiated procedure”. While there are differences between the competitive procedure with negotiation and the competitive negotiated procedure, each involves a pre-qualification stage and then a negotiation stage with the pre-qualified group of tenderers (although contracting authorities may award a contract without negotiations, provided they have reserved the right to do so). The fourth type of procedure is known as the “competitive dialogue”, which allows a dialogue to be conducted in successive stages, with the aim of reducing the number of bidders. The fifth type of procedure is the innovation partnership, which allows tenderers to submit a request to participate in response to a contract notice with a view to establishing a structured partnership for the development of an innovative product, service or works and the subsequent purchase of the resulting supplies, services or works. The partnership is structured in successive stages following the research and innovation process, and the contract will be awarded in accordance with the rules of a competitive procedure with negotiation.

10.3 There are also various important explicit and implied obligations concerning the conduct of the selection process following publication of the contract notice, including in particular the minimum timescales with which authorities must comply. These are essentially designed to ensure that at all stages (specification of requirements, selection stage and award stage) the contract award process is run fairly and transparently.




11 Qualification and Award Criteria

11.1 Under the EU procurement regime, there are discretionary grounds and mandatory grounds for the disqualification of bidders. Contracting authorities may derogate from the mandatory grounds only on an exceptional basis for “overriding reasons relating to the public interest”, or where an exclusion would be “clearly disproportionate”. The 2014 Directives clarify that the power to exclude bidders can apply throughout the procurement process (not only during the pre-qualification stage) and may also extend to sub-contractors and consortia members.

11.2 The 2014 Directives require contracts to be awarded to the tenderer which supplies the “most economically advantageous tender” (“MEAT”), which must be based on “price or cost”, and may include the best price-quality ratio. Where costs are taken into account, the 2014 Directives specify that a “cost-effectiveness” approach should be used, based upon an evaluation of certain costs over the life cycle of a product, service or works, such as: (i) costs relating to acquisition; (ii) use (e.g. consumption of energy); (iii) maintenance; (iv) end of life (e.g. collection and recycling); and (v) environmental externalities which can be valued (e.g. emissions of greenhouse gases or other pollutants).

11.3 The 2014 Directives specify that contracting authorities may take into account, as part of the MEAT criteria, the characteristics of the production process of the works, goods or services to be purchased, such as working conditions and staff health protection. The 2014 Directives expressly allow contracting authorities to take into account the organisation, qualification and experience of staff assigned to performing the contract as an award criterion, recognising that this may affect the quality of the contract performance.

11.4 As regards the assessments of the best price-quality ratio, the 2014 Directives provide that any qualitative, environmental or social criteria must be linked to the subject matter of the contract, which controls the ability of contracting authorities to take account of wider social, political and environmental considerations.

12 Modification of Contracts

12.1 The 2014 Directives include express provisions regulating the circumstances in which contracts may be modified during their term without triggering an obligation to carry out a new tender procedure – an issue that has given rise to much debate and litigation. The 2014 Directives define a “substantial” modification, requiring a new award process, as one that renders the contract substantially different from the one initially concluded, i.e. one which would: (i) result in the selection of other operators, or the award of the contract to another tenderer; (ii) change the economic balance of the contract in favour of the contractor; or (iii) include supplies, services or works which were not covered by the original OJEU process.

12.2 As well as codifying relevant case law, the 2014 Directives provide for a “safe harbour” within which a minor modification would not require a new award process. The safe harbour is set at a low level and applies where the value of the change: (i) does not exceed the value of the relevant threshold for the application of the procurement regime; and (ii) is below 10% of the initial contract value (15% for public works contracts).

12.3 More helpfully, the 2014 Directives provide that contract modifications will not be considered to be substantial where they have been provided for in the procurement documents in clear, precise and unequivocal review clauses or options. Such clauses or options must state the scope and nature of possible modifications, as

well as the conditions under which they may be exercised, and may not alter the overall nature of the contract.

12.4 The 2014 Directives also allow modifications in circumstances in which, despite reasonably diligent preparation of the initial award by the contracting authority, the modifications are required as a result of unforeseen circumstances. In such cases, a new procurement procedure will not be required so long as the modification(s) do not alter the overall nature of the contract, and any resulting increase in price is not greater than 50% of the value of the original contract.

12.5 In addition, the 2014 Directives clarify that a new award procedure will not be required in the event that additional works, services or supplies up to 50% of the value of the original contract are necessary, and where a change of contractor cannot be made for technical or economic reasons and would cause significant inconvenience or duplication of costs.

12.6 It is also helpful that the 2014 Directives expressly provide that a successful tenderer may undergo structural changes during the performance of the contract, such as internal reorganisations, mergers and acquisitions or insolvency, without giving rise to a requirement to conduct a new award process.

13 Enforcement

13.1 An aggrieved operator can either make a complaint to the Commission or bring proceedings before a national court for infringement of the national implementing legislation and/or the EU General Principles.

13.2 A complaint to the Commission is the cheapest and most straightforward option. However, it will usually be slow; therefore in many cases, it may not be very effective. There is always a risk that the Commission does not consider that the case is worthy of investigation at the EU level (the Commission will not and cannot pursue all complaints). Moreover, there is no effective mechanism for injunctive relief (interim measures at the EU level are very difficult to obtain). There is no fixed timescale for the procedure, and generally the process will be slow and certainly outside the control of the complainant, who will have limited visibility over the conduct and progress of the case.

13.3 If successful, a complaint may ultimately lead to the Commission taking action before the CJEU under Article 258 of the TFEU against a Member State for infringement of the relevant directive (see the description of the procedure above at paragraph 5.3). In its judgment under Article 258 proceedings, the CJEU cannot order a Member State to act or to refrain from acting in a particular way. However, the Member State would, under Article 260(1), “be required to take the necessary measures to comply”. The CJEU’s judgment in Commission v. Germany [see Endnote 17] clarifies what those “necessary measures” may involve in circumstances in which a contract has been concluded unlawfully. The CJEU held that Germany was under an obligation to remedy the infringement in question by taking all appropriate measures, which might include the rescission of a contract which had already been concluded, irrespective of whether German national law provided for this possibility.

13.4 The Public Sector Remedies Directive and the Utilities Remedies Directive require Member States to make certain minimum remedies available before national courts. In particular, contracting authorities are required to provide an automatic debrief to all tenderers and there is a mandatory “standstill” period between the award of a contract and its signature. There is an automatic suspension of the contract award if proceedings are brought against




the contracting authority’s award decision, shifting the burden onto the contracting authority to apply to court to lift the injunction. The minimum remedies include “ineffectiveness”, i.e. contract nullity (the prospective cancellation of all unperformed obligations) coupled with a fine on the contracting authority. This remedy is available on limited grounds after a contract has been entered into in breach of the applicable directive. Alternative penalties (contract shortening, fines, or both) are also available instead of ineffectiveness, in situations where ineffectiveness is inappropriate.

13.5 A likely outcome of any challenge is for the court to declare that a public contract has to be re-tendered to the market as a whole – particularly in cases where a public contract is amended in a way which is materially different in character from the original contract. Material changes and changes in scope can result in a procurement being qualified as a new procurement requiring a new tender process. In Wall [see Endnote 18], the CJEU held that the replacement of a specified sub-contractor may require a new award procedure to restore transparency. The CJEU affirmed that an essential change had taken place requiring a new award procedure to ensure compliance with the principle of transparency.

14 The New Concession Regime

14.1 Under the 2004 Directives, the award of service concessions was excluded from the public procurement regime, and the award of works concessions was subject only to a narrow set of specific rules.

14.2 The 2014 Concessions Directive sets out a basic framework for the award of works and services concessions in the public and utilities sector, subject to certain exemptions in respect of water (such as the disposal or treatment of sewage) with a value of €5,548,000 or more. The choice of the most appropriate procedure for the award of concessions is left to contracting entities, subject to basic procedural guarantees, including:

(a) the publication of a “concession notice” in the OJEU advertising the opportunity;

(b) certain minimum time limits for the receipt of applications and tenders;

(c) the selection criteria must be related exclusively to the technical, financial and economic capacity of operators;

(d) the award criteria must be objective and linked to the subject matter of the concession; and

(e) acceptable modifications to concessions contracts during their term, in particular where changes are required as a result of unforeseen circumstances.

14.3 The 2014 Concessions Directive seeks to clarify the concept of a “concession” itself, based on EU case law. The rules specify that the main feature of a concession, the right to exploit the works or services, always implies the transfer to the concessionaire of an economic risk involving the possibility that it will not recoup all the investments made and the costs incurred in operating the works or services covered by the award. However, this does not exclude the award of concessions in sectors, such as those with regulated tariffs, to the extent that an operating risk, however limited, can still be transferred to the concessionaire.

15 Public Procurement and State Aid

15.1 The TFEU includes specific provisions (Articles 107–109) restricting the ability of Member States to grant aid (of whatever form) which “distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods ... insofar as it affects trade between Member States”. Broadly, the

provisions are intended to stop Member States from unfairly supporting their own companies to the detriment of competing companies from other Member States.

15.2 In the context of public procurement, aid can arise where the terms of a contract for works, services or supplies are not aligned with normal market-based commercial terms, as to price or other matters, or where the contract does not reflect a genuine need. The advantage must come directly or indirectly from the resources of the State, and the measure providing for this must be imputable to the State.

15.3 The basic test is whether the purchaser acted as a “market purchaser” would have done. If it did, aid is not involved. If it did not, aid is involved – the aid being the difference between the actual value of the contract and the value of a contract that a market purchaser would have entered into (with the difference being repayable). If the purchaser has run an open, transparent and non-discriminatory procurement procedure (for example, one in accordance with the public procurement rules) and the contract price is established through that procedure, then there is generally accepted to be a presumption that State aid is not involved.

15.4 If the purchaser has properly used the open procedure, the contract should be at market value and not involve aid. The position is less clear for cases in which the restricted, negotiated or competitive dialogue procedures are used. However, the Commission has been flexible and has generally not sought to challenge public bodies in relation to purchase contracts. In several cases, it has accepted that a negotiated procedure used in PPP transactions has delivered a market result. The Commission explained the above principles in a November 2007 document titled “Frequently Asked Questions Concerning the Application of Public Procurement Rules to Social Services of General Interest” [see Endnote 19] as follows: “... a tender procedure guaranteeing full competition can be taken as an important indicator that the [contract is at] market price and that there is no State aid. Complying with procurement rules will in these cases therefore also help in ensuring respect of the State aid provisions”.

Endnotes

1. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Making Public Procurement work in and for Europe, COM(2017), 572 final, 3 October 2017.

2. Public Procurement Indicators 2015 – DG GROW G4-Innovative and e-Procurement, 19 December 2016.

3. See Endnote 1.

4. See Endnote 1.

5. Except where otherwise stated, references in this chapter are to Articles in the TFEU.

6. ‘European Commission Interpretative Communication on the Community Law Applicable to Contract Awards Not or Not Fully Subject to the Provisions of the Public Procurement Directives’, 23 June 2006.

7. ‘Proposal for a Regulation on the Access of Third-country Goods and Services to the Union’s Internal Market in Public Procurement and Procedures Supporting Negotiations on Access of Union Goods and Services to the Public Procurement Markets of Third Countries’, COM (2012), 124 final, 21 March 2012.

8. Amended proposal for a Regulation of the European Parliament and of the Council on the access of third-country goods and services to the Union’s internal market in public




procurement and procedures supporting negotiations on access of Union goods and services to the public procurement markets of third countries, COM(2016), 34 final, 29 January 2016.

9. Essentially, governments and government departments.

10. For example, local authorities.

11. Jean Auroux and Others v. Commune de Roanne, Case C-220/05, judgment of 18 January 2007.

12. Helmut Müller GmbH v. Bundesanstalt für Immobilienauf-gaben, Case C-451/08, judgment of 25 March 2010.

13. Teckal Srl v. Comune de Viano and Azienda Gas-Acqua Consorziale (AGAC) di Reggio Emilia, Case C-107/98, judgment of 18 November 1999.

14. Parking Brixen GmbH. v. Gemeinde Brixen and Stadtwerke Brixen AG, Case C-458/03, judgment of 13 October 2005.

15. Commission Staff Working Paper concerning the application of EU public procurement law to relations between

contracting authorities (“public-public cooperation”), SEC (2011), 1169 final, 4 October 2011.

16. The standard forms are contained in Commission Implementing Regulation (EU) 2015/1986 of 11 November 2015.

17. Commission of the European Communities v. Federal Republic of Germany, Case C-503/04, judgment of 18 July 2007.

18. Wall AG v. La ville de Francfort-sur-le-Main and Frankfurter Entsorgungs-und Service (FES) GmbH, Case C-91/08, judgment of 13 April 2010.

19. Commission Staff Working Document concerning frequently asked questions concerning the application of public procurement rules to social services of general interest; Accompanying Document to the Communication on “Services of General Interest, including Social Services of General Interest: A New European Commitment”, 20 November 2007, SEC (2007), 1514.

Euan Burrows

Ashurst LLP

Broadwalk House

5 Appold Street

London, EC2A 2HA

United Kingdom

Tel: +44 20 7638 1111 Fax: +44 20 7638 1112 Email: [email protected] URL: www.ashurst.com

Edward McNeill

Ashurst LLP

Broadwalk House

5 Appold Street

London, EC2A 2HA

United Kingdom


Ashurst is a leading global law firm with a rich history spanning almost 200 years. Our in-depth understanding of our clients and commitment to

providing exceptional standards of service have seen us become a trusted adviser to local and global corporates, financial institutions and

governments on all areas of commercial law.

We currently have 25 offices in 15 countries and a number of referral relationships that enable us to offer the reach and insight of a global network,

combined with the knowledge and understanding of local markets. With over 1,600 partners and lawyers working across 10 different time zones, we

are able to respond to our clients wherever and whenever they need us.

Euan Burrows is Head of Ashurst’s EU & Competition Law

Department. He specialises in all aspects of EU and UK competition

law, has full rights of audience and undertakes a wide range of

contentious and non-contentious work. He has considerable

experience in dealing with the European Commission and national

competition authorities.

Euan’s recent experience in public procurement includes advising on

major central government infrastructure projects, rail franchise bids

and defence procurements.

Edward is a Senior Associate in Ashurst’s EU & Competition Law

Department in London and specialises in all aspects of EU and UK

competition law, including public procurement law. He has experience

dealing with the EU Commission, the European Courts UK regulators

and antitrust authorities in other jurisdictions in relation to merger

control, State aid, cartels, behavioural issues and public procurement

law.

Edward has been involved in a large proportion of the firm’s recent

public procurement matters, including rail projects, development

projects, waste-related procurements, telecommunications projects

and defence-related procurements.




9

Chapter 2

Holding Redlich

Andrew Hynd

Olivia Fielding

Australia

1 Relevant Legislation

1.1 What is the relevant legislation and in outline what

does each piece of legislation cover?

At federal level, the following legislation and policy governs the management of expenditure of the Commonwealth’s resources by non-corporate and corporate Commonwealth entities:

■ Public Governance, Performance and Accountability Act 2013 (Cth) (PGPA Act); and

■ Public Governance, Performance and Accountability Rule 2014 (Cth) (PGPA Rule).

The requirements for procurement are contained in the Commonwealth Procurement Rules (CPRs) issued by the Minister for Finance under the PGPA Act. An amended version of the CPRs commenced on 1 January 2019.

At a state and territory level, legislation forms the basis for regulation of procurement policies and conduct, and regulates the expenditure of public monies.

Each state government body will establish the legislative framework for local government procurement, and local government then establishes procurement policy and rules.

1.2 What are the basic underlying principles of the regime

(e.g. value for money, equal treatment, transparency)

and are these principles relevant to the interpretation

of the legislation?

The CPRs specify six rules applicable to all procurements:

■ Officials should consider whether a procurement will deliver the best value for money. The CPR states this to be “the core rule”.

■ All potential suppliers to government be treated equitably so as to encourage competition.

■ Procurement should be efficient, effective, economical and ethical.

■ Officials should ensure accountability and transparency in its procurement activities.

■ Relevant entities establish processes to identify, analyse, allocate and treat procurement risk.

■ Officials should ensure that the procurement method is conducted by open tender or limited tender.

State and territory policies adopt a similar approach to the CPRs.

1.3 Are there special rules in relation to procurement in

specific sectors or areas?

Given the sensitivity, and typically high value of defence procurement, it is subject to additional rules prescribed by the Defence Procurement Policy Manual (DPPM). The DPPM incorporates the CPRs so that defence officials can identify the most appropriate Commonwealth and Defence procurement related policy that applies, but also includes additional Defence Procurement Policy Directives. It is important to note that there are certain circumstances where defence procurement may be exempt from free trade agreement procurement commitments. For example, the procurement of certain goods and services are exempt from the operation of Division 2 of the CPRs.

1.4 Are there other areas of national law, such as

government transparency rules, that are relevant to

public procurement?

The CPRs are the primary rules regulating procurement under the PGPA Act. There are, however, other pieces of legislation and policy that exist in the broader environment of procurement in Australia, including:

■ Freedom of Information Act 1982 (Cth) (FOI Act) which gives a right to access information in the government’s possession, unless contrary to the public interest.

■ Auditor-General Act 1997 (Cth) granting the Auditor General power to audit government contract performance.

■ Public Works Committee Act 1969 (Cth) providing parliamentary committee scrutiny of proposed public works programmes.

■ Public Service Act 1999 (Cth) and Crimes Act 1914 (Cth) prohibiting certain conduct, such as bribery of public officials.

■ Appropriation Acts allowing Treasury to issue funds under the Australian Constitution.

Similar laws and policies apply to states and territories.

1.5 How does the regime relate to supra-national regimes

including the GPA, EU rules and other international

agreements?

Australia is party to a range of free trade agreements. These arrangements are implemented domestically by legislation and/or



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Commonwealth policy. The CPRs include all relevant international obligations. Therefore, an official is not required to refer directly to international agreements when undertaking a procurement.

On a state and territory level, international obligations are similar to those of the Commonwealth, with a few identifiable differences including the applicable exemptions, thresholds and covered entities.

2 Application of the Law to Entities and

Contracts

2.1 Which categories/types of entities are covered by the

relevant legislation as purchasers?

Relevant entities to which the CPRs apply are non-corporate Commonwealth entities (as defined by section 8 of the PGPA Act) and prescribed corporate Commonwealth entities (listed in the PGPA Rule under section 30). For non-corporate Commonwealth entities (such as departments) and prescribed corporate Commonwealth entities (when no exemptions apply), compliance with the CPRs is mandatory. Generally speaking, private entities are not covered by government procurement frameworks.

2.2 Which types of contracts are covered?

The CPRs provide that procurement does not include grants, investments (or divestments), sales by tender, loans, procurement of goods and services for resale or procurement of goods and services used in the production of goods for resale, any property right not acquired through the expenditure of relevant money, statutory appointments, appointments made by a Minister using the executive power, or the engagement of employees.

2.3 Are there financial thresholds for determining

individual contract coverage?

The CPRs are divided into two divisions. Officials must comply with the rules for all procurements in Division 1, regardless of the procurement value. Officials must also comply with additional rules in Division 2 where the estimated value of the procurement is at or above the relevant procurement threshold and where an exemption does not apply.

The procurement thresholds (including GST) are:

■ $80,000 for non-corporate Commonwealth entities, other than for procurements of construction services;

■ $400,000 for prescribed corporate Commonwealth entities, other than for procurements of construction services; or

■ $7.5 million for procurements of construction services by relevant entities.

Despite being prescribed corporate Commonwealth entities, the Australian Digital Health Agency, Australian Human Rights Commission, National Portrait Gallery of Australia, Old Parliament House, and Regional Investment Corporation, must apply a procurement threshold and reporting threshold of $80,000 (excluding the procurement of construction services). These entities may opt-in to co-ordinated procurements and must only comply with those policies of the Commonwealth that specify compliance by corporate Commonwealth entities. The same rules apply to the Commonwealth Superannuation Corporation with regards to its administrative functions only.

2.4 Are there aggregation and/or anti-avoidance rules?

Division 1 of the CPRs applies irrespective of the procurement value, so cannot be avoided.

A procurement cannot be divided into separate parts solely for the purpose of avoiding a relevant procurement threshold and limiting the rules with which it must comply.

An entity must not use options, cancel a procurement, or terminate or modify an awarded contract, so as to avoid the rules of Division 2.

2.5 Are there special rules for concession contracts and,

if so, how are such contracts defined?

The rules relating to Public Private Partnerships (PPPs) that involve concession arrangements are dealt with below in question 7.2.

2.6 Are there special rules for the conclusion of

framework agreements?

There are no special rules relating to the conclusion of framework agreements.

2.7 Are there special rules on the division of contracts

into lots?

There are no special rules relating to the division of contracts into lots or the limitation of the amount of lots that may be awarded to a single bidder.

2.8 What obligations do purchasers owe to suppliers

established outside your jurisdiction?

As referred to in question 1.5, Australia is party to a range of free trade agreements which seek to limit preferential treatment and discrimination between local and international suppliers. This principle is incorporated into the Division 1 rules. It should be noted, however, that the non-discrimination principle has special conditions relating to defence and small to medium enterprises.

3 Award Procedures

3.1 What types of award procedures are available?

Please specify the main stages of each procedure and

whether there is a free choice amongst them.

It is generally a requirement for relevant entities to procure suppliers through a competitive tendering regime, according to the procurement thresholds outlined in question 2.3. The two main procurement methods include:

■ Open tender: involves publishing an open approach to market (via AusTender) and inviting submissions. This includes multi-stage procurements, provided the first stage is an open approach to market.

■ Limited tender: involves a relevant entity approaching one or more potential suppliers to make submissions when the process does not meet the rules for open tender. Entities must only conduct a procurement at or above the relevant procurement threshold in limited circumstances and certain reporting requirements will apply.

Holding Redlich Australia



Relevant entities are generally required to adhere to competitive tendering processes. A procurement, except where an exemption applies, is subject to the rules contained in Division 2 if the expected value of the procurement is at, or above, the relevant procurement thresholds outlined in question 2.3. The expected value of a procurement must be estimated prior to a decision on the procurement method being made. The expected value is the maximum value of the proposed contract in its entirety. If it is not possible to estimate the value of the procurement, the procurement is to be treated as though it is above the relevant procurement threshold.

3.2 What are the minimum timescales?

Although there are no default time limits, the CPRs establish a minimum time limit allowed during the procurement process. Where there is an approach to market to supply (an open tender), suppliers must be given at least 25 days from the date that the approach to market is published, to make submissions. This limit may be reduced to a minimum of 10 days in certain circumstances. Where electronic requests or submissions are not used, the time limit must be extended by 10 days.

3.3 What are the rules on excluding/short-listing

tenderers?

The CPRs outline the circumstances where a tenderer may be excluded, which includes bankruptcy, insolvency, false declarations, or significant deficiencies in performance of material or significant obligations under a previous contract. The CPRs do not cover shortlisting, which would typically be permitted in the tender conditions.

3.4 What are the rules on evaluation of tenders? In

particular, to what extent are factors other than price

taken into account (e.g. social value)?

Achieving value for money is the core rule of the CPRs. There is no obligation to choose the cheapest tender as price is not the sole factor when assessing whether a tender is good value for money. During a procurement, the financial and non-financial costs and benefits of each submission are considered. This includes total costs of ownership, quality and suitability of the goods and services for the purpose, track record and experience of the supplier, innovation and flexibility of the proposal and environmental sustainability of the goods and services.

The documentation given to a bidder will generally include a description of the evaluation criteria to be considered in assessing submissions. This information is provided to enable the proper identification, assessment and comparison of submissions on a fair, common and appropriately transparent basis. Most importantly, however, is the requirement that the tender clearly complies with any mandatory or essential criteria. If the tender response does not clearly show how the goods or services meet the criteria, the submission will be set aside and excluded. This is not a discretionary power.

Where the tender has been issued by the Federal Government, there are other principles that must be adhered to such as the Indigenous Procurement Policy and the Workplace Gender Equality Procurement Principles (Principles) and the supporting User Guide. Where the Principles apply, Australian non-public sector employers with 100 or more employees must supply a letter of compliance with their tender submission prior to contracting with the Australian Government.

3.5 What are the rules on the evaluation of abnormally

low tenders?

The CPRs contain no provisions on abnormally low tenders.

3.6 What are the rules on awarding the contract?

A contract must be awarded unless it can be determined that the contract is not in the public interest. The relevant considerations when awarding the contract are:

■ the tenderer satisfies the conditions for participation;

■ the tenderer is fully capable of undertaking the contract; and

■ the tenderer will provide the best value for money, in accordance with the essential requirements and the evaluation criteria specified in the approach to market and the request documentation.

3.7 What are the rules on debriefing unsuccessful

bidders?

Where a tenderer has been unsuccessful, officials are required to promptly inform the affected tenderer of the decision. Debriefings must be made available on request to unsuccessful tenderers, outlining the reasons the submission was unsuccessful.

3.8 What methods are available for joint procurements?

Coordinated procurement refers to whole-of-government arrangements for procuring goods and services. Non-corporate government bodies must use coordinated procurements. An exemption from the requirements to use coordinated procurements may be granted jointly by the Minister of the requesting body and Finance Minister when a special need for an alternative arrangement can be demonstrated by the non-corporate Commonwealth entity. Prescribed corporate Commonwealth entities have the option to opt in to coordinated procurements.

3.9 What are the rules on alternative/variant bids?

Alternative bids are allowed in Australia and are governed by the tender conditions. Typically, the conditions require a compliant bid to be submitted in order for a variant bid to be considered.

3.10 What are the rules on conflicts of interest?

Officials undertaking procurement must act ethically and in accordance with the Australian Public Service Values. This obligation extends to identifying and managing conflicts of interest and not making improper use of an individual’s position.

3.11 What are the rules on market engagement and the

involvement of potential bidders in the preparation of

a procurement procedure?

The relevant entity may conduct market research and other activities in developing specifications for a particular procurement. The government body may allow a potential bidder to participate in the procurement related to the services sought as long as the bidder does not have, or will not have, an unfair advantage over other potential suppliers.

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4 Exclusions and Exemptions (including

in-house arrangements)

4.1 What are the principal exclusions/exemptions?

There are 16 procurement exemptions to the CPRs, listed in Division 2. These exemptions do not interfere with the requirement to comply with the rules outlined in Division 1.

Limited tenders are exempt from some rules of Division 2 (but are still subject to the rules of Division 1). The CPRs prescribe conditions for limited tenders such that a relevant entity must only conduct a procurement at or above the relevant procurement threshold through limited tender in the following circumstances:

■ where in response to an open approach to market, no suitable submissions were received;

■ for reasons of extreme urgency brought about by unforeseeable events;

■ for procurements made under exceptionally advantageous conditions that arise only in the very short term and which are not routine procurement from regular suppliers; or

■ where the goods and services can be supplied only by a particular business and there is no reasonable alternative or substitute.

4.2 How does the law apply to "in-house" arrangements,

including contracts awarded within a single entity,

within groups and between public bodies?

The Commonwealth Competitive Neutrality Policy Statement, Competition Principles Agreement 1995 and ultimately, the Competition and Consumer Act 2010 (Cth) (Competition and Consumer Act) were enacted with the objective to maintain and encourage competition and to act as a vehicle to promote free markets and economic efficiency. Significantly, Governments have agreed to eliminate any competitive advantage that government-owned businesses may have over competitors by virtue of their public ownership. The validity of intergovernmental agreements has not been subject to extensive litigation and still remains a comparatively unexplored area of law especially in light of relatively recent reforms to competition law.

5 Remedies

5.1 Does the legislation provide for remedies and if so

what is the general outline of this?

Assented to on 19 October 2018, the Government Procurement (Judicial Review) Act 2018 (Cth) (the Government Procurement Act) provides a statutory basis to assert non-compliance with, or to make a complaint about, conduct governed by the CPRs. The Government Procurement Act vests in the Federal Circuit Court and the Federal Court of Australia with jurisdiction to grant an injunction, or to order payment of compensation, in relation to contraventions of the CPRs (so far as those rules relate to a covered procurement). This is a major improvement to the remedy process for challenging public procurement decisions. Australia now offers better recourse for aggrieved tenders, bringing Australia in line with their obligations to various international agreements.

Suspension

If a supplier has reason to believe that a relevant Commonwealth entity (or any official of a Commonwealth entity) has contravened the CPRs, the supplier may make a written complaint to the “accountable authority” of the entity. If a complaint is made, the accountable authority must:

■ investigate the conduct that is the subject of the complaint; and

■ if no “public interest certificate” is in force in relation to the procurement – suspend the procurement.

Public interest certificates are issued by the accountable authority of a relevant Commonwealth entity if it is not in the public interest for the specified procurement to be suspended during the investigation process. In the absence of a public interest certificate, procurements can be suspended until:

■ the supplier has informed the accountable authority that the complaint is resolved;

■ the supplier withdraws the complaint;

■ the accountable authority issues a public interest certificate; or

■ the court making a finding as to the nature of the conduct complained of, and whether it was in contravention of, the CPRs.

The legislation and rules offer no guidance for circumstances where parallel procurements involving multiple contracts exist. Whether or not the suspension would affect other related contracts is unknown.

Injunction

Where suppliers are of the belief that a Commonwealth entity is contravening the CPRs, the supplier is permitted to lodge an application with the Federal Circuit Court or the Federal Court for an injunction under Part 2 of the Government Procurement Act. The supplier will need to demonstrate that:

■ they have an interest in the covered procurement and whose interests are affected by the Commonwealth entity’s conduct; and

■ the Commonwealth entity’s conduct contravenes the CPRs.

A public interest certificate will grant an entity permission to continue a procurement while an application for an injunction is considered.

Compensation

Considered an “alternative remedy” under the Government Procurement Act, suppliers are permitted to seek compensation for costs incurred in preparing a tender, making a complaint and the steps involved in relation to resolving a complaint. If a supplier has made both a complaint and an application for an injunction, the court may award compensation if an injunction would create significant delay to the procurement.

5.2 Can remedies be sought in other types of

proceedings or applications outside the legislation?

Other administrative law instruments may be used by an aggrieved bidder to seek a remedy in various circumstances. This may include an application to the Office of the Australian Information Commissioner (freedom of information application), to obtain more evidence about the procurement process. Nonetheless, bringing alternate administrative actions may be difficult for an aggrieved bidder, as there is a higher evidentiary burden in successfully doing so.




Alternatively, an aggrieved bidder may seek private law remedies, such as breach of contract or estoppel. In particular, if a tender process contract exists, action may potentially be available for breach of this contract. In some circumstances, it may also be open to the aggrieved bidder to bring an action in misleading and deceptive conduct under the Competition and Consumer Act.

5.3 Before which body or bodies can remedies be

sought?

As identified in question 5.1, the Federal Circuit Court and the Federal Court of Australia now have the jurisdiction to address certain procurement grievances. The Federal Court also has jurisdiction for other administrative actions.

Should an aggrieved bidder wish to bring an action in private law against a government body, the body before which a remedy can be sought will be determined by the respective jurisdiction of the relevant state or territory.

5.4 What are the limitation periods for applying for

remedies?

Under the Government Procurement Act, time limitations on the Federal Court and the Federal Circuit Court to grant an injunction are prescribed.

The Government Procurement Act specifies that an injunction ought not to be granted in relation to a contravention unless the court is satisfied that the application for the injunction was made:

■ within 10 days after the later of the following days:

■ the day on which the contravention occurred; or

■ the day on which the applicant became aware, or ought reasonably to have become aware, of the contravention; or

■ within such longer period as the court allows.

This means that should an aggrieved bidder seek an injunction, they should promptly make an application to the relevant court. The Government Procurement Act does not prescribe any limitations for making a complaint against a government body for non-compliance with the CPRs.

Otherwise, the limitation period for seeking and applying a remedy is generally outlined in limitation legislation for each respective jurisdiction. The general limitation period is six years.

5.5 What measures can be taken to shorten limitation

periods?

Limitation periods may be shortened pursuant to the terms of the procurement contract.

5.6 What remedies are available after contract signature?

As noted in question 5.1, the aggrieved bidder may, under the Government Procurement Act and in the event of contravention of the CPRs:

■ seek compensatory relief;

■ apply for an injunction; or

■ make a complaint (therefore initiating a suspension of the procurement).

5.7 What is the likely timescale if an application for

remedies is made?

Interlocutory relief, such as an injunction, is usually urgent in nature and the courts endeavour to address it promptly. The timescale for other alternative remedies under the Government Procurement Act will be subject to the Federal Court Rules 2011.

5.8 What are the leading examples of cases in which

remedies measures have been obtained?

At the time of writing, there have been no actions successfully brought against a Commonwealth entity under the Government Procurement Act.

The principal Australian authority concerning procurement disputes remains to be Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 (Hughes). In Hughes, it was held that a process contract was created when a public tender was lodged, and that there was an implied obligation in the process contract that the government entity would conduct all tender assessments fairly and in good faith.

5.9 What mitigation measures, if any, are available to

contracting authorities?

Following the introduction of the Government Procurement Act, there are several actions Commonwealth entities can undertake in order to mitigate risk. These include:

■ conducting a review and/or update of internal procurement policies, procedures and documents to ensure compliance with the CPRs;

■ conducting a review of relevant procurement complaint and investigation procedures that may apply when a complaint is made to the relevant “accountable authority”; and

■ informing and training officials who are involved with procurement activities to ensure they are familiar with the internal procurement policies, the Government Procurement Act and CPRs.

6 Changes During a Procedure and After a

Procedure

6.1 Does the legislation govern changes to contract

specifications, changes to the timetable, changes to

contract conditions (including extensions) and

changes to the membership of bidding consortia pre-

contract award? If not, what are the underlying

principles governing these issues?

The CPRs allow entities to change terms applying to procurement, provided that all potential suppliers and tenderers are dealt with fairly and in a non-discriminatory manner. Where a procurement is above the procurement threshold, additional change notification requirements apply. Specifically, where there is modification to the evaluation criteria or specifications or in request documentation, customers must notify all the potential suppliers that are participating at the time the information is amended. Notification must be in the same manner (if known) as the original information provided to the potential suppliers and tenderers. The notification must be provided in adequate time and the entity must allow adequate time for potential suppliers to modify and re-lodge their submissions, if required.

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6.2 What is the scope for negotiation with the preferred

bidder following the submission of a final tender?

There is typically some scope for negotiation; however, if a tenderer fails to raise issues in its tender response, probity constraints may prevent the entity from negotiating the issues.

6.3 To what extent are changes permitted post-contract

signature?

Variations to a contract are permitted under normal contractual rules, provided they are not significant enough so as to require a new procurement.

6.4 To what extent does the legislation permit the transfer

of a contract to another entity post-contract

signature?

Legislation does not regulate the transfer of a contract to another entity post-contract signature. Typically, this would be done through an assignment or novation in accordance with the terms of the contract (which would usually require the Government party’s consent).

7 Privatisations and PPPs

7.1 Are there special rules in relation to privatisations and

what are the principal issues that arise in relation to

them?

There are no specific legislative requirements concerning privatisations. A principal consideration will be the effect of competition law (set out in question 4.2) which seeks to mitigate the risk of uncompetitive market structures post-privatisation in favour of higher profits. Governments will also consider laws relating to bidding protocols, sale terms, foreign ownership, cross-ownership, access rights, work-force retention and taxation.

7.2 Are there special rules in relation to PPPs and what

are the principal issues that arise in relation to them?

The National PPP Policy Framework requires all State, Territory and Commonwealth Governments (excluding local Governments) to apply the National PPP Guidelines (Guidelines) to the procurement of PPP projects. Where capital expenditure exceeds $50 million, evaluation of a PPP as a potential procurement method will be triggered. Projects under $50 million may also be eligible for PPP delivery if they exhibit sufficient value for money drivers. The Guidelines focus on gaining value for money through whole-of-life costing, managing risk and protecting the public interest.

Compared with other infrastructure delivery methods, PPPs are quite complex given their lengthy contract periods and the sharing of risk between private and public sectors. They therefore require careful consideration and approval by Government. In most projects, the private sector operator will be responsible for the risk of additional future costs.

8 The Future

8.1 Are there any proposals to change the law and if so

what is the timescale for these and what is their likely

impact?

The Government Procurement Act will be subject to judicial interpretation, following its commencement in 2019. As such, its effect on procurement processes as an avenue for remedies is yet to be seen.

8.2 Have there been any regulatory developments which

are expected to impact on the law and if so what is the

timescale for these and what is their likely impact?

As noted in question 5.1, the Government Procurement Act was assented to on 19 October 2018 and intends to provide aggrieved bidders a statutory basis to challenge the conduct of Commonwealth entities who contravene the CPRs. The provisions of the Government Procurement Act will be enforceable from 20 April 2019 (or earlier, if by proclamation).




Andrew Hynd

Holding Redlich

L2 300 Queen Street

Brisbane, Queensland

Australia

Tel: +61 7 3135 0642 Email: [email protected] URL: www.holdingredlich.com

Olivia Fielding

Holding Redlich

L2 300 Queen Street

Brisbane, Queensland

Australia

Tel: +61 7 3135 0543 Email: [email protected] URL: www.holdingredlich.com

Andrew Hynd is a Partner in the Corporate and Commercial group at

Holding Redlich, Brisbane, Australia, with specialist experience in

information technology and procurement. Andrew has over 20 years’

experience acting for a range of public and private sector organisations

on IT projects, especially software licensing, implementation and

support, cloud services and privacy and data advice. He is highly

regarded for the commercial and pragmatic advice he provides, with a

specific focus on strategic procurement and the development,

negotiation and implementation of complex contracts. Andrew

regularly provides high-level advice to local and international clients on

privacy compliance issues, as well as a broad range of issues relating

to data – including value capture, management, security and breaches.

Andrew also assists clients in the start-up ecosystem, providing initial

advice on structuring, IP protection, fund raising and funding

agreements, NDAs and employment arrangements, regulatory issues

and services agreements.

At Holding Redlich, great law is our starting point.

Across our offices in Melbourne, Sydney, Brisbane and Cairns, we provide a complete range of legal services for clients of all sizes including many

of Australia’s largest public and private companies and all levels of Government.

We provide solutions tailored to our clients’ needs, underpinned by the very best legal thinking and expert industry knowledge.

But it takes much more than great law to build enduring partnerships – our aim with every client.

That is why we have a personal stake in our clients’ success and longevity, a commitment to quality in everything we do and an informal culture which

values respect and collaboration.

And above all else, we understand that our role is to look after our clients and their best interests.

Olivia Fielding is a lawyer in the Corporate and Commercial group at

Holding Redlich, Brisbane, Australia. Olivia is trusted by clients to

manage an array of corporate transactions and complex commercial

matters. Olivia has specialist knowledge and experience in public

procurement and government contracting, particularly in connection

with the information and communications technology sectors, privacy

compliance, QITC and Procure IT. Olivia takes pride in her intricate

understanding of her clients’ intellectual property requirements,

providing advice on trade marks, licensing and franchising. At Holding

Redlich, Olivia contributes to complex cross-border, multi-jurisdictional

M&A transactions and her practice includes all areas of corporate

structuring and corporate governance, including government-owned

corporations. Olivia is passionate about her involvement in the

community through her contribution to pro bono clients including Reef

Restoration Foundation, GingerCloud, refugee advocacy and

homeless person legal clinic work through LawRight.


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Chapter 3


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Arne Carton

Belgium




Belgian legislation on public procurement has been codified in the Act of 17 June 2016 concerning public procurement, which entered into force on 30 June 2017. This Act contains the core of both the coordination and the codification of all existing public procurement regulations and of the transposition into Belgian law of the 2014 European Procurement Directives.

The most important Royal Decrees implementing the Act of 17 June 2016 are:

■ The Royal Decree of 18 April 2017 on the award of public procurement contracts in the ordinary sectors.

■ The Royal Decree of 18 June 2017 on the award of public procurement contracts in the “special sectors” (i.e. in the water, energy, transport and postal services sectors).

■ The Royal Decree of 14 January 2013 determining the general rules of execution of public procurement contracts.

This regulatory framework governing public procurement is complemented by the Act of 17 June 2013 concerning the motives, the information and the legal remedies with regard to public procurement contracts and certain contracts for works, supplies and services, and concessions.




of the legislation?

The principles of general Belgian constitutional and administrative law apply. The constitutional principles of government transparency, equality, and non-discrimination (articles 10 and 11 of the Belgian Constitution) are the most relevant to public procurement, as well as the Act of 29 July 1991 on the formal notification of the reasons for administrative acts, which requires all administrative authorities to give factual and legal reasons for individual decisions.



Specific rules exist concerning the award of public procurement contracts in the “special sectors” (i.e. in the water, energy, transport and postal services sectors).

With regard to procurement rules tailor-made for defence and security markets, the Directive 2009/81/EC on defence and security procurement has been implemented by the Act of 13 August 2011 on public contracts and certain contracts for works, supplies and services in the field of defence and security.



public procurement?

The principles of general Belgian constitutional and administrative law apply. The constitutional principles of government transparency, equality, and non-discrimination (articles 10 and 11 of the Belgian Constitution) are the most relevant to public procurement, as well as the Act of 29 July 1991 on the formal notification of the reasons for administrative acts, which requires all administrative authorities to give factual and legal reasons for individual decisions.



agreements?

The Act of 17 June 2016 transposes the 2014 Directives on public procurement, which are in turn influenced by the GPA rules.


Contracts



Article 2 of the Act of 17 June 2016 enumerates contracting authorities covered by the public procurement rules in the ordinary sectors. These contracting authorities are principally the “public authorities” (e.g. the State and municipalities), and the entities fulfilling the following criteria:

■ having legal personality;

■ being established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; and

■ being financed, for the most part, by the State, regional or local authorities, or other bodies governed by public law; being subject to management supervision by those bodies; or having an administrative, managerial or supervisory board, more than half of whose members are appointed by those bodies.


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In accordance with the European Directives, the Belgian legislation has a broader field of application in the special sectors. In addition to the contracting authorities mentioned in the ordinary sectors, the special sectors regulation also includes “public undertakings” (i.e. any undertaking over which the public authorities have a dominant influence) and some private entities.


The public procurement rules cover contracts for pecuniary interest concluded in writing between a contractor, a supplier, or service provider and a public purchaser for the undertaking of works, supplies, and/or services. Public works contracts cover the execution of general building and civil engineering works in conformity with the requirements specified by the public purchaser. The design of the works may also be included in the contract. Public supply contracts relate to the delivery of products. Delivery in this context includes purchase, lease, rental or hire purchase, with or without an option to buy. Public service contracts cover all the services mentioned in annex III of the Act of 17 June 2016.



All contracts are subject to Belgian procurement legislation. As a principle, the (Belgian) publication of the announcement of the contract is required, even when the European threshold values are not met, unless the negotiated procedure without publication can be used. European publication is obligatory if the thresholds laid down by the European Commission are exceeded.


It is forbidden to split up contracts that are to be considered as one work, supply or service contract, and that are valued above the threshold values for the purpose of obtaining different contracts that are below those values.

Furthermore, it is forbidden to subdivide a contract into different contracts in order to avoid the application of the European threshold values.



Concession contracts are contracts for pecuniary interest concluded in writing by means of which one or more contracting authorities or contracting entities entrust the management of services or the execution of works to one or more economic operators, the consideration for which consists either solely in the right to exploit the services or works that are the subject of the contract or in that right together with payment. The Act of 17 June 2016 on concession agreements provides further regulation for these type of contracts.



Article 43 of the Act of 17 June 2016 provides the possibility to conclude framework agreements in the ordinary sectors. In conformity with the European Directives, more flexibility with regard to the award of framework agreements exists in the special sectors.


into lots?

Article 58 of the Act of 17 June 2016 provides that a contract can be divided into lots. In the ordinary sectors, a motivation is necessary for contracts with a value of 135,000 euros or more if a contracting authority decides that it would not be appropriate to divide the contract into lots. Contracting authorities have the right to not award all of these lots and, if necessary, to decide that some lots will be part of one or more new contracts, which might be awarded in a different manner.



In general, contracting authorities must treat suppliers (in addition to contractors and service providers) in an equal, non-discriminatory and transparent way. The principles of equal treatment, non-discrimination, mutual recognition, proportionality and transparency apply especially to economic operators that are settled in the European Union.

3 Award Procedures




Belgian public procurement legislation previously made a distinction between the procedures of aanbesteding/adjudication (award to lowest regular tender) and offerteaanvraag/appel d’offres (award to the regular and most advantageous tender, according to the criteria mentioned in the contracting documents). Although a tender may still be awarded on the basis of price or costs alone, this terminological distinction has been abandoned in the Act of 17 June 2016.

The following three types of procurement procedures are the most common:

■ an open procedure, in which all interested contractors may submit tenders;

■ a restricted procedure, in which only those contractors that are invited by the contracting authority may submit tenders; and

■ a competitive procedure with negotiation, which allows the contracting authority to consult the economic operators of its choice and to negotiate the terms of the contract with one or more of them. In the ordinary sectors, this procedure can only be chosen in limited cases listed in the Act of 17 June 2016.

Other types of procurement procedures, such as the competitive dialogue, innovation partnership and the negotiated procedure without prior publication also exist on the basis of Belgian law. These procedures can only be used on the basis of the conditions provided by law.


The main principles can be summarised as follows:

■ Tenders have, in principle, at least 35 days to submit a tender for open procedures. For restricted procedures, there is a timescale of 30 days to submit a request to participate and 30 days to submit a tender.

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■ In certain cases, such as urgency, special rules on minimum timescales apply. In these cases, the time limit is reduced.


tenderers?

In accordance with the requirements of the European public procurement rules, the Royal Decree of 18 April 2017 contains rules concerning the situations in which a contracting authority has the obligation to exclude candidates that have been convicted of offences such as participation in a criminal organisation or corruption. This Royal Decree also deals with situations in which a contracting authority has the possibility (not the obligation) to exclude candidates; for example, in cases of non-compliance with the obligations concerning the payment of social security contributions.

Concerning the short-listing of tenderers, it should be noted that the selection of the tenderers must be based exclusively on the selection criteria contained in the tender notice and on the basis of documents enumerated in the tender notice as being required for the selection. The selection criteria may refer to technical and/or professional ability and economic and financial standing.




The contracting authority must award the contract to the most economically advantageous tender. This tender may be awarded on the basis of price or costs alone. It is also possible to award the contract on the basis of both economic and quality criteria, which may include environmental or social value considerations if these have a sufficient link with the subject of the tender.


low tenders?

In principle, an obligation exists for contracting authorities to demand justification for abnormally low tenders (either the total price or unit prices). An exception exists if the value of the possible abnormal unit price(s) is/are negligible.

A contracting authority has an amount of discretion to decide whether a price is “abnormal”, unless a specific threshold needs to be respected. This is the case for tenders in the so-called “fraud-sensitive sectors”, such as construction works and cleaning services. In these award procedures, an obligation may exist to demand justification for abnormally low tenders if the total price is at least 15 per cent below the average total price submitted by the tenderers.


The criteria for the award of the contract should enable tenders to be compared and assessed objectively, and must be mentioned in the contract documents or in the tender notice.

The contracting authority must make a motivated decision when deciding on the selection of tenderers (in cases where the procedure exists of two phases; the first phase is the submission of applications for participation in the procedure), or when deciding on the award of the contract.

3.7 What are the rules on debriefing unsuccessful bidders?

Immediately after the award decision, the contracting authority notifies:

■ every non-selected tenderer of the reasons for the non-selection, by distributing the relevant part of a copy of the motivated decision;

■ every tenderer with an irregular or unacceptable tender of the reasons for the exclusion of his offer, by distributing the relevant part of a copy of the motivated decision; and

■ every tenderer with an offer that, after assessment, does not constitute the most economically advantageous tender, by distributing a copy of the motivated decision.

The notification must mention the time limit of the applicable standstill period and the recommendation to inform the contracting authority if the tenderer would choose to initiate a suspending procedure.


In the event that two (or more) contracting authorities wish to set up the joint realisation of public works contracts, public supply contracts, or public service contracts, article 48 of the Act of 17 June 2016 provides the possibility of a joint procurement. The contracting authorities may designate one of the contracting authorities to act as their authorised representative during the award and execution of the contract.

Belgian public procurement rules also provide the possibility to make purchases using a central purchasing body, or on the basis of a framework agreement.


In principle, an economic operator must submit its best and final offer immediately.

If the specifications allow or oblige the formulation of variants, economic operators are permitted or obliged to state variants in their tender. The contracting authority must then make a detailed description in the specifications of what is required in order to lead to the desired result.

If the specifications do not mention the use of variant bids, stating that the contract will be awarded to the most advantageous tender, a tenderer may propose a variant bid on its own initiative, which contains alternative solutions for one or more aspects of the specifications.

Article 48 of the Royal Decree of 18 April 2017 also provides the possibility that “options” are described in the specifications. An “option” can be defined as an accessory element that is not strictly necessary to perform the contract, and which is submitted either spontaneously or at the request of the contracting authority.

Variant bids and options can only be accepted if these have been allowed by the tender documents and meet the minimum specifications required by the contracting authority (except when the European threshold value is not met, in which case tenders can propose variant bids or options freely in their offer).


Article 6, §1 of the Act of 17 June 2016 states that conflict of interest exists if a civil servant, public authority figure or any other person

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intervenes in the award and the performance of a public contract, in the situation where the person involved has direct or indirect, financial, economic or other personal interests that may be considered to compromise their impartiality and independence with regard to the award or execution of a public contract.

This conflict of interest is presumed to exist in cases such as when the person referred to in article 6, §1 is (directly or through an intermediary) owner, co-owner or partner in one of the candidate or tendering companies, or (directly or through an intermediary) exercises an executive or management authority in one of these companies (article 6, §3 of the Act of 17 June 2016).




The contracting authority may hold market consultations before the start of an award procedure in order to prepare the tender procedure, and to inform companies of its plans and requirements. For this purpose, the contracting authority may, for example, obtain or receive advice from independent experts, private or public institutions or from market participants. The prior market consultations may be used in the planning and conduct of the award procedure, provided that this does not lead to a distortion of competition and does not give rise to a breach of the principles of non-discrimination and transparency (article 51 of the Act of 17 June 2016).




The Belgian legislation concerning exclusions/exemptions is in accordance with the European Directives. Therefore, the public procurement rules do not apply to, for example, service contracts awarded on the basis of an exclusive right or the acquisition or rental of existing buildings.




In principle, the relations between contracting authorities concerning the awarding of public contracts are subject to the same public procurement rules as the relations between a contracting authority and a private entity.

There are, however, three general exceptions to this principle:

■ The first exception concerns the award of contracts between two contracting authorities (in-house contracts), on the basis of the conditions stipulated in article 30 of the Act of 17 June 2016 and the case law of the Court of Justice.

■ The second exception concerns certain types of situations in which contracting authorities together seek to ensure the performance of their public tasks, according to the conditions stipulated in article 31 of the Act of 17 June 2016 and the case law of the Court of Justice.

■ The third exception concerns delegation of powers, in cases where there is a full devolution of tasks, responsibility and power of decision from one contracting authority to another, and the contracting authority becomes a substitute, exercising all the competences of the initial contracting authority.

If one of these exceptions applies, the award of the contract will not be subject to the public procurement rules.

5 Remedies



The Act of 17 June 2013 concerning the motives, the information and the legal remedies with regard to public procurement contracts and certain contracts for works, supplies and services and concessions, aims to ensure compliance of the Belgian legislation with the review procedures provided by Directive 2007/66. The rules of the Act of 17 June 2013 are applicable to procedures above the threshold for European publication, and are only partially applicable to some procedures under the European threshold values. In accordance with the Directive, the Act provides for various forms of (judicial) protection, and it clarifies the specific review body and the time limits in which these procedures must be introduced.

The Act contains a standstill obligation on the basis of which, within a time frame of 15 days between the notification of the award decision and the contract conclusion with the chosen tenderer, a suspending procedure of extreme urgency before the Council of State or a summary procedure before the civil courts can be introduced.

Other measures can also be requested, ranging from the suspension and annulment of decisions taken by the contracting authority, to damage claims or alternative sanctions. Normally, the suspension or annulment of the contract itself cannot be obtained, except in the cases which are exhaustively enumerated in the Act of 17 June 2013.

The possibility to obtain the ineffectiveness of the contract is also provided for in some cases.



The Act of 17 June 2013 also includes rules on remedies regarding concession contracts.

For the other contracts, due to lack of specific proceedings, general Belgian (procedural) law can be utilised to its full extent in order to acquire some form of restitution or compensation. Various measures can be requested, ranging from the suspension or annulment of the different decisions taken by the contracting authority, to the suspension or annulment of the contract and damage claims. These measures can often be combined, even if all of them cannot necessarily be brought before the same judge.


sought?

Suspension or annulment procedures against a decision of a contracting authority are brought before the Council of State, unless the contracting authority is not an administrative authority within the meaning of the coordinated laws on the Council of State of 12 January 1973. In this case, the suspension or annulment actions are brought before the civil courts.

The civil courts are competent to examine claims for damages regarding the award of public procurement contracts and for all disputes concerning the execution of these contracts.

However, civil courts are not exclusively competent to examine a claim for damages after a suspension or annulment by the Council

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of State. If certain conditions are complied with, damages can be claimed before the Council of State by applicants or intervening parties after a judgment of the Council of State in which an illegality has been determined (article 11bis of the coordinated laws on the Council of State of 12 January 1973).


remedies?

If a decision falls under the scope of the Act of 17 June 2013, the suspending proceedings must be initiated, in principle, within a time frame of 15 days after the notification of the challenged decision. The annulment proceedings before the Council of State must be launched within a time frame of 60 days after the notification of the decision.

An action to obtain the ineffectiveness of the contract must, in principle, be initiated within 30 days after the day following the date on which the contracting authority has informed the tenderers and candidates concerned of the conclusion of the contract and, in any case, within six months after the day following the date of the conclusion of the contract.

An action for alternative sanctions must be launched within a time frame of six months.

In principle, damage claims before the civil courts must be initiated within a time frame of five years.

Damage claims before the Council of State on the basis of article 11bis in the coordinated laws on the Council of State of 12 January 1973 must be initiated within 60 days after the notification of the judgment of the Council of State in which the illegality has been determined.


periods?

Article 12 of the Act of 17 July 2013 enumerates a restricted number of cases in which no standstill-period must be observed. This Act does not provide any other measures to shorten the limitation periods described in question 5.4.


The conclusion of the contract deprives a third party, in principle, of the possibility to obtain rehabilitation in natura, i.e. the possibility of being able to still obtain the award of the contract itself.

Third parties can nonetheless still try to obtain the annulment of the award decision before the Council of State, and/or the suspension/annulment of the contract before the civil courts. However, the suspension/annulment of the contract is only allowed in limited cases for contracts which fall under the scope of the Act of 17 July 2013 (see question 5.1).

Furthermore, damage claims can be introduced before the civil courts or before the Council of State (e.g. after an annulment of an award decision by the Council of State).


remedies is made?

This is highly dependent upon the type of procedure, the facts of each case, and the availability of the competent court.

Judicial proceedings may take a few weeks (e.g. suspending proceedings of extreme urgency before the Council of State or summary proceedings before the civil courts and tribunals), or one to two years (e.g. annulment proceedings before the Council of State or damage claim before civil courts).



The Belgian judicial system does not know the principle of “precedents”.

Nonetheless, the jurisprudence of the Council of State in particular (judgments of the civil courts and tribunals are only rarely published) is deemed a relevant source of law with respect to the enforcement of public procurement legislation.



No specific legislation exists in this regard.


Procedure







In principle, a contract will be awarded on the same terms as those set out in the specifications.

Before the award of the contract, Belgian legislation does not deal with changes to contract conditions. However, European and Belgian case law admit the possibility of modifications under certain conditions determined by that particular case law.

After the award of the contract, Belgian legislation provides that changes are possible in certain cases, such as the application of previously agreed upon contract review clauses. Very detailed rules are provided in the articles 37 to 38/6 of the Royal Decree of 14 January 2013 determining the general rules of execution of public procurement contracts.

The general rules of execution also stipulate the conditions that allow contractors to apply for an extension of the time limit, or a review or revocation of the contract.

An extension of an existing contract must be considered, in principle, as a new contract and must, by consequence, be awarded in compliance with the public procurement rules.



Belgian legislation does not deal specifically with this situation. However, the following principles seem to apply. After a submission of a “Best and Final Offer” (BAFO), the contracting authority may allow or request certain changes to the tender, for example, to clarify understandings reached during negotiations or to rectify a material error. However, there can be no violation of the equal treatment of the tenderers, and these changes cannot have an

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impact on the overall ranking of the final tenders. Furthermore, the general balance between the rights and obligations of the parties, as determined by the specifications and the BAFO, should not be altered.


signature?

Apart from the situations mentioned under question 6.1, a new contractor may replace the initial one as a consequence of succession, following corporate restructuring (article 38/3, 2° of the Royal Decree 14 January 2013).



signature?

No specific legislation exists in this regard. Please see question 6.1.




them?

Belgian legislation does not contain specific rules regarding privatisations. If a privatisation results in the procurement of goods, works and/or services, it is, in principle, subject to the public procurement rules in the same way as any other contract.



There are some laws which aim to facilitate the use of PPPs, e.g. by authorising public authorities to participate in joint ventures. These laws often concern a particular matter (e.g. social housing) and may provide for subsidies.

8 The Future



impact?

The regulatory framework implementing the 2014 European Directives (Act of 17 June 2016 and Royal Decrees – see question 1.1) entered into force on 30 June 2017. No major changes to this regulatory framework are expected in the near future.




Please see question 8.1 above.

Stibbe Belgium


Belg

ium


David D’Hooghe

Stibbe

Central Plaza – Loksumstraat 25

1000 Brussels

Belgium

Tel: +32 2 533 52 61 Email: [email protected] URL: www.stibbe.com

Arne Carton

bpost

Muntcentrum

1000 Brussels

Belgium

Tel: +32 2 276 83 48 Email: [email protected] URL: www.bpost.be

David D'Hooghe specialises in constitutional and administrative law, in

particular in the field of public procurement, public private partnerships

(PPP’s), government goods, health, public office, social housing, rest

homes and education. On several occasions he has acted as legal

advisor to the Flemish and federal governments and on behalf of

various government authorities. He has an important procedural law

practice before the Belgian Constitutional Court, the Council of State

and the courts. David D’Hooghe has extensive experience in editing

laws and decrees. David D'Hooghe is a part-time professor at KU

Leuven where he is a lecturer for a number of courses in the field of

administrative law (legal protection against public authorities, public

authorities instruments). He has written several books and many

articles relating to the above-mentioned domains and in particular with

respect to public procurement and PPPs.

Stibbe is a Benelux law firm with main offices in Amsterdam, Brussels, and Luxembourg and branch offices in Dubai, London and New York. Stibbe

offers full legal service, both advisory work and litigation, in all areas of law, such as administrative law, banking & finance, corporate/M&A,

employment & pensions, energy, EU, competition & regulated markets, insolvency & restructuring, intellectual property, litigation & arbitration,

planning & environment, real estate & construction, tax, and TMT.

Stibbe consists of more than 390 lawyers. Stibbe’s Brussels office comprises close to 150 lawyers, of whom 30 are partners. As a full-service firm,

our lawyers work in multidisciplinary teams with the aim to deliver pragmatic advice. We build close business relationships with our clients that range

from local and multinational corporations to state organisations and public authorities. We realise that understanding their commercial objectives,

their position in the market and their sector or industry, allows us to render suitable and effective advice.

Arne Carton specialises in constitutional law and administrative law,

especially public economic law matters: public procurement; public-

private partnerships (PPPs); public enterprises; and utilities. After six

years of experience at Stibbe, Arne is currently employed as a Legal

Counsel in a public enterprise listed on the BEL 20 index. He has a

wide range of experience in advising on public procurement legislation

and other regulatory matters.

Arne holds an LL.M. in European Law from the College of Europe in

Bruges. He is a part-time assistant at the Catholic University of

Leuven (KUL), where he teaches public law. Furthermore, Arne is a

member of the federal Commission on Public Procurement.

Stibbe Belgium


23

Chapter 4


Pinheiro Neto Advogados

Ricardo Pagliari Levy

Heloisa Figueiredo Ferraz

Brazil




The main rules for public procurement and contracts are provided in the Public Procurement Law (Federal Law No. 8,666/93), applicable to federal, state and municipal entities.

Public procurement rules are also set forth in the Reverse Auction Law (Federal Law No. 10,520/02) and Electronic Reverse Auction Decree (Federal Decree No. 5,450/05), as well as in the State-owned Companies Law (Federal Law No. 13,303/16) and Decree (Federal Decree No. 8,945/16).

Additionally, there is the Differentiated Procurement Regime (RDC, acronym in Portuguese), created by Federal Law No. 12,462/11, which is applicable to a restricted type of procurement proceedings and is less used in Brazil.

While the Public Procurement Law, the Reverse Auction Law and the Electronic Reverse Auction Decree are applicable to all government entities, special funds, autarchies and public foundations, the State-owned Companies Law and Decree are applicable to public companies, mixed-capital corporations and their subsidiaries. The latter regulations provide specific public procurement rules applicable to such companies, since they are subject to a different law regime than those applicable to the entities subject to the Public Procurement Law, the Reverse Auction Law and the Electronic Reverse Auction Decree.

States and municipalities may also enact their public procurement regulations, within the limits of the general rules set forth by the Public Procurement Law and, respectively, the State-owned Companies Law and Decree, as applicable.




of the legislation?

The Public Procurement Law specifically mentions that the principles applicable to tenders are the following: equitable treatment; selection of the most advantageous proposal; promotion of sustainable national development; legality; impersonality; morality; equality; transparency; administrative probity; connection to the tender notice; and objective judgment. These principles guide the application of public procurement law and all measures taken by the public administration in such procedures.



Yes. There are sector-specific regulations which supplement the general public procurement rules and apply to certain cases. Examples of these are: Federal Law No. 9,427/96, applicable to the utilities sector; Federal Law No. 8,987/95, applicable to concessions of public services; Federal Law No. 11,079/04, applicable to Public-Private Partnerships; and Federal Law No. 12,598/12, applicable to the acquisition of strategic defence products and systems.



public procurement?

All rules applicable to the public administration must be complied with in public procurement procedures and by public entities during regular course of business and their activities. Rules applicable to areas such as government transparency and compliance must be followed in all procedures.



agreements?

Not applicable. Brazil is not subject to the EU procurement rules, nor is it a signatory of the GPA.


Contracts



All government entities, special funds, autarchies and public foundations, public companies, mixed-capital corporations and their subsidiaries.


All works, services, publicity, purchase, sale and lease contracts.


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Yes. For works and engineering services, the type of procurement procedure is defined based on the following contract thresholds: (i) invitation to bid: up to R$ 330,000.00; (ii) price quotation: up to R$ 3,300,000.00; and (iii) competitive bid: over R$ 3,300,000.00. For purchases and services not including works and engineering: (i) invitation to bid: up to R$ 176,000.00; (ii) price quotation: up to R$ 1,430,000.00; and (iii) competitive bid: over R$ 1,430,000.00.


Not applicable.



Yes. Examples of these are: Federal Law No. 9,427/96, applicable to the utilities sector; Federal Law No. 8,987/95, applicable to concessions of public services; and Federal Law No. 11,079/04, applicable to Public-Private Partnerships.



The Brazilian equivalent of a framework agreement is a commitment to supply, called ‘price registry minutes’, which is valid for one year. The execution of this agreement is preceded by a public procurement procedure and, at the end, the winning bidder executes the price registry minutes, committing to supply a certain quantity of goods or services at a certain price. The public entity is not obliged to request that the contracted company supply such products or services, but, if it does, the company must fulfil such supply. Based on the price registry minutes, the contracting public entity executes contracts with the company based on its demand for the good or service. The general rule is that the price registry minutes be executed with only one supplier.


into lots?

Regarding the division of a contract into lots, the tender notice itself shall divide the object of the tender into lots whenever possible, aiming to cover as many bidders as possible and stimulate the competitive nature of the procedure. There is no provision set forth in law limiting the number of lots that single bidders may be awarded. However, the tender notice itself may foresee such limitation, on a case-by-case basis and if such restriction is duly justified (i.e. if it is not possible/feasible for one bidder to be awarded more than one lot in a certain tender).



The obligations are the same for suppliers established in or outside the Brazilian jurisdiction.

3 Award Procedures




The type of public procurement procedure depends on the purpose, scope and value of the tender. Types of public procurement procedures provided in the Brazilian legal framework are the following: competitive bid; price quotation; invitation to bid; contest; auction; and reverse auction (regular or electronic). Decisions rendered by the Federal Budget Oversight Board (TCU) tend to recommend that, whenever possible, public entities conduct reverse auctions, which apply for the acquisition of ordinary goods and services. In our experience, public entities tend to follow such guidance and conduct such reverse auctions, mostly in the electronic form, probably due to it being more straightforward than other procedures. Besides these public procurement procedures, there are also cases of waiver and unfeasibility of tender.


Minimum timescales vary from five to 45 days between the publication of the tender and receipt of proposals.


tenderers?

Tenderers will be excluded/short-listed when they do not comply with the requirements of the tender notice, required for the contract. The excluded tenderers are allowed to challenge the decision administratively as well as judicially.




Evaluation of tenders also takes technique into consideration, as well as price. However, price is usually the most common criterion for evaluation of proposals.


low tenders?

According to Brazilian legislation, ‘abnormally low’ bids are those considered to be unfeasible, which, as per the Public Procurement Law, are bids with prices lower than input costs or the estimated price for the product or service as researched by the public entity during preparation of the public procurement procedure.

The contracting public entity shall request that the bidder provide evidence that the bid is not unfeasible. In case the evidence presented is satisfactory, the bid shall be accepted. If not, the bidder may be subject to penalties imposed by the public entity due to submission of a bid which it would not be able to carry out and comply with.

Pinheiro Neto Advogados Brazil


Braz

il



Once the winning bid is confirmed and not subject to challenges, the result of the tender will be confirmed by the superior authority and the public entity will call the winning bidder to sign the agreement.


bidders?

The session held by the contracting entity to analyse and judge proposals shall be public and all participating bidders shall be present. In electronic reverse auctions, the public entity’s decision is disclosed online and to all participating bidders. Therefore, unsuccessful bidders will be notified of the selection and the successful bidder will be announced. In any case, results of public procurement procedures must be published in the respective Official Gazette.


Companies are allowed to participate in tenders together by means of a consortium.


Variant bids are not allowed under the Brazilian legal framework.


Regarding conflicts of interest in the course of a tender procedure, the tender notice usually prohibits the participation of bidders with any relation to the contracting public entity. In case conflict of interest occurs involving a public official and an interested bidder, there could be applicable penalties, based not only on the Public Procurement Law, but also the Administrative Improbity Law (Federal Law No. 8,429/92) and the Anti-corruption Law (Federal Law No. 12,846/13). These penalties range from fines to suspension and blacklisting from participating in public tenders and executing public contracts, applicable to companies benefiting from any illegal acts harming the public tender and the government, as applicable according to each law.




As a general rule, bidders are not allowed to participate directly or indirectly in the preparation of a tender procedure. Companies or individuals participating in studies or projects involving the initial tender phase are not allowed to participate as bidders, as per the Public Procurement Law.

However, an exception to such prohibition is the Manifestation of Interest Proceeding (PMI, as the Portuguese acronym), which allows companies to submit studies and projects to public entities in preparation for public tenders. The public entities usually publish a notice requesting projects to be submitted by private parties, and may use the studies received in full or partially, or even not at all. The parties submitting studies prior to the tender procedure are allowed to participate as bidders, and the studies shall be reimbursed as foreseen in the tender notice by the successful bidder of the public procurement procedure (other than that which carried out the study

in the first place). The PMI is a useful structure which allows companies to submit well-grounded studies and projects to the government, helping to develop complex infrastructure projects.




The main cases of exclusions/exemptions are those of waiver/unfeasibility of tender. These apply in certain types of contracts, which, as a rule of thumb, cannot be subject to an objective assessment typical of a public procurement procedure.

As examples, the law sets forth that, among others, cases in which there are exclusive suppliers are subject to unfeasibility of tender. Also, concerning the value of the contract, the public procurement law provides waiver of tender in the case of engineering works and services amounting up to R$ 33,000.00, and, for other services and purchases, for contracts amounting up to R$ 17,600.00. In specific cases provided by the public procurement law (when public consortia or autarchies or foundations qualified as Executive Agencies are contracting authorities), these thresholds are doubled.




The general rule is that contracts between public entities are subject to waiver of tender.

5 Remedies



Authorities have different attributions and overlapping jurisdiction over public procurement procedures. Remedies could include injunctions, orders to declare procedures null and void and the imposition of penalties, for instance.



Yes, even if an administrative proceeding results in a ruling against the contracted party, a judicial proceeding and/or one before the Budget Oversight Board with jurisdiction over the case could result in a ruling in the opposite sense.


sought?

Remedies can be sought from the contracting entity, the judiciary and the Budget Oversight Board with jurisdiction over the case.


remedies?

According to the general rule foreseen in the Public Procurement Law, applications for remedies may be filed up to five business days



Braz

il


before the date scheduled for the opening of proposals, while the deadline applicable to bidders is up to two business days before such date.


periods?

Not applicable.


After contract signature, administrative measures are still available, but judicial and Budget Oversight Board remedies are usually more effective.


remedies is made?

There is no fixed term foreseen in law for the duration of such proceedings. Administrative proceedings usually take up to one year to be concluded, whereas judicial proceedings may take up to 10 years before a lower court decision on the merits is rendered.



Successful applications for remedies depend on the supposed violation involved in the tender, the public entity and the relevance of the tender itself. Administrative challenges to decisions issued by the public entity may have automatic suspension effects, but, in our experience, such suspension effects are usually lifted when analysed by the public entity. Also, we believe that the public entity’s analysis depends on the stage of the public tender. Our impression is that, as the tender moves towards its conclusion, it is more likely for suspension effects to be lifted than at the beginning of the tender procedure. This may be due to the fact that tenders close to conclusion would cause greater damage to public interest than those at an early stage.



Contracting authorities are allowed ample defence in proceedings involving public tenders, usually demonstrating the legality of their acts and the fact that they would be more beneficial for public interest than declaring them null and void.


Procedure







Yes. In cases where the tender is still ongoing, substantial changes to the tender notice or contract would require the new publication of

such specifications. Regarding ongoing contracts, the public procurement law governs changes to public contracts in certain conditions, be such changes unilateral or agreed upon between the parties. Changes to contracts must be duly justified and formalised by means of an amendment (see the answer to question 6.3 below). The members of a consortium may not be changed during the course of a public procurement procedure. If allowed by the tender notice and contract, the members of the consortium may exceptionally be replaced, usually upon the contracting public entity’s prior consent, and provided that such companies demonstrate evidence that they also fulfil the qualification requirements.



Negotiations with a preferred bidder after a final bid are restricted to auctions, when bidders can improve their bids and try to beat the other. In Brazil, the bidders’ proposals have been thoroughly evaluated by the time they are considered a winning bidder of a public procurement procedure.


signature?

As a general rule, according to the Public Procurement Law, contracts may be amended up to the total term of 60 months (including their original term). Such amendment must be executed prior to termination of the contract. In case a contract has expired beyond the allowed 60-month term, a new public procurement procedure must be conducted for the public entity to execute a contract with the same scope.



signature?

The public procurement law permits the transfer of public contracts when this is allowed under the tender notice and the contract itself. The new contracted party must hold the same qualifications as the original winning bidder and party transferring the contract. In concessions, specifically, transfer of contracts and also of control of the concessionaire are subject to prior consent of the public entity. In regular public contracts, the requirement of prior consent depends on what is provided in the specific contract.




them?

Privatisations are subject to a public procurement procedure, as per the rules of Federal Law No. 9,491/97 (at the federal level), and specific state and municipal legislation, as applicable, for assets belonging to entities at these levels. The Public Procurement Law is also applicable to privatisations, complementing Federal Law No. 9,491/97. Privatisations must also be authorised by law and include the transfer of public assets into private ownership, sale of shares owned by the government in companies and the transfer of public services to the private sector (such as concessions).



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Yes, Federal Law No. 11,079/04 is applicable to Public-Private Partnerships. The main issues provided in such law relate to the consideration received by private companies, guarantees and the applicable tender procedure.

8 The Future



impact?

Yes. Many proposals to change the Public Procurement Law have been submitted. There is a main bill currently being discussed by the House of Representatives (Bill No. 6814/2017), which was approved by the Brazilian Senate in 2016 (formerly as Bill No.

559/2013). This bill aims to change the Public Procurement Law, the Reverse Auction Law and the RDC Law. After analysis by the House of Representatives, the bill is subject to sanction by the Brazilian President.




Not applicable. Please see question 8.1 above.



Braz

il


Ricardo Pagliari Levy


Rua Hungria, 1100

01455-906, São Paulo – SP

Brazil

Tel: +55 11 3247 8477 Email: [email protected] URL: www.pinheironeto.com.br

Heloisa Figueiredo Ferraz


Rua Hungria, 1100

01455-906, São Paulo – SP

Brazil

Tel: +55 11 3247 6161 Email: [email protected] URL: www.pinheironeto.com.br

Ricardo Pagliari Levy is a partner at Pinheiro Neto Advogados and

member of the São Paulo office since 1995, having worked in the

former London office. He works with public procurement and

contracts, concessions and PPPs and regulatory issues. He provides

counsel on these matters and defends clients in administrative and

budget oversight board proceedings, administrative improbity civil

suits and class actions. He is a member of the Procurement Lawyers’

Association and an associate member of the Procurement Law

Academic Network (PLAN), has published articles in the Public

Procurement Law Review and other legal journals, as well as chapters

of books on public procurement. He was included in the top-10 list of

public procurement lawyers worldwide, published by Who’s Who Legal in 2011. Since 2013, he has been listed among the “Approved

Administrative Law private practitioners in Brazil” published by the

Latin American Corporate Counsel Association (LACCA). He and his

team have also been recommended for their work in “Public Law” by

The Legal 500 (since 2012), Chambers and Partners (since 2013) and

Latin Lawyer 250 (2018).

Pinheiro Neto Advogados is a Brazilian, independent, full-service firm specialising in multi-disciplinary deals and in translating the Brazilian legal

environment for the benefit of local and foreign clients.

Founded in 1942, Pinheiro Neto Advogados was one of the first Brazilian law firms to serve foreign clients as well as the first Brazilian law firm to

specialise in corporate clients. With clients in almost 60 countries, the firm was recognised in 2014 by the Brazilian government as the number one

exporter of legal services from Brazil.

The firm has grown organically, and developed a distinctive, tight-knit culture, with a low associate-to-partner ratio. Its unique, democratic

governance structure promotes transparency and consensus-building among the partners.

With a focus on innovation, the firm has kept its competitive edge throughout the years, and is widely hailed as an institution of the Brazilian legal

market.

In order to maintain its status as a valued strategic partner to its clients, the firm invests heavily in professional development, not only through strong

on-the-job training, but also by means of the highly structured Pinheiro Neto Professional Development Program, the first of its kind in Brazil. In

addition, our lawyers can take advantage of the largest and most complete private legal library in Brazil.

The firm advises and represents both local and international clients in a broad range of sectors, including automotive, banking and financial services,

construction and materials, energy and natural resources, environment and waste management, health care, oil and gas, real estate and technology.

Heloisa Figueiredo Ferraz is a mid-level associate at Pinheiro Neto

Advogados and has been a member of the São Paulo office since

2011. She works with public procurement and government contracts,

concession of public services and PPPs and in regulatory issues. She

provides counsel on these matters and also defends clients in

administrative proceedings and before Budget Oversight Boards. She

has published articles in public procurement reviews and legal

journals. She has been recommended for her work in “Public Law” by

The Legal 500.



29

Chapter 5


Blake, Cassels & Graydon LLP

Clémentine Sallée

Marianne Smith

Canada




Canada is a federal parliamentary democracy and constitutional monarchy. Different sets of rules apply at the federal, provincial, territorial and municipal levels of government. Additionally, two legal systems co-exist: common law (federal and all provincial and territorial regulation apart from Québec); and civil law (Québec). Outside of Québec, the law in Canada with respect to public procurement is based largely on common law and there is no single piece of legislation that governs public procurement.

At common law, procurement law relies on contract law, that is binding competitive procurement processes create two contracts: (i) the bidding contract, which sets out the “rules” that apply to the competitive procurement process (“Contract A”); and (ii) the substantive contract entered into between the procuring authority and successful bidders (“Contract B”). This contractual framework applies to both the public and private sectors when issuing or responding to binding competitive procurement processes and has been integrated into civil law.

For the public sector, layered on top of this contractual legal framework is a “governance framework” comprised of a collection of trade agreements and government legislation, policies and guidelines that govern procurement practices of governmental and quasi-governmental entities.

Generally speaking, the procurement rules set out in many of the trade agreements to which Canada is a party apply to all government and quasi-governmental entities at the federal and provincial level, and may extend to Crown corporations, school boards, publicly funded academic, health and social service entities, public utilities and municipalities. Canada is a party to numerous trade agreements including the World Trade Organization Agreement on Government Procurement (“WTO GPA”), the Comprehensive Economic and Trade Agreement between Canada and the EU (“CETA”), the Canadian Free Trade Agreement (“CFTA”) and, until it is no longer in force, the North American Free Trade Agreement (“NAFTA”). Each international trade agreement has implementing legislation in Canada. It is worth noting that on November 30, 2018, a new United States-Mexico-Canada Agreement was signed but the procurement provisions of this new agreement do not apply to Canada as of the date of execution.

At the federal level, key legislation impacting public procurement includes the Department of Public Works and Government Services Canada Act, the Financial Administration Act (“FAA”), the Government Contracts Regulations, the Federal Accountability Act, the Canadian International Trade Tribunal Act and the Procurement Ombudsman Regulations. Various federal policies are also relevant, including the Treasury Board Contracting Policy, the Standard Acquisition Clauses and Conditions Manual, the Supply Manual, the Code of Conduct for Procurement and the Ineligibility and Suspension Policy.

At the provincial level, each province has various laws, regulations and policies governing public procurement of various governmental and quasi-governmental entities. For example, in Ontario, procurement by certain public-sector entities is also governed by the Broader Public Sector Accountability Act and various directives issued by the Management Board of Cabinet. Relevant legislation in other provinces includes the Procurement Services Act, 2003 in British Columbia and the Public Works Act, 2000 in Alberta. In Québec, public procurement is highly legislated and regulated and this legal framework is mostly binding on public bodies. The main piece of legislation is the Act respecting contracting with public bodies (the “Public Contracts Act”) and its implementing regulations and directives, which govern the procurement of public bodies broadly defined (the “Public Framework”).




of the legislation?

The principles of fairness, openness and transparency are at the heart of the governance framework applicable to public procurement in Canada. Value for money, geographic non-discrimination, consistent treatment of bidders, accountability and confidentiality are also central to public procurement. In Québec, the Public Contracts Act contains an additional principle: the promotion of public confidence in the public procurement process.

At common law, the courts have also found that an implied duty of fairness exists in binding procurement processes as well as a duty to reject non-compliant bids and to conduct a fair process. In Québec, these principles are statutory.

The principle of fairness requires that a procuring entity comply with any rules set out in its procurement documents, so long as they do not conflict with its governance framework.


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Yes, special rules apply to specific sectors as determined by the applicable governance framework. For example, special rules apply to defence procurement pursuant to the federal Defence Procurement Strategy. There are also special rules that apply in some provinces and at the federal level to public-private partnership (“PPP”) procurements. Procurement of specific types of goods or services such as health or social services may also be excluded from the application of an entity’s governance framework, including the trade agreements.



public procurement?

At the federal level, the government introduced an Integrity Regime in 2015 with the goal of ensuring the government only does business with ethical suppliers. The regime includes an Ineligibility and Suspension Policy and integrity provisions that must form part of specified federal contracts. For further information on the Integrity Regime, see https://www.tpsgc-pwgsc.gc.ca/ci-if/ci-if-eng.html.

At the provincial level, various provinces have also introduced integrity and oversight regimes. For instance, in 2011, the province of Québec created a pre-authorisation regime applicable to certain contracts and subcontracts above certain thresholds (the “Qc Authorisation”). In 2018, Québec adopted the Act respecting the Autorité des marchés publics, which created the Autorité des marches public (“AMP”), an independent supervisory body of public procurement processes.

Other key areas of federal and provincial law applicable to public procurements include conflict of interest rules, access to information and privacy, official language, lobbying, anti-trust and criminal law.



agreements?

Once implemented into federal or provincial laws, trade agreements are applicable to a public procurement process to the extent the procurement meets the criteria set out in such agreement, including in relation to the estimated procurement value, the type of procuring entity and the types of goods, services or construction being procured.


Contracts



Generally, federal, provincial and municipal governments, departments, agencies, Crown corporations and government enterprises and other entities that are owned or controlled by the government (including school boards, universities or public utilities) are subject to a procurement governance framework and the contractual obligations derived from common law or, in Québec, from civil law. The applicability of the various trade agreements,

legislation, regulations and policies governing public procurement to a specific public entity will vary depending on the entity in question.


CETA and CFTA are the components of Canada’s procurement governance framework with the widest application and broadest scope. At the federal and provincial levels (subject to specific exceptions and thresholds), most contracts for goods, services and construction are covered by these agreements. CETA and CFTA contain exceptions to such coverage (see Annexes 19.4 to 19.6 and Article 19.3 of CETA and Section 504 and applicable Schedules of CFTA).

Certain goods or services may also be excluded; for example, where national security interests are applicable.



Financial thresholds determine the obligations of the procuring entity. Thresholds are based on the total procurement value (including options) during the term of the awarded contract. Thresholds will vary depending on the applicable governance framework, the goods/services being procured and the procuring entity.

Applicable thresholds in force until December 31, 2019 under key trade agreements may be found at https://www.canada.ca/en/treasury-board-secretariat/services/policy-notice/2017-6.html.

Below these thresholds, procuring entities have more flexibility and may conduct non-competitive procurements.


Applicable trade agreements and several statutes and regulations contain anti-avoidance rules. For instance, Article 503(1)) of CFTA provides that a procuring entity may not design or structure a procurement or divide procurements in order to avoid the obligations of CFTA.

Canada’s Ineligibility and Suspension Policy also contains anti-avoidance rules related to successor entities (see Section 10).



Procurement rules in Canada apply to concession contracts. For instance, one form of PPP is a concession contract structure to which the governance framework and the common law or, in Québec, the Québec Framework and civil law apply. See question 7.2 for further discussion on PPPs.

In Québec, the Public Framework comprises a Regulation respecting government concession contracts applicable to departments or bodies whose budget is voted by the National Assembly.



Specific rules may apply for the conclusion of framework agreements. At the federal level, for example, standing offers and

Blake, Cassels & Graydon LLP Canada


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supply arrangements are forms of framework agreements where a supplier or contractor provide goods, services or work on an “as (and when) required” basis under general terms and conditions. Framework agreements are also contemplated by some provincial legislation for instance, in Québec, for the acquisition of cloud goods and services.


into lots?

Yes, various trade agreements and legislation, regulations and policies contain restrictions on the division of contracts in the procurement context. For example, pursuant to Section 19.2(6)(a) of CETA, a procuring entity cannot divide its procurement in separate procurements with the intention of totally or partially excluding such procurement from the application of CETA. See also Section 503 (1) of CFTA, Section 6 of the Supply Manual or, at the provincial level, Section 12 of Québec’s Public Contracts Act, for additional rules.



As a signatory to trade agreements and subject to the terms thereof, Canada has committed to opening its public procurement processes by covered public entities to suppliers established in signatory countries or jurisdictions. Suppliers in these jurisdictions may challenge the procurement decisions of Canadian public entities that are contrary to the obligations set out in the relevant trade agreement using the mechanism specified in that trade agreement.

3 Award Procedures




Public-sector entities have discretion with respect to the procurement process adopted, provided such processes are conducted in an open, transparent and non-discriminatory manner and in compliance with the applicable governance framework. Available procedures may include invitation to tender, request for proposals, request for quotation, qualification or prequalification of suppliers, standing offers and supply arrangements.

As a general rule, the governance framework (including trade agreements) requires an open competitive process for procurements above certain financial thresholds. Below such thresholds, a public entity usually has more flexibility in how it conducts its procurements.


Timescales vary depending on the applicable governance framework. CFTA does not specify timescales but requires that the nature and complexity of the procurement be considered when setting deadlines. Under CETA, the minimum timescale for the submission of tenders is 40 days from the publication of the notice of intended procurement or the invitation to tender, but in certain circumstances can be lowered to a minimum of 10 days. In Québec, the minimum timescale is typically 15 days pursuant to the Public Framework.


tenderers?

Generally speaking and subject to the obligation to conduct an open, fair and transparent process, the conditions of participation in a public tender, including the rules on excluding or short listing tenders, are set by the procuring entity. Bidders are evaluated based on the disclosed criteria and process. Examples of acceptable grounds to exclude a bidder are found in CETA (Article 19.7(4)) and CFTA (Section 507(4)).

Ineligible or suspended suppliers are not permitted to participate in federal procurements under the Integrity Regime. Some provincial legislation also establishes restrictions on participation. For instance, in Québec, if required by the Public Framework, bidders are to have a valid Qc Authorisation upon tender submission or contract award.




In Canada, competitive procurement processes, including tenders, may evaluate factors in addition to price, provided the procurement documentation sets out the applicable evaluation criteria and the relative importance of each criterion. Qualification requirements and evaluation criteria will vary depending on the nature of the goods and/or services being procured and are subject to the governance framework applicable to the procuring entity.


low tenders?

Examples of rules regarding abnormally low tenders include the following:

■ CETA Section 19.14(7) provides that upon receiving a tender with an abnormally low price in comparison to other tenders, the procuring entity is required to verify the bidder’s capacity to meet the conditions for participation and contractual obligations.

■ The PSPC’s Supply Manual, Chapter 5, Section 5.30(e) provides that bidders with abnormally low bids are provided an opportunity to confirm or withdraw their bid in writing.

■ Québec’s Public Framework provides for a specific procedure for tenders with unusually low prices, which may ultimately lead to the rejection of the tender.


Generally, a contracting authority is required to award the contract in accordance with the procedure set out in its procurement documentation, to the extent such procedure complies with the applicable governance framework, and in a fair and transparent manner. In Québec, further statutory rules apply.


bidders?

CFTA and CETA both provide that unsuccessful bidders may request a debriefing following the conclusion of the procurement.



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Joint procurement is generally permissible in Canada, subject to the principles of fairness and transparency. CFTA specifically contemplates the possibility of joint procurement through “buying groups”. In Québec, the Public Contracts Act contains specific provisions respecting joint calls for tenders.


There is no widely applicable express prohibition or specific rules in relation to alternative or variant bids in Canada. However, restrictions or rules may be included in the procurement documentation and would also be subject to common law or civil law requirements. A permissible approach to alternative/variant bids would need to comply with the overarching principles of fairness and transparency of the procurement process.


Procuring entities (and public servants) have a duty to avoid any conflict of interest that could potentially compromise the integrity of the procurement process. At both the federal and provincial levels, conflict of interest legislation will be applicable. In addition, as part of the governance framework, trade agreements may impose obligations (see, for example, CETA Article 19.4(4)(b)).

For bidders, there is generally an obligation to declare actual or potential conflicts of interest and comply with conflict of interest provisions which are typically included in procurement documentation.




While there are no specific rules related to market engagement, early engagement is welcomed and seen as a tool to “better position all stakeholders for a successful procurement that meets the client’s needs” (Section 2.26 of the Supply Manual). This early engagement may take various forms including Requests for Information, Letters of Interest and one-on-one consultations. Trade agreements such as CETA also encourage procuring entities to publish future procurement plans through notices of planned procurement (Article 19.6(5 and 6)). However, because the involvement of potential bidders in the preparation of a procurement procedure may be seen to create a conflict of interest or unfair advantage in violation of a procuring entity’s governance framework, it may violate a procuring entity’s governance framework to engage potential bidders in this way.




Non-competitive procurement is permissible in certain specified situations as set out in the applicable governance framework. For example, CFTA and CETA provide single/sole sourcing exceptions (referred to as limited tendering) as well as non-application provisions that exempt certain procurement processes from the

application of the procurement rules. Common circumstances which permit non-competitive procurement include situations of extreme urgency or where a good or service can only be supplied by a particular supplier and no reasonable alternative exists or the absence of participation of suppliers (see Article 19.12 of CETA and 513 of CFTA and its Schedules).

4.2 How does the law apply to “in-house” arrangements,



Certain types of “in-house” arrangements are not subject to the trade agreements; for example, a procurement between subsidiaries or affiliates of the same entity or between one government body or enterprise and another government body or enterprise (see Section 504(11) and Annexes of CFTA and Article 19 and Annex 19-7 of CETA).

5 Remedies



At the federal level, the Canadian International Trade Tribunal (“CITT”) is responsible for safeguarding the integrity of federal procurement, including breach of certain trade agreements. Bidders have recourse to a relatively efficient and accessible complaint process through the CITT, which can make a broad range of orders and binding recommendations, including requiring the cancellation or reissuance of a tender call or the award of damages to prejudiced bidders. Decisions made by the CITT are subject to judicial review by the Federal Court of Appeal.

Outside of the jurisdiction of the CITT, at both the federal and provincial level, bidders can seek recourse through the courts. Potential remedies include injunctions or applications for judicial review, summary judgment aimed at seeking a speedy post-tendering process resolution or post-tendering process litigation aimed at recovering damages for lost profits.

Both CFTA and CETA contemplate the creation and implementation of an administrative complaint/bid challenge process, which has not yet been fully implemented in all Canadian provinces.

In Québec, the AMP will, as of May 25, 2019, supervise the application of the Public Framework, receive complaints and make determinations thereon (see also question 8.2).



Yes. In general, public bodies may be sued in Canadian common law courts for damages in tort and in contract. In Québec, public bodies may be sued for extra-contractual liability (the equivalent of tort) under the Civil Code of Québec in the same courts as those involving private parties.

A public body’s decisions may also in certain circumstances be subject to judicial review. Certain remedies may not be available or may be limited, however, in particular as against the Crown.


sought?

See question 5.1.



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At the federal level, the Procurement Ombudsman can hear complaints from dissatisfied bidders under certain circumstances in relation to the procurement by certain federal entities.

Alternative dispute mechanisms may also be available. Court rules in some provinces provide for mandatory pre-trial mediation in ordinary civil proceedings in certain circumstances.


remedies?

For federal procurements, complainants have 10 business days to file a complaint with the CITT after the day on which the basis of the complaint became (or reasonably should have become) known to them. A complaint with the Procurement Ombudsman must be filed within 30 business days. For provincial procurements, the timeframe will vary between provinces. In most provinces (except Québec, which is three years for monetary claims), the limitation period for claims is two years from the time the claim arises or the claimant should have known of the existence of the claim.


periods?

In common law provinces, limitation periods may be shortened through clear unequivocal contractual provisions (subject to restrictions in applicable legislation), but this is rare in the procurement context and subject to the obligation of fairness. In Québec, limitation periods are imperative and cannot be waived or shortened contractually.


The CITT’s remedies include termination of the awarded contract or monetary compensation of the complainant. However, matters subsequent to the award of a contract fall outside CITT jurisdiction except where the mandatory requirements are changed after contract award.

Federal and provincial courts may award monetary damages for breaches of contract or in tort under common law or in extra-contractual liability in Québec. Québec courts could order the termination of a contract for non-compliance with the Public Framework, since it is imperative.


remedies is made?

For matters before the CITT, the CITT typically has 90 days from the filing of the complaint to complete its inquiry. If circumstances warrant, the inquiry may be extended to 135 days. Also, any party in the proceeding may request the express option and require the CITT to reach a decision within 45 days.

At the provincial level, the time period for a court to hear and decide a case varies from months to years depending on the complexity of the case and the caseload of the court.



There are numerous examples of cases in which remedies have been obtained from the CITT or from a court. A common remedy is to

require the procuring authority to re-tender but damages are also awarded in circumstances where this is not an appropriate remedy. For example, on September 11, 2017, in Rockwell Collins Canada Inc. v. Department of Public Works and Government Services, the CITT recommended that Rockwell be compensated for 50% of its lost profits in connection with a questionable procurement process. The procuring authority has filed applications for judicial review of the CITT’s determination before the Federal Court of Appeal (no decision has been made at the time of drafting this chapter). On May 28, 2018, the CITT published its decision on the amount of costs and compensation.



The federal Integrity Regime and the Qc Authorisation are examples of large-scale mitigation measures in place to ensure the integrity of contractors. Evaluating references and maintaining discretion to exclude a bidder for material performance deficiencies in prior contracts are others. Additional mitigation measures include early engagement with suppliers, having a Q&A process embedded in the procurement, engaging a fairness monitor and reserving discretion to waive minor deficiencies and clarify genuine ambiguities in proposals.


Procedure







Yes. However any such changes are required be disclosed to all bidders in the same manner as the procurement documentation was initially made available and sufficiently in advance to allow bidders to take such amendments into consideration in their tender, as appropriate (see Article 19.9(11) of CETA and Section 510 of CFTA). In Québec, for changes which are likely to affect the price of tenders, the Public Framework requires seven days between the change and the tender closing time, which may warrant an extension thereof.

Changes to the membership of bidding consortia pre-contract award is typically subject to the procuring entity’s consent and meeting certain conditions set out in the procurement documents.



CETA and CFTA both permit negotiations: (i) where indicated in the procurement documentation; or (ii) where no one bid is obviously the most advantageous. While the common law recognises a role for negotiation in procurement, including post-award, in a binding process, negotiation would generally be limited to non-fundamental elements of the contract; i.e. elements that would not have impacted the ranking of bidders. Negotiations following contract award are less constrained in non-binding processes.



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signature?

Post-contract execution, the parties are generally free to amend the contract by mutual agreement. At the federal level, the Supply Manual specifies that Canada’s best interest should always be considered and that, except for administrative amendments and pre-approved options, a procurement risk assessment for amendments should be completed (see Sections 8.70.5 and 8.70.10). In Québec, however, only “non-fundamental” changes may be made.



signature?

Transfer of a contract to another entity is usually governed by the term of the contract itself (assignment clause) and not legislated. Assignments by the contractor are typically subject to consent of the public contracting entity and conditioned on the assignee meeting certain criteria. In certain contracts, transfers may even be prohibited. Assignments by the public contracting entity are usually permitted without conditions.




them?

Privatisation, understood as the transfer of ownership of an entity from public to private, is governed by legislation/regulation federally and provincially. Over the past two decades, privatisations have become increasingly less popular in Canada.



PPP procurement processes are subject to certain rules to adapt the general procurement framework to their specificity. For instance, certain provisions of CFTA procurement rules do not apply to public-private partnerships (see Section 504.10). The Supply Manual contains a section (Section 9.60) on PPPs and their procurement. PPPs do not have specific procurement issues except to the extent of their complexity, which require careful planning, adequate risk transfer, and strong governance.

8 The Future



impact?

The governance framework landscape is constantly evolving at the federal and provincial levels.

Canada is a signatory to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”) which will enter into force at the end of 2018. Given the similarity of the procurement chapter of CPTPP and CETA, however, the impact of the CPTPP on procurement in Canada will be limited.

At the provincial level, in Québec, the obligation of Public Bodies to implement internal complaint processes related to procurement processes will enter into force in 2019 and will likely result in increased transparency and accountability. In British Columbia, the recent introduction of the new procurement strategy, with the aim to “change the way government buys goods and services and make it easier for businesses to access opportunities” means that the procurement landscape in that province is set to change.




CFTA requires the development of an independent and impartial process within each province and federally to allow a bidder to challenge procurement if the bidder believes it was not conducted in accordance with CFTA rules. At this time, this bid dispute process is not fully developed and remains subject to change.

Amendments to Canada’s Integrity Regime coming into force in January 2019 include more flexibility in debarment decisions, increasing the number of triggers that can lead to debarment and expanding the scope of business ethics to other key areas.

Acknowledgment

The authors would to thank Carrie Fleming and Alyssa Shivji for their invaluable assistance in the preparation of this chapter.

Carrie Fleming’s practice focuses on infrastructure projects, public-private partnerships (P3s), and energy and defence projects.

Tel: +1 604 631 3367 / Email: [email protected]

Alyssa Shivji’s practice focuses on public procurement, including the procurement of infrastructure and public-private partnerships (P3s).

Tel: +1 416 863 5289 / Email: [email protected]



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Clémentine Sallée


1 Place Ville Marie

Suite 3000

Montréal QC H3B 4N8

Canada

Tel: +1 541 982 4077 Email: [email protected] URL: www.blakes.com

Marianne Smith


199 Bay Street

Suite 4000

Toronto, ON M5L 1A9

Canada

Tel: +1 416 863 3156 Email: [email protected] URL: www.blakes.com

As one of Canada’s top business law firms, Blake, Cassels & Graydon LLP (Blakes) provides exceptional legal services to leading businesses in

Canada and around the world.

Thanks to our clients, Blakes was named the leading law firm brand for the third year running in Acritas’ Canadian Law Firm Brand Index and was

also awarded Canada Law Firm of the Year by Who’s Who Legal for the 10th consecutive year. We received the highest number of ranked lawyers

in Canada for the second year in a row in Chambers Global: The World’s Leading Lawyers for Business and we are the only firm to be identified by

Chambers as “Band 1” for Public Procurement.

Serving a diverse national and international client base, our integrated network of offices worldwide provides clients with access to the Firm’s full

spectrum of capabilities in virtually every area of business law. Whether an issue is local or multi-jurisdictional, practice-area specific or

interdisciplinary, Blakes handles transactions of all sizes and levels of complexity.

Clémentine’s practice mainly focuses on public procurement,

infrastructure and public-private partnerships projects, including

project finance. She advises private and public entities on the

development and preparation of tenders and on the drafting and

negotiation of partnership and other commercial agreements in the

context of projects for the design, construction, financing and

operation of infrastructure and clean energy ventures; and on the

administration of the design and construction phases of such projects.

In her procurement practice, Clémentine assists local and

international stakeholders in both the public and private sectors

providing advice and legal opinions relating to procurement

processes, project risk management and mitigation strategies, project

structuring, agreements, and compliance issues related to

governance and integrity.

Marianne is a commercial lawyer with a focus on public procurement,

infrastructure and public-private partnerships. She advises clients on

the development, preparation and ongoing administration of public

tenders and procurement processes, and the development and

negotiation of commercial agreements for the design, construction,

financing and maintenance of infrastructure.

In her procurement practice, Marianne acts for domestic and

international clients in a wide range of sectors, including transit and

transportation, water and wastewater, health-care services, information

technology, gaming, energy and mining. She regularly acts for both

procuring entities and bidders with respect to conducting a successful

procurement process, fairness issues, mitigating procurement risk and

avoiding compliance issues. Marianne has expertise in the

procurement of mega infrastructure development projects and

alternative finance and procurement projects across multiple

jurisdictions, including municipal, provincial, federal and international

and has been at the forefront of recent municipal PPP projects.



Chapter 6


Gorrissen Federspiel

Erik Kjær-Hansen

Marie Berg Simonsen

Denmark




Public procurement in Denmark is governed by Act no. 1564 of 15 December 2015, known as the Public Procurement Act (‘Act’). The Act implements Directive 2014/24/EU of 26 February 2014 on public procurement (‘Directive’) and includes detailed regulation of the procedures that public authorities and bodies must follow when procuring goods, services, or works. Unless explicitly mentioned, the following will concern contracts covered by the Act and the underlying Directive.

The EU legislature has adopted specific regulations governing public procurement within the utilities sector in Directive 2014/25/EU. This directive has been implemented into Danish law by executive order no. 1624 of 15 December 2015. Similarly, Directive 2014/23/EU on the award of concession contracts has been implemented into Danish law by executive order no. 1625 of 15 December 2015. The Act, as well as the two executive orders, all entered into force on 1 January 2016.

Consolidated Act no. 593 of 2 June 2016 (‘Remedies Act’) regulates the organisation and powers of the Danish Complaints Board for Public Procurement, which is a tribunal that resolves public procurement disputes, and establishes the available remedies, cf. Sections 5 and 8.




of the legislation?

The core principles of the Act follow those of the Directive. The general principles of EU public procurement law are equal treatment, transparency, proportionality, and competition. The principles are set out in Section 2 of the Act, but are also manifested in both procedural and material rules throughout the Act. In addition, they serve as crucial interpretational guidance of the legislation and often determine the outcome of cases. Contracting authorities must comply with the core principles throughout the procedure and, in some cases, even during the performance of the contract.



There are specific EU directives in place in the utilities sector and for concessions, cf. question 1.1. Both directives have been implemented into Danish law by way of executive orders, cf. question 1.1.

Section 23 of the Act specifically exempts certain contracts within the fields of defence and security. The provision states that the rules of the Act do not apply to public contracts covered by Directive 2009/81/EC (‘Defence Directive’). Parallel to the Defence Directive is TFEU Article 346, under which authorities may avoid subjecting defence purchases to public procurement if a number of conditions are met.

The Directive introduced new rules for public contracts for social and other services with a value exceeding DKK 5,583,000, which are implemented in Sections 186-189 of the Act. Such services are exempted from the full spectrum of the Act given their limited cross-border interest.



public procurement?

Public authorities shall comply with general administrative law and act in accordance with the principle of sound administration.



agreements?

The Act is the Danish implementation of the Directive on public procurement (see question 1.1) and is thus the primary legislative source for practitioners of Danish public procurement law. However, the Directive (including the preamble) serves as crucial guidance in the correct interpretation and application of the rules of the Act.

The EU approved the WTO Agreement on Government Procurement (GPA) by Council decision 94/800/EC. In Article 25 of the Directive, it is stated that contracting authorities must apply the rules of the Directive to economic operators of third countries, which have signed the GPA. This provision is implemented in Section 3 of the Act.


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Contracts



The group of entities governed by the Act is defined in Section 24(28) as state, regional, and local authorities, bodies governed by public law and associations of one or more of those authorities or one or more of such bodies governed by public law.

In terms of public entities, the Act differentiates between central government authorities and sub-central government authorities. The distinction between central and sub-central authorities affects the applicable thresholds, cf. question 2.5.

Section 24(27) sets out the cumulative conditions for when an entity can be defined as a ‘body governed by public law’. The test is essential in establishing whether the procuring entity is subject to the Act.

Private entities are generally not obliged to comply with the Act. Private entities may, however, be subject to the Utilities Directive or the Concessions Directive, which are both implemented in Denmark, cf. question 1.1.


Section 24(24) defines public contracts as contracts for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities.

The contracting authority is granted a wide margin of discretion in determining the subject-matter of the contract. The Act distinguishes between public contracts for the supply of goods, services, or works. The categorisation of the contract is important first and foremost because different thresholds apply depending on the subject-matter of the contract, cf. question 2.5.



If the contract value meets the relevant threshold, the contract is subject to the detailed provisions in the Act, cf. Section 6. If below the thresholds, it may still be subject to some of the provisions in the Act depending on the nature of the contract. The thresholds vary according to contract type:

■ Public works contracts: DKK 38,624,809.

■ Public supply and service contracts awarded by a central government contracting authority: DKK 998,019.

■ Public supply and service contracts awarded by a sub-central government contracting authority: DKK 1,541,715.

Contract value is calculated net of VAT and the thresholds are revised every two years.


Section 2(2) of the Act stipulates the general principle that the contracting authorities may not design the tender procedure with the object of excluding it from the scope of the Act. While contracting authorities may divide contracts into lots, cf. Section 49, contracts may not be separated with the objective of circumventing the procurement rules, cf. Section 30(2).



Concession contracts are regulated by the Concessions Directive, which has been implemented into Danish law, cf. question 1.1. A concession is defined as a works or services contract for pecuniary interest concluded in writing by means of which one or more contracting authorities or contracting entities entrust the execution of works or the provision of services to one or more economic operators, the consideration of which consists either solely in the right to exploit the works or services or in that right together with payment. The award of a concession shall involve the transfer to the concessionaire of an operating risk in exploiting those works or services, cf. Article 5(1) of the Concessions Directive.



Rules governing framework agreements are set out in Sections 95-100 of the Act. A framework agreement is a contract between one or more contracting authorities and one or more economic operators, which establishes the terms (e.g. terms, quantities) for contracts to be awarded within a specific timeframe. A framework agreement includes two stages:

(1) setting up the framework agreement itself; and

(2) awarding contracts in accordance with the framework agreement.


into lots?

In line with the EU objective of facilitating SME participation in tender procedures, Section 49 of the Act states that a contracting authority may decide to divide contracts into lots. A ‘divide-or-explain’ principle applies, meaning that if choosing not to divide a contract into lots, the contracting authority must state the reasons for this. If divided into lots, it must be stated in the contract notice to what extent a tenderer may submit bids and be awarded one or several lots and the objective and non-discriminatory criteria for determining the award of lots.



The contracting authority shall announce in the tender notice whether the specific contract is covered by the GPA. If this is the case, potential tenderers from GPA countries must be treated on equal footing with other tenderers, cf. Section 3(3).

3 Award Procedures




Two types of procedures – open and restricted – are always available to the authority, while others require justification, such as competitive procedure with negotiation and competitive dialogue. Alternatively, the contracting authority may choose to structure the procedure as an innovation partnership. Finally, negotiated

Gorrissen Federspiel Denmark


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procedure without prior publication (also known as direct award) may only be used in exceptional circumstances.

Open procedure (Sections 56-57): In an open procedure, any economic operator may submit a tender.

Restricted procedure (Sections 58-60): The restricted procedure consists of two stages. At the first stage, the contracting authority publishes a call for competition where any economic operator may request to participate in the procedure. At the second stage, the contracting authority reviews the requests and shortlists candidates, who are then invited to tender for the contract. The contracting authority must invite a minimum of five candidates.

Competitive procedure with negotiation (Sections 61-66): The contracting authority may only use this procedure in specific situations as listed in Section 61. The procedure is carried out in several stages. First, the contracting authority issues a contract notice, and any economic operator may request to participate by providing the information required by the contracting authority. The contracting authority invites a number of economic operators (a minimum of three) to submit initial tenders, which form the basis of negotiations. Except for the final tender, all tenders will be subject to negotiations. Essential elements such as minimum requirements and award criteria are not subject to negotiations.

Competitive dialogue (Sections 67-72): The conditions for use of competitive dialogue are similar to those for the competitive procedure with negotiation. The procedure is carried out in several stages. The contracting authority issues a contract notice, and any economic operator may request to participate if they provide the information as required by the authority. The contracting authority selects and invites a minimum of three candidates to participate in the dialogue. The dialogue may relate to all aspects of the procurement procedure except minimum requirements and award criteria. After concluding the dialogue phase, each candidate submits their final tender. The final tender may be clarified, specified, and optimised at the request of the contracting authority; however, this may not involve changes to essential aspects, distort competition, or otherwise have a discriminatory effect. The contract shall be awarded based on the award criterion best price-quality ratio. There is limited scope for negotiations post-award decision, and it must not result in material changes.

Innovation partnership (Sections 73-79): There are no specific conditions for the use of innovation partnership; however, it is clear from Section 73 that its intended use is where the contracting authority plans to develop innovative services, which are not readily available in the market. An innovation partnership involves three stages: a procurement procedure; an innovation process; and the possible purchase of the service developed. Sections 73-79 of the Act set out rather detailed rules on how the contracting authority must carry out an innovation partnership.

Negotiated procedure without prior publication (Sections 80-83): The Act provides very narrow room for the contracting authority to use this procedure. It may only be used in exceptional circumstances as described in Sections 80-83, and the burden of proof is on the contracting authority.


As a general rule, the contracting authority shall set an appropriate time limit for receipt of requests to participate in tenders. In most cases, this implies a minimum time limit of 30 days, which may be reduced in certain situations, e.g. if electronic submission of bids is accepted, or owing to urgent needs of the contracting authority. However, the time limits do vary according to the type of procedure,

and therefore economic operators should always check the provisions in the Act relating to the specific procedures (as outlined in question 3.1 above).


tenderers?

The Act distinguishes between compulsory (Sections 135-136) and voluntary (Section 137) exclusion grounds. The contracting authority is required to apply the compulsory exclusion grounds to the tenderers and must exclude them from the procedure if they are convicted of one of the serious offences listed in Section 135(1)(1)-(6). The contracting authority is also required to exclude a tenderer which has unpaid debt of DKK 100,000 or more relating to payment of taxes or social security contributions. Further, the Danish legislature has opted to make the grounds listed in Section 136 of the Act compulsory.

Section 137 of the Act sets out the voluntary grounds for exclusion, which, among others, include where the tenderer has been declared bankrupt or insolvent, or has committed previous material breach of a public contract, and such breach resulted in the cancellation of the contract. Self-cleaning is possible, cf. Section 138. Further, in case of overriding reasons relating to the public interest, the contracting authority may omit to exclude a tenderer.

Selection or suitability criteria refer to the criteria the contracting authority may apply to tenderers to determine whether they have sufficient resources and ability to perform the contract. Section 140 of the Act lists the selection criteria available to the contracting authority, i.e. exercise of the professional activity, economic and financial standing, or technical and professional ability, cf. Sections 141-143. The selection criteria must be proportionate and fixed as minimum requirements in the contract notice.

In procedures involving shortlisting, the contracting authority may fix a number of candidates to receive an invitation to tender. The contracting authority shall base the selection on objective and non-discriminatory criteria, which are stated in the contract notice, cf. Section 145. Candidates and tenderers shall use the ESPD, cf. Section 148.




The contracting authority shall award the contract to the tenderer who has submitted the most economically advantageous tender, cf. Section 161 of the Act. The award decision must be based on price, costs, or best price-quality ratio, cf. Section 162. If the award criterion is best price-quality ratio, there is room to consider other factors such as qualitative, environmental, and social aspects.


low tenders?

If a tender appears to be abnormally low, the contracting authority must request the tenderer to account for the prices and costs stated in the tender within a suitable time limit, cf. Section 169(1). The Danish Complaints Board for Public Procurement issued a decision on 3 October 2018 in the case 18/06812, Efkon GmbH v Vejdirektoratet, in which they found that there is not an obligation on the contracting authority to reject an abnormally low tender outside of the situations stated in Section 169(3) (see below). However, the contracting authority has the right to reject an



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abnormally low tender. A tender may only be rejected as abnormally low if the tenderer cannot justify the price or cost level, cf. Section 169(2).

According to Section 169(3), the contracting authority must reject a tender which is abnormally low due to disregard of obligations within environmental, social, or labour law, or if a tenderer has received state aid which has not been verified to be compatible with the internal market as required under EU law.


The rules on the award procedure and decision are set out in Chapter 13 of the Act. The contracting authority must award the contract in accordance with the chosen award criteria and to a tenderer that is not subject to exclusion grounds, fulfil the minimum requirements and selection criteria. The award criteria, evaluation method, and elements of importance in the evaluation of the tender must be stated in the procurement documents, cf. Section 160. Please see question 3.4 above.


bidders?

After having reached an award decision, the contracting authority must brief all tenderers simultaneously, and in writing, of the decision, cf. Sections 171-173. The briefing must include the date of the expiry of the standstill period, and if the tender is unacceptable, the grounds of rejection. If the tender is acceptable, it must include the characteristics and advantages of the winning tender in relation to the rejected tender and the name of the winning tenderer.


Contracting authorities may engage in joint procurement, cf. Sections 119-126 of the Act. Joint procurement may take place through a central purchasing body, cf. Section 119, or authorities may agree to organise joint procurement procedures, cf. Section 123. The Act also provides for the opportunity of cross-border joint procurement, cf. Sections 124-126.


The contracting authority may require or accept variant bids from a tenderer. The variant must be related to the subject matter of the contract, and the contracting authority must make sure that the award criteria can be applied to both variants and ordinary tenders, cf. Sections 50-53.


The contracting authority must take appropriate measures to identify, prevent, and remedy conflicts of interests in connection with procurement procedures, cf. Section 4 of the Act.




Section 39 of the Act covers involvement of economic operators in the pre-procurement phase, and the steps the contracting authority must take to avoid distorting competition. The contracting authority

may enter into dialogue with economic operators before initiating a tender procedure. However, if such an economic operator subsequently participates in the tender procedure, the contracting authority shall act appropriately to mitigate any competitive advantage. If the principle of equal treatment cannot be guaranteed by less radical means, it must exclude the economic operator in question, cf. Section 136(2).




Sections 12-23 of the Act exclude various contracts from the scope of the rules, such as in-house arrangements, contracts awarded on the basis of an exclusive right and contracts relating to utilities or electronic communication.




The Act exempts certain contracts between entities within the public sector. In-house and other public-public arrangements are governed by Sections 12-16 and may be exempted from the scope of the Act if certain criteria are met. The Act does not apply to contracts awarded by a contracting authority to a legal person fulfilling the criteria in Section 12. The same applies in the situation where a contracting authority awards a public contract to the legal person controlling the contracting authority pursuant to Section 12, or to another legal person controlled by the same legal person, cf. Section 13. Even if the contracting authority does not itself exercise control over the legal person being awarded the contract, the in-house exception may nevertheless apply if the contracting authority exercises joint control as described in Section 14. In addition to in-house arrangements, some forms of public-public cooperation may be exempted under Section 15 of the Act.

5 Remedies



Remedies are regulated in the Remedies Act, cf. question 1.1, which implements Directives 89/665/EEC and 92/13/EEC as amended by Directive 2007/66/EC. If the contracting authority fails to comply with its obligations under public procurement law, economic operators or tenderers may submit a complaint to the Complaints Board. Available remedies include suspension or annulment of decisions or procedures, ineffectiveness of the contract or an alternative economic sanction, and damages.



A complainant may seek remedies before the Complaints Board or before the courts. Complaints may also be submitted to the Competition and Consumer Authority; however, the authority only reviews complaints on an informal basis and does not have the power to impose sanctions.



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sought?

Please see question 5.2 above. The expertise of the Complaints Board and the expedient review periods make it the preferred forum for public procurement disputes. Alternatively, complainants may choose to bring suit against the contracting authority before a court. If a complaint is submitted during the standstill period, the parties must await the decision of the Complaints Board before proceeding to court. The deadline for appeal is eight weeks.


remedies?

Following the award decision, a standstill period of 10 days applies (15 days if the decision is sent by letter) meaning that the contracting authority may not conclude the contract until this period has expired. In other scenarios, the limitation periods for bringing a complaint vary, cf. Section 7 of the Remedies Act.


periods?

The standstill period and limitation periods mentioned at question 5.4 are mandatory and may not be shortened by the contracting authority.


Post-signature, the complainant may seek to have the contract declared ineffective and/or seek damages if it has suffered economic loss. However, a contract cannot be declared ineffective if the contracting authority has observed the steps in Section 4 of the Remedies Act.


remedies is made?

The likely timescale of a complaint procedure before the Complaints Board is 195 days on average from the time the complaint is submitted until the Complaints Board reaches a decision. If proceedings are initiated directly before a court, the likely timescale of the case is six to 13 months in the first instance.



It is not uncommon that remedies are obtained in cases before the Complaints Board. However, it is traditionally difficult to get the Complaints Board to decide that a complaint shall have a suspensive effect until the Complaints Board has decided the case, cf. Section 12 of the Remedies Act. The conditions for suspensive effect were established in a case decided by the Complaints Board, 2007-0013949, Kuwait Petroleum A/S v Sønderborg Kommune. The Complaints Board found that suspensive effect requires fumus boni juris, urgency, and that, on balance, the complainant’s interest in suspensive effect outweighs the contracting authority’s interest in the contract.



If the contracting authority has observed the steps in Section 4 of the Remedies Act, the authority can safeguard the contract from being declared ineffective.


Procedure







The contracting authority’s access to make changes pre-contract award is governed by the general principles of equality and transparency as set out in Section 2 of the Act. Substantial amendments to the procurement documents require that the contracting authority extend the time limits for the receipt of requests to participate in tenders, cf. Section 93. The contracting authority cannot make material changes to the procurement documents, i.e. changes relating to essential elements as defined in Section 24(37).

In terms of changes to the membership of bidding consortia pre-award, the starting point is that only the entity that has submitted a bid (upon prequalification if required) may be awarded the contract. However, certain exceptions do exist as outlined in Section 147(1).



The scope for negotiation following the submission of a final tender is limited. According to Section 159(5) of the Act, the contracting authority may request the candidates or tenderers to supplement, specify or complete the requests for participation or tender by submitting relevant information within a suitable time limit when the request or tender is incomplete or incorrect, provided the submission does not result in submission of a new request to participate or a new tender.


signature?

Changes during the contract term are governed by Sections 178-184 of the Act.

Under Section 178, material changes to a contract or a framework agreement necessitate that the contracting authority carries out a new tender procedure. A change is material when it renders the contract or agreement materially different in character from the one initially concluded. Section 178 includes a list of changes that are always deemed material. Sections 179-183 list various changes which may be implemented without a new tender procedure, e.g. if the change was envisaged in a clear, precise and unequivocal review clause, cf. Section 179.



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signature?

Even if the replacement of supplier at the outset is considered to be a material change, cf. Section 178(2)(4), Section 182 provides that this is not the case if the replacement is the result of a clear, precise, and unequivocal review clause, or the reorganisation of the supplier; the latter only if certain requirements are met.




them?

There are no special rules governing privatisations under the Act.



There are no special rules governing PPPs under the Act.

8 The Future



impact?

The Ministry of Industry, Business and Financial Affairs has recently issued a draft proposal to amend the Public Procurement Act. The amendments relate to the publication of evaluation models in the procurement documents as well as the evaluation of tenders for larger works contracts. The proposal includes making it mandatory for contracting authorities in the procurement documents to publish all parts and aspects of evaluation models used to evaluate tenders.

Furthermore, it is proposed that in tender procedures for works contracts with a value exceeding DKK 350,000,000, the contracting authority must evaluate price and qualitative criteria separately.

The proposal is currently under public consultation, but it is expected that it will be presented to the Danish Parliament before the end of 2018. If the proposal is adopted, Danish public procurement law will impose heavier transparency obligations on contracting authorities than under EU law, which is also acknowledged in the proposal.




See question 8.1.



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Erik Kjær-Hansen


Axel Towers, Axeltorv 2

1609 Copenhagen V

Denmark

Tel: +45 33 41 41 36 Email: [email protected] URL: www.gorrissenfederspiel.com

Marie Berg Simonsen


Axel Towers, Axeltorv 2

1609 Copenhagen V

Denmark

Tel: +45 86 20 75 71 Email: [email protected] URL: www.gorrissenfederspiel.com

Head of the EU & Competition Law department at Gorrissen

Federspiel, Erik Kjær-Hansen provides assistance in relation to

competition law, state aid law and procurement law. He has

comprehensive litigation experience and has conducted cases before

the Supreme Court.

In respect of competition law, Erik Kjær-Hansen focuses on litigation

(including actions for damages), issues relating to dominant

undertakings and cartel probes. In relation to procurement law, Erik

assists authorities and undertakings in carrying out tender procedures,

submitting tenders and conducting complaints procedures.

Erik Kjær-Hansen has many years of experience handling matters for

the media and entertainment industry and he is head of the firm’s

cross practice group within this area of law. He has, inter alia,

conducted a number of cases concerning media content.

For a number of years Erik Kjær-Hansen has assisted undertakings

and authorities in carrying thorough legal investigations and has

provided assistance in relation to compliance and regulatory issues.

He also acts as arbitrator.

Gorrissen Federspiel is one of the leading corporate law firms in Denmark with strong and long-standing international relations.

This position is a result of consistent dedication to quality and understanding of our clients' needs.

Over the years, we have acted on behalf of our clients in many of Denmark's largest and most complex transactions, and Gorrissen Federspiel's

partners have litigated in some of the recent years' most high-profile and critical lawsuits.

Our aim is to provide advice at the highest professional and ethical level, tailored to the client's individual situation and requirements. We are

accessible whenever our clients need our assistance.

Our practice areas cover all branches of Danish and EU commercial law.

We maintain close relations with leading lawyers worldwide and, at short notice, are able to provide our clients with the professional assistance where

ever they need it.

Marie Berg Simonsen has extensive experience within public

procurement law and related dispute resolution, including public

procurement law studies at King’s College London.

Moreover, Marie also advises on competition law matters including

the prohibition against anti-competitive agreements, government

investigations, due diligence, and merger control.



43

Chapter 7


Ashurst LLP

Euan Burrows

Edward McNeill

England & Wales




On 26 February 2015, the majority of the provisions of the Public Contracts Regulations 2015 (SI 2015/102) (“PCR 2015”) entered into force. The PCR 2015 implements Directive 2014/24 in England, Wales and Northern Ireland.

On 18 April 2016, the Utilities Contracts Regulations 2016 (SI 2016/274) (“UCR 2016”) and the Concession Contracts Regulations 2016 (SI 2016/273) entered into force. The UCR 2016 implements Directive 2014/25 in England, Wales and Northern Ireland, while the CCR 2016 implements Directive 2014/23.

The PCR 2015 implements the EU rules relating to the procurement of services, supply or works contracts by public bodies, other than by utilities in relation to a utility activity. The UCR 2016 implements the EU rules relating to the procurement of service, supply or works contracts by utilities that relate to a utility activity. The CCR 2016 implements the EU rules relating to the procurement of services concessions and works concessions by public bodies.

The PCR 2015, the UCR 2016 and the CCR 2016 are collectively referred to hereafter as “the Regulations”.




of the legislation?

The basic principles underlying the regime (and which are key to its interpretation) are those underlying the EU public procurement directives, which arise out of the Treaty on the Functioning of the European Union (“TFEU”), and which apply throughout the EU (“EU General Principles”). These principles include, in particular, the free movement of goods, the right of establishment, the freedom to provide services, non-discrimination, equal treatment, transparency, proportionality and mutual recognition. These underlying principles form the basis of the interpretation of the UK legislation and apply in all situations in which an authority procures works, services or supplies from a third party, including where the contract falls outside the scope of the directives or the Regulations.



The UK Ministry of Defence (“MoD”), the UK government body which procures military equipment, is subject to the Regulations in the same way as any other public body. However, Article 346 of the TFEU provides an overriding exemption in relation to defence and classified procurements (the “national security exemption”), which has been included in the Regulations as an express exclusion. There is also an express exclusion in the Regulations for secret contracts.

The Defence and Security Public Contracts Regulations 2011, which implement the EU Defence Directive 2009/81, came into force on 21 August 2011. The Defence Regulations set out specific rules for the procurement of arms, munitions and war material (plus related works and services) for defence purposes, as well as for the procurement of sensitive supplies, works and services for non-military security purposes.

Under section 75 of the Health and Social Care Act 2012, the Secretary of State for Health was given the power to make regulations to impose requirements on the National Health Service Commissioning Board (the “Board”) and clinical commissioning groups (“CCGs”) for the purpose of securing that, in commissioning health care services for the purposes of the NHS, they adhere to good practice in relation to procurement, as well as certain other objectives. Accordingly, the National Health Service (Procurement, Patient Choice and Competition) (No.2) Regulations 2013 were enacted and came into force on 1 April 2013. The NHS Regulations provide that when procuring health care services, other than pharmaceutical services, for the purposes of the NHS, the Board or the CCG must act with a view to: securing the needs of the people who use the services; improving the quality of the services; and improving efficiency in the provision of the services. The NHS Regulations also provide that a relevant body may, at its discretion, award contracts directly without advertisement in cases of extreme urgency or where only one provider would be capable of performing the contract.

In addition, the Regulations do not apply to the award of public service contracts for public passenger transport services by rail or metro, which are subject to the award requirements under Regulation (EC) 1370/2007 on public passenger services by rail and road.


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public procurement?

The Freedom of Information Act 2000 (“FOIA”) is relevant in the context of public procurement. The FOIA offers a general right of access to information held by public authorities about public contracts and procurement activities, subject to certain conditions and exemptions (the principal exemptions being trade secrets and commercially sensitive information). The FOIA can, for example, allow an unsuccessful tenderer to obtain information about the conduct of a procurement process, in addition to the information which the authority is required to provide to tenderers pursuant to the Regulations.

In 2011, the UK Government implemented specific measures to ensure greater transparency across all government operations. For instance, central government tender documents for contracts over £10,000 must be published in full on a single website and made available to the public free of charge. A website named “Contracts Finder” (see www.gov.uk/contracts-finder) was launched in January 2011 as the Government’s single platform for providing access to the above public sector procurement-related information.

In addition, the Protection of Freedoms Act 2012 (Commencement No. 8) Order 2013 (SI 2013/1906) brought into force, from 1 September 2013, several provisions of the Protection of Freedoms Act 2012 (“POFA”), which require public bodies to provide datasets in response to FOIA requests in a re-usable form as far as reasonably practicable, licensed for re-use (if the public body owns the copyright).

The Public Services (“Social Value”) Act 2012 introduced a statutory requirement for public authorities to have regard to economic, social and environmental well-being in connection with public services contracts. The Act applies only to public services contracts, and not to works or supplies contracts. Section 1(3) states that the authority must consider how that which is proposed to be procured might improve the economic, social and environmental well-being of the relevant area and how, in the process of the procurement, it might act with a view to securing that improvement.

However, contracting authorities remain fully subject to the EU rules, in particular, the principles of equal treatment and non-discrimination between tenderers.

In October 2012, new legislation (the Infrastructure (Financial Assistance) Act 2012) was adopted to enable the Government to provide financial assistance of up to £50 billion in support of infrastructure investment, thereby supporting major infrastructure projects that have struggled to access private finance because of adverse credit conditions.



agreements?

As noted in the response to question 1.1, the UK rules implement the EU public procurement directives. In addition, the UK procurement market is open to operators from the operators countries that are parties to the WTO Government Procurement Agreement (“GPA”), as well as operators from Norway, Iceland and Liechtenstein by virtue of the European Economic Area (“EEA”) Agreement (see further Chapter 1 on EU public procurement rules). The Regulations implement the UK’s obligations under the GPA and the EEA Agreement.


Contracts



The PCR 2015 applies to public sector “contracting authorities”, i.e. state, regional and local authorities; bodies governed by public law; and associations formed by one or several of such authorities or bodies. Schedule 1 of the PCR 2015 contains an express list of public bodies either by category or name.

In addition to entities expressly referred to in the PCR 2015, there is a broad category of other “bodies governed by public law”, which can be described as bodies set up for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character, and which are either: (i) financed wholly or mainly by another contracting authority; (ii) subject to management supervision or control by another contracting authority; or (iii) where more than half of the board of directors or members, or, in the case of a group of individuals, more than half of those individuals, are appointed by another contracting authority. Associations involving one or more of the above entities are also subject to the PCR 2015.

In practice, certain essentially private entities can be subject to the Regulations if they are funded for the most part or controlled by a contracting authority and fulfil a non-commercial purpose. There are other limited circumstances in which a private entity can be subject to the Regulations, such as where a public authority awarding a subsidy (or “State aid”) is obliged to require the subsidised body to comply with the PCR 2015 as if it were a public authority.

The UCR 2016 applies to “utilities”, which comprise:

■ the same list of public bodies as the PCR 2015, including public undertakings (i.e. undertakings over which the State exercises a “dominant influence”), provided that they are performing a “utility activity”; and

■ certain private entities performing a “utility activity” “on the basis of special and exclusive rights granted by a competent UK authority”.

A “utility activity” comprises procurements related to certain specified activities in the water, energy, transport and postal sectors.


Contracts must be classified as either a works contract, a supplies contract or a services contract. These categories are mutually exclusive, i.e. a procurement can only be for one type of contract. This classification will determine which set of rules will apply and the applicable financial thresholds. “Works contracts” are contracts carried out in connection with the execution or realisation of a work or works for a contracting authority, for example, general building and civil engineering works (including demolition, installation and building completion work). “Supply contracts” are contracts for the purchase, lease, rental or hire of goods. “Service contracts” are contracts engaging an entity to provide a service. In circumstances in which a procurement is for both goods and services, it will qualify as a services procurement, rather than a supplies procurement, if the value attributed to the services exceeds that of the goods. If a procurement is for both works and services, it will qualify as a services procurement, provided that the works are only incidental to the provision of services.

Ashurst LLP England & Wales


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A procurement will only fall within the Regulations if its value exceeds a specific financial threshold, which differs according to the classification of the procurement. The value of a procurement for the purposes of the threshold rules is its estimated value net of value-added-tax. The reasoning behind the use of financial thresholds is that procurements above a certain threshold are considered capable of having an impact on competition and of affecting trade between EU Member States, as they are more likely to attract bidders from other Member States.

The EU’s policy is to keep the financial thresholds in line with those set in the WTO GPA. The Commission revises the EU thresholds accordingly from time to time. In addition, non-Eurozone EU Member States, such as the UK, receive a revision of the financial thresholds every two years converted into their national currencies, based on the exchange rate published in the OJEU. The following thresholds have been applicable since 1 January 2018.

* The Regulations identify a number of categories of services, collectively referred to as “social and other specific services”, which are subject to a light touch procurement regime. Contracting authorities have greater flexibility when awarding contracts for social and other specific services.


The Regulations contain an express “splitting” prohibition, which requires the aggregation of the values of similar contracts in certain circumstances. The aim is to prevent the artificial splitting-up of contracts into lower-value contracts, which would fall below the relevant thresholds and, thus, outside the scope of the Regulations. In practice, this means that, in circumstances in which a contracting authority/utility intends to award more than one contract for a single overall requirement (for example, in phased construction projects), the value of these contracts must be added together. The aggregate figure will determine whether or not the relevant threshold has been met.

Contracting entity

Supplies £

Services £

Social and other specific services £*

Works £

Entities listed in Schedule 1 of the Public Contracts Regulations (i.e. those en-tities that are subject to the WTO GPA, which are es-sentially central government bodies)

118,133 118,133 615,278 4,551,413

Other public sector contract-ing authorities (such as local authorities)

181,302 181,302 615,278 4,551,413

Utilities (public or private)

363,424 363,424 820,370 4,551,413



The CCR 2016 introduced a distinct regime for the award of concession contracts. Under the CCR 2016, the main feature of a “concession” is the transfer to the concessionaire of an economic risk involving the possibility that it will not recoup all the investments it has made and the costs it has incurred in operating the works and services covered by the award.

A contract for a toll road or a bridge, under which the contractor builds (wholly or partly at its own cost) the asset but is entitled to recoup its investment by levying tolls for its use, is an example of a “works” concession. The operation of a local bus service, pursuant to which the “operator” will charge the public fares, is an example of a “service” concession. Concessions that contain elements of both works and services are classified according to whichever element forms the greater part of the contract (although in such an event, it may be advisable to split the contract into a separate public works concession and a service concession).

The new regime leaves the choice of the most appropriate procedure for the award of concessions to contracting entities, subject to basic procedural guarantees, including:

■ the publication of a “concession notice” in the OJEU advertising the opportunity;

■ a minimum time limit of 30 days from the date on which the concession notice was sent for the receipt of applications and tenders;

■ the selection criteria must be related exclusively to the technical, financial and economic capacity of operators;

■ the award criteria must be objective and linked to the subject matter of the concession;

■ a requirement that the contracting authority inform each candidate and tenderer as soon as possible of decisions taken concerning the award of a concession, including the name of the successful tenderer, the grounds for any decision to reject an application or tender, and the grounds for any decision not to award any concession in relation to which a concession notice has been published;

■ each tenderer which makes an admissible tender has a right to request that the contracting authority provide, within 15 days of the receipt of that request, a debrief setting out the characteristics and relative advantages of the winning tender; and

■ limits on the scope of acceptable modifications to concession contracts during their term.

Specific sub-contracting rules also apply. In particular, a contracting authority should:

■ take appropriate measures to ensure that in the performance of concession contracts, sub-contractors comply with the obligations applicable to contractors in relation to environmental, social and labour laws; and

■ require bidders to specify the amount of works that will be carried out by independent sub-contractors, and the proportion of the work as a whole that this constitutes.



The Regulations include express rules on the award and use of framework agreements. The procuring authority does not need to establish the precise scope of the products or set a fixed price when it awards a framework agreement. The purpose of the framework



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mechanism is to be able to establish the scope and prices of products with sufficient precision at the time that the products/services are required.

The Regulations impose certain restrictions on the use of frameworks. In particular, framework agreements may not be used with a view to preventing, restricting or distorting competition. This means that, in practice, limits on the scope of the products or services covered by the framework need to be established.

Framework agreements may be either single or multi-supplier. Multi-supplier agreements are often favoured where the authority wants to retain a competitive element throughout the term of the framework. However, the Regulations provide that multi-supplier agreements must include at least three suppliers, provided that there are sufficient suppliers that satisfy the selection criteria and who have submitted admissible tenders. In addition, when awarding specific contracts under a multi-supplier framework, the authority is often under an obligation to hold a mini-competition between the suppliers that are party to the framework and capable of performing the contract.

Framework agreements may be either single or multi-purchaser (i.e. they can be created for the benefit of one or more contracting authorities). Multi-purchaser frameworks may involve either a single contracting authority acting as a central purchasing body for a number of contracting authorities, or all of the relevant contracting authorities entering into an agreement with one or more suppliers. Under multi-purchaser arrangements, only those contracting authorities that have been identified in the contract notice, either specifically or as part of a group or class of contracting authorities, will be entitled to make use of the framework.

In principle, each of the award procedures under the Regulations may be used to award a framework agreement. However, as framework agreements are most commonly used for more straightforward purchases, grounds for using the competitive procedure with negotiation, the competitive dialogue procedure or the innovation partnership procedure, are unlikely to apply. See further the response to question 3.1 on the types of award procedures that are available.

Before awarding a framework agreement, the procuring body is required to publish a contract notice in the OJEU, including some additional information specific to framework agreements, including:

■ disclosure of the fact that the contracting authority is setting up a framework;

■ the planned duration of the framework agreement;

■ the estimated value of the products to be supplied over the duration of the agreement; and

■ the proposed number of suppliers to whom a framework agreement will be awarded.

There is no obligation to award specific contracts under a framework agreement in accordance with the Regulations. However, the award of specific contracts must comply with the terms of the framework agreement, and the terms of the framework agreement should not be varied, particularly those terms relating to the price to be paid.

The Regulations also require mini-competitions to be conducted, in circumstances in which there is a multi-supplier agreement which has not established all of the terms of the proposed contract in advance. However, mini-competitions should only be used where the framework does not anticipate or is unable to make advance provision for a term. The Regulations impose specific obligations on the contracting authority in respect of the mini-competition. In particular, it should be based on the same terms as those which

applied for the award of the framework agreement and satisfy certain requirements with respect to the evaluation of tenders.

The term of a framework agreement should not exceed four years; however, a longer term may be granted in exceptional circumstances. The Regulations do not stipulate the duration of a specific contract awarded under a framework agreement. Contracting authorities are entitled to place orders for specific contracts at any point up to the end of the four-year period, which means that a specific contract can extend beyond the lifespan of the framework arrangement.


into lots?

The Regulations provide that contracting authorities may divide the scope of contracts into different lots based on, for example, value or geographical area.

Contracting authorities are being encouraged to divide contracts into lots whenever possible in order to facilitate the access of small and medium-sized enterprises (“SMEs”) to public sector contracts. In addition, when a contract is divided into lots, it leaves the contracting authority with a contingency option, in case one of the suppliers fails to perform its contract.

If a contracting authority decides not to subdivide a particular contract into lots, it must set out the main reasons for its decision in the procurement documents or in its procurement report.

If a contracting authority divides a contract into lots, it must set out:

■ whether tenders may be submitted for one, several or all lots; and

■ the maximum number of lots each tenderer can win, if any limits apply.

If a contracting authority wishes to limit the number of lots a single tenderer can win, it must clearly set out how lots will be allocated, in the event that a tenderer is the highest scorer for more lots than it is permitted to win. These rules must be objective and non-discriminatory.



Contracting authorities in the UK are required to provide access to public contract opportunities to suppliers which are established in an EU Member State; or a country which is a signatory to (a) the Government Procurement Agreement (“GPA”) (see Chapter 1), or (b) another relevant international agreement by which the EU is bound.

Suppliers from countries not falling within any of the categories mentioned above are not, as a matter of law, prevented from bidding for and performing public contracts in the UK. However, contracting authorities may not owe the same duties to bidders from non-GPA countries, and may choose to treat bidders established in non-GPA countries less favourably than bidders established in the EU (or another GPA signatory country), at least at the outset of a tender process.

Once non-GPA bidders have been admitted to the process, it is probable that the EU General Principles, including equal treatment, apply thereafter.

In addition, where the procurement in question falls under the UCR 2016, a supplier from a non-GPA country risks being treated less favourably where it sources more than 50% of the products to be supplied under the contract from non-GPA countries.



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3 Award Procedures




There are five different types of procurement procedure available to contracting authorities under the PCR 2015:

■ The open procedure, under which the procurement is advertised and all interested providers tender a single fully-priced offer. This procedure is generally used only for simple procurements, as it does not permit any negotiation with interested providers.

■ The restricted procedure, under which the contract is advertised and bidders are invited first to pre-qualify. Only those tenderers who pre-qualify are invited to submit a fully-priced tender. The procedure offers no scope for substantive negotiation or dialogue between the contracting authority (or utility) and the tenderers.

■ The competitive dialogue procedure, under which interested bidders must first pre-qualify before being invited to enter into a dialogue with the contracting authority in order to identify and develop a solution. This procedure is very flexible and the dialogue may be conducted in successive stages, with the aim of reducing the number of solutions/bidders. This procedure is designated for use in the award of complex contracts.

■ The competitive procedure with negotiation is a new procedure which replaces the negotiated procedure. The initial stages of the procedure mirror the restricted procedure; however, further tender stages are permitted to negotiate with interested parties to improve the content of their bids. The revised procedure provides a number of additional safeguards to protect against unequal treatment and discrimination.

■ The innovation partnership, which is an entirely new procedure to be used where a contracting authority requires a partner to develop an innovative product, service, or works. Under this procedure, the contract is awarded in accordance with similar rules to the competitive procedure with negotiation. However, the procedure also sets out certain provisions governing the structure and operation of the partnership with the contractor in the contract execution phase. The procedure is only available in limited circumstances and, in particular, where a solution is not readily available in the market.

The UCR 2016 also makes available to contracting entities the open procedure, the restricted procedure, the competitive dialogue procedure and the innovation partnership. The key difference is that the UCR 2016 retains the negotiated procedure, under which interested bidders must first pre-qualify before the contracting authority enters into negotiations with a group of pre-qualified tenderers by way of an invitation to negotiate (“ITN”).


The Regulations set out minimum timescales for each procedure. The applicable minimum timescales in both Regulations are broadly the same; however, there are variations in the form of possible shorter timescales under the UCR 2016, due to the fact that the utilities regime as a whole is more flexible and less stringent.

The standard minimum timescales are as follows:

■ the open procedure: 35 days between the dispatch of the contract notice and the receipt of response (the timescale can be reduced by five days where the contracting authority

accepts that tenders may be submitted by electronic means); and a 10-day standstill period before the award of the contract;

■ the restricted procedure: 30 days between the dispatch of the contract notice and the receipt of response; 30 days between the ITT and the receipt of bids; and a 10-day standstill period before the award of the contract;

■ the competitive procedure with negotiation: 30 days between the dispatch of the contract notice and the receipt of expressions of interest; unspecified but sufficient time between the issue of the ITN and the receipt of responses; and a 10-day standstill period before the award of the contract;

■ the competitive dialogue procedure: 30 days between the dispatch of the contract notice and the receipt of expressions of interest; unspecified but sufficient time for the competitive dialogue to take place; and a 10-day standstill period before the award of the contract; and

■ the innovation partnership: 30 days between the dispatch of the contract notice and the receipt of response; unspecified but sufficient time between the issue of the ITN and the receipt of responses; and a 10-day standstill period before the award of the contract. The procedure allows research and development (“R&D”) phases to take place following contract award.

In the case of the open and restricted procedures and the competitive procedure with negotiation, the above timescales between the publication of a contract notice and the receipt of tenders/selection questionnaire (“SQ”) responses can be reduced by publishing a Prior Information Notice, between 35 days and 12 months before the date of publication of the contract notice, which gives the market advance notice of an intended procurement. The form of a PIN is standardised, and includes outline information about the nature and scope of the works/supplies or services that the authority intends to procure, as well as the scheduled date for the start of the award procedure.

In cases of urgency, an accelerated timetable is available under each of the open procedure, the restricted procedure and the competitive procedure with negotiation. In circumstances in which the accelerated procedures are used, the minimum time for receipt of responses is reduced to 15 days from the publication of the contract notice.


tenderers?

In open procedures, bids are directly submitted after publication of the contract notice, without any short-listing stage. The contracting authority has no opportunity to limit participation to pre-qualified providers and can, therefore, only assess issues such as the economic and financial standing of a bidder once bids have been submitted. In contrast, the restricted procedure, the competitive procedure with negotiation, the competitive dialogue procedure and the innovation partnership procedure allow the contracting authority to select which bidders may participate in the tender process during a pre-qualification stage which takes place before any bids are submitted. The pre-qualification stage consists of the assessment of SQ forms completed by prospective bidders. SQ forms are issued to all prospective bidders who respond to a contract notice.

The purpose of the SQ is, firstly, to enable the contracting authority to identify any material legal reasons as to why it may be required to exclude a bidder. The SQ will cover the criteria set out in the Regulations for the mandatory exclusion of a bidder, which apply where a contracting authority has actual knowledge that the bidder has been convicted of offences such as conspiracy to participate in a



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criminal organisation, corruption, bribery, fraud or money laundering. The SQ will also cover the criteria set out in the Regulations for the discretionary exclusion of a bidder. These criteria cover factors such as: lack of financial standing or technical capacity/ability; conviction of a criminal offence relating to the conduct of a business or profession, or of an act of grave misconduct in the course of a business or profession; failure to fulfil obligations relating to the payment of taxes; or serious misrepresentation in providing any information required under the Regulations.

In addition, contracting authorities may exclude a bidder where it can demonstrate by any appropriate means that the bidder is in breach of its obligations relating to the payment of taxes or social security contributions.

Bidders are subject to an ongoing obligation to satisfy the conditions for participation during the award procedure. This means that contracting authorities are required to exclude bidders if they become aware during the procedure that the bidder satisfies one of the mandatory exclusion grounds. Similarly, contracting authorities may exclude a bidder where they become aware of it satisfying one of the discretionary exclusion grounds.

Notwithstanding the foregoing, the Regulations provide “self-cleaning” rules which provide bidders with an opportunity to provide evidence to the effect that they have taken measures to demonstrate their reliability to perform a contract, despite the existence of the relevant grounds for exclusion. The contracting authority must evaluate the measures taken by the bidder to rectify the breach, taking into account the seriousness of the criminal offence or misconduct. Once a decision to exclude a bidder has been taken, the period of exclusion can be up to five years from the date of conviction for the mandatory grounds for exclusion and up to three years from the relevant event in the case of the discretionary grounds for exclusion.

The SQ may also set out minimum standards required from bidders in respect of (i) economic and financial standing, (ii) technical or professional ability, and (iii) suitability to pursue a professional activity. This may consist of questions regarding: background corporate information; turnover, financial history and current financial position; contractual performance history; statements of compliance; customer details for reference purposes; and any particular questions relating to the specific product/service required.

In addition, the SQ may contain a list of documents and supporting material to be submitted with the SQ response, such as quality certification(s), annual accounts and health and safety and environmental policies.

The SQ responses will be evaluated on the basis of a scoring weighting which the contracting authority is required to disclose in advance to the prospective bidders. The contract notice will have indicated the estimated numbers of bidders to be invited to tender, and bidders will be ranked and selected to meet that estimate.




After the deadline for the receipt of bids, the contracting authority will proceed to evaluate the bids against pre-disclosed award criteria. The basic principle is that the contracting authority must select the “most economically advantageous tender” (“MEAT”). The contracting authority is required to identify the MEAT on the basis of the price or cost of the tender. In addition, the MEAT may be identified based on the best price-quality ratio, assessed on the basis of criteria linked to the subject matter of the contract. Such

criteria are typically required to be qualitative in nature, or relate to environmental or social policy considerations.

The contract notice and related tender documentation must specify the basis on which the contract will be awarded. Where cost or the price-quality ratio is relevant, the authority must disclose the scoring and the relative weighting given to each award criterion and sub-criterion. Where this is not feasible, the award criteria must be stated in descending order of importance.

The Regulations introduced the right to use life-cycle costing in the evaluation of the MEAT. The purpose of this right is to enable greater use of public procurement to further social and environmental objectives. Therefore, life-cycle costing may include costs of use, such as consumption of energy and other resources; maintenance costs; end of life costs, such as collection and recycling costs. Where the authority intends to factor in costs imputed to environmental externalities, those costs must be linked to the subject matter of the contract, and be capable of determination and verification. Where the authority intends to use a life-cycle costing approach, the intention to do so, and the methodology to be applied must be communicated to bidders in the procurement documents.


low tenders?

The Regulations oblige contracting authorities to require tenderers to explain the price or costs proposed in a tender where the tender appears to be abnormally low. The explanations given may relate to: the economics of the manufacturing process, the services provided or the construction method; the technical solutions chosen; any exceptionally favourable conditions available to the tenderer for the supply of products or services or for the execution of the work; compliance with applicable environmental, social and labour law obligations; and the possibility of the tenderer obtaining State aid. The right to reject arises when the evidence supplied does not satisfactorily explain the low price or costs.


Whenever a contracting authority makes a decision to award a contract which is covered by the Regulations, it must publish a contract award notice detailing the contract award. The notice must be published in the OJEU within 30 days of the date of the contract award decision.


bidders?

The reasons for the award decision must be provided to unsuccessful bidders. That debrief must include the following information:

■ the award criteria;

■ the full reasons for the decision, including narrative descriptions of the characteristics and relative advantages of the successful tender, which should be expressed in a sufficiently generic way in order to ensure that the confidentiality or IP rights of the winning tenderer are not compromised;

■ the scores obtained by the recipient and by the successful tenderer;

■ the identity of the successful tenderer; and

■ a precise statement of when the mandatory standstill period will end.



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In essence, the contracting authority must provide the information necessary for an unsuccessful bidder to determine whether or not the decision is well founded. The debrief will, therefore, be case specific and also be specific to each unsuccessful bidder.


Joint procurements (for the purchase of “shared services”) will usually be undertaken in the UK through either an administrative model (two public bodies collaborate to provide services to each other without any structural change), a corporate model (an entity with a separate legal personality is used as the medium to supply services to various purchasers), or a contractual model (services are procured on the basis of a detailed written contract).

If the arrangement is between a purchaser and an “in-house entity” (see further the response to question 4.2 below), then the public procurement rules will not apply.


There are specific requirements which must be followed if a variant bid (i.e. a bid which provides a different solution to a requirement than that set by the purchaser) is to be accepted. The purchaser must indicate in the contract notice (commencing the award procedure) whether or not it will accept variants. Variants must be linked to the subject matter of the contract. The purchaser must also provide details of the minimum requirements to be met by a variant and the specific requirements for the presentation of a variant. Only variants meeting those minimum requirements may be taken into consideration.

In practice, purchasers commonly face the issue of whether they can “cherry-pick” and change their requirements based on the tenders received. The position is complex, but it is arguable that it is permissible to allow this if all tenders are permitted to re-tender on the same basis. However, even in such a situation, issues may arise in relation to, in particular, the confidentiality of tenderers’ solutions.


The Regulations include an express rule which requires contracting authorities to take appropriate measures to prevent, identify and remedy actual or potential conflicts of interest arising in the conduct of procurement procedures, in order to avoid any distortion of competition and to ensure equal treatment of all operators. The Regulations provide examples of the circumstances in which a conflict of interest may arise. These circumstances relate primarily to situations where staff members’ personal interests might compromise the independence of the award procedure.




The Regulations contemplate contracting authorities conducting market consultations for the purposes of preparing procurements. Contracting authorities may also seek advice from third parties when planning a procurement, provided that the involvement of those third parties does not have the effect of distorting competition.

Where a bidder (or an entity related to a bidder) has been involved in some way in the preparation of the procurement procedure, the

contracting authority is required to take appropriate measures to ensure that competition for the contract would not be distorted as a result of that bidder’s prior involvement in any preparatory activities. Such measures include communication to the other bidders of relevant information exchanged in the context of or resulting from the involvement of the bidder in the preparation of the procurement procedure.

The bidder should only be excluded as a result of its involvement in the preparation of the procurement where there are no other means of ensuring that all bidders are treated equally. However, prior to any decision to exclude a bidder on this basis, the relevant bidder must be given the opportunity to prove that its involvement in preparing the procurement would not be capable of distorting competition.




The most important exclusions relate to:

■ secrecy, security and other essential national security interests;

■ defence procurements for hard defence equipment (and services related to such equipment) covered by Article 346 of the TFEU. This exclusion is confined to “truly exceptional cases”. All other defence procurements (plus related works and services) are now subject to the Defence Regulations;

■ the acquisition of land, including existing buildings, and rights related to land – unless the main object of the procurement is to acquire works built to the contracting authority’s specifications; and

■ public passenger transport services by rail or metro, which are subject to the award requirements under Regulation (EC) 1370/2007 on public passenger services by rail and road.

In addition, there are specific exceptions that only apply to the utilities sector:

■ utility procurements covered by a general sector exemption, i.e. where the specific activity takes place in a market that has been liberalised and opened up to competition. In the UK, there are currently three exemptions: procurements which relate to the exploration for and exploitation of oil and gas; the supply of electricity and gas; and electricity generation;

■ a procurement awarded by a utility to an affiliated undertaking or by a joint venture utility to one of its members or an affiliated undertaking of those members, provided that the undertaking in question essentially exists to provide services/supplies/works to that group and not to the open market; and

■ a procurement by a utility for the purchase of water, energy or fuel for the production of energy.




The Regulations do not apply to certain “in-house” arrangements and certain arrangements between public bodies.

Broadly speaking, in-house arrangements are characterised either as:

■ “vertical” arrangements, involving a single contracting authority or a shared system of control; or



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■ “horizontal” arrangements, involving a number of contracting authorities co-operating to meet public service obligations.

The vertical exception will apply if the following conditions are satisfied:

■ the contracting authority exercises a control over the legal person concerned that is similar to the control it exercises over its own departments;

■ more than 80% of the activities of the legal person are carried out for the contracting authority or for other legal persons controlled by the contracting authority; and

■ there is no direct private capital participation in the controlled legal person.

The PCR 2015 and the UCR 2016 also provide that the vertical exception applies where the controlled legal person awards a contract to the contracting authority it is controlled by, or where it awards a contract to another legal person controlled by the same contracting authority.

The horizontal exception will apply if the following conditions are satisfied:

■ the contract establishes or implements a co-operation between the participating contracting authorities with the aim of ensuring that the public services which they have to perform are provided with a view to achieving objectives which they have in common;

■ the contract is governed solely by considerations relating to the public interest; and

■ the participating contracting authorities perform on the open market less than 20% of the activities concerned by the co-operation.

5 Remedies



Breaches of the Regulations are actionable by a third party which “in consequence, suffers, or risks suffering, loss or damage” (i.e. it would or could lose out as a result of the breach), both pre-contract award and post-contract award.

An injunction preventing the contracting entity from signing the contract will automatically be granted to the claimant where the challenge is against the contract award decision. However, the contracting authority may apply to have the automatic suspension set aside on the basis that the test for injunctive relief is not met (based upon the American Cyanamid principles).

There have now been several recent reported cases where the High Court has refused to grant an application to lift the automatic suspension, including R (Edenred (UK Group) Limited) v. HM Treasury and others (2014) and NATS (Services) Ltd. v. Gatwick Airport Ltd. (2014). Although in the majority of cases the Court will grant an application to lift the automatic suspension, the Court appears to have become more open to maintaining the automatic suspension pending an expedited trial.



Actions by public bodies in pursuit of public functions and subject to public law duties are, generally, subject to judicial review. A public duty will arise if there is a statutory obligation as to how something is to be done. A claimant must show that it has

“sufficient interest”, which is construed widely, in order to apply for a public law remedy. The most significant principles applied in judicial review are: fairness; the requirement not to act arbitrarily or unreasonably; the obligation to take into account only relevant considerations; and legitimate expectations. Recent case law suggests that judicial review is also available for a breach of the Regulations, on the basis that the statutory obligations in the Regulations constitute public law obligations. However, it is generally accepted that an economic operator should use the statutory cause of action if it is available.


sought?

The High Court has jurisdiction to hear claims under the Regulations. Public procurement cases are typically heard by the Technology and Construction Court, which is a specialist court within the High Court.

The Administrative Court reviews the lawfulness of a decision or action taken by a public body under the judicial review procedure.

Appeals are heard by the Court of Appeal, and then by the Supreme Court.

There is no specific administrative tribunal for public procurement claims.


remedies?

Proceedings under the Regulations generally need to be brought within 30 days, beginning with the date when the tenderer first knew or ought to have known that grounds for starting the proceedings had arisen. The Court has a discretion to extend the time limit to up to three months if there is good reason to do so. In Turning Point Limited (2012), the High Court indicated that a good reason will usually be something which was beyond the control of the claimant, for example, significant illness or detention of relevant members of the tendering team.

There are specific limitation rules for the remedy of ineffectiveness. An application for a declaration of ineffectiveness must be brought either: (i) within six months of the date of contract signature; (ii) within 30 days of the receipt of information from the contracting authority to the effect that the contract has been concluded and a summary of the relevant reasons for award; or (iii) in the case of a contract awarded without publication of a prior contract notice, within 10 days of the publication of a Voluntary Ex Ante Transparency Notice (“VEAT Notice”) or 30 days of the publication of a Contract Award Notice (“CAN”) in the OJEU. There is no linkage to knowledge of contract execution; therefore, the date of contract signature constitutes a hard line in the sand for ineffectiveness proceedings.


periods?

As noted above, the ordinary 30-day limitation period is triggered from the date of knowledge. This period cannot be shortened. However, tactically, authorities may seek to put tenderers on notice of facts relating to potential breaches before they take an award decision with a view to triggering the date of knowledge. The authority would then be in a position to raise a limitation defence if a tenderer subsequently sought to challenge that potential breach after it has discovered that its tender was unsuccessful.



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There are specific measures that can be taken to shorten the limitation period for the remedy of ineffectiveness in circumstances in which a contract has been awarded without first advertising the opportunity in a contract notice published in the OJEU (see further question 5.6 below). Each of these measures involves publishing a specific type of notice in the OJEU.

The first type of notice is the VEAT Notice. The VEAT Notice must explain why the contracting authority considered that the contract opportunity did not need to be advertised in a contract notice. Provided the contracting authority does not enter into the contract within ten days of publishing the VEAT notice, the remedy of ineffectiveness will not be available.

The second type of notice is the CAN. The CAN must, like the VEAT Notice, explain why the contracting authority considered that the contract opportunity did not need to be advertised in a contract notice. In addition, the contract must not be entered into for 30 days from the date of publication of the CAN.


After contract signature, disappointed bidders that have suffered loss as a result of a breach of the Regulations by the contracting authority may claim damages for the loss of opportunity or for wasted tendering costs.

In addition, the remedy of ineffectiveness (contract nullity) may be available if one of the three grounds is satisfied. Firstly, where a contract is concluded without prior publication of a contract notice. Secondly, where a contract is concluded during the standstill period or during the automatic suspension of the contract award procedure. It is necessary, in this case, to show an additional breach of the public procurement rules which prevented pre-contractual remedies from being sought. Finally, where a drawdown contract based upon a framework agreement is not awarded in compliance with an applicable mini-competitive procedure.

In making a declaration of ineffectiveness, the Court must also impose financial penalties on the contracting authority. In addition, the Court may make orders dealing with issues of restitution and compensation between the contracting parties. In England and Wales, there has been one reported case to date concerning an application for such the ineffectiveness remedy, which was struck out by the Court (Alstom Transport and Eurostar International Limited (2011)).

Alternative penalties (contract shortening, fines, or both) are also available instead of ineffectiveness, in situations where ineffectiveness is inappropriate.


remedies is made?

The likely timescale is case-specific and depends upon the particular issues in dispute, the speed with which the Court can hear the case, and the remedy being sought. It is possible to obtain practical protection for the interests of an aggrieved tenderer very quickly. However, cases typically come to trial on the substance within a six to 12-month timeframe; this can extend to two to five years.



Set aside

There have been several recent cases where claimants have

successfully obtained an order from the courts setting aside the contract award decision. In Woods Building Services v. Milton Keynes, the High Court set aside the contracting authority’s original decision and declared that the claimant’s tender was the most economically advantageous tender. The Court did not consider it appropriate to make a mandatory injunction in relation to the award of the contract, although it did not rule out the possibility of such an injunction being made in appropriate circumstances. The High Court ruled that the claimant was entitled to damages, but the amount of those damages will be assessed after the re-run procurement as the outcome of the re-run procurement could affect the quantum of any claim for loss of profit.

In Lancashire Care NHS Foundation Trust and another v. Lancashire County Council (2018), following an expedite trial, the Court set aside the decision to award a contract under the light touch regime for social and other specific services on the basis that the reasons given by Lancashire County Council for the scores it had awarded in respect of the quality evaluation questions were insufficient, which meant that the Court could not determine the issue of manifest error in the evaluation of tenders received without conducting a full re-evaluation. In MLS (Overseas) Ltd. v. The Secretary of State for Defence (2018), the Court set aside the Ministry of Defence’s (“MOD”) award decision after it had unlawfully rejected the claimant’s tender. However, the Court declined to order the MOD to enter into the contract with the claimant.

Damages

The level of damages recoverable depends on whether the evidence indicates that the claimant would have been awarded the contract in the absence of the breach or merely whether he has lost the opportunity to bid in a fair and transparent tender procedure. Lancashire County Council v. Environmental Waste Controls Limited (2010) confirms that in the latter case the most the claimant can hope to recover is a proportion of the lost profit.

In Mears Limited v. Leeds City Council (2011), the Court found that Leeds City Council had failed to disclose the weightings applied to certain award criteria and that this could have affected the preparation of the claimant’s tender. The Court concluded that, if this breach had not been made, it is likely that the claimant would have been selected to participate in the next stage of the tender procedure. However, it was decided that damages, rather than set aside of the Council’s decision, was the appropriate remedy as the balance of convenience weighed heavily against restarting the procurement.

In August 2012, Virgin Trains initiated Court proceedings against the Department for Transport (“DfT”) in relation to the award of the West Coast train franchise to another operator, which resulted in the DfT deciding to cancel the award and to reimburse the four tenderers’ bidding costs (estimated to amount to a total of £40 million) well before any Court judgment was reached.

In April 2017, the Supreme Court handed down a ruling in Nuclear Decommissioning Authority v. Energy Solutions EU Ltd. (2017) concerning the circumstances in which damages may be recoverable for failure to comply with the Directives as given effect in the Regulations. The Court confirmed that the detailed procedural rules governing actions for safeguarding an individual’s rights under EU law must be no less favourable than those governing similar domestic actions. Therefore, liability is to be assessed by reference to the Francovich conditions, namely: the rule of law must be intended to confer rights on individuals, the breach must be sufficiently serious, and there must be a direct causal link between the breach of obligations and the damages sustained by the injured party. Moreover, based on the UK’s approach to the transposition of



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the EU’s remedies directives (see General Chapter on the EU Public Procurement Rules), the Regulations should be read as providing damages only upon the satisfaction of the Francovich conditions.

Ineffectiveness

On 14 November 2018, the Court of Appeal made the first declaration of effectiveness by an English court in the case of Faraday Development Ltd v. West Berkshire Council and another (2018). West Berkshire Council had entered into a development agreement with a developer (“SMDL”) without first carrying out a regulated procurement. The council had issued a VEAT notice stating that it believed that the agreement did not need to be procured in compliance with a regulated procurement. The Court of Appeal held, however, that although the development agreement was not a “public works contract” at the time it was entered into, its provisions meant that the council had effectively agreed to act unlawfully in the future. In particular, under the agreement, the council committed itself to acting in breach of the legislative procurement regime as a “public works contract” would come into existence when SMDL proceeded to draw down the land. The Court concluded that the remedy of ineffectiveness was not time-barred on the basis that a valid VEAT notice had not been published. The parties agreed, following judgment, that the Public Contract Regulations 2006 made it mandatory for the Court to grant a declaration of ineffectiveness, and to order the payment of a civil financial penalty by the council. The amount of that penalty was fixed at £1.



The types of mitigation measures available depend upon the type of risk.

As noted above VEAT notices and CANs, if used correctly, may reduce the time limit within which ineffectiveness proceedings can be brought. Each notice can be used, for instance, prior to contract signature where a contract has been modified and there is a risk of challenge on the basis that the modification results in the award of a “new” contract which has not been properly advertised in a contract notice.

Where possible, the contracting parties could sign a contract but suspend or limit the implementation and expenditure for the first six months, in order to limit the commercial exposure, should a claim be brought seeking a declaration of ineffectiveness. This approach can be combined with contractually agreed provisions on compensation in the event of ineffectiveness.


Procedure







The Regulations do not expressly deal with the issue of change during an award procedure. The extent to which changes to specifications or conditions are permitted depends upon a range of factors, the justification of the change and the effect on the economic balance of the contract, and should be assessed on a case-by-case basis against the background of the EU General Principles.

Before selecting the winning tender, changes that are not material are generally permitted. However, the contracting authority should, in general, ensure that any changes could not have had an impact on the identity of the participating tenderers and that there is no breach of the equal treatment principle.

In practice, the appropriate approach should be to consider whether any actual or potential tenderer could be prejudiced by any change and, if so, to go back to the stage in the procedure at which this impact would have first occurred.

The Regulations do not provide any express provisions on changes to the membership of bidding consortia. However, contracting authorities may provide restrictions on changes to consortia arrangements in the tender documents. In general, these restrictions require tenderers to demonstrate that the reconstituted consortium continues to meet the pre-qualification criteria and that the changes do not result in breaches of the EU General Principles.



There are many legitimate reasons for permitting changes to final tenders, e.g. correcting errors, supplementing omissions, and providing further details. However, there is a risk that the contracting authority may be in a position of favouring a certain tenderer by giving it an opportunity to improve its tender. The extent to which changes to final tenders may be permitted depends upon the applicable award procedure.

In the context of the open and restricted procedures, the Regulations do not specify whether changes to final tenders are permissible. It is generally accepted that variations for the purposes of clarifying or supplementing the content of tenders, pre-contract award, are permissible. This is subject to the contracting authority giving the same opportunity to all tenderers, and to tenderers not being allowed to improve their final tender. Changes post-contract award could be permitted, provided that the result is an improvement of the terms of the tender for the benefit of the contracting authority. However, changes that benefit the tenderer are unlikely to be permissible.

In the context of the competitive procedure with negotiation/negotiated procedure, the Regulations again do not specify whether changes to final tenders are permissible. The PCR 2015 and the UCR 2016 clarify, however, that fine-tuning is possible under the competitive dialogue procedure following the submission of tenders. However, the basic features of the final tender cannot be amended. Post-contract award, the Regulations specify that the contracting authority may require the preferred bidder to clarify aspects of its tender or confirm commitments, provided that there is no change to the substantial aspects of the tender.

Changes to final tenders post-contract award are therefore generally permissible, subject to certain constraints, namely that the changes must not be capable of affecting the outcome of the competition such that the preferred bidder remains the best bidder. Moreover, the reasons for the changes are relevant. For instance, changes are more likely to be permissible if they result from external reasons, such as changes in risk or technology.


signature?

The Regulations introduce express provisions, based on the principles developed in the CJEU’s case law, which set out the circumstances in which changes may be made to public contracts without triggering a requirement to run a new procurement process.



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In particular, a new award procedure will not be required where:

■ the changes, irrespective of their monetary value, were provided for in the initial procurement documents. Thus, contracts may include price review clauses, provided that they (a) state the scope and nature of possible modifications, and (b) do not provide for changes that would alter the overall nature of the contract;

■ additional works, services or supplies are required from the original contractor that were not included in the initial procurement, where a change of contractor (a) cannot be made for economic or technical reasons, and (b) would cause significant inconvenience or substantial duplication of costs for the contracting authority, provided that each increase in price does not exceed 50% of the value of the original contract or framework agreement;

■ changes arising from unforeseen circumstances, provided that those changes do not alter the overall nature of the contract, and each increase in price does not exceed 50% of the value of the original contract;

■ the changes are not substantial. This rule, based on the Pressextext judgment, provides that a change will be substantial if it:

■ renders the contract materially different in character from the one initially concluded;

■ introduces conditions which, had they been part of the initial procurement procedure, would have allowed for the admission of other candidates than those initially selected; allowed for the acceptance of a tender other than that originally accepted; or attracted additional participants in the procurement procedure; or

■ changes the economic balance of the contract or the framework agreement in favour of the contractor; and

■ the changes are low-value. A change will be low-value if:

■ the value is less than both (a) the applicable threshold (see above), and (b) 10% of the initial contract value for service and supply contracts, or 15% of the initial contract value for works contracts; and

■ the change does not alter the overall nature of the contract.



signature?

The Regulations permit changes of contractor in accordance with an unequivocal review clause, or universal or partial succession into the position of the initial contractor, following corporate restructuring, including takeover, merger, acquisition or insolvency, of another contractor that fulfils the criteria for qualitative selection initially established, provided that this does not entail other substantial changes to the contract.




them?

The Regulations do not contain specific rules in relation to privatisations. It is necessary to consider the whole arrangement, in order to determine whether the Regulations apply.

There are arguments available as to why the privatisation of a business (even with the benefit of contracts for the supply of goods, works or services back to the privatising entity) should not amount to a procurement. In particular, it is generally assumed that it will not breach the Regulations to award a contract at privatisation which only covers pre-existing areas of work for which the purchaser has a clear requirement at the time the contract is made, which reflects insofar as possible the provisions of the previous arrangement, and which includes terms that are normal for a contract of the type in question. In addition, the duration of the contract should be as short as possible. This is sometimes called the “privatisation principle”.



The Regulations do not contain special rules in relation to PPP (or PFI) arrangements. Where a PPP/PFI arrangement gives rise to a procurement of goods, works and services and is above the relevant threshold value, it is, in principle, within the scope of the Regulations in the same way as any other contract. The principal issues that arise in relation to PPP/PFI arrangements stem from the fact that these are typically long-term contracts that are exposed to changes in government policies (for example, the scaling-back of the schools’ building programme) and/or market requirements. This means that there are often difficult issues as to whether these contracts can be adapted to changes in circumstances without fundamentally altering the nature and extent of the original OJEU advertised contract, with the result that quite a new contract is created (one that is subject to a new application of the public procurement rules, including a new OJEU notice). Issues of scope and contract flexibility need to be carefully considered at the outset of a procurement.

8 The Future



impact?

There are no proposals to change the law at this time. In particular, immediately after Brexit, the Regulations will continue to apply. However, following Brexit, the UK Government will have more freedom to set/change its own procurement rules. Therefore, there is a prospect that proposals to change the law could be put forward following Brexit.




The key regulatory development in the UK has been the referendum on EU membership, which resulted in the UK electorate voting to leave the EU. The way in which the UK continues to apply the public procurement rules will likely depend on the way in which the UK wishes to continue engaging with the EU’s single market. The impact of Brexit is considered in the general chapter “The Implications of Brexit for Public Procurement”.



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Euan Burrows

Ashurst LLP

Broadwalk House

5 Appold Street

London, EC2A 2HA

United Kingdom


Edward McNeill

Ashurst LLP

Broadwalk House

5 Appold Street

London, EC2A 2HA

United Kingdom


Ashurst is a leading global law firm with a rich history spanning almost 200 years. Our in-depth understanding of our clients and commitment to

providing exceptional standards of service have seen us become a trusted adviser to local and global corporates, financial institutions and

governments on all areas of commercial law.

We currently have 25 offices in 15 countries and a number of referral relationships that enable us to offer the reach and insight of a global network,

combined with the knowledge and understanding of local markets. With over 1,600 partners and lawyers working across 10 different time zones, we

are able to respond to our clients wherever and whenever they need us.

Euan Burrows is Head of Ashurst’s EU & Competition Law

Department. He specialises in all aspects of EU and UK competition

law, has full rights of audience and undertakes a wide range of

contentious and non-contentious work. He has considerable

experience in dealing with the European Commission and national

competition authorities.

Euan's recent experience in public procurement includes advising on

major central government infrastructure projects, rail franchise bids

and defence procurements.

Edward is a Senior Associate in Ashurst’s EU & Competition Law

Department in London and specialises in all aspects of EU and UK

competition law, including public procurement law. He has experience

dealing with the EU Commission, the European Courts UK regulators

and antitrust authorities in other jurisdictions in relation to merger

control, State aid, cartels, behavioural issues and public procurement

law.

Edward has been involved in a large proportion of the firm's recent

public procurement matters, including rail projects, development

projects, waste-related procurements, telecommunications projects

and defence-related procurements.



55

Chapter 8


Borenius Attorneys Ltd

Ilkka Aalto-Setälä

Henrik Koivuniemi

Finland




Finnish legislation on public procurement is codified in the Act on Public Procurement and Concession Contracts (1397/2016, “Act on Public Contracts”), the Act on Procurement and Concession Contracts of Entities Operating in the Water and Energy Supply, Transport and Postal Services Sector (1398/2016, “Act on Public Contracts in Special Sectors”) and the Public Defence and Security Procurements Act (1531/2011, “Defence and Security Procurements Act”).

The Act on Public Contracts covers the general legal framework for procurement threshold values, award procedures and award of contracts by public purchasers, as well as applicable legal remedies. The Act on Public Contracts in Special Sectors essentially covers similar ground, with the exception of being limited to procurement entities operating in the water, energy, transport and postal service sectors. The Defence and Security Procurements Act applies exclusively to defence and security procurements.




of the legislation?

The basic underlying principles of the Finnish public procurement regime are (i) equitable and non-discriminatory treatment, (ii) transparency, and (iii) proportionality. These principles are of great relevance to the interpretation of the procurement legislation.



The Act on Public Contracts in Special Sectors covers procurements by contracting authorities operating in the water, energy, transport and postal service sectors.

The Defence and Security Procurements Act covers defence and security procurements.

The Act on Public Contracts contains sector-specific rules on social and health services and other specific service procurements.



public procurement?

Other areas of national law relevant to public procurement in Finland include: the Act on the Openness of Government Activities (621/1999, “The Openness Act”) and the Act on the Contractor’s Obligations and Liability when Work is Contracted Out (1233/2006, “The Contractor’s Liability Act”).

The Openness Act covers, inter alia, when tenders, offers and other documents related to public procurement are to enter the public domain, and the extent of parties’ right of access to information compiled in public procurement relating to business or professional secrets of other tenderers.

The Contractor’s Liability Act covers contractors’ obligation to ensure that enterprises concluding contracts with them on temporary agency work or subcontracted labour duly observe their statutory obligations as contracting parties and employers.



agreements?

As a Member State of the European Union, Finland is subject to the applicable EU legislation on public procurement. Finland has implemented the latest EU directives on public procurement, i.e. Directive 2014/24/EU on public procurement, Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors, and Directive 2014/23/EU on the award of concession contracts.

Under the public procurement legislation, tenderers and tenders from other State Parties in procurements falling within the scope of the World Trade Organisation Agreement on Government Procurement must be governed by the same terms and conditions as tenderers and tenders from Finland and other European Union Member States.

However, under the Act on Public Contracts in Special Sectors, contracting authorities may reject tenders for the supply of goods wherein the value of products originating in third countries accounts for more than 50% of the total value of products included in the tender. The above does not apply to tenders containing products from third countries with which the European Union has concluded a multilateral or bilateral agreement in order to ensure that European companies are guaranteed equal and effective access to the markets of those third countries.


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Contracts



The public entities covered by the Act on Public Contracts are:

1) authorities of central and local government and joint municipal authorities;

2) the Evangelical-Lutheran and Orthodox churches of Finland and their parishes and other authorities;

3) State commercial institutions;

4) institutions of public law character; and

5) any party conducting a procurement when it has secured the support in doing so of a contracting authority referred to in points 1–4 amounting to more than half of the value of the procurement.

Public entities covered by the Act on Public Contracts in Special Sectors are authorities of central and local government and joint municipal authorities, State commercial institutions, institutions of public law character, as well as associations formed by the aforementioned entities, which operate in the water, energy, transport and postal service sectors. In addition, the contracting authorities referred to in the Act include public undertakings operating in the aforementioned sectors, as well as entities operating in these sectors under a special or exclusive right granted via public authority.


Types of contracts covered by the procurement legislation include: supply contracts; service contracts; public works contracts; concession contracts; and framework agreements.



The national threshold values (excluding VAT) included in the Act on Public Contracts are:

1) EUR 60,000 in procurements of goods, services and design contests;

2) EUR 150,000 in public works contracts;

3) EUR 400,000 in certain social and health care services procurements referred to in points 1–4 of Schedule E of the Act;

4) EUR 300,000 in the other specific services procurements referred to in points 5–15 of Schedule E of the Act; and

5) EUR 500,000 in concession contracts.

The EU threshold values (excluding VAT) included in the Act on Public Contracts are:

1) EUR 144,000 in public supply, service and design contest contracts awarded by central government authorities;

2) EUR 221,000 in public supply, service and design contest contracts of contracting entities other than those referred to in point 1; and

3) EUR 5,548,000 in public works contracts.

With regard to the EU thresholds, the European Commission revises the threshold values at two-yearly intervals. The EU threshold values presented above are those in force during 2018–2019.

The threshold values (excluding VAT) included in the Act on Public Contracts in Special Sectors are:

1) EUR 443,000 in procurements of goods, services and design contests;

2) EUR 1,000,000 in certain social and health care services and other specific services procurements referred to in Schedule C of the Act;

3) EUR 5,548,000 in public works contracts; and

4) EUR 5,548,000 in concession contracts.

The European Commission revises these threshold values at two-yearly intervals. The threshold values presented above are those in force during 2018–2019.

The national threshold values (excluding VAT) included in the Defence and Security Procurements Act are:

1) EUR 100,000 in procurements of goods and services; and

2) EUR 500,000 in public works contracts.

The EU threshold values (excluding VAT) included in the Defence and Security Procurements Act are:

1) EUR 443,000 in procurements of goods and services; and

2) EUR 5,548,000 in public works contracts.


The calculation of the estimated procurement value, including the aggregation of the values of separate lots, is covered by the procurement acts. In general, if a procurement is implemented at the same time in the form of separate lots, then the estimated value of all of the lots must be taken into account when calculating the total value of the procurement agreement.

In addition, the acts contain an explicit prohibition of artificial division or combination of procurements, according to which a procurement may not be broken into lots, nor may its value be reduced by exceptional means in order to evade the application of the procurement acts.



The procurement acts contain special provisions governing concession contracts. Concession contracts covered by the acts are defined as:

a) works concessions, which denote a written agreement concluded for financial consideration, whereby one or more contracting entities assign the provision and administration of services not pertaining to a public works contract and the associated operational risk to one or more suppliers, and in which the consideration for the assignment consists either solely in the right to exploit the service or in that right together with payment; and

b) service concessions, which denote a written agreement concluded for financial consideration, whereby one or more contracting entities assigns the provision and administration of services not pertaining to a public works contract and the associated operational risk to one or more suppliers, and in which the consideration for the assignment consists either solely in the right to exploit the service or in that right together with payment.



According to the procurement acts, the contracting authority must

Borenius Attorneys Ltd Finland


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select suppliers for a framework agreement in accordance with the procurement procedures established in the said acts. The contracting authority may select one or more suppliers for the framework agreement and the number of suppliers must be announced in advance in the contract notice, the invitation to negotiate or the call for tenders. A framework agreement may remain in force for no longer than four years, although the agreement may be of longer duration under exceptional circumstances where the procurement justifiably so requires. Integral modifications must not be made to the terms and conditions of a framework agreement while it remains in force.

If the contracting authority has concluded a framework agreement with several suppliers and all of the terms and conditions of the framework agreement and the impartial terms and conditions determining the choice of suppliers for procurements based on the said agreement have been established in the call for tenders, then procurements based on the framework agreement can be made without competitive tendering by selecting a supplier in accordance with the terms and conditions of the framework agreement and with the criteria set out in the call for tenders. However, if not all of the terms and conditions of the framework agreement have been established, then procurements based on the framework agreement shall be made by competitive tendering between the suppliers selected for the framework agreement in accordance with the criteria for determining the most economically advantageous tender that were set out when establishing the framework agreement, which criteria may be specified, and with other terms and conditions that were indicated in the call for tenders for the framework agreement.


into lots?

According to the procurement acts, contracting authorities may conclude a procurement agreement in the form of separate lots and may determine the size and subject-matter of such lots. If a contracting authority does not divide a procurement agreement into lots, it must specify the reasons for not doing so. Contracting authorities must indicate in the contract notice whether tenders may be submitted for one, for several, or for all of the lots. If tenders may be submitted for several or for all of the lots, then the contracting authority may limit the number of lots for which a tender from the same tenderer may be selected. In such cases, the contracting authority must indicate in the contract notice the maximum number of lots for which a tender from the same tenderer may be selected. The contracting authority must indicate in the contract notice or call for tenders, the rules that it will apply when deciding the lot for which a tenderer’s tender will be selected if the tenderer’s tender is selected for more lots than the maximum number indicated in the contract notice. The contracting authority may also combine multiple lots or all of the lots in the same procurement agreement.



Tenderers and tenders from other States Parties in procurements falling within the scope of the World Trade Organisation Agreement on Government Procurement must be governed by the same terms and conditions as tenderers and tenders from Finland and other European Union Member States.

However, under the Act on Public Contracts in Special Sectors, contracting entities may reject tenders for the supply of goods

wherein the value of products originating in third countries accounts for more than 50% of the total value of products included in the tender. The above does not apply to tenders containing products from third countries with which the European Union has concluded a multilateral or bilateral agreement in order to ensure that European companies are guaranteed equal and effective access to the markets of those third countries.

3 Award Procedures




The Act on Public Contracts contains separate award procedures for procurements exceeding national and EU threshold values, respectively. In general, the rules are much more pedantic with respect to EU award procedures than national award procedures. The Act on Public Contracts in Special Sectors contains essentially the same procedures, yet with less stringent regulation both in terms of their content as well as the choice among particular procedures.

With regard to national award procedures, the content and stages of the procedures are not specifically regulated, apart from a general obligation to comply with a procedure that is consistent with the basic underlying legal principles of equitable and non-discriminatory treatment, transparency and proportionality. Moreover, the contracting authority must outline the procurement procedure it applies in the contract notice or in the call for tenders.

With regard to EU award procedures, the procedures available to the contracting authority include:

1) open procedure;

2) restricted procedure;

3) negotiated procedure;

4) competitive negotiated procedure;

5) innovation partnership; and

6) direct procurement.

In an open procedure, the contracting authority publishes a contract notice and places a call for tenders for the receivable, on which basis all prospective suppliers may submit their tenders. After the contract notice has been published and the call for tenders has been placed, the contracting authority may send the call for tenders to the suppliers that it considers suitable.

In a restricted procedure, the contracting authority publishes a notice of a contract in which all prospective suppliers may request to participate. Only the candidates selected by the contracting authority may submit a tender. No fewer than five candidates must be invited to join a restricted procedure unless there are fewer suitable candidates.

In a negotiated procedure, the contracting authority publishes a notice of a contract in which all prospective suppliers may request permission to participate. The contracting authority will negotiate the terms and conditions of the procurement agreement with the suppliers that it selects. No fewer than three candidates must be invited to join a negotiated procedure unless there are fewer suitable candidates. Furthermore, the utilisation of the negotiated procedure by a contracting authority requires that certain criteria are met.

During the course of the negotiated procedure, the contracting authority must request preliminary tenders from the candidates selected for negotiation, which shall serve as the basis for negotiating. Negotiations may occur in stages, so that the number of tenders included in the negotiations is limited during the



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negotiations. The contracting authority must send the final call for tenders to the tenderers and set a deadline for submitting final tenders.

In a competitive negotiated procedure, the contracting authority publishes a notice of a contract in which all prospective suppliers may request permission to participate. The contracting authority negotiates with the candidates admitted to the procedure in order to review and determine the best way of satisfying its requirements. No fewer than three candidates must be invited to join a competitive negotiated procedure unless there are fewer suitable candidates. Furthermore, the utilisation of the negotiated procedure by a contracting authority requires that certain criteria are met.

During the course of the competitive negotiated procedure, a contracting authority must specify its needs and requirements for a procurement in the contract notice. The contracting authority must commence negotiations with the selected candidates with a view to reviewing and determining the best way of satisfying its requirements. Negotiations may occur in stages, so that the number of solutions included in the negotiations is limited during the negotiations. The contracting authority must continue the negotiations until it has selected the solutions that are capable of satisfying the needs that it has specified. The contracting authority must ask the tenderers for their final tenders based on the solutions presented and specified in the negotiations.

In an innovation partnership, the contracting authority publishes a notice of a contract in which all prospective suppliers may request permission to participate. A contracting authority may select an innovation partnership if the needs of the contracting authority cannot be satisfied by procuring goods, services or public works contracts that are already on the market. No fewer than three candidates must be invited to join an innovation partnership unless there are fewer suitable candidates.

During the course of the innovation partnership, the contracting authority must negotiate with the selected tenderers with a view to developing the innovative product, service or public works contract and procuring the resulting goods, services or public works contracts. An innovation partnership shall be divided into consecutive stages corresponding to the various stages of the research and innovation process. The contracting authority shall set intermediate targets to be attained by the partner or partners, and shall provide for payment of compensation.

In a direct procurement, the contracting authority negotiates the terms and conditions of a procurement agreement with its selected suppliers without prior publication of a contract notice. A contracting authority may opt for direct procurement if certain stringent criteria are met, e.g. that no suitable tenders have been received in an open or restricted procedure, or that only a certain supplier can implement the procurement for technical reasons.


With regard to national award procedures, no explicit minimum timescales have been stipulated. With regard to EU award procedures, the following minimum timescales have been stipulated in the Act on Public Contracts:

■ In a restricted procedure, a negotiated procedure, a competitive negotiated procedure, or an innovation partnership, at least 30 days must be allowed for submitting a request to participate.

■ The tendering period in an open procedure must not be less than 35 days. The tendering period must not be less than 30 days in a restricted procedure.

■ The time limit for preliminary tenders in a negotiated procedure and in an innovation partnership must not be less than 30 days.


tenderers?

The procurement acts contain both mandatory and discretionary exclusion criteria.

According to the mandatory exclusion criteria, the contracting authority must exclude a candidate or tenderer if the contracting authority is aware that the candidate or tenderer, a member of its administration or management, or a person exercising representative, managerial or regulatory authority therein, has a criminal record indicating a legally final conviction for certain criminal and labour offences or failure to pay taxes or social security contributions. However, a candidate or tenderer cannot be excluded from competitive tendering if more than five years have elapsed since the issuing of a legally final judgment concerning the offence.

According to the discretionary exclusion criteria, the contracting authority may decide to exclude a candidate or tenderer which is, inter alia: bankrupt; guilty of gross professional misconduct; guilty of concluding agreements with other suppliers seeking to distort competition; if the candidate’s or tenderer’s participation in the preparation of the procurement procedure has distorted competition; or if the candidate’s or tenderer’s performances in previous procurement agreements have involved significant or repeated shortcomings.

However, a candidate or tenderer may not be excluded if more than three years have elapsed since the event referred to above.

In addition, the acts provide that certain corrective measures of a candidate or tenderer must be given due consideration in the contracting authority’s assessment for exclusion (self-cleaning). In particular, a candidate or tenderer may submit evidence of its reliability notwithstanding its encumbrance by a ground for exclusion referred to above.




Above all, the principle of equal and non-discriminatory treatment must be observed in the tender evaluation process. The most economically advantageous tender must be selected. The most economically advantageous tender is a tender with the lowest price, most affordable cost, or with the best price-quality ratio for the contracting authority. In addition, the contracting authority may impose price-quality ratio comparison criteria related to qualitative, societal, environmental or social considerations, or innovative characteristics.


low tenders?

The contracting authority must require the tenderer to provide an account of the prices or costs of any tender that seem to be abnormally low. The request and explanation may relate in particular to the manufacturing method, the economic and technical solutions for performing a service or for a construction method, exceptionally low-cost terms and conditions of procurement, the originality of public works contracts, goods or services, compliance with environmental, social and labour law obligations, subcontracting, and State aid received by the tenderer.



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The contract must be awarded on the basis of the most economically advantageous tender. A contracting authority must make a written decision on resolutions affecting the status of candidates and tenderers, including procurement procedure resolutions, which must be substantiated. The decision or its associated documents must state the facts that integrally affected the resolution, which shall at least include the grounds for rejecting a candidate, tenderer or tender, and the principal criteria on which the comparison of approved tenders was made. The contracting authority must conclude a procurement agreement after making the procurement decision. The procurement agreement must be concluded by making a separate written agreement.


bidders?

The decision made by the contracting authority with its justifications, and the instructions for appeal and rectification, must be served in writing to the parties concerned.


A contracting authority may procure goods and services from a central purchasing body or make procurements of goods, services and public works contracts using a procurement agreement concluded by a central purchasing body. In addition, contracting authorities may agree to implement an individual procurement jointly.


In general, the contracting authority may accept alternative/variant bids only if the possibility to submit alternative/variant bids has been explicitly stated in the contract notice.


Pursuant to the discretionary exclusion criteria, the contracting authority may decide to exclude a candidate or tenderer whose conflict of interest in the procurement procedure cannot be effectively eliminated by other measures.




Before launching a procurement procedure, contracting authorities may conduct market consultations to prepare the procurement, and inform suppliers of the plans and requirements for the forthcoming procurement. Contracting authorities may also utilise independent specialists, other public authorities or suppliers in a market consultation. However, the use of advice from these parties must not result in a distortion of competition, nor conduct contrary to the principles of non-discrimination and transparency. If a candidate, a tenderer or an enterprise related to a tenderer has participated in preparing a procurement, then the contracting authority must ensure that this does not distort competition.




The procurement acts contain general exemptions as well as particular exemptions applicable to procurement of services and concession contracts. In practice, the principal exemptions are procurements from in-house entities and other contracting authorities.

There are some exemptions to the rule stating that procurements must be called for tender, one of which is related to the production and sale of electricity. In accordance with the Act on Public Contracts in Special Sectors, if a contracting authority considers that a given activity is directly exposed to competition on markets to which access is not restricted, it may submit a request to the Commission. In the request it must be established that the Directive on Public Contracts in Special Sectors (2014/25/EU) does not apply to the award of contracts for the pursuit of that activity, where appropriate together with the position adopted by an independent national authority that is competent in relation to the activity concerned. Such requests may concern activities which are part of a larger sector or which are exercised only in certain parts of the Member State concerned. In the request, the Member State or contracting authority concerned shall inform the Commission of all relevant facts, and in particular of any law, regulation, administrative provision or agreement concerning compliance with the conditions set out in Article 34(1) in the Directive.

Even before the Act on Public Contracts in Special Sectors was enacted, Finland had been given a Commission Decision regarding the production and sale of electricity where a special permit to not calling for tenders was granted. This decision was given on 19 June 2006, while the Act on Public Contracts on Special Sectors took effect on 1 January 2017. In accordance with the decision, given the overall picture of the electricity sector in Finland, in particular the extent to which networks have been unbundled from generation/supply and the effective regulation of network access, the condition of direct exposure to competition laid down in Article 30(1) of Directive 2004/17/EC (currently 2014/25/EU) should be considered to be met in respect of production and sale of electricity in Finland. The further condition of free access to the activity must be deemed to be met. Consequently, Directive 2004/17/EC (currently 2014/25/EU) should not apply when contracting entities award contracts intended to enable electricity generation or the sale of electricity to be carried out in these geographical areas.




Procurements made by a contracting authority from its in-house entity are exempted. The term in-house entity denotes an entity that is formally separate and independent for policymaking purposes from the contracting authority. A further condition is that the contracting authority, either alone or together with other contracting authorities, exercises a controlling interest in the in-house entity in the same way as in its own establishments, and that the in-house entity performs no more than 5% and a share of no more than EUR 500,000 of its business operations with parties other than the contracting authorities that exercise a controlling interest over it. An in-house entity may not have capital other than the capital of contracting authorities.



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In addition, procurements between contracting authorities are exempted, whereby the contracting authorities collaborate to implement public services in the public interest for which they are responsible in order to achieve common objectives. A further condition is that no more than 5% and a share not exceeding EUR 500,000 of the services falling within the scope of the collaboration are provided for third parties.

5 Remedies



The procurement acts provide extensive legal remedies, including demand for rectification addressed to the contracting authority, appeal procedure in the Finnish Market Court, and claims for damages.



In addition to administrative proceedings at the Market Court, the Finnish Competition and Consumer Authority (FCCA) supervises compliance with the procurement acts. Anyone who considers that a contracting authority has contravened the procurement legislation may submit a request to the FCCA for measures to investigate the legality of the procedure. Damages claims can be sought via civil proceedings.


sought?

The Market Court serves as the court of first instance in public procurement disputes. The decisions of the Market Court can be appealed to the Supreme Administrative Court. Damages claims are handled by the District Courts, the decisions of which can be appealed to the Court of Appeal and ultimately the Supreme Court.


remedies?

As a general rule, an appeal must be submitted in writing within 14 days of the date on which the candidate or tenderer received notice of the procurement decision together with instructions for appeal. However, in specific circumstances certain exceptions apply, which may extend the application period to up to 30 days or even six months.


periods?

The limitation periods mentioned above are mandatory.


After contract signature, the Market Court may:

1) order the contracting authority to pay a compensatory fine to a concerned party that would have had genuine prospects of winning the competitive tendering under a correct procedure;

2) order the contracting authority to pay an inefficiency sanction;

3) order the contracting authority to pay a penalty fine to the State; and

4) shorten the agreement period of the procurement agreement or concession contract to expire within the period stipulated by the court.


remedies is made?

Following the submission of an application for remedies, the Market Court procedure takes six months on average.



Overall, in cases where the contracting authority’s conduct has, in one form or another, been in breach of the basic principle of equal and non-discriminatory treatment of candidates or tenderers, remedies have been successfully obtained.



In general, the procurement acts do not provide any explicit mitigation measures available to contracting authorities. However, when imposing certain sanctions, the Market Court takes into consideration overriding public interest grounds, as well as the nature of the error or default of the contracting authority and the value of the procurement that is the subject matter of the appeal.


Procedure







The national procurement legislation does not specifically govern these issues. However, the general underlying principles of the EU directives and case law are applicable.



In principle, there is very limited scope for further negotiation with the preferred bidder following the submission of a final tender, especially if this would result in manifest alterations of the original tender to the detriment of the equal and non-discriminatory treatment of the other candidates. In the negotiated procedures, however, there is more scope for negotiations to the extent that the above principles are observed.

The contracting authority may, however, allow tenderers to correct a manifest written error or erroneous calculation or some other manifest error in their final tenders.

Moreover, the contracting authority may also request that a final tender is clarified or supplemented, provided this does not lead to discrimination of the other candidates.



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signature?

In general, procurement agreement concluded in procurements that exceed the EU threshold value, or in certain service procurements or concession contracts that exceed the national threshold value, may not be amended in any integral respect during the agreement period without a new procurement procedure.

Nevertheless, a procurement agreement may be amended without a new procurement procedure if:

1) it is based on contractual terms that were known during the procurement procedure and the said terms and conditions are clear, precise and unambiguous and do not modify the general character of the procurement agreement or framework agreement;

2) it is necessary for the original contractual partner to perform additional work and a change of contractual partner is not possible for financial or technical reasons;

3) the need for amendment is due to circumstances that a diligent contracting authority could not have foreseen;

4) the original contractual partner is replaced with a new contractual partner due to corporate restructuring; or

5) the case concerns a minor contractual amendment (i.e. 10–15% of the value of the original procurement).



signature?

The legislation permits the transfer of a contract to another entity post-contract signature if the original contractual partner is replaced with a new contractual partner under an unambiguous condition for amending the agreement, or the status of the original contractual partner is wholly or partly assigned to another operator that satisfies the originally established qualitative selection criteria due to corporate restructuring, takeovers, mergers, changes of controlling interest or insolvency, provided that this does not entail other substantial amendments to the agreement and does not seek to circumvent the application of the procurement legislation.




them?

There are no special rules that apply in relation to privatisations.



There are no special rules that apply in relation to PPPs.

8 The Future



impact?

Currently, there are no proposals to amend the procurement acts.




The Finnish government is currently contemplating a reform of its public health and social services. The planned reform aims to, inter alia, increase customer choice regarding health care providers. According to the latest timescale, the reform is due January 2021.

If implemented, the reform would entail greater customer choice via, e.g., service voucher systems, with the likely impact of de facto reducing the scope of the procurement legislation in the health and social services sector. This ensues from the fact that, pursuant to the EU procurement directives, situations such as customer choice and service voucher systems where all operators fulfilling certain conditions are entitled to perform a given service, without any selectivity by contracting authorities, are not understood as procurement but authorisation schemes, and thus fall outside the procurement legislation.



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Ilkka Aalto-Setälä


Eteläesplanadi 2

00130 Helsinki

Finland

Tel: +358 20 713 3545 Email: [email protected] URL: www.borenius.com

Henrik Koivuniemi


Eteläesplanadi 2

00130 Helsinki

Finland

Tel: +358 20 713 3269 Email: [email protected] URL: www.borenius.com

Established in 1911, Borenius Attorneys Ltd is one of the largest and most experienced law firms in Finland. Borenius provides services in all areas

of law for corporate clients. Borenius’ commitment to clients’ success is firmly grounded in strong expertise, long-term commitment, genuine

involvement, experience and innovation. Borenius’ main office in the centre of Helsinki is ideally located to serve the entire Finnish business

community. Clients who are located outside of the Helsinki metropolitan area are also served from our Tampere office. Borenius consists of over

200 employees in three jurisdictions. Borenius provides easy access to full-scale business law solutions in Finland, Russia and in the USA.

Ilkka has worked on antitrust and merger control matters for over 20

years. Ilkka successfully defended a client against the Finnish

Competition Authority’s first attempt (Digita/Yle/Telia) to prohibit a deal.

Ilkka advises companies and governmental agencies on competition,

marketing law and regulatory issues at the national and EU level,

including merger control, abuse of dominant position, cartels, state

aid, gaming and public procurement. Ilkka also litigates on a regular

basis before the Finnish Market Court and the European Commission.

Ilkka has advised numerous domestic and foreign clients on M&A

transactions and cooperation arrangements. Important authority

bodies, such as the National Emergency Supply Agency, have also

been among his clients.

Ilkka is the chairman of the Competition Law Expert Group of the

Finnish Bar Association. He is currently also a member of the working

group investigating changes to the current Competition Act which

came into force in November 2011. The Ministry of Employment and

Economy appointed the working group on 28 August 2015.

Henrik advises clients on questions related to competition law and

public procurement.

Henrik joined Borenius in 2017, and before that he worked as a

Research Officer at the Finnish Competition and Consumer Authority.

Before graduating, Henrik also worked as an associate trainee at

Hannes Snellman and as a legal trainee at the Finnish Competition

and Consumer Authority.



63

Chapter 9


BIGNON LEBRAY AVOCATS

Kévin Holterbach

Jean-Baptiste Dubrulle

France




The main Public Procurement rules can be found in:

■ the Ordinance n° 2015-899 of 23 July 2015, which is the global framework of French public procurement (hereafter “the Ordinance”); and

■ the implementation Decree n° 2016-360 of 25 March 2016, which contains the detailed, comprehensive rules set by the Ordinance (hereafter “the Decree”).

A recent Decree n° 2017-516 of 10 April 2017 has modified the Decree of 25 March 2016 on various and heterogeneous subjects.




of the legislation?

The three guiding principles of French public procurement are:

■ transparency: the public buyers shall report in advance the crucial facts to win the bid;

■ equal treatment: the public buyers shall give the same information to each bidding firm; and

■ open access to the public procurement: public announcement and competition are mandatory in order to inform the potential bidders, allowing them to compete.

The efficiency and good use of public funds is also significant: whenever there is an issue about the meaning and/or the legal interpretation of a public procurement rule, those principles must be remembered and raised.



There are special rules, additional to those mentioned above, applicable to:

■ public network operators (water, energy, telecomm-unications, petroleum, gas, charcoal and solid fuels, transport and postal services);

■ national defence and security contracts; and

■ research and development contracts.



public procurement?

Public procurement is at the crossroad of many national laws, as public buyers have variegated and eclectic needs. The laws commonly applied in public procurement are:

■ labour laws: the public buyers need to be sure that the bidding firms are not employing illegal or undeclared workers and are up-to-date with their social contributions;

■ environmental and social law, as Law n° 2015-992 of 17 August 2017 has declared that public procurement is one of the main and best tools to reach a sustainable development;

■ criminal law and government transparency rules, as awarding a public contract by knowingly violating public procurement rules can be a criminal offence; and

■ Law n° 85-704 of 12 July 1985 is frequently applied in the public procurement area, as it deals with the relations between the public contracting authorities and the technical programme manager and the architects.

And, of course, Government transparency rules, codified in the National Code of relations between the public and the administrations, created by Ordinance n° 2015-1341 of 23 October 2015 and Decree n° 2015-1342 of the same day, which is very useful for anyone who would want access to the documents describing and explaining the awarding procedure of a particular contract.



agreements?

The French regime (the Ordinance and the Decree) are a transposition of the European rules. Accordingly, these texts directly refer to the European Union Directives on public procurement, as well as the GPA and the international agreements to which the EU is a contracting party.


Contracts



The public contracting authorities, covered by public procurement law, are:


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ce


1. the legal persons governed by public law: this affects the state authority, the state public body, the local public body and some public entities, governed by public law by the effect of the law; and

2. the public undertakings, operating as network operator (cf. question 1.5).


1. Private entities that fulfil the requirements below are covered by the law:

a) they are specifically created in order to satisfy the general interest;

b) they have no commercial and/or industrial nature; and

c) alternatively, they are mainly financed and/or administered by a contracting authority, and/or mainly managed by people designated by a contracting authority.

2. The legal persons, governed by private law, created by several contracting authorities, in order to take part together in a joint programme of activities.



The main thresholds between appropriate and formalised procedures are set in an official notice of 31 December 2017, as follows:

■ For supply or service contracts:

There is a threshold of €144,000 net of VAT, applicable to the State authority and its public administrative institutions.

For local authorities and their public administrative institutions, the threshold is set at €221,000 net of VAT.

For public network operators, and national defence and security contracts, the threshold is set at €443,000 net of VAT.

■ For works contracts:

There is only one threshold, applicable to both state and local authorities, set at €5,548,000 net of VAT.

Article 22 of the Decree of 25 March 2016 transposes faithfully article 5 of the Directive of 26 February 2014, when stating that “contracting authorities may award contracts for individual lots without applying the procedures provided for under this Directive, provided that the estimated value net of VAT of the lot concerned is less than EUR 80 000 for supplies or services or EUR 1 million for works”. Those thresholds are exactly the same in France.


The Ordinance and the Decree provide the methods that must be used in order to calculate the estimated value of the contract and, thus, identify the appropriate procedure. It is strictly forbidden to use any other methods (such as a contrived subdivision of the procurement) that would lead to an underestimation of the value of the contract, in order to avoid the application of the Ordinance and Decree, or to use a less stringent procedure than required by said Ordinance and Decree.

On the other hand, it is also forbidden to aggregate the procurement in order to award it as a whole to just one tender. In brief, public procurement must be subdivided into lots, in order to allow the small and medium companies to win some of these lots, but the economic value of the whole procurement contract must be calculated on the basis of the value of all the lots in order to

determine the appropriate procedure, and, especially, the correct advertising of the call for competition.



Concession contracts are, as previously mentioned, ruled by Ordinance n° 2016-65 of 29 January 2016 and Decree n° 2016-86 of 1 February 2016. The Ordinance and the Decree, ruling public procurement, are not applicable to the concession (although these two contracts have common ground, such as the aforementioned principles of open access, equality of treatment and transparency).

These contracts can be defined as follows: the objects are the same as public procurement contracts, i.e. the execution of a work, or the provision of services; the main difference between public procurement and concession contracts is that the consideration is not a price, or something akin, paid by the contracting authorities, but the right to exploit the work or the service, granted to the contracting party.



The Decree of 25 March 2016 (articles 78 to 80) provides special rules for this type of contract. A framework agreement is used when the buyer does not exactly know if he will have a need in the future, or when this need will occur. This type of contract is most commonly used in France to buy supplies in important quantities.

Two different types of situation can occur:

■ The framework agreement can either provide all the stipulations of the future procurement contract, and, in this case, it can be executed as soon as the buyer signs the order form.

■ If the framework agreement does not contain all the required stipulations, it can only be the basis of a future tender between the preselected operators. Once the economic operators are selected, the contracting authority must define the precise stipulations of the procurement contract and then launch the awarding procedure, which will only affect the aforementioned preselected economic operators.

A framework agreement can only last four years, but can be extended, providing the performance of the contract made necessary a massive investment for the contracting party that would justify a longer term.


into lots?

The Ordinance and the Decree, in accordance with the preparatory work, and with the introductory recitals of Directive 2014/24/EU of 26 February 2014, insist that it is important for VSE (Very Small Enterprises)/SME (Small and Medium Enterprises) to have access to public procurement. It is therefore necessary to divide public contracts into the same number of lots as there are objectively distinct services to allow for the execution of the contract.

It is possible to make a global contract (thus without a lot) only under certain strict conditions, due mainly to the impossibility of identifying separate services, or to the fact that the determination of lots would make the performance of the contract substantially more expensive or technically impossible.

BIGNON LEBRAY AVOCATS France


Fran

ce


NB: The legislator (Sapin II law of 8 November 2016) reverted to the idea of allowing tenders to submit variable offers, depending on the number of lots that they would be allocated.



There are none per se. However, the contracting authorities must guarantee open access to the public procurement procedures. Hence, the foreign tenders cannot be set aside: they must have open access to the procedures in the same conditions as the national tenders do. Moreover, as mentioned above, the Ordinance and the Decree directly refer to the European Union Directives on public procurement, as well as the GPA and the international agreements to which the EU is a contracting party, thus ensuring open access to public procurement for foreign tenders, and equality of treatment.

3 Award Procedures




Schematically, there are two main categories of procedures: formalised procedures; and appropriate procedures.

When the value of the contract is below €25,000, no procedure is required (which always poses a problem regarding European case law – cf. ECJ, 7 December, 2000, TelAustria, C-321/98 – which enforces the principles of public procurement from the first € spent).

Where the value of the contract is between €25,000 and the aforementioned thresholds, the contracting authorities can use (though it is not an obligation, they can also award the market according to a formalised procedure if they so wish) an appropriate procedure, in which they freely determine the appropriate amount of publicity, and the terms and conditions of the procedure, in accordance with the principles of equality of treatment, open access to the procedures and transparency.

When the value of the contract exceeds the aforementioned thresholds, they must use one of the formalised procedures described by the Decree, among the following:

■ A call for tender (“appel d’offre”).

This procedure can be open (the tenders submit the candidature file and the sell offer all at once) or restricted (in which only the selected candidature files can submit a sell offer) – the choice between open or restricted is free.

■ A competitive procedure with negotiation.

■ A competitive dialogue.

Both these procedures can be used when the technical solution to the needs of the contracting authorities is not already available, when the contracting authority needs an innovative solution or, generally speaking, when the solution is technically, legally or financially complex.

The competitive procedure with negotiation will be preferred when the technical solution is identified, or identifiable, but the conditions of the public contract remain to be determined, in negotiation with the economic operators. The competitive dialogue will be preferred when the buyer is not able to identify the technical solution likely to meet his needs.

In addition, there are exceptions to the determination of the procedure with regard to the amount of the contract: certain service

contracts may always be concluded according to an appropriate procedure, regardless of their amount.

On the other hand, some contracts, whatever their amount, may be awarded without advertising and tendering procedures for they fulfil extremely strict criteria, as defined by the Decree.


■ In the case of open tender: the minimum deadline for receipt of applications and offers is 35 days from the publication of the contract notice. This period may be reduced to 30 days if applications and tenders can be submitted electronically, and may even be reduced to 15 days when a prior information notice has been published, under certain conditions.

■ In the case of restricted tender: 30 days minimum for receipt of applications (15 days in case of emergency) and 30 days minimum for receipt of tenders (which can be reduced to 25 days if the offer can be transmitted electronically, or even reduced to 10 days when a prior information notice has been published and fulfils strict conditions).

■ In the case of competitive procedure with negotiation: the deadlines are the same as in the case of the restricted tender.

■ In the case of competitive dialogue: 30 days to submit the application. The Decree does not provide for the possibility of reducing this deadline, and does not provide for a minimum period for submitting the offer, or for a minimum or maximum duration of the dialogue. Candidates submit their offers within the time set by the buyer, whenever the latter believes that the dialogue has come to an end.


tenderers?

The Ordinance provides for assumptions in which the candidate is prohibited from bidding (in which case, he must be excluded from the procedure): this is particularly the case if he has been the subject of a conviction for money laundering, criminal association, non-compliance with tax and/or social obligations, or is going through a Court-ordered liquidation.

The Ordinance also provides, and this is new, for cases of optional prohibition: the purchaser can decide to erect them as exclusion criteria, but is not obliged. This will concern, in particular, operators ordered to pay damages for breach of their obligations in the performance of previous contracts, operators against whom there is a serious suspicion of distortion of competition, or conflict of interest.

In the case of short-listing, purchasers may only impose on tenderers conditions of participation appropriately destined to ensure that the latter have the ability to carry on the said activity, the economic and financial capacity to perform the contract, and the technical and professional capacities necessary for the fulfilment of the contract. The purchaser must set its requirements in proportion to the size of the contract.




Tenders are evaluated according to selection criteria, announced in the consultation documents, weighted, and possibly specified by sub-criteria, themselves weighted. These criteria, and their importance (mathematical weighting), can no longer be modified during the procedure.



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Traditionally, price was the determining factor (“lowest bidder” logic): the purchaser chose the cheapest offer.

From now on, this logic tends to be replaced by the “best bidder” logic, i.e. towards the choice of the service having the best quality/price ratio.

Therefore, the price criterion may only be the sole criterion of choice if the quality of the service is standardised and not likely to vary, or at the margin, between the operators.

Otherwise, the financial criterion that can be set as a single criterion is the criterion of cost, determined according to a global approach (cost of manufacture + cost of use + cost of maintenance/assistance + end-of-life cost).

Most of the time, tenders are also judged on the basis of criteria relating to quality (with particular emphasis on sustainable development aspects, such as environmental protection, social inclusion and biodiversity), deadlines, and quality of the team dedicated to the performance of the contract.

In general, the criteria must be justified by the subject matter of the contract, or its conditions of fulfilment.


low tenders?

The Decree provides for the respect of a prior contradictory procedure before excluding any tender as being abnormally low: the purchaser must, when he believes to have detected an abnormally low bid, ask the tenderer about the financial structuring of his bid. If the bidder’s response is deemed satisfactory, the tender gets a grade. If the answer is insufficient, and/or unconvincing, in this case the purchaser must eliminate the tender, without giving any grade to it.

Qualifying a tender as abnormally low is a complex process, for the purchaser cannot simply rely on the fact that the tender is substantially lower than the offer of the other bidders, or on its preliminary cost evaluation: it is hence recommended to use a mathematical method known as the “double average”, consisting in:

■ making a first average of the amount of the tenders, excluding from this first calculation the highest tender and the lowest tender; and

■ then, after the purchaser has excluded all tenders that exceed the first average by 20%, making a second average of all the remaining tenders.

Tenders that are 15% lower than this second average can reasonably be regarded as abnormally low.


The overriding rule is to award the contract to the first ranked tender, by applying the selection criteria set out in the consultation documents and by order of importance.


bidders?

Tenderers must necessarily be informed:

■ whenever their tender is rejected;

■ of the reasons why their tender was rejected and/or reasons for choosing the winning bid;

■ of the name of the chosen tenderer (in certain circumstances); and

■ of the period during which the purchaser shall stand by, between the information of the rejected tenderers and signature of the contract, in order to allow the said tenderers to form an appeal (pre-contractual summary proceedings) (“référé précontractuel”) by virtue of which the rejected tenderer may request the cancellation of all or part of the tender procedure.

The absence or insufficiency of information poses a risk of recourse to invalidate the contract, for a long period of time, making admissible the contractual summary proceedings (“référé contractuel”) (provided that the contract is signed, and that the bidder has not previously initiated any pre-contractual summary proceedings) directed, this time, not against the procedure, but against the contract itself (which may lead to its outright cancellation).

Once notified of the rejection of their bid, bidders may request additional information (such as the overall price of the winning bid, and the grades obtained by their bid, on all criteria and sub-criteria), which must be provided within 15 days.


Several methods for joint procurements are possible:

■ Some result directly from the Ordinance.

■ The use of central purchasing: the purchase is externalised to the central purchasing body which must comply with the procedures and obligations of public procurement, and which will buy in “bulk”, for several purchasers with the same need.

■ Order grouping: when several public purchasers have the same need, they can regroup in order to enter into a contract and entrust one of them with the power to manage the procedure and execution of the contract with the operator likely to satisfy the need. Order grouping may even include private legal entities excluded from the scope of the Ordinance and the Decree.

■ The transnational joint entity, enabling purchasers from several countries to set up a structure dedicated to their purchases.

■ Cooperation between contracting authorities (new in France) allowing several contracting authorities to pool their purchases, which may, under certain conditions, be excluded from the scope of the Ordinance and the Decree.

■ Some do not result from the texts: it is, mainly, an institutionalised partnership, i.e. the possibility of coming together, not on a contractual basis, but through the constitution of a dedicated structure, which according to applicable texts, will be subject to private law (semi-public company, local public company, economic interest group) or public law (public interest grouping, for example).


The Decree lays down the following rules:

■ variants are, in principle, prohibited in contracts awarded in accordance with a procedure formalised by the contracting authorities, unless they are expressly authorised in the consultation documents; and

■ variants are, in principle, authorised in contracts awarded in accordance with a procedure formalised by the contracting entities (public network operators) and in all contracts awarded under an adapted procedure, unless they are expressly prohibited in the consultation documents.



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As stated above, conflicts of interest must be avoided: when a serious suspicion falls on a bidder, it must be excluded from the procedure. If this is not the case, this may lead to the cancellation of the contract, or even to the criminal conviction of the purchaser who has continued the procedure despite those suspicions.




Thanks to the Decree, purchasers are now able to consult the economic operators who are involved in a field, in order to determine and target their needs as best as possible through the solicitation of opinions, the completion of market studies or even discuss with the operators about the project, its constraints and requirements.

The limitation is that this procedure, which is implemented before the needs are defined, should not be used by the purchaser as an opportunity to distort competition by consulting only one operator, or providing the consulted operators with more information. The principles of transparency and equal treatment must also be respected.




Exclusions: the Ordinance proceeds by listing the contracts excluded from its scope, from which it is difficult to draw a whole system of exclusions.

Among the most significant:

■ the acquisition or rental of land, existing buildings or other immovable property;

■ public procurement of services relating to arbitration and conciliation;

■ public procurement for passenger transport services by rail or metro;

■ certain public procurement for legal services; and

■ certain public procurement for financial services.

Exemptions: the Decree also provides for a list of hypotheses, in which the contracts can be negotiated, and concluded without advertising or competitive bidding, including:

■ imperious urgency, not resulting from a deficiency of the purchaser;

■ the case where the purchaser does not receive any tender, or, in any case, no valid and/or appropriate offer; and

■ cases where the purchaser cannot launch a competitive tendering for it would be useless, since only one identified operator can provide the service (acquisition of a work of art, acquisition of a minority and inseparable part of a building with works meeting the needs of the contracting authority, acquisition of a service for which the operator has an exclusivity right).

All of these hypotheses, however, require close scrutiny to ensure that they are actually fulfilled, as obviously they will be very strictly interpreted by the judge. In particular, he will control that the purchaser has not organised a restriction of competition allowing him to artificially resort to one of these hypotheses.




The Ordinance lays down strict conditions for the application of “in-house” exceptions, allowing a contracting authority to award a public contract to a separate legal person without advertising or calling for competition:

■ the contracting authority must exercise control over the concerned legal person that is similar to the one which it exercises over its own departments (administrative and/or financial control);

■ the legal person must carry out at least 80% of its activity in the framework of tasks entrusted either directly by the contracting authority or by other legal persons controlled by the contracting authority; and

■ the controlled legal person must not have any private shareholders in its capital whose participation confers to it any controlling or blocking capacity and, generally, does not confer to it a decisive influence (minimal participation in the capital and absence of representation in the management bodies).

In theory, these conditions therefore allow mixed-economy companies to benefit from the exception, in instances where they were automatically excluded as a result of previous European case-law.

The exception also applies in reverse: if the controlled legal person is a contracting authority, it may award a contract “in-house” to the contracting authority which controls it, or to other legal persons also controlled by the said contracting authority.

5 Remedies



The legislation provides for two remedies, which are emergency procedures:

■ pre-contractual summary proceedings (“référé pré-contractuel”): this remedy allows an unsuccessful tenderer to ask only for the cancellation of all or part of the tender procedure in which he participated, or in which he was prevented from participating. However, the applicant can only argue that the contracting authority did not understand his obligation to advertise and call for competition; and

■ contractual summary proceedings (“référé contractuel”): this remedy allows the evicted bidder to only request the cancellation of the contract. Such a procedure can only be used in certain extremely limited cases: complete absence of publicity by the contracting authority, or breach of its obligation to suspend the signature, either by virtue of the standstill period, or by the effect of the introduction of pre-contractual summary proceedings.

There are other remedies, which are totally Praetorian creations (creation of the judge).

This is the case when the validity of the contract is challenged, which allows unsuccessful tenderers to request the cancellation of the contract and the payment of compensation. The tenderer may use any means he considers appropriate: he is not limited in this respect.

Remedies also exist in regard to public contract performance:

■ the service provider’s appeal against the decision to terminate his contract, and request continuation of the contractual relationship; and



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■ also, and very recently, third parties are allowed to take action against the refusal of the contracting authority to terminate a contract.

Finally, bear in mind that:

■ third parties who are not rejected bidders may also take action against severable acts of the contract, such as deliberations authorising the representative of the contracting authority to sign the contract; and

■ parties to the contract can also refer an application to the judge in a view to obtaining the cancellation or termination of their contract.



Such remedies are relatively limited, but we can think of two cases:

■ appeal to the civil court: for instance, in the event of the cancellation of a public contract for the sale of land and/or immovable property: if the contracting authority sells land or a building, in exchange for the completion of works carried out on this land or building in order to meet its needs, it will be a public contract. If the private contractor has resold the land or the building to another legal private entity, then an action for annulment of this sale could be sought, before the civil judge, on the grounds of the illegality of the initial public sale contract; and

■ appeal to the criminal court: a number of offences may be prosecuted before the criminal court, in respect of the awarding of public contracts: for instance, the offence of favouritism (granting an unjustified advantage); that of bribery (active corruption); influence peddling; or passive corruption.


sought?

The main remedies in this matter must be registered before the Administrative Court: the Administrative Court, then the Administrative Court of Appeal and finally the Council of State.

The pre-contractual and contractual summary proceedings fall within the competence of a particular administrative judge, single judge: the judge of the interim reliefs, whose orders are only admissible for an appeal before the Council of State, within 15 days.


remedies?

The pre-contractual summary proceedings may be initiated at any time, as long as the contract is not signed. On signature, and even if it is irregular, the pre-contractual summary proceedings become inadmissible (it has recently been held that pre-contractual summary proceedings registered more than six months after the rejection of the bid are admissible, since the contract had not been signed).

The contractual summary proceedings may be registered within 31 days of the publication of a notice of award. If the purchaser does not publish such a notice, the contractual summary proceedings can be registered within a period of six months from the signature.

The appeal against the validity of the contract must be registered within two months of the publication of a notice mentioning the date of signature of the contract and the practical details of its consultation (address, opening hours).


periods?

Posting the notices required by law will always reduce delays. It is always better to publish, and run the litigation period, than not publish, and never run the litigation time, because in the latter case, it means that the validity of contract may always be contested.

As stated above, publishing a notice of award reduces the period of contractual summary proceedings from six months to 31 days.

Moreover, if the public purchaser publishes a notice of intention to enter into the contract, and respects a period of 11 days between this publication and the signature of the contract, the contractual summary proceedings will simply be inadmissible.


As stated above, the following remedies are available after contract signature: contractual summary proceedings, as well as the appeal of third parties contesting the validity of the contract; the procedure to obtain the nullity or termination of the contract; and all the appeals against any acts of execution of the contract.


remedies is made?

It depends on the appeal. In pre-contractual summary proceedings, a decision must be rendered by the judge within 20 days. In contractual summary proceedings, the judge must render his/her decision within one month. For the rest, no deadlines have been set by law: the reasonable time of a proceeding is about two years.



In 2007, the administrative judge offered companies having bid on a public contract the possibility to obtain the cancellation, as well as indemnities (Council of State, 16 July 2007, Tropic works signalling). In 2014, he extended this possibility to all third parties (including local elected officials, associations, ordinary defendants – cf. Council of State, 4 April 2014, Department of Tarn-et-Garonne). In 2017, the Council of State finally admitted the possibility for a third party to ask a contracting authority to terminate a contract that it considers illegal and, if the latter refuses, to challenge the refusal to terminate before the judge (cf. Council of State, 30 June 2017, Company France Manche and Channel Tunnel Group).



It is possible to negotiate and enter into a settlement agreement with the persons who lodged an appeal against the public contract: payment of compensation in exchange for their withdrawal from the proceedings.

It is also possible to refer the matter to a committee for the amicable settlement of litigations (“business mediator” or “advisory committee for amicable settlement of public contracts”).



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Procedure







The principle here is that the characteristics of the procedure and the contract, announced in the consultation documents, can no longer be modified during the procedure (with the exception of the procedures specifically allowing for negotiation with candidates and, mainly, the competitive dialogue).

Under certain conditions, a few non-substantial changes can be made during the procedure, but all bidders must always be informed at the same time, in accordance with the principles of equality of treatment and transparency.

It is absolutely necessary to avoid any modification of an aspect of the procedure, during the procedure, which would make it possible to consider that the purchaser has arrogated to himself a discretionary margin of manoeuvre, allowing to falsify the choice of the bid.

The modification of a consortium after submission of the application or the tender is in principle prohibited, for the contracting authority must award the contract to the bidder who has submitted the best offer. If the bidder changes in the meantime, that will not be the case. However, under certain strict conditions (in particular in the event of a merger or restructuring), or if the group demonstrates that one of the members will be unable to perform its task for reasons which are external to it, the group may request permission to continue to participate in the proceedings, possibly by introducing a new member in replacement.



This will depend on the procedure used: the scope varies from full on negotiation (competitive dialogue) to almost no bargaining at all (“appel d’offre”).

In the latter case, there is no negotiation stricto sensu between the purchaser and the candidates. However, it is now possible for the purchaser to ask tenderers to regularise their tenders, during the procedure, when they appear to be inadmissible or unacceptable (except in the case of an abnormally low bid) and to develop certain market components, prior to its signature, with the potentially successful tenderer, without, however, being able to substantially modify the characteristics of either the selected bid or the contract. This is hence a matter of detail to be perfected.


signature?

As a matter of principle, any modification subsequent to the execution of the contract must be the subject matter of an amendment to the contract, i.e. a contract amending the contract. The possibility of modifying the contract must also have been expressly provided for therein. However, these amendments must not have the effect of substantially modifying the original contract: the contract must not be so altered that it is possible to assert that if

the terms of the amendment had been known at the time of the execution thereof, one can be certain that other companies would have participated in the procedure, and won the contract.



signature?

It is possible to transfer the public contract to another legal entity, when it is provided for in the contract, by way of a transfer amendment.

Such an amendment can only be executed if:

■ the transfer does not involve a substantial change in the transferred contract;

■ the transfer is not intended to remove the contract from advertising and competitive bidding requirements; or

■ the new holder fulfils the conditions which had been set by the contracting authority to participate in the initial procedure.




them?

It is possible to transfer the public contract to another legal entity, when it is provided for in the contract, by way of a transfer amendment.

Such an amendment can only be executed if:

■ the transfer does not involve a substantial change in the transferred contract;

■ the transfer is not intended to remove the contract from advertising and competitive bidding requirements; or

■ the new holder fulfils the conditions which had been set by the contracting authority to participate in the initial procedure.

The principal issue that can arise is that the contracting party refuses the transfer and asks for a breach of contract.



The PPPs are now called “marché de partenariat”. It is no longer a contract separate from public procurement contracts, but a particular form of public procurement contract. Therefore, the rules applicable to these schemes are now provided for in the Ordinance and Decree, both in terms of the procurement procedure, and the content of the contract.

8 The Future



impact?

A Public Procurement Code should be published before the end of 2019, in order to codify and thus consolidate all the rules of public



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Kévin Holterbach


4 rue des Canonniers

59000 – LILLE

France

Tel: +33 320 069 393 Email: [email protected] URL: www.bignonlebray.com/fr

Jean-Baptiste Dubrulle


4 rue des Canonniers

59000 – LILLE

France

Tel: +33 320 069 393 Email: [email protected] URL: www.bignonlebray.com/fr

Bignon Lebray is a business law firm entirely dedicated to assisting companies and public authorities in their activities, and advising players in the

economic life through consulting, and in contentious matters, both nationally and internationally.

The firm specialises in corporate law, mergers and acquisitions, securities law, banking law, tax law, employment law, real estate law, public law and

environmental law, intellectual property law, new technologies and communication, as well as competition and distribution law, contract law,

insolvency law and criminal business law.

The firm's public law department assists contracting authorities, contracting entities and economic operators on a daily basis at all stages of public

contracts, in accordance with the following precepts: pragmatism; responsiveness; and simplicity.

All members of the team have transverse experience, in all current versions of public law adapted to public policies: urban planning; public

investments; privatisation; liberalisation of regulated sectors; project financing/public-private partnerships; loan guarantees; rationalisation of public

debt; and state aid.

Kévin Holterbach obtained his Master's degree in Public Contracts

Law, with honors, at the University of Strasbourg, under the direction

of Professor François Llorens, in 2009.

Kévin Holterbach then completed numerous internships, in the area of

Public Law, not only with law firms and jurisdictions (2nd Chamber of

the Administrative Court of Strasbourg, competent for administrative

contracts) but also with several administrative bodies (legal service of

the University Strasbourg (2011), the Urban Community of Strasbourg

(2010), and the regional delegation of INSERM GRAND-EST).

Kévin joined Bignon Lebray's Public Law Department in December

2012.

Kévin’s expertise in the area of public procurement law has been

reinforced, both in contentious and non-contentious matters. As part

of his activities, Kévin has developed a particular know-how in

summary proceedings (pre-contractual and contractual referrals,

referred expert) where he intervenes mainly on behalf of large local

authorities, and advises in the areas of concession development as

the counsel of large groups of developers.

Jean-Baptiste Dubrulle has been a partner of Cabinet Bignon Lebray

since 2015.

He has a PhD in Public Law, and holds the lawyer’s professional

certificate (CAPA), obtained at the Ecole des Avocats CFPA du Nord

Ouest, since November 2008.

He joined Bignon Lebray's Public and Environmental Law Department

in January 2009.

Jean-Baptiste Dubrulle specialises in public procurement, urban

planning, environment and local authority law. He has been certified

as a Public Law practitioner since 2013.

He is the author of numerous publications and regularly participates in

conferences and seminars.

Jean-Baptiste Dubrulle has been elected President of the Lille Bar for

the years 2018-2020.


procurement for the moment scattered in various texts. The Code is set to gather the texts ruling public procurement contracts, concession contracts, supervision of public work and its relation with the supervision of private work, public private partnership, which has been heavily redefined by the Ordinance of 23 July 2015 and the Decree of 25 March 2016.

It is plausible that this codification may be carried out through constant law (i.e. without modifications), but there is no guarantee that some modifications will not slip in the texts of this new Code, especially since a public consultation on the subject has been launched by the State. This will need to be tracked.




There are two new texts that have to be mentioned. First, the two Decrees of 27 July 2018, regarding e-procurement: one sets the capital minimal requirements for the electronic devices and instruments used in public procurement procedures; and the other sets the practical arrangements for providing the procurement documents in a dematerialised form.

Second, on 25 October 2018, an official guide was published by the French Economics Ministry, in order to help contracting authorities struggling with the GDPR in public procurement and the specific clauses to be included in the procurement contracts.


71

Chapter 10


BLOMSTEIN

Dr. Pascal Friton

Rita Zuppke

Germany




Public procurement in Germany is governed by part 4 of the Act against Restraints of Competition (“Act”). The Act implements EU public procurement law (particularly Directives 2014/23/EU, 2014/24/EU and 2014/25/EU, and the “Remedies” Directives 92/13/EEC and 89/665/EEC). Depending on the type of contract, or the sector in which public procurement takes place, the following subsidiary legislation also contains detailed rules:

■ Regulation on the Award of Public Contracts (“Regulation”);

■ Regulation on the Award of Public Contracts by Entities Operating in the Transport, Water and Energy Sectors;

■ Regulation on the Award of Public Contracts in the Defence and Security Sector; and

■ Regulation on the Award of Concession Contracts.

Regarding the award of works contracts, part A chapter 2 of the Contracting Rules for the Award of Public Works Contracts also applies.

Outside the scope of EU law (i.e. below the relevant EU thresholds), public procurement is generally governed by budgetary law and is supposed to be less regulated and more flexible. However, case law and national public procurement regulation have led to a more and more aligned public procurement regime. Works contracts are governed by part A chapter 1 of the Contracting Rules for the Award of Public Works Contracts. Supply and service contracts are governed (at national level and in some of the federal states) by the Regulation on the Award of Public Supply and Service Contracts below the EU Threshold.

Further, a law on a national competition registry was introduced in 2017 providing for the enlistment of all ineligible companies, which have committed serious legal infringements. There is also legislation enacted by the federal states that is only applicable to procurement of the federal states.




of the legislation?

The basic principles underlying the regime (which are key to its interpretation) are those underlying the EU public procurement directives. The principles of EU procurement law are transparency,

equal treatment and proportionality. These principles and the principle of competition are set out in section 97 of the Act, but are also manifested in both procedural and material rules throughout the Act.

Additionally, procurement is supposed to enhance quality and enable innovation, be economically efficient and consider the interest of small and medium-sized enterprises. Social and environmental aspects are also to be considered.



Other than the specific areas mentioned in question 1.1, the Act and its subsidiary legislation contain special rules and exemptions for public procurement of public transport services, such as in the Public Transportation Act, and there exist specific regulations for the pharmaceutical sector, which are contained in various volumes of the Social Security Act.



public procurement?

Legislation regarding public funding and competition law is particularly important. There also exists a regulation on procurement statistics, which obligates all contracting authorities to provide relevant data to the Federal Ministry for Economic Affairs and Energy. Public entities may be subject to the German Freedom of Information Act or respective federal state transparency laws.



agreements?

German public procurement legislation implements the relevant EU Directives. This legislation is compliant with the GPA.


Contracts



Public contracting authorities are:

■ regional and local authorities and their special funds;


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■ other legal persons under public or private law which were established for the purpose of meeting non-commercial needs in the general interest and that are under certain forms of organisational subordination to other public contracting entities; or

■ associations formed by above-mentioned entities.

Natural or legal persons under private law or legal persons under public law may be considered public contracting authorities:

■ if they receive funds for civil engineering projects, for building hospitals, sports, leisure or recreational facilities, school, university or administrative buildings or for related services and design contests by above-mentioned entities, if these funds finance more than 50 per cent of a certain project; or

■ if they carry out activities in the energy, water or transport sectors, when such activity is carried out based on special or exclusive rights that were conferred by a competent authority or when a public contracting authority as mentioned above individually or jointly exercises a controlling influence on these persons.

Please see section 99 of the Act for more details.

Outside the scope of the Act, public procurement law only applies to public entities which are bound by respective budgetary regulations or which by virtue of other legal rules are under obligation to public procurement law. Private entities are only covered in exceptional cases, e.g. where they are bound by statutory requirements or other respective provisions.


German public procurement law covers public contracts, concessions, framework agreements and design contests.

Public contracts are defined as contracts for pecuniary interest concluded between public contracting authorities and economic operators for the procurement of services whose subject matter is the delivery of goods, the execution of works or the provision of services.

For concessions, see question 2.5.

For framework agreements, see question 2.6.



The Act applies only if the contract value reaches or exceeds a certain threshold. The thresholds are determined by EU law and are regularly updated. The current thresholds are:

■ for works contracts: EUR 5,548,000;

■ for supply and service contracts: EUR 221,000; and

■ for supply and service contracts in the defence and security sector, and in the energy, water and transport sectors: EUR 443,000.

A different threshold applies to public procurement of supply and service contracts by higher and supreme federal authorities: EUR 144,000.


Tenders may not be designed in a certain way with the intention of circumventing requirements of the Act and its subsidiary legislation.

This includes, most importantly, the method of estimating the contract value and the division of contracts. Specific rules exist regarding the calculation of contract values and the division of contracts in order to prevent such circumvention.



Concession contracts are covered by the Act. However, within the Act, special rules and limitations may apply. Special subsidiary legislation also applies (see question 1.1).

Concessions are defined as contracts for pecuniary interest where concession grantors entrust economic operators with the execution of construction works or the provision and management of services, the consideration for which consists in the right to exploit the work/services or in that right together with a payment. The distinguishing feature of a concession contract is that the operating risk for the use of the work or for the exploitation of the services passes to the concessionaire.



Contracting entities often use framework agreements in order to simplify the procurement of goods or services that they need on a repeated or ongoing basis. They predetermine certain conditions for public tenders that accumulate in a certain period. As a general rule, the same regulations apply to the award of framework agreements. However, special procedural regulations exist with regard to the conclusion of single contracts based on a framework agreement.


into lots?

As a general rule, contracting authorities must divide a contract into lots to encourage the participation of small and medium-sized businesses. Contracts may be divided into lots according to quantity and according to the type or respective area of expertise. They may only be awarded collectively if this is required by certain economic or technical reasons. Anti-avoidance and aggregation rules must be considered (see question 2.4).

Although not entirely clear, no such requirements exist for the award of concessions.



Suppliers located outside Germany are not restricted from participating in public procurement procedures in Germany.

It is only possible to reject a tender in the energy, water and transport sectors, and only if over 50 per cent of the total value of the products to be supplied originate from countries which are not parties of the Agreement on the European Economic Area and with which no other agreements on mutual market access exist.

BLOMSTEIN Germany


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3 Award Procedures




Section 119 of the Act lists five different types of award procedures available to contracting authorities:

1. Open procedure, in which the contracting authority publicly invites an unlimited number of economic operators to tender an offer.

2. Restricted procedure, in which the contracting authority publicly invites an unlimited number of economic operators to participate. Of those pre-qualified, only a limited number are invited to tender an offer.

3. Negotiated procedure, in which only selected economic operators are invited to tender a first offer, which serves as a basis for negotiations. In most cases – with very limited exceptions – the procedure must start with a competitive tender.

4. Competitive dialogue, in which a competitive tender is followed by negotiations with selected participants. Different from the negotiated procedure, the means to satisfy the need of the contracting authority are not defined prior to the tender. Participants tender an offer only after negotiations.

5. Innovation partnership, which is aimed at developing innovative supplies, works or services, which are not yet available on the market.

Contracting authorities may freely choose between an open and restricted procedure. Other procedures are only available where explicitly permitted. This hierarchy also applies, with certain limitations, to public procurement in the defence and security sectors, as well as the energy, water and transport sectors. Where contracting authorities procure in the form of a concession, any procedure may be chosen, provided that the general principles are observed.


The standard minimum timescales are as follows:

■ Open procedure: 35 days between dispatch of the contract notice and receipt of offers (may be reduced to 30 days, if electronic submission of tenders is permitted, or to 15 days, if special urgency is duly substantiated or a Prior Information Notice is published).

■ Restricted and negotiated procedure:

■ 30 days between dispatch of the contract notice and receipt of response (may be reduced to 15 days, if special urgency is duly substantiated, or to 10 days, if a Prior Information Notice is published).

■ 30 days between invitation to tender and receipt of offers (may be reduced by consensus between the contracting authority and participants, or, alternatively, to 25 days if electronic submission of tenders is permitted, or to 10 days if special urgency is duly substantiated).

■ Competitive dialogue procedure: 30 days between dispatch of the contract notice and receipt of response. Unspecified time for the competitive dialogue.

■ Innovation partnership: 30 days between dispatch of the contract notice and receipt of response. Unspecified time for negotiations.

Additionally, a standstill period must be observed between the award decision and award of the contract.


tenderers?

To be eligible, participants and bidders have to prove that they are skilled and efficient. Selection criteria are defined by the contracting authority, but may only relate to:

■ qualification and authorisation to pursue the professional activity;

■ economic and financial standing; or

■ technical and professional ability.

Non-eligible participants and bidders must be excluded.

Additionally, the Act sets out mandatory and facultative grounds for exclusion (e.g. with respect to criminal convictions, serious breaches of contractual obligations and competition law violations). Economic operators may undertake self-cleaning measures to demonstrate their reliability to perform a contract.

In all but the open procedure, the contracting authority may check eligibility in a pre-qualification round. It may invite only selected participants to negotiations, or to tender an offer. During negotiations, the contracting authority may further reduce the amount of participants. However, the principle of competition must always be observed.

In the open procedure, the contracting authority checks eligibility at the time of the award decision.




The contracting authority must award the contract to the “most economically advantageous tender” (i.e. best price-quality ratio) according to specified and pre-disclosed award criteria. Beyond price or costs, qualitative and innovatory, environmental or social aspects may be taken into account since the Act’s latest revision in 2016. Award criteria always have to be materially connected to the contractual object. A connection also has to be assumed when a criterion appears only in a specific stadium in the lifespan of the service. The possible combination of these new criteria and the time aspect broadens the scope of the evaluator possibilities.


low tenders?

Where the price or costs of a tender appear to be abnormally low in relation to the performance to be provided, the contracting authority must review the constituent elements of the tender and consider the transmitted documents. It must seek clarification from the tenderer.

If the contracting authority is unable to establish a satisfactory explanation for the low price or costs, it may refuse to award the contract to this tenderer. It must refuse to award the contract if the low price or costs are a result of non-compliance with legal obligations.

If a tender is abnormally low because the tenderer has obtained state aid, the tenderer must show within a certain time limit that the aid in question was lawfully granted, otherwise, the contracting authority must refuse to award the contract. If one tenderer presents an abnormally low bid price, competitors can request the contracting authority to examine this offer in more detail.

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The contracting authority must award the contract in accordance with the specified and pre-disclosed award criteria, and only to eligible tenderers which are not subject to exclusion grounds (see question 3.3). Apart from strict documentation rules, no special formal requirements apply to the award procedure.


bidders?

When an award decision has been made in a tender procedure above the EU thresholds, the contracting authority must notify unsuccessful bidders in writing. The notice must include the name of the successful bidder, reasons for the decision, as well as the earliest date for conclusion of contract, which must not be earlier than 15 days after the information has been issued via letter, or 10 days if the information has been issued electronically or via fax.

Additionally, a debrief must be sent out on request giving reasons for the decision, including descriptions of the characteristics and relative advantages of the successful tender, as well as the name of the successful bidder.


Multiple contracting authorities may agree on joint public procurement. The contracting authorities are jointly responsible for complying with public procurement rules. If contracting authorities from different member states are involved, they must specify by agreement the responsibilities and applicable provisions of national law.

In addition, contracting authorities may procure supplies and services from central purchasing bodies or award contracts for supplies, works and services through central purchasing bodies.


Contracting authorities may authorise or require variant tenders (i.e. a bid which provides a different solution to a requirement than that set by the contracting authority). Without such indication, variant tenders are not allowed. They must be related to the subject matter of the contract. Although this is a controversial issue, the legislator decided to permit variant tenders in cases where the price or the costs are the sole criterion.


Pursuant to section 6 of the Regulation, members of the executive body or employees of the contracting authority or of a procurement service provider acting in the name of the contracting authority may not participate in a procurement procedure if a conflict of interest exists. Such conflict of interest constitutes a discretionary exclusion ground.




A participant or bidder who has advised the contracting authority or participated in the preparation of the procurement procedure in

another manner may participate if such participation does not distort competition. The contracting authority must take appropriate measures to prevent distortion. It may only exclude the participant or bidder if a distortion of competition cannot be prevented by other means.




General exclusions relate to secrecy and essential security interests, arbitration and conciliation services, the acquisition, rental or leasing of land, existing buildings, other immovable property or rights related to land, employment contracts as well as certain civil defence, civil protection and danger prevention services that are provided by non-profit organisations or associations.

There are additional exemptions that only apply to certain types of procurement. In the energy, water and transport sectors, some enterprises and activities are excluded.




In section 108, the Act exempts certain contracts between entities within the public sector. Such coordination arrangements can be characterised as “vertical” and “horizontal” arrangements.

Vertical arrangements are excluded from public procurement rules if:

■ the public contracting authority (alone or jointly with other public contracting authorities) exercises a control similar to that exercised over its own departments over the legal person concerned;

■ more than 80 per cent of the activities of the legal person are carried out in the performance of tasks entrusted to it by the public contracting authority or by other legal persons controlled by that public contracting authority; and

■ there is no direct private capital participation in the legal person with the exception of non-controlling and non-blocking forms of private capital participation that are required by national legislative provisions and that do not exert a decisive influence on the controlled legal person.

The same applies if the contract is awarded by a controlled legal person to the controlling public contracting authority (inverse in-house arrangement), or to another legal person controlled by that public contracting authority.

Horizontal arrangements are exempted from public procurement rules if:

■ the contract establishes or implements a cooperation between the participating public contracting authorities to ensure that public services they have to perform are provided with the prospect of achieving objectives they have in common;

■ the implementation of the cooperation is governed solely by considerations relating to the public interest; and

■ the public contracting authorities perform less than 20 per cent of the activities concerned by the cooperation on the open market.

The ECJ ruled in 2016 that in the case of a transfer of functions to a public body in Germany, procurement law does not apply.

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5 Remedies



Any award of public contracts or concessions within the scope of the Act is, upon application, subject to review by public procurement tribunals according to section 155 of the Act. Any economic operator may file an application if it:

■ has an interest in the public contract or the concession;

■ claims that its rights were violated by non-compliance with public procurement provisions that are intended to also protect participants or bidders; and

■ can show that it has been or is at risk of being harmed by the alleged violation.

An application is inadmissible if:

■ the applicant did not complain to the contracting authority within a specified time after the violation became apparent from the tender notice, the procurement documents, or after the applicant became otherwise aware of the violations; or

■ more than 15 calendar days have expired since receipt of notification from the contracting authority that it is unwilling to redress the objection.

The decision by the public procurement tribunal may be appealed against before the competent higher regional court.

Proceedings before the public procurement tribunal and the higher regional court automatically suspend the procurement procedure, and so the contracting authority may not award the contract. However, the suspensive effect lapses two weeks after the expiry of the time limit for the appeal if not extended by the appellate court, upon application.



Primary legal protection for contracts within the scope of the Act can only be sought within the procurement review process. In addition, claims for damages may be asserted in civil law proceedings.

Outside the scope of the Act, the primary legal protection offered by the procurement review process is not available. The only option of preventing award of the contract is applying for a temporary restraining order with the responsible civil or administrative court.


sought?

Initial remedies must be sought with the public procurement tribunals. The tribunals are independent chambers with a court-like organisation. Two national public procurement tribunals, which are affiliated to the Federal Cartel Office, are competent for national procedures and each federal state has established at least one public procurement tribunal. Appeals have to be made to higher regional courts.


remedies?

Prior to an application for review, a complaint must be submitted to the contracting authority (see question 5.1). If the violation became apparent from the tender notice or the procurement documents, a

complaint must be submitted by the end of the time limit for the application or the submission of a tender. For other violations, the applicant must complain within 10 days from becoming aware of the violation. If such complaint is rejected, the review application has to be filed within 15 calendar days following receipt of the rejection notice.

As a general rule, primary legal protection is not available if a contract has already been awarded. However, if the contracting authority has violated its duty to inform unsuccessful bidders, did not observe the standstill period or awarded the contract without publishing a tender notice, the award decision may be deemed ineffective by a public procurement tribunal. Such application must be submitted:

■ if the contracting authority informs affected candidates and tenderers concerning the conclusion of the contract, within 30 calendar days;

■ if the contracting authority has published the award of the contract in the Official Journal of the European Union, within 30 calendar days after the publication, or otherwise, at the latest six months after conclusion of the contract; and

■ in case of an ex ante announcement, pursuant to section 135 para. 3 of the Act, within 10 days after the issuing of the announcement.


periods?

Limitation periods are mandatory and may not be shortened by the contracting authority.


Please see the answer to question 5.4.


remedies is made?

The public procurement tribunal shall take its decision and give reasons in writing within five weeks of receipt of the application. In exceptional cases, the chair may extend this period by a maximum of two weeks.

No such timescale exists for decisions by the appellate court, which means that such proceedings take considerably longer (usually between four and seven months).



It is not uncommon that remedies are obtained in cases before the public procurement tribunal.



There are no specific mitigation measures available to contracting authorities. After a bidder has filed a complaint with the contracting authority, the authority can however file a preventive caveat before a public procurement tribunal, describing why the contracting authority deems the complaint as unjustified and why a possible application for review with the public procurement tribunal would have no prospect of success.

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Procedure







Pre-award, the contracting authority may make changes, insofar as it respects the general principles of equality and transparency.

If the contracting authority makes significant changes to the procurement documents, the time limits for the tender must be extended. Changes are significant if undertakings need additional time in order to understand and respond appropriately.

Changes require a publication in the Official Journal of the European Union if they are so substantial that the admission of candidates other than those initially selected would have been allowed or additional participants in the procurement procedure would have been attracted.

Changes to the membership of bidding consortia are not explicitly regulated. However, if such changes affect the “identity of the bidder”, they may constitute a change of the offer. This may lead to exclusion. In addition, it needs to be examined that the selection criteria are also fulfilled by the new consortium.



Negotiations are permitted only in a negotiated procedure, competitive dialogue and an innovation partnership. However, to prevent discrimination after submission of the final tender, further negotiations may not be conducted. The contracting authority may only ask for clarifications, and such clarifications must not change the final offer substantially.


signature?

As a general rule, section 132 of the Act prescribes that material changes to a public contract during its term require a new procurement procedure. Changes are material if they result in the public contract differing substantially from the public contract originally awarded. This is particularly the case where:

■ the change introduces conditions which would have made it possible to admit other candidates or tenderers, to accept a different tender, or would have drawn the interest of further participants;

■ the modification shifts the economic balance in favour of the contractor; or

■ the modification significantly extends the scope of the public contract.

Nevertheless, modifications are permitted if:

■ the initial procurement documents provide clear, precise and unequivocal review clauses or options which contain statements on the scope and nature of and requirements for possible contract modifications;

■ additional supplies, works or services become necessary, which were not provided for in the initial procurement documents, a change in the contractor is not feasible, and the price is not increased by more than 50 per cent; or

■ the need for modification has been brought about by circumstances that a diligent public contracting authority could not foresee, the overall nature of the contract is not altered by the modification, and the price is not increased by more than 50 per cent.

For the consequences of a replacement of the original contractor, please see question 6.4.

Additionally, modifications are permitted if the overall nature of the contract is not altered, and the value of the modification:

■ does not exceed the applicable EU thresholds; and

■ does not amount to more than 10 per cent (supplies and services)/15 per cent (works) of the original contract value.

For replacement of the contractor, see question 6.4.



signature?

If a new contractor replaces the old, this generally constitutes a material change and therefore requires a new public procurement procedure (see question 6.3).

Nevertheless, the contractor may be replaced if:

■ the decision is based on a clear, precise and unequivocal review clause;

■ a different economic operator that meets the requirements originally set for eligibility replaces the original contractor wholly or in part, following corporate restructuring, provided this does not entail further material modifications (see question 6.3); or

■ the contracting authority itself assumes the main contractor’s obligations towards its subcontractors.




them?

Public procurement law does not contain special rules in relation to privatisations. However, the sale of public assets is generally subject to EU primary law or national budgetary law. Since budgetary law requires the use of state-owned capital as efficiently as possible, a public authority is obliged to only accept the most economically advantageous offer which automatically leads to an applicability of basic EU principles of transparency and equal treatment.



Public procurement law does not contain special rules in relation to PPPs. In cases where a PPP is formed, public procurement law does not apply, but it becomes relevant when its municipal majority owner awards the PPP a contract.

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8 The Future



impact?

On an EU and national level, there are currently no specific proposals. However, as public procurement is heavily influenced by case law, changes may arise from judicial decisions.




Further implementation of the Regulation on the Award of Public Supply and Service Contracts below the EU Threshold in the federal states can be expected. The implementation of the law on a national competition registry for ineligible companies through respective regulation and governmental guidelines serving as an aid for the interpretation of article 346 TFEU in the defence sector is currently being developed.

BLOMSTEIN Germany

Dr. Pascal Friton LL.M.

BLOMSTEIN

Oranienburger Str. 66

10117 Berlin

Germany

Tel: +49 30 2148027 00 Email: [email protected] URL: www.blomstein.com

Rita Zuppke

BLOMSTEIN

Oranienburger Str. 66

10117 Berlin

Germany

Tel: +49 30 2148027 00 Email: [email protected] URL: www.blomstein.com

BLOMSTEIN is based in Berlin and was founded in April 2016 as a spin off from Freshfields Bruckhaus Deringer LLP with a clear focus on regulatory

and competition law compliance. We advise our international client base in Germany, Europe and worldwide on public procurement and international

trade law, including public international law, as well as antitrust and competition and state aid law. For worldwide support we cooperate with leading

law firms in Germany and abroad.

Within our first two years, we were able to build a respectable client base ranging from medium-sized to large blue chip companies, as well as

government entities. We were able to secure a wide range of mandates, including some of the most prestigious public procurement matters with an

EU dimension. We also provide ongoing cartel advice for important international clients and act as their “trusted advisor”, merger control support in

several mid-cap transactions, advice related to vertical restraints/distribution contracts, state aid matters and cartel follow-on damages claims.

www.blomstein.com/kanzlei.php

Pascal Friton specialises in public procurement law and trade law. His

public procurement law practice covers advising contracting

authorities and bidders (services, IT and defence). He has

longstanding experience with compliance-related issues, advising

multinational companies on legal consequences of misconduct in

public procurement procedures and on self-cleaning measures.

He has been recognised as a leading public procurement lawyer by

Who’s Who Legal (Government Contracts) since 2016.

He studied law at Humboldt-University of Berlin and holds a master of

laws degree from the University of Durham, UK. In 2016, he finalised

his PhD thesis on selection/suitability criteria in EU Directives at the

Bucerius Law School in Hamburg.

Pascal is a regular speaker at conferences and seminars on public

procurement law in Germany and other EU Member States.

Furthermore, he has co-authored a chapter of King’s College London’s

law school’s new distance learning programme in public procurement

law.

Rita Zuppke specialises in German and European public procurement

law and international trade law. She advises German and international

clients in proceedings before the German and European courts, the

European Commission and the Federal Cartel Office.


Chapter 11


Michailopoulos & Associates

Greg Michailopoulos

Marios Markatos

Greece




Public Procurement in Greece is legislated, mainly, via Law 4412/2016 on ‘Public works, supplies and services contracts – Transposition of Directives 2014/24/EU and 2014/25/EU’ (OJ 147/A’/08.08.2016), and via Law 4413/2016 on ‘Award and execution of concessions – Transposition of Directive 2014/23/EU’ (OJ 148/A’/08.08.2016).

Law 4412/2016, which is the core instrument of public procurement in Greece, regulates in a single act the award and execution of public works, supplies and services contracts, as well as the award of public contracts by entities operating in the sectors of water, energy, transport and postal services.

The application of Law 4412/2016 has drastically changed the state of play in public procurement, as it has brought an end to a multi-fragmented legal framework, where procurement regulation had been divided horizontally between subject-matters and vertically between levels of government. In practice, Law 4412/2016 has codified in a single act numerous legal acts, which have been repealed by the latter, and, therefore, its provisions apply today to contracts of all subject-types, regardless of their estimated value and to all type of contracting authorities, irrespective of their legal status. Among other significant changes, Law 4412/2016 has overhauled the rules regarding review proceedings, as well as the execution and monitoring of public contracts.

Law 4413/2016, the second pillar of public procurement legislation, provided for the first time an adequate, balanced and flexible legal framework for the award and execution of public works and services concession contracts.




of the legislation?

The fundamental basis on which all procurement rules are implemented consists of the principles of Internal Market, as well as of the principles deriving therefrom, such as the principle of equal treatment, non–discrimination, genuine competition, mutual recognition, proportionality, transparency and effectiveness. The principle of formality and the obligation to state reasons for unfavourable administrative acts are also applicable. At the same

time, it is imperative to comply with obligations in the fields of environmental, social and labour law.

The aforementioned principles are of major practical importance as they provide legal guidance upon issues that are not explicitly laid down in a legal act.



Public procurement in the defence and security sector is currently governed by Law 3978/2011 (OJ 137/Α’/16.06.2011), which has transposed into Greek law Directive 2009/81/EU. Moreover, Law 3433/2006 (OJ 20/Α’/07.02.2006) regulates the procurement of equipment for military forces, whereas the Ministerial Decision 8028/1/34/2000 (OJ 1101/Β’/06.09.2000) determines the procurement of goods of a confidential nature for police forces.



public procurement?

Apart from the EU publicity procedures, domestic legislation also includes the following transparency rules:

The Central Electronic Registry for Public Procurement (hereinafter KIMDIS) is a transparency register, which has recently been introduced. Since its operation, it is compulsory for contracting authorities to publicise on it all acts or documents related to the life-cycle of a public contract (i.e. requests for a procurement, call for tenders, contract award decisions, signed contracts and payment orders).

In addition to this, a central online hub offering e-access, e-notification and e-submission services, named as National System of Electronic Public Procurement (hereinafter ESIDIS), has been set up. It follows that where procurement of contracts amounts to an estimated value higher than EUR 60,000 it is compulsory that such procurement be conducted electronically through ESIDIS. Hence, in order for potential bidders to be able to participate in award procedures, they have to be in possession of an e-signature.

Besides the abovementioned technical means, transparency is also served through the prior judicial review by the Greek Court of Auditors. As far as the legality and the regularity οf public expenditure is concerned, public contracts exceeding a certain amount fall within the range of the judicial review of the Greek Court of Auditors, according to the provisions of Article 35 of Law 4129/2013 (OJ 52/A’/28.02.2013).


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Furthermore, Law 3310/2005 (OJ 30/A’/14.02.2005) on transparency and prevention of circumvention in public procurement foresees that a limited company that participates in an award procedure for a contract of value above EUR 1 million has to submit evidence of registered shares held by individuals ‘until a natural person is identified as owner’.



agreements?

Notwithstanding the provisions of Law 4412/2016 that transpose the EU directives and cover tenders above EU thresholds, the sections of Law 4412/2016 that govern the awarding procedures for contracts below the EU thresholds, as well as procedural and technical issues, are in conformity with EU principles.

In the case of international agreements, the explicit provisions of Article 25 of Law 4412/2016 ensure the respect of the commitments of the EU arising from agreements concluded with third parties, such as the WTO Government Procurement Agreement (GPA) or any other international agreement to which the EU is party.

In view of the above, the Greek procurement market does not impose any obstacles to financial entities originating from Member States of the European Economic Area (EEA) Agreement or from countries that are signatories to the GPA.


Contracts



Law 4412/2016 applies to both public and private entities, as purchasers.

Regarding public entities, it applies to the Hellenic Republic, regional or local authorities, public authorities or associations formed by these authorities or, in general, entities governed by Public Law. However, chambers of industry and commerce, professional associations and church institutions, when the financing of a certain procurement is undertaken solely by their own funds, may be exempted from the scope of Law 4412/2016.

The private entities covered by Law 4412/2016, as purchasers, are the ones that fall within the definition of “bodies governed by public law”, which in accordance with consistent case-law of the European Court of Justice are: (a) established for the specific purpose of meeting needs in the general interest and not having an industrial or commercial character; (b) wholly or substantially financed by the State; and (c) subject to the state management or supervision.

It should be noted that the Hellenic Corporation of Assets and Participations S.A. and its subsidiary companies, such as the Hellenic Republic Asset Development Fund S.A., the Public Properties Company S.A. (‘ETAD’), which are entrusted with the privatisation and the management of valuable assets of the Greek State, as well as the Hellenic Financial Stability Fund, are excluded from the scope of Law 4412/2016, by virtue of the relevant provisions of Law 4431/2016 in conjunction with Law 4389/2016. Furthermore, the Hellenic Telecommunications Organisation S.A. (OTE) and several companies listed on the Athens Stock Exchange, which do not constitute a contracting entity of the utilities sector, may under several conditions be considered not to fall within the scope of Law 4412/2016.


The following types of public contracts are covered by Law 4412/2016:

(a) Work contracts.

(b) Supply contracts.

(c) Provision of services contracts; according to domestic law, these are further classified to ‘general services’ having as their object consultancy services in all sectors of the economy and ‘contracts of designs, technical and other related scientific services’.

(d) Mixed contracts having as their subject-matter different types of the abovementioned contracts.

(e) Social and other specific services – incumbent rules lay down a ‘light regime’ for health, social, educational and cultural services.

(f) Framework agreements.

(g) Contracts assigned by entities operating in the water, energy, transport and postal services sectors.



The EU thresholds laid down in Law 4412/2016, which are subject to revision every two years, are, for the current period, the following (net of VAT):

■ ΕUR 5,548,000 for public works and concession contracts.

■ ΕUR 144,000 for supply and services contracts of ‘central government authorities’ (e.g. ministries, local government bodies).

■ ΕUR 221,000 for supply and services contracts of ‘non-central contracting authorities’ (i.e. all the rest except for ministries and local government bodies).

■ ΕUR 750,000 for social and other specific services (the ‘light regime’).

For contracts of value below the EU thresholds the following financial ceilings apply:

■ Up to EUR 20,000 contracting authorities may proceed to a direct award.

■ From EUR 20,001 to EUR 60,000 a brief informal tendering procedure may apply.

■ From EUR 60,001 to EU thresholds a formal procedure may apply, which is conducted via electronic means (question 1.4).


According to Law 4412/2016, the estimated value of a public contract shall be based on the total payable amount, net of VAT, as estimated by the contracting authorities and shall include any form of options or renewals of the contract.

Special rules are provided with regard to the methods for calculating the estimated value of contracts subdivided into lots, where account shall be taken of the total estimated value of all such lots, so as not to circumvent the proper application of public procurement rules.

As far as framework agreements and dynamic purchasing systems are concerned, the value to be taken into consideration shall be the maximum estimated value of all the contracts envisaged for the total term of the framework agreement or the dynamic purchasing system.

Michailopoulos & Associates Greece


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Special rules for concession contracts are laid down in Law 4413/2016, by which the Directive 2014/23/EU has been transposed into Greek Law, providing for the first time an adequate, balanced and flexible legal framework for the award and execution of services concession contracts.

The main feature of a concession contract is the right to exploit the works or services; this always implies the transfer to the concessionaire of an operating risk of an economic nature involving the possibility that it will not recoup the investments made and the costs incurred in operating the works or services awarded under normal operating conditions even if a part of the risk remains with the contracting authorities or contracting entities.

Besides the definition of concession contracts, other key elements of Law 4413/2014 are the following: (a) the calculation of the estimated total value of the contract, based on the total turnover of the concessionaire; (b) the discretion of the contracting authorities to conduct the award procedure in successive stages and to include negotiations; (c) the determination of the duration of the contract, which in the case of exceeding a five-year period shall be limited to the time that a concessionaire could reasonably be expected to recoup the investments made; and (d) the execution of concession contracts and the herewith obligation to establish a special purpose vehicle company.



Special rules for the conclusion of framework agreements are laid down in Article 39 of Law 4412/2016. Notably, the most important are:

■ the term of a framework agreement shall not exceed four years;

■ the regular award procedures apply to the award of the framework agreement;

■ a framework agreement can be concluded with a single or more economic operator (i.e. at least two);

■ unless all the terms of the contract have been identified in the framework agreement, a new procurement procedure follows; and

■ contracting authorities have a wide discretion in choosing the appropriate tendering procedure for the assignment of the call-off contract – it is possible to apply a different tendering procedure rather the one pursued at the stage of the framework agreement award.


into lots?

Special rules on the division of contracts into lots are set forth in Article 59 of Law 4412/2016. Aiming to the widest participation of small and medium enterprises in public procurement, contracting authorities are encouraged to divide tenders into lots. In the call for tender, the contracting authorities shall define whether tenders may be submitted for one, several or all of the lots. Furthermore, they may limit the number of lots that may be awarded to the same bidder.



As stated in question 1.5, Greek contracting authorities are not allowed to treat in a discriminatory way or less favourably any economic entity from another EU Member State or Member State of the EEA Agreement or signatory State of the GPA. Law 4412/2016 lays down no explicit obligation with regard to suppliers established not within any of the aforementioned jurisdictions.

3 Award Procedures




Law 4412/2016 sets the rules for the application of awarding procedures, for both above and below the EU thresholds contracts.

(a) For contracts that exceed EU thresholds, a contract may be awarded pursuant to the following procedures, between which the contracting authority can choose freely, without prejudice to the procedures which require prior written consent provided by the Hellenic Single Public Procurement Authority, as mentioned below:

Regular procedures:

■ Open procedure.

In an open procedure, which is by far the most frequently used in public procurement practice, all interested suppliers, contractors or service providers may submit tenders. The stages of this procedure are the following: (1) opening of the tenders – review of the supporting documents for participation and evaluation of the adequacy of the tender with regard to the technical specifications and technical evaluation of the tenders (if applied); (2) financial evaluation of the tenders; (3) inspection of the supporting documents for the award of the contract; and (4) award of the contract.

It has to be noted that the competent contracting authority, unless the contract is awarded on the basis of the lowest price criterion, ratifies each of the abovementioned stages by issuing an enforceable decision, which can be challenged by filing a pre-judicial objection before the Authority for the Hearing of Pre-Judicial Objections (AEPP), as analysed under question 5.1.

■ Restricted procedure.

Special procedures:

■ Competitive procedure with negotiation. It should be stressed that the decision of a contracting authority to find recourse to the competitive procedure with negotiation due to submission of improper tenders is subject to a prior written consent provided by the Hellenic Single Public Procurement Authority.

■ Negotiated procedure without prior publication. It should be stressed that a decision of a contracting authority to find recourse to this exceptional procedure is subject to a prior written consent provided by the Hellenic Single Public Procurement Authority.

■ Competitive dialogue.

■ Innovation partnership. Innovation partnership has been introduced by Law 4412/2016 and, therefore, its application remains a terra incognita for the contracting authorities.



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(b) For the award of contacts that fall below EU thresholds, Law 4412/2016 lays down the following award procedures:

■ All procedures mentioned in point (a).

■ Up to EUR 20,000, a direct award based upon negotiations with a single economic entity may apply.

■ From EUR 20,001 to EUR 60,000, a brief informal tendering procedure may apply.

■ From EUR 60,001 to EU thresholds, a formal procedure may apply.


The minimum timescales to submit a request or tender are as follows:

(a) For contracts above EU thresholds:

Open procedure: 35 days between the dispatch of the contract notice and the submission of tender. It can be further reduced to 30 days, in the event the tenders are submitted by electronic means. When a prior information notice has been published, the time limit may be shortened to 15 days.

Restricted procedure and competitive procedures with negotiation:

■ 30 days between the dispatch of the contract notice and the submission of request (1st stage). It can be further reduced to 20 days, in the event the tenders are submitted by electronic means.

■ 30 days between the dispatch of the invitation to submit a tender and the submission of bid (2nd stage).

Under extraordinary conditions the timescales of the restricted procedure may be further shortened as follows: 15 days for the receipt of requests and 10 days for the receipt of tenders.

Competitive dialogue and innovation partnership: 30 days between the dispatch of the contract notice and the submission of request.

Negotiated procedure without prior publication: the timescale shall be determined in the Request to Participate.

(b) For contracts below EU thresholds

Deadlines are initiated from the date of the publication of the call for tenders on the KIMDIS System (question 1.2); the said deadlines, according to Article 121 of Law 4412/2016, are as listed below:

■ Formal tendering: 22 days from the date on which the call for tenders was published.

■ Brief informal tendering: 12 days from the date on which the call for tenders was published.

■ Direct award: Within the period as stipulated in the Request for Expression of Interest.

(c) For concession contracts falling under the scope of Law 4413/2016

As far as timescales for concession contracts are concerned, Article 43 of Law 4413/2016 provides that the minimum time limit for the receipt of applications, whether or not including tenders, shall be 30 days from the date on which the concession notice was sent. Where the procedure takes place in successive stages, the minimum time limit for the receipt of tenders shall be 22 days from the date on which the invitation to tender is sent, which may be reduced by a further five days where the tenders are submitted via electronic means.


tenderers?

Law 4412/2016 includes:

(a) Exclusion grounds (Article 73-74) related to the status of the economic operators, leading to compulsory or potential exclusion from the contract award procedure are laid out as follows:

■ Compulsory exclusion grounds:

■ The economic operators’ legal representative(s) has(have) been the subject of a conviction by final judgment for specific criminal offences.

■ The economic operator is in breach of its obligations relating to the payment of taxes or social security contributions.

■ The economic operator has been sanctioned for specific labour law infringements of major importance.

For contracts of a value above EUR 1 million, economic operators should pay special attention to Law 3310/2005, according to which the status of an owner, partner, substantial shareholder or director of a media company is deemed to be incompatible with being owner, partner, substantial shareholder or director of a contractor of a public contract.

■ Potential exclusion grounds:

These grounds are specifically laid down in Article 73 par. 4 of Law 4412/2016 and may include: non-compliance with environmental, social and labour law rules; cases of bankruptcy, insolvency or similar situations; demonstration of guilt of grave professional misconduct; distortion of competition; serious deficiencies in the performance under a prior public contract, etc.

(b) Selection criteria

There are three sets of requirements that bidders must meet in order to participate in a public procurement procedure, namely: (a) suitability to pursue a professional activity; (b) economic and financial capacity; and (c) technical and professional skills.

Requirements under (b) and (c) have to be specified by the contracting authorities in line with the proportionality principle. Especially for the requirement listed under (a), as far as works, designs and technical services contracts are concerned, participation to tendering procedures is allowed to companies registered in the ‘Register of Contractors’ Enterprises’ kept by the Ministry of Infrastructure, Transport and Networks of Greece, or in any equivalent register kept in the country where the economic operator has its seat.

(c) Short-listed tenderers

In open procedures, bids can directly be submitted further to the publication of a call for tenders without any pre-qualification stage. However, this is not the case under the restricted procedure, competitive procedures with negotiation, competitive dialogue procedure and innovation partnerships, where the contracting authorities may limit the number of candidates in respect of the criteria or the rules defined in the contract notice.



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Public contracts may be awarded on the basis of the Most Economically Advantageous Tender (MEAT) criterion. The most economically advantageous tender may be identified on the basis of the price or cost or on the basis of the best price-quality ratio. In this context, the following novelties of Law 4412/2016 should be highlighted:

■ On the basis of the price or cost: In addition to the cases where a contract is awarded solely on the basis of price or cost, especially for supply contracts, according to Article 95 of Law 4412/2016, the most economically advantageous tender may result as a percentage discount offered upon a reference price, which is determined by a public authority.

■ On the basis of the best price-quality ratio: The contracting authorities take into consideration both the economical and the technical aspects of the tenders submitted, including qualitative, environmental and/or social aspects, linked to the subject-matter of the public contract in question. However, contracting authorities, according to Article 86 par. 7 of Law 4412/2016, may decide to award a contract by solely evaluating the technical aspects of a tender, on the basis of a fixed price.


low tenders?

Contracting authorities are not allowed to exclude tenderers when their tenders appear to be abnormally low, without beforehand asking for explanations on the price or costs in relation to the works, supplies or services. They may only reject a tenderer in the event that the evidence supplied does not satisfactorily account for the low level of price or costs proposed.


The awarding procedures include the following main phases:

(a) Assessment of the so-called eligibility and qualitative criteria.

(b) Evaluation of the so-called award criteria, namely the appraisal of (i) the technical offer (if any), and (ii) the financial offer.

(c) Examination of the supporting evidence that the preferred tenderer is asked to submit concerning the fulfilment of the eligibility and qualitative criteria.


bidders?

It should be noted that contracting authorities shall comply with the rule of transparency and the obligation to state reasons and to provide arguments in a clear, precise and unequivocal manner with regard to any unfavourable act or decision for bidders. The rules on debriefing are interrelated to the rules on remedies, which are analysed in Section 5.


As far as joint procurements are concerned, Law 4412/2016 provides the following:

Occasional joint procurement: two or more contracting authorities may agree to perform certain procurements jointly.

Centralised purchasing activities and central purchasing bodies: public purchasers may also acquire works, supplies and/or services from a central purchasing body.


Contracting authorities may allow tenderers to submit variant bids. A special provision for variants is required in the tender notice, otherwise alternative offers are rejected as inadmissible in their entirety.


One of the novelties brought by Law 4412/2016 is the thorough definition of ‘conflicts of interest’. The concept of ‘conflicts of interest’ covers any situation where staff members or members of the management board of the contracting authority, as well relatives thereof, who are involved in the conduct of the procurement procedure or may influence the outcome of that procedure have, directly or indirectly, a financial, economic, political or other personal interest, which might be perceived to compromise their impartiality and independence in the context of the procurement procedure.

In such cases, the abovementioned persons must notify the contracting authority of their situation, which in turn shall advise the Hellenic Single Public Procurement Authority and take any possible measures in order to avoid any potential distortion of the competition. If a conflict of interest remains, as an ultimum refugium, the candidate or tenderer associated with it shall be excluded from the procedure.




Market engagement and the involvement of potential bidders in the preparation of a procurement procedure constitute a potential exclusion criterion, as provided by Article 73 of Law 4412/2016 and, therefore, may be laid down in the relevant Call for Tenders. In view of the above, it can be required that the participants declare any similar situation in the respective fields of ESPD. In this event, the Contracting Authority provides the tenderers concerned with the opportunity to demonstrate that their participation in the preparation of the contract award procedure cannot cause distortion of competition. If it is not proven so, and in the absence of any other mitigating measures, this involvement may lead to their exclusion from the procedure.



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Exclusions from the award and monitoring procedures of Law 4412/2016 are listed in Articles 1 and 7-17 of Law 4412/2016 and cover the following cases:

■ Specific exclusions in the field of electronic communications.

■ Contests organised pursuant to international rules.

■ Specific exclusions for service contracts (e.g. acquisition or rental of real estate, legal services, financial services, etc.).

■ Service contracts awarded on the basis of an exclusive right.

■ Public contracts between entities within the public sector (“in-house’’ arrangements).

■ Public-Private Partnerships (‘PPPs’) which are excluded from the scope of specific articles of Law 4412/2016 and are mainly based on Law 3389/2005.

■ Contracts subsidised by contracting authorities.

■ Research and development services.

■ Defence and security contracts.




‘In-house’ arrangements are explicitly excluded by the provisions of Law 4412/2016. These arrangements may take the following forms:

Vertical agreements

A public contract awarded by a contracting authority to a legal person governed by private or public law where (a) the contracting authority exercises over the legal person concerned a control which is similar to that which it exercises over its own departments, (b) more than 80% of the activities of the controlled legal person are carried out in the performance of tasks entrusted to them by the controlling contracting authority, and (c) there is no direct private capital participation.

Horizontal agreements

A contract concluded exclusively between two or more contracting authorities shall fall outside the scope of Law 4412/2016 where (a) the contract establishes a cooperation between the participating contracting authorities with the aim of ensuring public services and achieving objectives they have in common, (b) the implementation of that cooperation is governed solely by considerations relating to the public interest, and (c) the participating contracting authorities perform on the open market less than 20% of the activities concerned by the cooperation.

‘Programme agreements’

Similarly to in-house agreements, specifically for public works and studies contracts, Article 44 of Law 4412/2016 introduces the tool of ‘Programme Agreements’, intended to be used by contracting authorities who do not possess a certain standard of technical sufficiency to carry out the procurement under their responsibility. These contracting authorities can sign a Programme Agreement with a supervising public authority, or in the absence of the latter, with any public authority within the spectrum of ‘General Government’ (which includes ministries, local government bodies and other entities governed by public or private law), which

assumes the responsibility for carrying out the award procedure and the supervision of the awarded contract.

5 Remedies



The incumbent legislation provides a set of detailed provisions regarding judicial review in conformity with the Remedies Directive 2007/66/EC. Notably, Law 4412/2016 has enacted a new dispute mechanism, according to which the robust framework of the Remedies Directive applies not only to contracts falling within the scope of Directive 2014/24/EU, but also to any public contact the estimated value of which exceeds EUR 60,000. Under Book IV of Law 4412/2016, review procedures include processes of (a) administrative remedies, and (b) judicial review before the competent Courts.

(a) Administrative remedies (Articles 360-367)

i. For contracts of an estimated value above EUR 60,000, any act or omission of a contracting authority, which is enforceable and is deemed to infringe EU or Greek Law, can be challenged by filing a pre-judicial objection before the Authority for the Hearing of Pre-Judicial Objections (AEPP). For the admissibility of the pre-judicial objection, complainants have to pay an administrative fee that amounts to 0.5% of the estimated value (net of VAT) of the contract.

ii. For contracts of an estimated value below EUR 60,000, any interested participant may submit a complaint before the contracting authority within five days from the date of notification of the decision in question.

(b) Judicial Review

i. Interim relief measures (Article 372 par. 4)

Acts of AEPP may be challenged by both contracting authorities and applicants of the objection by filing an Application for Suspension before the administrative Courts. For the admissibility of the Application for Suspension, applicants have to pay an administrative fee that amounts to 0.1% of the estimated value (net of VAT) of the contract.

Rulings of contracting authorities upon complaints for contracts of an estimated value below EUR 60,000 may be contested before the competent administrative or civil Courts.

ii. Application for Annulment (Article 372 par. 4)

In the case that an Application for Suspension has been admitted, the party who succeeded the suspension must file an application for annulment, otherwise the validity of the suspension will be automatically revoked.

iii. Claim of damages

If a contracting authority proceeds to signing a contested contract despite the interim relief measures, the party in question may raise claims by filing an award for damages. Furthermore, an award for damages can be filed by a contractor during the period of contract execution.



If Greek authorities violate their obligations deriving from EU public procurement law, an economic operator may lodge a complaint before the European Commission. Moreover, a



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complainant before Greek courts may ask from the competent court to refer a question for a preliminary ruling to the EU Court of Justice.


sought?

The competent bodies for the aforementioned remedies are:

For contracts above EUR 60,000

■ Pre-Judicial Objections, related to contracts of an estimated value equal to or above EUR 60,000, may be brought before the Authority for the Hearing of Pre-Judicial Objections.

■ Applications for Suspension of the decision of the Authority for the Hearing of Pre-Judicial Objections may be brought before the competent Administrative Court of Appeal. For contracts of a value above EUR 15 million, the competence lies with the Council of State. Similarly, disputes arising from the award of concession contracts falling within the scope of Directive 2014/24/EU are being heard by the Council of State.

■ Applications for Annulment of the decision of the Authority for the Hearing of Pre-Judicial Objections may be brought before the competent Administrative Court of Appeal.

■ The petition for award of damages during the award process, regardless of the estimated value of the contract, may be brought before the competent administrative courts. The petition for award of damages during the execution phase, regardless of the estimated value of the contract, may be brought before the competent administrative or civil courts. It should be noted that the petition for award of damages during the execution phase of a work contract, irrespective of the contracting authority’s legal nature, may be brought exclusively before the competent administrative courts.

For contracts below EUR 60,000

■ Complaints related to contracts of an estimated value below EUR 60,000 are lodged before the contracting authorities.

■ Decisions of contracting authorities on complaints for contracts of an estimated value below EUR 60,000 may be contested before the competent administrative or civil courts.


remedies?

Limitation periods for applying for remedies provided by Law 4412/2016 are short and require the complainant to be prompt. Moreover:

For contracts above EUR 60,000

(a) The time-limit to lodge a Pre-Judicial Objection before AEEP is 10 days from the notification of the contested act, in case of notification by electronic means, or 15 days if other means of communication have been used or the objection is addressed against an omission.

(b) The time-limit to lodge an Application for Suspension is 10 days after the issuance of the AEEP decision.

(c) The time-limit to lodge an Application for Annulment is 10 days after the notification of the court ruling upon the application for suspension.

For contracts below EUR 60,000 the time-limit to lodge a complaint before the contracting authority is five days from the notification of the contested act.


periods?

Except for the case of shortening the limitation period for lodging a Pre-Judicial Objection, due to the use of electronic communication as stated in question 5.4, no further measure is foreseen.


Article 368 of Law 4412/2016 provides a remedy for the annulment of the signed contract for the following reasons related to the award procedure: (a) the contracting authority has awarded the contract without prior publication; (b) if the obligation to suspend the contract has not been complied with; and (c) when the awarding procedures for a framework agreement or for a dynamic purchasing system have been violated.

It should be noted that any dispute arising from the execution of the contractual obligations (i.e. action for compensation) is subject to ordinary procedural rules (as analysed in question 5.3).


remedies is made?

(a) The timescale with regard to the Pre-Judicial Objection before AEEP is as follows:

■ The case has to be heard within 40 days after the filing of the objection.

■ The time limit for the issuance of the ruling is 20 days after the hearing.

(b) The timescale with regard to processes before the competent Administrative Court of Appeal is as follows:

■ The Application for Suspension shall be heard no later than 30 days after its filing. The court decision is issued within 20 days after the hearing.

■ The Application for Annulment shall be heard no later than three months after its filing.



(a) Authority for the Hearing of Pre-Judicial Objections (AEPP) Decision no. 39/2017: A qualitative selection criterion providing that the tenderer should have successfully performed a number of contracts to contracting authorities of specific capacity (i.e. 500-bed capacity hospitals) is not related with the technical and professional ability of the tenderer to execute the contract, but with the special features of the relevant contracting authorities. In this respect, such condition restricts competition and prevents SMEs from entering into a certain market. Furthermore, a qualitative selection criterion according to which a tenderer should submit two annual activity reports restricts competition, given the fact that it impedes the access of new entrants that have been established recently to the relevant market. Last but not least, the use of electronic means of tendering procedures shall not result in disproportionate formal reasons for exclusion that unduly distort competition.

(b) Authority for the Hearing of Pre-Judicial Objections (AEPP) Decision no. 116/2017: Τhe mere fact that two companies participating in the same award procedure are “associated enterprises” shall not be regarded by the contracting authority per se as a reason for their automatic exclusion. In any case, the exclusion of “associated



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enterprises” shall be regarded as compatible with the incumbent legislation only if the contracting authority has evaluated the connection between the participating enterprises and has concluded that this connection affects in concreto the competition between the tenderers in a specific award procedure.

(c) Authority for the Hearing of Pre-Judicial Objections (AEPP) Decision no. 120/2017: Ιn light of the new Directive 2014/24/EU, it can be construed that a criterion, under certain conditions, may be adopted as a qualitative selection criterion or as an award criterion. However, this cannot lead to an overlap between the two types of criteria in a specific procurement procedure. The above is also reflected in Article 86 par. 13 of Law 4412/2016, providing that if a tender does not meet a minimum standard of technical specifications should be excluded from the award procedure, which means that award criteria, in such respect, bring the same results with qualitative selection criteria. In any case, in view of the principles of transparency and equal treatment, a call for tenders must clearly define to which extent a criterion might serve as a qualitative criterion and, further to this, under which terms this criterion might be assessed as an award criterion.



The mitigation measures a contracting authority may take are the following:

■ Request that AEPP does not impose the suspension of the tendering process or, if the contract has already been signed, not to declare it void on grounds of public interest.

■ Lodge an appeal against acts of AEEP.

■ Proceed to partial annulment of the tendering process, continuing from the point where an irregularity occurred, or even cancel the tender and re-launch it (Article 106 par. 2 and 3).


Procedure







In view of the principles of equal treatment and transparency, the most important cases of pre-contract award changes regulated by Law 4412/2016 are as listed below:

■ Article 121 provides that when a provision of the tendering documents has to be amended, the time-limit for the submission of tenders should be extended.

■ Article 104 foresees that the award of a public supply or service contract may under certain conditions vary, in terms of quantity, and exceed up to 15% or be less than 50% of the initially estimated value of the contract.

■ The same article also provides that changes to the membership of bidding consortia should be notified to the contracting authority before the invitation to the preferred tenderer to submit its documents of evidence (see question 3.6).



As mentioned at question 3.1, negotiations may exceptionally take place only when applying the negotiation procedures. Under the regular procedures, negotiations after the tender submission are prohibited. However, it should be mentioned that the contracting authority has the discretion to invite the bidders to supplement or provide clarifications upon issues that do not involve changes to the essential aspects of their tenders (Article 102).


signature?

In general terms, modifications may occur provided that they are not substantial. By virtue of Article 132, the amendment of a concluded contract without a new procurement procedure is permitted in the following exceptional cases:

■ where modifications, irrespective of their monetary value, have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses;

■ for additional works, services or supplies that have become necessary where a change of contractor cannot be made for economic or technical reasons; and

■ where the modifications have become necessary as a result of extraordinary circumstances, which a diligent contracting authority could not foresee.



signature?

Under the provisions of Article 130 of Law 4412/2016, the replacement of the initial contractor by a new one is considered to be fair as a consequence of:

■ an unequivocal review clause or option;

■ universal or partial succession into the position of the initial contractor, following corporate restructuring; and

■ in the event that the contracting authority itself assumes the main contractor’s obligations towards its subcontractors.




them?

The Hellenic Republic Asset Development Fund (HRADF) was established in 2011 (Law 3986/2011) aiming to restrict governmental intervention in the privatisation process and further develop it within a fully professional and private context.

In addition to that, a new Super-Fund under the name ‘Hellenic Corporation of Assets and Participations S.A.’ (H.C.A.P.) which was established in 2016, by virtue of Law 4336/2015, with the objective to own and manage a large number of assets belonging to the Greek State. H.C.A.P. also operates as the holding company of four subsidiaries, namely: (a) the Hellenic Financial Stability Fund, entrusted with the stabilisation of the Greek banking sector; (b) the Hellenic Republic Asset Development Fund, the entity that has so far managed the privatisation programme; (c) the Public Properties Company, which owns and manages all real estate assets of the



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Greek State; and (d) the Public Participations Company, which holds the participations of the Greek State in a number of public companies.

H.C.A.P. will exploit and optimise the value of all assets owned by its subsidiaries, operating under private economy and, thus, overcoming bureaucracy obstacles, inherent to the operation of public or quasi-public entities. The above framework sets a very ambitious and challenging privatisation package, the implementation of which could create a ‘flood’ of investment opportunities.



Due to the lack of public funds, nowadays PPPs appear to be an appealing vehicle for large-scale projects especially in the fields of environment, waste-management, energy, urban development, transport and digital-convergence.

Law 3389/2005 relating to ‘Public-Private Partnerships’ (OJ 232/A’/22.09.2005) offers a solid and coherent framework for the implementation and development of PPPs, which has been well ‘tested’ before the competent courts during its application, thus providing legal certainty.

The ‘PPP Special Secretariat of the Ministry for Development and Competitiveness’ is entrusted to coordinate and to safeguard the interests of all parties by providing clarity, continuity and security at all stages of a PPP project life-cycle.

The principal issues that arise in relation to a PPP project can be summarised as follows:

■ The award procedure is excluded from the scope of specific articles of Law 4412/2016 and is based on the provisions of Law 3389/2005. The selected private entities conclude contracts through SPVs that are established exclusively for the purposes of the project.

■ The private entities assume the risks associated with the financing, the availability and the construction of the necessary infrastructure or the provision of the services, against a consideration paid in lump sum or in instalments by the Public Entities (availability payments) or the end users of the services (e.g. tolls).

The approval of inclusion of a PPP project to the framework of Law 3389/2005 is subject to a decision issued by an Inter-Ministerial Committee.

PPP schemes under Law 3389/2005 are a significant means of achieving the strategic priorities of public entities, complementary to other forms of partnership between the public and the private sector, such as concession agreements, which are governed by the recently introduced Law 4413/2016 (see question 2.5).

8 The Future



impact?

Law 4412/2016, which entered into force in August 2016, is not expected to be repealed or substantially changed. However, at the end of 2018, it was amended 25 times; these amendments resulted from the built-in dynamism of public procurement policy and were aimed mainly at overhauling issues of a procedural or technical nature.




Law 4412/2016 provides the delegation for the issuance of a series of presidential decrees and ministerial decisions, which may regulate the award within specific subject-matters of contracts (e.g. works) or technical issues, but are not capable of altering the core policies of Law 4412/2016.

Acknowledgment

The authors would like to acknowledge the contribution of their colleague Demetrios Bouzoukas in the preparation of the chapter.


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Greg Michailopoulos


7, Pindarou Str.

10671 Athens

Greece

Tel: +30 211 770 0 670 Email: [email protected] URL: www.gmlaw.gr

Marios Markatos


7, Pindarou Str.

10671 Athens

Greece

Tel: +30 211 770 0 670 Email: [email protected] URL: www.gmlaw.gr

MICHAILOPOULOS & ASSOCIATES is a boutique law firm, distinguished for its public finance and business law practice. In this context, Public

Procurement Law lies at the core of our practice.

We provide comprehensive legal services across the whole spectrum of public procurement issues, by consulting and litigating on behalf of bidders,

as well as on behalf of contracting authorities.

We have handled a great number of cases related to contentious proceedings at administrative and judicial level; we have provided legal guidance

upon strategy matters related to the participation of bidders throughout the entire public procurement process; we have drafted numerous legal

opinions on delicate issues related to the participation of tender procedures; and we have been involved in significant PPP projects and concession

agreements.

At the same time, our client portfolio contains a variety of public authorities and entities, such as ministries, local government bodies and state-owned

companies. Therefore, our profound understanding of the contracting authorities modus operandi, in addition to our extensive experience in advising

bidders, renders us a key provider of best practice and know-how in this field.

Gregorios Michailopoulos is the Founder and Managing Partner of

MICHAILOPOULOS & ASSOCIATES. He possesses substantial

experience in providing legal advice and counselling on Public

Procurement, Public Finance and Business Law matters.

Greg has consulted and represented an extensive number of

multinational and local business operators active in several business

sectors, as well as public entities and organisations. Greg's litigation

experience spreads over the whole spectrum and jurisdictions of

Greek courts and extends to the Court of Justice of the European

Union (CJEU), where he has pleaded cases related to Public

Procurement.

From his previous capacity as Head of the Legal Support Unit at the

Ministry of Development and Competitiveness, Greg has handled a

great number of cases related to complex investment plans and co-

financed projects by EU Funds while he has also been involved in the

legal fine-tuning of important legal acts related to development and

competitiveness issues.

Greg is the author of the books ‘Legal Handbook of Contracts’

(Dashöfer publication), ‘Contracts of Private and Public Law' and

'Contracts of Contemporate Commerce’ (Sakkoulas publication). He

is often invited as an instructor to scientific workshops and seminars in

the field of Public Procurement, PPPs and State Aid Law.

Marios Markatos is an Associate Lawyer with MICHAILOPOULOS &

ASSOCIATES. He specialises in Public Law and has a strong

academic background and practical experience in Public Procurement.

Marios has expertise in consulting both contracting authorities and

bidders on complicated public procurement issues. He has advised

bidders on contentious proceedings and has handled objections and

administrative appeals before the competent courts. Marios has also

played an important role in the structuring of the procurement process

and the preparation of tendering documents for a significant

concession contract in Greece.



Chapter 12


BTG Legal

Prashant Mara

Devina Ramakant Deshpande

India




The legal and regulatory public procurement framework in India broadly comprises the following elements:

(i) Constitutional provisions: The Constitution of India authorises the Central and State Governments to contract for goods and services in the name of the President of India or the Governor of the State (respectively), and directs autonomy in public spending. However, it does not stipulate any procurement policies or procedures.

(ii) Legislative provisions:

■ There is no comprehensive central legislation exclusively governing public procurement. Nonetheless, various procurement rules and policies (see below) are guided by central legislations such as the Contract Act 1872, Sale of Goods Act 1930, Prevention of Corruption Act 1988, Arbitration and Conciliation Act 1996, etc.

■ In addition, certain states, like Tamil Nadu, Karnataka, Andhra Pradesh, Assam and Rajasthan have enacted state-specific legislation such as the Tamil Nadu Transparency in Tenders Act, 1998, Karnataka Transparency in Public Procurement Act, 1999, the Rajasthan Transparency in Public Procurement Act, 2012, etc., that govern procedure for procurement in these states.

(iii) Administrative guidelines:

■ Comprehensive administrative rules and directives on financial management and procedures for government procurement are contained in the General Financial Rules (“GFR”) initially implemented in 1947 and last modified in 2017. All government purchases must strictly adhere to the principles outlined in the GFR, which include specific rules on procurement of goods and services and contract management.

■ In addition, the Manual for Procurement of Goods, 2017 (“MPG”) contains guidelines for the purchase of goods, and the Delegation of Financial Powers Rules, 1978 (“DFPR”) delegate the government’s financial powers to various ministries and subordinate authorities.

■ This is supplemented by: (a) manuals and policies governing procurement by individual ministries/ departments such as defence and railways (see question 1.3 below); (b) guidelines issued by the Directorate General of Supplies and Disposals (“DGS&D”), the central purchase organisation which undertakes

procurement on behalf of ministries/departments that lack the expertise to undertake procurement themselves.

■ In 2017, the government issued the Public Procurement (Preference to Make in India) Order 2017 which grants purchase preference to local suppliers based on certain conditions so as to promote manufacturing and production of goods and services in India.

(iv) Overseers: The framework is bolstered by authorities including: (a) the Central Vigilance Commission (“CVC”) tasked with increasing transparency and objectivity in public procurement; (b) the Competition Commission of India (“CCI”) which checks anti-competitive elements; and (c) the Central Bureau of Investigation (“CBI”) engaged for investigation and prosecution of the criminal activities in the procurement process such as probity issues.

In summary, a public procurement process must adhere to: (i) GFR and MPG; (ii) sector-specific procurement rules contained in manuals published by the relevant ministry; and (iii) state-specific legislation on transparency in procurement. As between the procurer and the supplier, these rules above flow down via a tender award and a contract.




of the legislation?

India’s regulatory and institutional framework seeks to ensure responsibility, accountability and efficiency in the public procurement regime. The underlying principle is to procure materials/services of specified quality at the most competitive prices in a transparent and non-arbitrary manner.

This is evident in the GFR which declares that all authorities delegated with the financial powers of procuring goods in public interest will be responsible and accountable to ensure efficiency, economy and transparency, fair and equitable treatment of suppliers, and the promotion of competition in public procurement. To this end, specific measures have been set out under the GFR including requirements pertaining to contents of the bidding documents, description of the subject matter, quality and quantity specifications, preparation of an annual procurement plan by all ministries/departments, adherence to a code of integrity to address probity issues, etc.

Further, the Supreme Court of India has recognised that while the government must have freedom of contract:

(i) all contracts by the State should only be granted by public auction/tenders to ensure complete transparency and provide all eligible persons with the opportunity to participate in the auction;


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(ii) all official acts must be actuated by public interest, and should inspire public confidence;

(iii) generally, the State should not grant contracts by private negotiation (subject to certain exceptions based on the nature of the trade, emergency circumstances, single source supply, etc.); and

(iv) appearance of public justice is as important as doing justice (i.e. government actions should not only be fair but should also be seen to be fair, and nothing should be done which gives an impression of bias, favouritism or nepotism).



(i) Defence: Governed by the Defence Procurement Procedure, 2016 (“DPP”) and the Defence Procurement Manual 2009 (as amended from time to time) which envisage various modes of procurement including indigenous, capital, local purchase, etc.

(ii) Railways: Governed by a number of specific laws and uses the Indian Railway e-Procurement Systems (“IREPS”) for procurement.

(iii) Energy: New Exploration Licensing Policy (“NELP”) under the Petroleum and Natural Gas Regulatory Act, 2006, provides for the evaluation of bids according to a quantitative bid evaluation criteria.

(iv) Electronics: The Preference for Domestically Manufactured Electronic Products Policy (2013) applies to all ministries/departments (except the Ministry of Defence) for electronic product procurement for government purposes.

(v) Electricity: Electricity Act, 2003 provides for the determination of tariffs through bidding processes by distribution licensees for the procurement of power.

(vi) Telecoms: Guided by the National Telecom Policy (currently in the process of being re-worked to transition from physical to digital infrastructure. See question 8.1 below).

(vii) Renewables: The Ministry of New & Renewable Energy has released a National Policy on Biofuels and a Strategic Plan for New and Renewable Energy Sector. In 2017, the government issued guidelines for wind power procurement to enable the distribution licencees to procure wind power at competitive rates in a cost-effective manner.

(viii) Micro, small and medium-sized enterprises (“MSMEs”): Under the Public Procurement Policy for Micro and Small Enterprises Order 2012, a minimum of 20% of annual value of goods/services of the Central Government and public sector undertakings (“PSUs”) must be procured from micro and small enterprises (with further reservation of 4% in favour of MSMEs owned by ‘backward classes’).

(ix) Pharmaceuticals: Pharmaceutical Purchase Policy 2013 reserves the procurement of certain medicines from Central Public Sector Enterprises.

(x) DGS&D: Procurement of stores for the Central Government is undertaken pursuant to the manual of the DGS&D, which is the relevant authority in respect of such procurements.



public procurement?

Transparency, competition and curbing of probity issues is further ensured through:

(i) Competition Act, 2002: Penalises anti-competitive activities such as bid rigging, collusive bidding, cartelisation, and abuse of dominance.

(ii) Right to Information Act, 2005: Promotes transparency in government dealings by entitling Indian citizens to expeditiously procure information from the government through a “right to information” application.

(iii) Integrity pact under the GFR and CVC guidelines: Addresses probity in procurement activities including through the appointment of an external monitor to mitigate corruption and ethical risks.

(iv) Prevention of Corruption Act, 1988 and Prevention of Money Laundering Act, 2002: Penalise bribery and money-laundering and provide for confiscation of property derived from money-laundering and other illicit activities.



agreements?

Although India has not acceded to the GPA, it became an Observer State in 2010.


Contracts



Government and government agencies, or entities otherwise deemed to be ‘state entities’ for the purposes of the Constitution will be governed by the procurement framework. The concept of ‘state entities’ has been expanded through judicial review to include all ministries and departments of the Central and State Governments, corporate entities owned/controlled by central or state governments, public authorities exercising statutory powers, statutory authorities and non-statutory authorities exercising public functions, or otherwise under the direct or indirect control of the aforementioned ‘state entities’.

Further, autonomous bodies that are created or owned by, or receive grants from, the Government, and entities whose services are being utilised by the entities mentioned above or to whom the procurement process has been outsourced (such as procurement support agencies or procurement agents) will also be covered.


The regulatory framework covers all contracts offered by the government at the central, state or local level. Examples of types of contracts covered include PPP contracts, concession agreements, operation and maintenance contracts, engineering procurement and construction contracts, supply of equipment, supply of services, transfer of technology, etc.



While the GFR applies to all instances of procurement of goods required for public sector use regardless of the value of the goods, monetary thresholds are involved in the following instances under the GFR:

(i) Purchases of up to INR 250,000 can be made at the discretion of the ministry/department by issuing purchase orders containing basic terms and conditions.

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(ii) For works contracts valued at: (a) INR 100,000 – INR 1,000,000, the letter of acceptance will result in a binding contract (subject to certain conditions of contract being included in the tender document); and (b) INR 1,000,000 and above, a contract must be executed (which can be a “simple one page contract” where preceded by an invitation to tender and conditions of contract).

(iii) Goods can be purchased without inviting bids: (a) on the basis of a certificate from the competent authority, where the goods are of up to INR 25,000 in value; and (b) on the recommendation of the relevant Local Purchase Committee if between INR 25,000 and INR 250,000 in value.

(iv) A limited tender enquiry (with no advertisement necessary) can be pursued for goods valued less than INR 2,500,000.

(v) The monetary ceilings for direct online purchases on the Government e-Marketplace (“GeM”, a portal for the purchase of common use goods and services) are as under:

(a) up to INR 50,000: through any of the available eligible suppliers on GeM;

(b) INR 50,000 – INR 3,000,000: eligible GeM seller having the lowest price of amongst at least three different manufacturers; and

(c) over INR 3,000,000: eligible supplier having the lowest price after mandatorily obtaining bids using the online bidding/reverse auction tool.


These issues are typically governed by the tender documents which may, for instance, specify that the credentials of a bidder may not be aggregated with those of its group companies/holding company/JV partner, etc. for the purpose of determining compliance of the bidder with the specified qualification criteria for the supply of goods. The documents may also permit clubbing the financial standing credentials of the fully owned subsidiary bidding company with those of its holding company, with appropriate legal documents proving such ownership. Bidders may be queried during the tender process and requested to provide substantiating documents to ensure probity.



Concession contracts are agreements where the right is granted to a private sector entity to undertake actions for the provision of a public good or service, which would, save for such grant, be provided by a public sector entity.

There are no comprehensive central rules or regulations governing concessions. However, states such as Tamil Nadu, Gujarat, Himachal Pradesh, Punjab, Andhra Pradesh and Bihar have infrastructure development laws that include matters pertaining to work or services concessions.

Further, Model Concession Agreements (“MCAs”) have been formulated by the government to standardise terms on which licences are granted to private entities for delivery of goods and services for public benefit. MCAs have been developed across sectors (for instance for highways, metros, ports, airports, railway stations, etc.) and set out the contractual framework for implementation of PPP projects under the policy and regulatory framework in question 1.1 above. They address critical issues such as mitigation and unbundling of risks, allocation of risks and returns, symmetry of obligations, reduction of transaction costs, termination, etc. Various versions of the MCA have been

formulated on the basis of the different PPP modes such as Build Operate Transfer (Toll), Build Operate Transfer (Annuity), Design, Build, Operate and Transfer (“DBOT”) and Operate Maintain and Transfer (“OMT”).



Yes, the GFR and MPG lay down principles pertaining to the conclusion of framework agreements, typically referred to as ‘rate contracts’. Such contracts can be entered into with one or more suppliers for the supply of specified goods/services at specified prices and for a specified period of time. The contract is in the nature of a standing offer from the supplier and no quantity or minimum drawal is guaranteed under the contract. The procurer can conclude more than one rate contract for a single item and also has the option to renegotiate the price with the rate contract holders.

Typically, rate contracts are entered into by DGS&D for common user items which are frequently needed in bulk across government departments. If a ministry/department directly procures goods for which DGS&D has a rate contract in place, the price paid for the goods should not exceed that stipulated in the rate contract. The MPG further suggests that rate contracts should be entered into by DGS&D via the GeM for specialised and engineering items.


into lots?

Yes, there is an accepted principle of division of contracts into “parallel contracts” on terms to be set out under the tender documents. The tender documents will reserve the right of the procurer to divide the contract quantity between suppliers. The manner of deciding the relative share of lowest bidder (L1) contractor and the rest of the contractors/tenderers should be clearly defined under the tender, along with the minimum number of suppliers sought for the contract. This is particularly advantageous for the procurer in case of critical/vital/safety/security nature of the item, large quantity under procurement, urgent delivery requirements and inadequate vendor capacity, to ensure security of supply.

Further, the MPG suggests that if it is discovered that the quantity under the tender is such that a sole supplier is not capable of supplying the entire quantity, and there was no prior decision/declaration in the bidding documents to split the quantities, then the quantity finally ordered may be distributed among the other bidders by counter offering the L1 rate in a manner that is fair, transparent and equitable.

However, the GFR prohibits dividing a demand for goods into small quantities so as to make piecemeal purchases to avoid procurement through L1 buying (i.e. lowest price), bidding or reverse auction requirements on GeM or the necessity of obtaining the sanction of higher authorities (which may be required based on the estimated value of the total demand).



While there are no obligations specific to foreign suppliers, the GFR and the procurement policies established under its general principles seek to ensure the transparent, fair and equitable treatment of all suppliers – whether local or foreign – and the promotion of competition in public procurement.

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However, the following items are of relevance to foreign bidders and suppliers:

(i) Certain manuals of ministries and PSUs may, under the term of the tender documents, obligate foreign suppliers to enter into the tender contract and supply via a local entity (as a JV, consortium or subsidiary).

(ii) Further performance guarantees may be sought from foreign suppliers who do not have a track record of supply in India.

(iii) Certain long-term contracts may have continuing obligations in the form of transfer of technology and warranty support from foreign suppliers.

(iv) For qualifying contracts under the Public Procurement (Preference to Make in India) Order, 2017, local suppliers will be given purchase preference if they match the winning bid of a foreign supplier within a certain margin above the L1 price (see question 3.4 below for more information).

3 Award Procedures




(i) Advertised Tender Enquiry: This is the default mode of procurement. The tender is advertised on governmental websites, national newspapers, the Indian Trade Journal, the central public procurement portal (“CPPP”) and GeM, and also circulated to foreign embassies (in the case of global tenders).

(ii) Limited Tender Enquiry: Procurement is obtained through selected suppliers. A pre-selected list of vendors, prepared through a thorough screening process, is directly approached for bidding. As this strains the transparency principle, it should only be pursued for goods/services up to INR 2,500,000 in value.

(iii) Two-stage Bidding: Two bids (technical and financial) are invited from the procurers (usually in highly technical tenders).

(iv) Nomination-based Tenders:

(a) Proprietary Article Certificate (“PAC”): Where items can only be procured from the original equipment manufacturers or manufacturers having proprietary rights, this is done against a PAC signed by the appropriate authority.

(b) Single Tender Enquiry: Procurement under invitation to one firm only, without a PAC. Typically used:

■ in emergencies with the approval of a competent authority; and

■ for machinery standardisation or for procurement of spare parts that are compatible with existing machinery/equipment (on the advice of a competent technical expert and approved by the competent authority).

(v) Procurements without Calling Tenders: This is typically undertaken for small value purchases of standard specifications and includes withdrawals against rate or framework contracts (see question 2.6), direct procurement without quotation (for goods upto INR 25,000 with approval of the competent authority) and direct procurement by the Purchase Committee (for goods up to INR 250,000, and based on market survey to ascertain reasonableness of rate, quality and specifications).

(vi) Electronic Reverse Auction: Presentation by bidders of successively more favourable bids during a scheduled period of time and automatic evaluation of bids.

(vii) Government to Government (“G2G”): Also known as Foreign Military Sales Program, G2G deals involve the transfer/sale of a country’s defence equipment, services, training, etc. to other foreign governments. In the defence sector, the DPP contemplates the conclusion of an Inter-governmental Agreement for such purpose, along with the deputation of a delegation to the seller country (to ascertain acceptability of equipment, select from multiple choices, etc.).

The choice of procedure will in large part be dictated by the subject matter, value, technical complexity and nature of the procurement. The method chosen must be consistent with the criteria of pre-qualification and any restrictions that are imposed before execution, and the mandates of the GFR must at all times be adhered to.


Ordinarily, the minimum time to be allowed for submission of bids should be three weeks from the date of publication of the tender notice or availability of the bidding document for sale, whichever is later. Where bids are also to be obtained from abroad, the minimum period should be four weeks for both domestic and foreign bidders.

In terms of the award of the tender, while the MPG sets out a suggested time schedule as a guideline for finalising contracts against various modes of procurements, the schedule will typically be led by the nature of requirements, sourcing, sample evaluation, site visit/pre-bid meeting with prospective bidders and government, etc. guidelines. The GFR stipulates that, to reduce delay, the appropriate timeframe for each stage of procurement should be prescribed by the relevant ministry/department.


tenderers?

The Central Purchase Organisation (e.g. DGS&D) maintains a list of “registered suppliers” (i.e. eligible suppliers who are qualified and capable of delivering goods commonly required for government use). All ministries/departments can utilise this list of suppliers, in addition to maintaining their own list of suppliers. Registration is undertaken based on parameters captured under the GFR and other specific procurement guidelines, including the supplier’s past performance, manufacturing capabilities, quality control systems, after-sales services and financial standing.

However, a supplier can be removed from the list of approved suppliers if he fails to comply with the terms of the registration, fails to supply the goods on time, supplies substandard goods, makes a false declaration to any government agency or in public interest.

Further, a bidder can be debarred/blacklisted (i) for up to three years, if he has been convicted of corruption or of a criminal offence as part of execution of a public procurement contract, and (ii) for up to two years for breach of the code of integrity.




Generally, the criteria for evaluation of bids are:

(i) technical qualifications: technical specifications and prior technical performance of the product, past experience of the bidder, availability of qualified personnel, etc.;

(ii) financial qualifications: solvency, net worth, etc.; and

(iii) financial proposal: the tender is typically awarded to the lowest evaluated bid (“L1”).

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However, the government has sought to boost the domestic sector through reserved/preferential procurement of locally produced goods and services such as in the pharmaceuticals and electronics sectors. PSUs have been permitted to relax the norms of ‘prior experience and prior turnover’ for MSME bidders.

The Public Procurement (Preference to Make in India) Order, 2017 also seeks to promote manufacturing and production of goods and services locally in India. Thereunder, and in respect of procurement for goods where the relevant Ministry has communicated that sufficient local capacity and local competition exists, only local suppliers will be eligible to contract for contracts that are less than INR 5,000,000 in value. For contracts which have a value of over INR 5,000,000, local suppliers will be given purchase preference if they match the winning bid of a foreign supplier within a certain margin above the L1 price.

In addition, in certain sector-specific procurement guidelines (such as defence and telecoms), offset content (local content) and value of such offset is an important factor in the valuation of a tender.


low tenders?

Under the MPG, an ‘abnormally low bid’ is one in which the bid price, in combination with other bid elements, appears so low as to raise material concerns regarding the capability of the bidder to perform the contract at the offered price.

The MPG suggests that the procuring entity should seek written clarifications from the bidder, including detailed price analyses of its bid price covering scope, schedule, allocation of risks and responsibilities, and any other requirements of the bid’s document. If, thereafter, the procuring entity determines that the bidder has substantially failed to demonstrate its capability to deliver the contract at the offered price, it may reject the bid/proposal. Abnormally low tenders may lead to a conclusion of anticompetitive behaviour, which is also a ground for ordering a re-tender.


All tenders must be evaluated strictly on the basis of the terms and evaluation methods captured under the tender enquiry document (based on which offers have been received) and no new material condition can be brought in at the time of evaluation.

In a two-stage tender, bids are obtained in two parts: (i) the technical bid consisting of all technical details along with commercial terms and conditions; and (ii) the financial bid indicating itemised pricing for the items mentioned in the technical bid. The technical bids are opened by the procuring ministry/department in the first instance, and evaluated by a competent committee. At the second stage, the financial bids of only those bidders whose offers are found to be technically acceptable are opened. These bidders are intimated the date and time of the opening of the financial bid for further evaluation and ranking, pursuant to which the contract is awarded.

Generally, the contract is awarded to L1, subject to the procurer determining that the price is reasonable (based on factors such as receipt of sufficient competitive bids from different sources, current market price, last purchase price of same/similar goods, terms and period of delivery, etc.). However, the contract may also be awarded to the highest bidder (i.e. H1 method, typically in case of contracts contemplating revenue sharing, return on the procurer’s equity, etc.), bidder requiring the lowest government grant/subsidy or shortest concession period, etc.


bidders?

While there are no specific rules regarding debriefing of unsuccessful bidders, GFR stipulates that bid securities must be returned to unsuccessful bidders within 30 days after the award of the contract.


There are no separate procedures specified, and the general procurement rules will apply. Under the GFR, in the case of projects jointly executed by several governments, where the expenditure is to be shared by the participating governments in agreed proportions, and where the expenditure is initially incurred by one government and the shares of the other participating governments are recovered subsequently, such recoveries from the other governments are to be exhibited as abatement of charges under the relevant expenditure Head of Accounts in the books of the governments incurring the expenditure initially.


Alternative/variant bids must be specifically permitted by the terms of the tender in order to be considered. Failing this, such tender submission is liable to be rejected.


In tender submission, the GFR prescribes that no official of a bidder or a procuring entity shall contravene the code of integrity – which includes a disclosure of conflict of interest. The MPG further indicates that conflict of interest with other bidders is a ground for disqualification of a bidder in view of the anti-competitive practices that could arise therefrom. In tender evaluation, the courts have generally, and as a rule of administrative law, advocated the exclusion of persons having a conflict of interest from the bid evaluation/award process.




Market engagement and involvement of potential bidders is limited to the technical aspects of any procurement requirement and not for a procurement procedure.

In the case of a two-stage tender, the GFR stipulates that the procuring entity should hold discussions with the bidder community to finalise the technical specifications in the first stage, with a view to enhance the technical capacity of the procuring entity by drawing on the know-how from the market.

Further, sector-specific guidelines for defence recognise the need to share the future needs of armed forces with the defence industry. To this end, long-term acquisition plans and requirements are made available on the website of the Ministry of Defence for use by the industry. The industry may even be involved in consultations at the feasibility stage itself. Draft qualitative requirements, indicative time frames, envisaged quantities, etc. may also be shared, to the extent actionable by the industry.

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Generally, the involvement of a bidder in the bidding process (including in drafting the tender documents, discussing possible specifications, etc.) would lead to the disqualification of such bidder. In instances where the code of integrity is considered to have been breached, the bidder may be debarred for up to two years.




While it is mandatory, under the GFR, for ministries/departments to receive all bids through e-procurement portals in respect of all procurements, exemptions are made for:

(i) cases where national security and strategic considerations demands confidentiality (with the approval of the Secretary of the relevant Ministry); and

(ii) tenders floated by Indian Missions Abroad (with the approval of the competent authority).

Similar exemptions apply to e-publishing tenders on the CPPP.

In addition, G2G procurement does not follow standard procurement procedure but instead is based on provisions agreed between the Indian government and the government of the contracting country under an Inter-governmental Agreement. Further, in respect of the defence sector, separate provisions for fast-track procurement are applicable under the DPP for acquisitions for meeting urgent operational requirements.




There are no specific procurement rules applicable to in-house arrangements. In a “pure” in-house procurement (i.e. the performance by the procurer of activities using its own administrative, human, technical, etc., resources exclusively, without any support from an external entity), public procurement rules will not be applicable since there is no distinct and separate legal entity involved and there is no need to award a contract.

However, where the procurer does not perform the activity through an internal department but engages another government entity that is legally separate from the procurer, a contract between these entities must be concluded (i.e. an intra-government contract). In such event, the procurement rules discussed above will continue to apply. In keeping with general contracting principles, all intra-group contracts should be entered into on an arm’s length basis, should comply with transfer pricing regulations and should not trigger anti-avoidance measures.

5 Remedies



(i) An aggrieved bidder can report irregularities in the procurement process to the concerned officials of the procuring entity. This may include approaching the independent external monitor appointed under the CVC

guidelines to oversee implementation of the integrity pact. In addition, alleged probity violations can also be subject to criminal investigation by the relevant enforcement authorities.

(ii) The procurer can terminate the contract for default, insolvency, etc. of the supplier, forfeit performance security, blacklist the supplier, seek damages, etc.

(iii) Typically, and as directed by the MPG, tenders contemplate settlement of disputes via mutual consultation, failing which the parties can resort to arbitration as per the Indian Arbitration and Conciliation Act, 1996.

(iv) Courts can also be approached seeking enforcement of contractual terms and/or remedies such as damages for breach, specific performance and injunctions under the Indian Contract Act, 1872, the Sale of Goods Act, 1930 and the Specific Relief Act, 1963.



The bidding process is further subject to limited judicial review in the exercise of the writ jurisdiction of the High Courts and the Supreme Court of India. The courts will typically intercede only in cases of violation of constitutional/statutory requirements, a lack of transparency, reasonableness or fairness in action, or arbitrary conduct.

Further, Indian citizens are entitled to procure information from the government through a “right to information” (“RTI”) application. The RTI process is geared towards promoting transparency, and information requested is to be expeditiously provided by the relevant public authority.


sought?

See questions 5.1 and 5.2 above.

In addition, certain sector-specific regulatory authorities with judicial and quasi-judicial powers have been established to adjudicate disputes and dispose of appeals in a time-bound manner, such as the Telecom Disputes Settlement and Appellate Tribunal (“TDSAT”) and the electricity regulatory commissions.

The Competition Commission of India can also be approached to address anti-competitive issues in public procurement.


remedies?

Normally, claims for specific performance or compensation for contractual breach, involving private parties, should be raised within three years from the date on which cause of action arises (or, where the breach is continuing, the date on which it ceases). However, the limitation period for suits by or on behalf of the government is 30 years from the date on which the cause of action arose.

There is no deadline for approaching a court in its writ jurisdiction (as discussed in question 5.2). Nonetheless, writ petitions should be agitated in a timely manner by the aggrieved party. The court may decline to intervene in the event of an unreasonable delay.

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periods?

Limitation periods prescribed under law cannot be shortened or contracted out of.


See question 5.1, points (ii) – (iv) and question 5.2. Please note that in the case of infrastructure projects of a public nature, a recent amendment to specific relief law has prohibited the grant of injunctions that would hinder/delay completion of the project.


remedies is made?

Disposal of judicial proceedings in India can take from a few months to several years, based on complexity of the action, the forum, etc.



Ramana Dayaram Shetty v. International Authority of India (1979) is a landmark decision on the issue of state control and administrative action, with equal relevance in the sphere of public procurement. The Supreme Court observed:

■ Government actions must informed with reason, and not arbitrary.

■ Government actions must be based on standards that are neither arbitrary nor unauthorised.

■ The Government, when contracting, must do so in a fair manner, without any discrimination and by following a fair procedure.

■ If Government action departs from the above principles, it would be liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory.

In Centre for Public Interest Litigation v. Union of India (2012), the Supreme Court cancelled 122 2G spectrum licences issued to various telecom companies by the government on a “first come, first serve” policy at archaic rates. The court observed that there is a fundamental flaw in this approach as it involves an “element of pure chance or accident” and held that an auction held fairly and impartially is the best method for the state to allocate public or natural resources. This case has been a stepping stone towards the introduction of a specific and exclusive procurement law in India in the form of the Public Procurement Bill, 2012 (currently before the Parliament).



MPG suggests the following contract management risk mitigation measures:

(i) Any advance payments to suppliers should be interest bearing and released in stages linked to the progress of the contract. The advance should be progressively adjusted against bills cleared for payment.

(ii) Contract modifications and renegotiations should not substantially alter the nature of the contract so as to vitiate the basis of selection of the contractor.

(iii) A contract management manual or operating procedure should be prepared for large value contracts, reflecting an inbuilt systems of checks and balances.

(iv) Agents should only be as per the terms of the contract, and sub-contracting should typically not be allowed.


Procedure







The procurer may, at any time prior to the bid submission date, amend bid documents by issuing a corrigendum. This may be done at the procurer’s initiative or in response to a clarification sought by a prospective bidder. When the amendment/modification materially alters the original terms, and/or there is not much time left for the tenderers to respond or prepare a revised tender, (a) fresh publication of the amendment should be undertaken, following the same procedure as for publication of the original tender enquiry, and (b) the time limit for submission of tenders (and corresponding timeframes) should be suitably extended. The MPG indicates that in exceptional circumstances, the consent of the bidder may be requested in writing to extend the period of bid validity. A bidder accepting the request will not be permitted to modify his bid.

Further, tender documents typically permit bidders to alter/modify their bid within the deadline for submission of tenders. Any alterations/modifications received after such deadline will not be considered. Additionally, any withdrawal of the tender after this deadline could result in forfeiture of the bidder’s security deposit along with other sanctions.



Post-tender negotiations are specifically discouraged under the CVC guidelines, and even post-tender negotiations with the lowest bidder (L1) can only be undertaken for reasons to be recorded in writing. Any deviations from the terms of the tender should be recorded during submission of the tender proposal by the bidder. These deviations will be taken into account at the time of tender award and typically only limited negotiations are allowed post tender award.


signature?

Post-award, the terms of the contract including the scope and specifications should not be materially varied. In exceptional cases, however, where unavoidable, modifications may be allowed after taking into account the corresponding financial and other implications. In order to vary the conditions, specific approval of the competent authority must be obtained. Further, no extensions to the scheduled delivery or completion dates should be granted except

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upon force majeure events, as specified in the contract, or for other reasons contained under the terms of the contract. All changes should be in the form of an amendment to the contract duly signed by all parties to the contract.



signature?

Determined on a case-by-case basis. As a general rule, assignment of contractual obligations to another entity is not allowed unless specifically approved by the tendering authority.




them?

Privatisation in government-owned companies occurs post approval from the Cabinet Committee on Economic Affairs, which is a central government cabinet level body. It also (on an ad hoc basis) decides the mode (usually via IPO) and scope of privatisation. Once an in-principle approval is obtained, privatisation follows the normal process that is specified for the selected mode. As an example, if it is via an IPO, securities regulations will apply for the capital float.



The Ministry of Finance has issued special procedures and guidelines for procurement of PPP projects which are applicable to all central government ministries, departments and PSUs.

These guidelines contemplate a two-stage bidding process (the first for shortlisting eligible bidders, and the second under which shortlisted bidders conduct a comprehensive examination of the project and submit financial offers). It also provides for pre-qualification of bidders, the creation of a reserve list of bidders for substitution (in cases of withdrawal or rejection from the list). Projects above INR 10,000,000,000 in value are sent to the PPP Approval Committee (set up under the Finance Ministry to appraise PPP projects) and then to the Cabinet for final approval. The project authority can also specify restrictions to prevent concentration of projects in the hands of a few entities.

The Department of Economic Affairs has, in 2011, also formulated an extensive policy for PPP projects (including rules regulating expenditure, appropriation of revenue, contingent liabilities, etc.), but the policy has not been finalised at the time of writing this chapter.

Further, the Department of Economic Affairs, in 2016, introduced the PPP Guide for Practitioners, which guides practitioners in developing projects through PPP frameworks.

Please also see question 2.5 above.

8 The Future



impact?

(i) The Public Procurement Bill, 2012: Provides for a uniform, streamlined procurement process espousing good faith, equity and anti-arbitrariness. It proposes open competitive bidding as the preferred procurement method and also incorporates UNCITRAL Model Law, 2011 principles (such as privatisation). The bill is currently pending before Parliament, but there is no clarity regarding the timescale for notification.

(ii) Draft National Telecom Policy 2018: Drafted to transition from physical to digital infrastructure, in line with the Make in India initiative. Promotes procurement of domestic products/services with domestically-owned IPR (particularly for security-related products). The draft document is currently open for comments from stakeholders and the public.




(i) Specific Relief Act, 1963: A recent amendment prohibits courts from granting injunctions in respect of ‘infrastructure projects’ (i.e. transportation, energy, communication, water and sanitation, and social and commercial infrastructure) which would hinder/delay the progress/completion of the project (for instance, filed by an unsuccessful bidder). The rationale here is to prevent impediments to the completion of public welfare works.

(ii) Prevention of Corruption (Amendment) Act, 2018: Introduces a number of amendments to the existing law such as punishment for the bribe-giver (including: (a) bribes directly given to a public servant; (b) inter se dealings between persons with the intention to bribe a public servant; and (c) acceptance of a bribe to influence a public servant), prosecution of commercial organisations (including personal liability of persons in charge), forfeiture of property obtained through illicit means, etc. Private entities should not fall foul of these provisions in their dealings with the government (including the bidding process).

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Prashant Mara

BTG Legal

804 Lodha Supremus

Dr. E. Moses Road, Worli

Mumbai – 400018

India

Tel: +91 22 2482 0820 Email: [email protected] URL: www.btg-legal.com

Devina Ramakant Deshpande

BTG Legal

804 Lodha Supremus

Dr. E. Moses Road, Worli

Mumbai – 400018

India

Tel: +91 22 2482 0820 Email: [email protected] URL: www.btg-legal.com

BTG Legal is a transactional law firm with best-of-breed technical expertise, a culture of innovation, and an unrelenting commitment to excellence.

We are particularly focused on the following sectors, where we track industry issues: defence; industrials; digital business; energy (renewables and

nuclear); retail; transport (railways and electric vehicles); and financial services.

Our practices include corporate transactions (capital raise, M&A, JVs, investments, exits, restructuring and reorganisations), commercial contracting,

public procurement, private equity & venture capital, regulatory compliance & risk mitigation, labour & employment, pre-litigation advisory & dispute

management, business crime and other areas of law that are fast-developing, with rapid changes in technology and methods of doing business.

Our lawyers have worked in-house in large companies as well as in established law firms, bringing immense depth to the team. Our service delivery

is commercial, direct and simple with emphasis on compliance, risk mitigation and finding solutions for our clients.

Clients such as Facebook, WhatsApp, Jet Airways, Indigo Airlines, Tech Mahindra, MAN, Zeppelin, News Group, TripAdvisor, Wirecard and Leica

Cameras continue to trust us with their work due to our understanding of their sectors and our appreciation of the challenging business environment

in which they operate.

Prashant Mara is a commercial and regulatory lawyer with a focus on

strategic investments and collaborations, procurement projects,

compliance, investigation support and dispute management. He

specialises in the technology, defence (with a focus on technology

transfer and licensing) and industrials (with a focus on technology

deployment) sectors. His work is primarily in the areas of foreign

investment, public procurement, anti-bribery and cybercrime.

Prashant was previously co-head of the India Group at Osborne

Clarke and prior to that ran the India desk of a Franco-American firm in

Paris. He started his career as in-house counsel at Infosys and

managed their European legal operations.

Prashant is qualified to practise in India and read law at the National

Law School of India University, Bangalore.

Devina is a senior associate with BTG Legal, focusing on the

technology, defence and industrials sectors. Her experience includes

cross-border and domestic investments, M&A, procurement,

commercial contracting, compliance, pre-dispute advisory, corporate

governance and corporate advisory.

Devina has previously worked at a Magic Circle UK law firm in their

London and Dubai offices. She is dual-qualified, being admitted to

practise law in India and a solicitor of the Senior Courts of England and

Wales.

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Chapter 13


Assegaf Hamzah & Partners

Farid Fauzi Nasution

Berla Wahyu Pratama

Indonesia




The relevant legislation that governs public procurement is Presidential Regulation No. 16 of 2018 on Public Procurement of Goods and Services (“PR 16/2018”). PR 16/2018 was enacted recently on 22 March 2018, replacing the previous legislation on public procurement, namely Presidential Regulation No. 54 of 2010 on Public Procurement of Goods and Services (and its amendments) (“PR 54/2010”).

In general, PR 16/2018 provides a simpler regulatory framework on public procurement compared to that in PR 54/2010. While PR 54/2010 also contains technical provisions, PR 16/2018 only contains normative provisions under a simpler structure. Further, PR 16/2018 is more closely aligned with the best practice in public procurement compared to PR 54/2010.

Although PR 16/2018 has been effective since 22 March 2018, the transitional provisions in Article 89 of PR 16/2018 stipulate that:

a. any procurement of goods and services for which preparation and implementation have taken place before 1 July 2018 can still be carried out in accordance to PR 54/2010; and

b. any procurement contracts signed based on PR 54/2010 are still valid until the expiration of such contracts.

Another regulation relevant to public procurement is the National Public Procurement Agency Regulation No. 9 of 2018 on Guideline for Procurement through Supplier (“Public Procurement Guideline”). This Guideline contains detailed and technical provisions for public procurement, particularly through suppliers (collectively, PR 16/2018 and the Public Procurement Guideline shall be referred to as “Indonesian Public Procurement Regulation” or “IPPR”).




of the legislation?

Article 6 of PR 16/2018 states that the provision of goods or services in Indonesia must be based on the following principles: (i) efficiency; (ii) effectivity; (iii) transparency; (iv) openness; (v) competitiveness; (vi) fairness; and (vii) accountability. These underlying basic principles are actively implemented in the interpretation of the legislation.



Yes, certain procurements are regulated under specific regulations. Some examples are as follows:

a. procurement of a primary weaponry defence system, which is regulated under the Ministry of Defence Regulation No. 17 of 2014 on Procurement of the Primary Weaponry System within the Ministry of Defence and the National Military of Republic Indonesia;

b. procurement of special tools and materials by the National Police of Republic Indonesia, which is regulated under the Chief of the Indonesian National Police Regulation No. 10 of 2015 on Guideline and Procedure on Procurement of Special Tools and Materials within the Indonesian National Police;

c. procurement of medicine through an e-catalogue, which is regulated under the Minister of Health Regulation No. 63 of 2014 on Procurement of Medicine through E-Catalogue;

d. procurement of tax administration systems, which is regulated under the Presidential Regulation No. 40 of 2018 on Renewal of the Tax Administration System;

e. procurement carried out by a contractor under an Oil and Gas Cooperation Contract in relation to upstream oil and gas business activities, which is regulated under the Second Book of the Decision of the Chief of Special Task Force for Upstream Oil and Gas Business Activities No. PTK-007/SKKMA0000/2017/S0 (fourth revision) on Guideline on Procurement of Goods and Services;

f. procurement carried out by a state-owned enterprise (“SOE”), which is regulated under the Minister of State-owned Enterprises Regulation No. PER-05/MBU/2008 on General Guideline for Procurement of Goods and Services carried out by State-owned Enterprises, as amended by Minister of State-owned Enterprises Regulation No. PER-15/MBU/2012 on Amendment of Minister of State-owned Enterprises Regulation No. PER-05/MBU/2008 (“Procurement Guideline for SOEs”); and

g. procurement carried out abroad, which shall be conducted in accordance to the prevailing laws and regulations in the country where such procurement takes place, provided that it is not possible to apply PR 16/2018. Such procurement is further regulated under Ministry of Foreign Affairs Regulation No. 6 of 2011 on Guideline and Procedure for Public Procurements Carried out Abroad.


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public procurement?

Yes, there are other national laws and regulations relevant to public procurement. While some of these laws and regulations do not relate to the public procurement process, they are still important in ensuring compliance by the procuring entity to IPPR (e.g., antitrust and anti-corruption laws) and/or govern the prioritisation of local products and micro and small enterprises. Such regulations should be considered by every procuring entity when conducting procurement, since one of the objectives of the IPPR is to promote the use of local products and micro and small enterprises’ participation in public procurement.

The following are regulations relevant to public procurement:

a. Law No. 5 of 1999 on Prohibition of Monopolistic Practices and Unfair Business Competition, which prohibits the practice of bid rigging;

b. Law No. 31 of 1999 on Eradication of Criminal Act of Corruption, as amended by Law No. 20 of 2001 on Amendment of Law No. 31 of 1999, which forms the basis for investigation of public procurements that violate IPPR and cause losses to the state;

c. Law No. 20 of 2008 on Micro, Small, and Medium Enterprises, which prioritises the use of products manufactured by micro and small enterprises through direct procurement;

d. Minister of Industry Regulation No. 02/M-IND/PER/1/2014 on Guideline for Increasing the Use of Domestic Products in Public Procurements, which prioritises the use of domestic products in public procurements, as well as the required local content;

e. Law No. 1 of 2004 on State Treasury, which governs the management of state finance, including the utilisation of state budget by the Indonesian Government (“Government”) in public procurement; and

f. Law No. 30 of 2014 on Government Administration, which stipulates the basic authorities of public procurement officials.

It is worth noting that in 2017, the Corruption Eradication Commission (Komisi Pemberantasan Korupsi) released a statement saying that 80% of corruption cases in provincial and municipal levels in Indonesia are related to public procurement.



agreements?

Please note that Indonesia is an observer of the GPA. Currently, there is no ongoing negotiation between the GPA Committee and the Government relating to Indonesia’s accession to the GPA. As such, it is unlikely that the GPA will be implemented in Indonesia in the near future.


Contracts



In general, the IPPR applies to all government bodies at national, provincial, and municipal levels. Further, even though it is not

explicitly stated in the IPPR, SOEs are also subject to IPPR when they procure goods or services by utilising state or regional budget. In procurement that utilises another source of funding, SOEs are bound to the Procurement Guideline for SOEs and their internal regulation instead of the IPPR.


The IPPR covers all procurement contracts that utilise state or regional budget, as well as procurement contracts which are performed by government bodies that are wholly or partially funded by a domestic or foreign loan or grant.



No. The IPPR does not stipulate any financial threshold with respect to its coverage. However, there are thresholds applicable in determining the government official who is authorised to determine the winning bid. Further, there are also thresholds applicable in determining the procurement method that must be used, which will be explained further in our response to question 3.1 herein.


According to Article 20(2) of the IPPR (“Procurement Packaging Rule”), it is forbidden to split a contract for the purpose of avoiding tender. The Procurement Packaging Rule also prohibits the procuring party from grouping different contracts into a single contract if such contracts are supposed to be divided considering the type, nature, or location of the procured works. It is also prohibited to group contracts if there is any existing regulation(s) that requires the procured goods or service to be provided by micro or small enterprises and grouping of the contracts will prevent micro or small enterprises from doing so.



Concession contracts are not covered under the IPPR. In general, cooperation between the Government and private entities is implemented through the public-private partnership (“PPP”) scheme under Presidential Regulation No. 38 of 2015 on Public Private Partnership in Provision of Infrastructures (“PR 38/2015”). Based on PR 38/2015, PPP is defined as a cooperation between the Government and a private entity in providing economic and social infrastructure, whereby the private entity’s investment will be compensated through:

a. availability payment, which will be paid periodically within the duration of the PPP contract by the procuring government entity;

b. user charge; or

c. other lawful mechanism to generate investment return.

The types of economic and social infrastructures that may be provided under a PPP scheme are listed in Article 5(2) of PR 38/2015, which will be detailed further in our response to question 7.2 herein.



Under the IPPR, it is possible to use a framework agreement for repeated purchase of goods or services with definite specifications, such as medicines, travel agent services, catering services, etc. A

Assegaf Hamzah & Partners Indonesia


Stage Time Period

Pre-qualification announcement Minimum seven business days.

Registration and downloading Request for Qualification (“RfQ”)

Up to one business day prior to the deadline for qualification document submission.

Briefing from the Procurement Committee (if needed)

Up to at least three business days from the pre-qualification announcement.

Qualification document submission

Up to at least three business days from the end of the pre-qualification announcement.

Evaluation of qualification document

As needed.

Verification of qualification document

As needed.

Determination and announcement of qualification result

One business day after the verification of the qualification document.

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framework agreement shall stipulate the price of the goods or services to be paid by the procuring entity each time it makes a purchase during the period of the agreement (usually up to 12 months).

Further, although the exact quantity of the purchased goods or services are still unknown when the framework agreement is signed, there should be an estimate of the purchased quantity that will be made during the period of the agreement. In practice, the procuring entity will refer to the purchased quantity from the previous year to determine the estimate.


into lots?

Please refer to our response to question 2.4 regarding the Procurement Packaging Rule.



There is no specific stipulation in the IPPR regarding the obligation of the purchasers in importing goods or services. In relation to procurement of imported goods or services, the Public Procurement Guideline only stipulates the documents that must be provided by suppliers, which consist of:

a. supporting letter/letter of intent/letter of agreement from the manufacturer/principal in the country of origin;

b. certificate of origin; and

c. certificate of production.

3 Award Procedures




In general, the IPPR differentiates the procurement methods applicable in procuring goods or construction works or services other than consultation services, and procurement methods applicable in procuring consultation service, as follows:

a. Procurement of goods or construction works or services other than consultation service:

1) E-purchasing

E-purchasing is applicable only for procuring goods or services that are already listed in the E-Catalogue managed by the National Public Procurement Agency (Lembaga Kebijakan Pengadaan Barang/Jasa Pemerintah) (“LKPP”).

2) Direct procurement

Direct procurement is applicable only for procuring goods or services with a maximum value of IDR 200 million.

3) Direct appointment

Direct Appointment is applicable only under certain circumstances, such as:

(a) for the purpose of preparing any instantaneous event, which will be held as a follow-up of an international commitment and attended by the President/Vice President;

(b) for procuring goods or services deemed to be confidential in the interest of the state, which include procurement for the purposes of intelligence, witness protection, presidential protection, etc.;

(c) for procuring goods or services that can only be supplied by a certain capable supplier; and

(d) as a follow-up of an unsuccessful tender even after a re-tender process has been held.

4) Selective tendering

Selective tendering is applicable in selecting a supplier through the Supplier Performance Information System (Sistem Informasi Kinerja Penyedia Barang/Jasa) (“SIKaP”). In selective tendering, there is no evaluation of the qualification of the bidders since only pre-qualified suppliers that have been registered in SIKaP can participate. Further, there is no technical evaluation of the offers since the technical specification has been specifically determined.

5) Tender

Tender should be used if none of the above procedures are applicable in selecting a supplier.

b. Procurement of consultation services

1) Direct procurement

Direct procurement is applicable for procuring consultation services with a maximum value of IDR 100 million.

2) Direct appointment

Direct appointment is applicable only under certain circumstances, such as:

(a) for procuring services that can only be provided by a certain consultant;

(b) for procuring an urgently needed legal service that cannot be postponed (e.g., for the purpose of defending a lawsuit); and

(c) repeated order for a service from a certain consultant.

3) Selection

Selection is applicable for procuring consultation services valued above IDR 100 million.

Please refer to our response to question 3.2 herein for an explanation on the main stages of the above procedures.


The applicable minimum timescale in public procurement depends on the procurement method used.

a. Tender process with pre-qualification stage

1) Qualification stage



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2) Supplier selection using a two-stage tender submission

Stage Time Period

Objection on the qualification result (“Qualification Objection Period”)

Any objection shall be submitted within five business days from the announcement of the qualification result.

The Procurement Committee will issue its response within three days from the end of the Qualification Objection Period.

Stage Time Period

Tender invitation One business day as of the end of the Qualification Objection Period if there is no objection, or one business day after all objections have been resolved.

Registration and downloading Request for Tender (“RfT”)

Up to one business day prior to the deadline for tender submission.

Briefing from the Procurement Committee

Up to at least three business days from the tender invitation.

First stage tender submission (administrative and technical specification documents)

As needed.

Opening of the administrative and technical specification documents

One business day from the end of the first stage tender submission.

Evaluation of administrative documents

As needed.

Evaluation of technical specification documents and negotiation on the technical specification with bidders who passed such evaluation

As needed.

Announcement of bidders who passed the evaluation on administrative and technical specification documents

One business day from the evaluation on technical specification documents.

Second stage tender submission (revised technical specification and price bid)

As needed.

Opening of the revised technical specification and price bid

After the second stage tender submission has ended.

Evaluation of price bid As needed.

Determination and announcement of the winning bid

One business day from the evaluation on price bid.

Objection on the determination of the winning bid (“Objection Period”)

Within five business days from the announcement of the winning bid.

The Procurement Committee shall issue its response within three days from the end of the Objection Period.

3) Supplier selection using a one-stage tender submission (two

files submission)

Stage Time Period

Appeal on the response to the objection (for procurement of construction work)

Within five business days from the date when the response to the objection is uploaded onto the electronic procurement system (Sistem Pengadaan Secara Elektronik) (“SPSE”).

The appellant must deliver a collateral in the amount of 1% of the price estimate from the Procurement Committee (“Owner’s Estimate”) before submitting its appeal.

Response to the appeal shall be issued within 14 business days from the verification of the collateral.

Stage Time Period

Tender invitation One business day from the end of the Qualification Objection Period if there is no objection, or one business day after all objections have been resolved.

Registration and downloading RfT



Up to at least three business days since the tender invitation.

Tender submission As needed.

Opening of the administrative and technical specification documents (File I)

After the deadline for tender submission.


As needed.

Evaluation of technical specification documents from bidders who passed the evaluation on administrative documents

As needed.



Opening of the price bid from bidders who passed evaluation on technical specification documents (File II)

One business day from the announcement of bidders who passed the evaluation on administrative and technical specification documents.



One business day from the evaluation of price bid.

Objection Period Within five business days from the announcement of the winning bid.




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b. Tender process with post-qualification stage

1) Supplier selection using two files submission

Stage Time Period


Within five business days from the date when the response to the objection was uploaded to the SPSE.


Stage Time Period

Tender announcement Minimum five business days.




Up to at least three business days since the tender announcement.


Up to at least three business days since the briefing from the Procurement Committee.

Opening of the administrative, technical specification, and qualification documents (File I)


Evaluation of administrative and qualification documents

As needed.

Evaluation of technical specification documents from bidders who passed the evaluation on administrative documents

As needed.



Opening of the price bid from bidders who passed evaluation on technical specification documents (File II)

One business day from the announcement of bidders who passed the evaluation on administrative and technical specification documents.


Verification of qualification document from the potential winner

As needed.


One business day from the verification of the qualification documents from the potential winner.

Objection Period Within five business days from the announcement of the winning bid.


2) Supplier selection using a single file submission

Stage Time Period



The appellant must deliver a collateral in the amount of 1% of the Owner’s Estimate before submitting its appeal.


Stage Time Period

Tender announcement Minimum five business days.




Up to at least three business days since the tender announcement.


Up to at least three business days since the briefing from the Procurement Committee.

Opening of the submitted tender After the deadline for tender submission.

Evaluation of administrative, technical specification, price bid, and qualification documents

As needed.

Verification of qualification documents from the potential winner

As needed.


One business day since the verification of qualification documents from the potential winner.

Objection Period Within five business days since the announcement of the winning bid.




The appellant must deliver a collateral in the amount of 1% of the Owner’s Estimate before submitting its appeal.




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c. Selective tendering

d. Selection in procurement of consultation service provided by a company

1) Qualification stage

2) Consultant selection using qualitative evaluation method

Stage Time Period

Pre-qualification announcement Minimum seven business days.

Registration and downloading RfQ

Up to one business day prior to the deadline for qualification documents submission.

Briefing from the Procurement Committee (if needed)

Up to at least three business days from the pre-qualification announcement.

Qualification documents submission

Up to at least three business days from the end of pre-qualification announcement.

Evaluation of qualification documents

As needed.

Verification of qualification documents

As needed.

Determination and announcement of the short-listed bidders

One business day after the verification of qualification documents.

Qualification Objection Period Within five business days since the announcement of the qualification result.

The Procurement Committee shall issue its response within three days from the end of the Qualification Objection Period.

Stage Time Period

Tender invitation -

Tender submission Within three business days since the tender invitation.

Opening of the submitted tender After the deadline for tender submission.

Announcement of the result of the tender opening

After the tender opening.

Clarification regarding the qualification of the potential winner

As needed.


One business day after the clarification regarding the qualification of the potential winner.

Stage Time Period

Selection invitation One business day from the end of the Qualification Objection Period if there is no objection, or one business day after all objections have been resolved.




Up to at least three business days from the selection invitation.


Opening of the administrative and technical documents (File I)


3) Consultant selection using qualitative and cost/price

evaluation method compared to the pre-determined ceiling price

Stage Time Period

Selection invitation One business day from the end of the Qualification Objection Period if there is no objection, or one business day after all objections have been resolved.




Up to at least three business days from the selection invitation.


Opening of the administrative and technical documents (File I)



As needed.

Evaluation of technical documents from bidders who passed the evaluation of administrative documents

As needed.

Announcement of the result of the evaluation of administrative and technical documents




One business day after the evaluation of price bid.

Stage Time Period


As needed.

Evaluation of technical documents from bidders who passed the evaluation of administrative documents

As needed.

Announcement of the bidders’ rankings based on the evaluation of technical documents

One business day from the evaluation of technical documents.



Opening of the price bid (File II) from bidders who passed the evaluation of technical specification documents

After the end of Objection Period or after all objections have been resolved.

Evaluation and negotiation of price bid and technical documents

As needed.


One business day after the evaluation and negotiation of price bid and technical documents.



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e. Selection in procurement of consultation service provided

by an individual


tenderers?

The IPPR stipulates that in procuring goods or construction works or services, a minimum of three bidders must pass the pre-qualification stage in order to advance to the selection stage. Otherwise, the pre-qualification stage must be repeated from the pre-qualification announcement in order to attract new participants. As for procuring consultation services, the pre-qualification stage must result in three to seven bidders.

Stage Time Period

Selection announcement Minimum five business days.




Up to at least three business days since the selection announcement.


Opening of the administrative, technical (File I) and qualification documents

After the deadline for tender submission

Evaluation of administrative and qualification documents

As needed.

Evaluation on technical documents from the bidders who passed the evaluation of administrative documents

As needed.

Verification of qualification document

As needed.

Announcement of the result of the evaluation of administrative and technical documents

One business day from the evaluation of technical specification documents.



Opening of the price bid (File II) from bidders who passed the evaluation of technical documents

One business day after the end of the Objection Period.

Evaluation and negotiation of price bid and technical documents

As needed.


One business day after the evaluation of price bid.

Stage Time Period



Technical and price negotiation After the end of the Objection Period.




In general, evaluation will depend on the procured goods or services and the selected procurement method. For procurement of goods or construction works or services, the evaluation shall be based on: (i) a scoring system; (ii) an economic life cycle cost evaluation; or (iii) the lowest price. As for procurement of consultation services, evaluation shall be based on: (i) quality and cost; (ii) quality; (iii) the ceiling price; or (iv) the lowest price.

Out of the evaluation methods mentioned above, the scoring system for procurement of goods or construction works or services and the quality-based evaluations for procurement of consultation services also consider technical factors besides price or cost factor.


low tenders?

The Public Procurement Guideline stipulates that the Procurement Committee shall evaluate the validity of a tender with a proposed price below 80% of the Owner’s Estimate. In conducting such evaluation, the Procurement Committee will:

a. verify the actual cost of labour, materials, and equipment needed to implement the procured construction work; or

b. verify the reasonable price of the goods or services by referring to the latest market data.

If the result shows that the proposed price of the tender is lower than the reasonable cost or price, the bidder will be disqualified. Conversely, if the proposed price of the tender is above the reasonable price, the bidder will be required to deliver a collateral in the amount of 5% of the Owner’s Estimate before signing of the relevant contract (provided that such bidder is appointed as the winner of the tender).


Before issuing the Provider Appointment Letter (Surat Penunjukan Penyedia Barang/Jasa) (“SPPBJ”), the Contracting Official shall review the report on the provider selection process to ensure that:

a. the selection process has been conducted in accordance to the predetermined procedures; and

b. the selected provider is capable of implementing the contract.

Based on such review, the Contracting Official is authorised to either accept or reject the result of the selection process. If the Contracting Official rejects the result even after it has been discussed with the Procurement Committee, the procuring entity (Budget User) will determine its final decision, namely:

a. to order the Procurement Committee to revaluate the tenders/reopen the tender submission/re-tender; or

b. to order the Contracting Official to issue SPPBJ and proceed with the next procedure.


bidders?

Under the IPPR, the Procurement Committee is not obliged to directly notify unsuccessful bidders of the result. However, the winner of a tender process will be announced publicly through the SPSE, thus making such information accessible to unsuccessful bidders. Further, unsuccessful bidders have the right to submit their



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objection on the result of the tender process and the Procurement Committee is obliged to answer all objections received by them.


Joint procurement between Government institutions are not governed under the IPPR.


Submission of alternative or variant bids is not governed under the IPPR.


PR 16/2018 explicitly requires all related parties in a procurement to avoid conflict of interest that results in unfair business competition. The following are situations that constitute conflict of interest under Article 7(2) of PR 16/2018:

a. interlocking directorship between companies that participate in the same tender process;

b. execution of construction work by the supervising consultant or the consultant who planned the construction work;

c. construction management consultant performing the role of planning consultant;

d. Contracting Official/Procurement Committee, either directly or indirectly, having control over the provider or being involved in the management of the provider; or

e. where several participants in a tender process are controlled, either directly or indirectly, by the same party and/or more than 50% of their shares are owned by the same shareholder.




In the procurement preparation stage, the Contracting Official shall determine the technical specifications and Owner’s Estimate of the procured goods or service by taking into account the following factors:

a. availability;

b. price;

c. substitute products/services;

d. level of domestic components of the products that are available in the market;

e. compliance to the Indonesian National Standard; and

f. sustainability.

In this stage, market data will be used as a reference, and the Contracting Official is authorised to assign a team or experts to assist the Contracting Official in determining the technical specifications. If the required goods or services are not available in the market, the Contracting Official shall propose alternative technical specifications in accordance to the market condition.

Although it is not clearly stipulated in the IPPR, in principle, it is not possible for potential bidders to be involved in the procurement preparation stage.




In general, there are some exclusions or exemptions for certain procurements due to the special characteristic of the procured goods or services that cannot be equated with any other public procurement in general. Examples of these exempted procurements that are governed by specific regulations are provided in our response to question 1.3 herein.




“In house” arrangements are governed under PR 16/2018 in the form of self-managed procurements (Swakelola) (“Self-managed Procurement”). The technical provisions for such procurements can be found under the LKPP Regulation No. 8 of 2018 on Guideline for Self-managed Procurements (“LKPP Regulation 8/2018”).

Essentially, self-managed procurement is the procurement of goods or services of no commercial value and thus do not generate any market interest. Such method is commonly used to procure small-value work, such as maintenance of a community garden, or construction of residential irrigation system. Self-managed procurement is also common in procuring small construction work in rural areas.

There are four types of self-managed procurement under LKPP Regulation 8/2018:

a. type I: planned and executed independently by the procuring government entity;

b. type II: planned and supervised by the procuring government entity and executed by another government entity;

c. type III: planned and supervised by the procuring entity and executed by a community organisation; and

d. type IV: planned by the procuring entity based on a proposal from a community organisation and executed and supervised by the proposing community organisation.

5 Remedies



Prior to the award of a contract, unsuccessful bidders may challenge the result of the tender evaluation or the validity of the whole tender process by submitting an objection to the Procurement Committee during the Objection Period. Such objection aims to seek remedy in the form of:

a. re-evaluation of qualification/tenders;

b. re-submission of tenders; or

c. repeat pre-qualification/re-tender.

The Procurement Committee must grant one of the above remedies if they found that one of the following conditions have occurred during the tender procedure:

a. an error in the evaluation process;

b. violation of PR 16/2018;



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c. bid rigging, which prevented fair business competition; or

d. abuse of authority by the related officials.

In procurement of construction works, parties who are unsatisfied with the Procurement Committee’s response to their objection may submit an appeal to the procuring entity (Budget User) to seek re-evaluation or re-tender.



In principle, the primary procedure to challenge the result or validity of a tender process is to submit an objection or appeal as explained in our response to question 5.1. However, it is possible to file a complaint outside the objection or appeal period, addressed to the Government’s Internal Auditor. Unlike objections or appeals, complaints do not postpone the tender process, and there is no clear stipulation in the IPPR that governs the procedure for resolving complaints and the outcome that can be expected.

Aside from the procedures mentioned above, it is also possible for unsuccessful bidders to challenge the validity of the tender process by filing a tort lawsuit before the Civil Court. Such lawsuit is subject to the provision in the Indonesian Civil Code and Indonesian Civil Procedure, in which unsuccessful bidders can only claim for damages instead of seeking re-evaluation or re-tender.


sought?

Please refer to our responses to questions 5.1 and 5.2.


remedies?

Objections can be submitted during the Objection Period, which lasts for five business days from the announcement of the winning bid. In addition, in the case of procurement of construction works, unsuccessful bidders who are unsatisfied with the Procurement Committee’s response to their objection may submit an appeal within five business days from the date such response is uploaded to the SPSE.

Unlike objection and appeal, there is no limitation period for unsuccessful bidders to file a tort lawsuit before the Civil Court.


periods?

There are no measures that can be taken to shorten the limitation period in submitting objection or appeal, as well as to file lawsuit to the Civil Court.


The only applicable procedure to seek remedy after contract signature is to file a lawsuit before the Civil Court, since there is no limitation period for filing such lawsuit under the Indonesian Civil Procedure. As explained in our response to question 5.2, unsuccessful bidders can only claim for damages before the Civil Court.


remedies is made?

As explained in our responses to questions 3.2 and 5.4, the Objection Period lasts for five business days from the announcement of the winning bid. The Procurement Committee will then have three business days to provide their response to any objection submitted.

As for the procedure before the Civil Court, there is no clear timeline for resolution of civil cases since there is no stipulation in the Indonesian Civil Code that requires judges to issue a verdict within a specific time period. Further, although Supreme Court Circular Letter No. 2 of 2014 on Settlement of Cases at First Level Courts and Appeals within Four Judicial Circuit requires every civil case before the District Court to be resolved within five months, in practice, the timeline is still unclear. It should also be noted that any verdict by the District Court will be subject to review by the Court of Appeals and the Supreme Court, which have no clear timeline either.



There are many cases where the Procurement Committee has granted a remedy in the form of re-evaluation following an approval of the objection from an unsuccessful bidder. However, none of these cases are considered as a leading example since such practice is very common.



There are no mitigation measures available for contracting authorities.


Procedure







In principle, the IPPR allows changes to RfT prior to the deadline for tender submission. Mainly, such changes are made as a follow-up of the pre-bid briefing and should be made as an addendum of the original RfT. Further, changes to the technical specification, Owner’s Estimate, and the draft contract must be approved by the Contracting Official. Addendum can be made more than once, as long they are uploaded to the SPSE no later than three business days prior to the deadline for tender submission. If the changes to the RfT means that more time is required to prepare the tender, the Procurement Committee must extend the deadline for tender submission accordingly.



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The Procurement Committee is authorised to make changes to the timetable if necessary, particularly in the evaluation of tenders. Since the time needed to complete the evaluation process depends on the number of tenders that have been submitted, there is a possibility that the evaluation process will deviate from the pre-determined timeline as laid out in the RfT.

Lastly, there is no clear stipulation in the IPPR governing changes to the membership of a consortium pre-contract award.



Under the IPPR, negotiation with the preferred bidder is applicable only in procurement of consultation services. The scope of the negotiation includes cost and technical aspects of the contract, as follows:

a. Technical aspects:

1) scope and objective of the procured work;

2) methodology;

3) qualification of experts and supporting personnel;

4) organisation/team structure;

5) transfer of knowledge;

6) timeline;

7) personnel assignment schedule; and/or

8) supporting facilities.

b. Cost:

1) remuneration for experts;

2) suitability between the work plan and expenditures; and/or

3) volume of the procured work and expenditures.


signature?

Under the IPPR, it is possible to make amendments to a contract if there are differences between the factual condition when implementing the contract and the information provided in the tender document. However, amendments are limited to:

a. addition or reduction of volume/scope of work;

b. adjustment to technical specifications in accordance with the factual condition; and/or

c. changes to the implementation schedule.



signature?

There is no stipulation in the IPPR that explicitly prohibits the transfer of a contract to another entity post-contract signature. However, in practice, it is likely for a tender document to include a prohibition from transferring the contract to another entity, except if the provider changed its name as a result of merger/ consolidation/spin-off.




them?

Under Indonesian law, privatisations are not covered by the IPPR. In fact, there is no concept of privatisation within the Indonesian public procurement and PPP legal framework.

Nevertheless, in Indonesia, privatisation is defined as a transfer of SOEs’ shares to the public under Government Regulation No. 33 of 2005 on Procedure on Privatisation of State-owned Enterprises, as amended by Government Regulation No. 59 of 2009 on Amendment of Government Regulation No. 33 of 2005. This regulation provides that privatisations cannot be applied to the following SOEs:

a. SOEs engaged in a business sector that can only be conducted by SOEs according to the prevailing laws and regulations;

b. SOEs engaged in a business sector related to national defence and security;

c. SOEs engaged in certain sectors, who are recipients of any given special assignments by the Government to perform certain activities related to public interest; and

d. SOEs engaged in the natural resources sector and prohibited from being privatised under the prevailing laws and regulations.



PPPs are governed separately by several regulations, namely:

a. PR 38/2015;

b. Minister of National Development Planning/Head of National Development Planning Agency Regulation No. 4 of 2015 on Procedure for Public-private Partnership in Provision of Infrastructure (“BAPPENAS Regulation 4/2015”); and

c. LKPP Regulation No. 29 of 2018 on Procedure for Procurement of Implementing Business Entity in the Provision of Infrastructure through Solicited Public-private Partnership (“LKPP Regulation 29/2018”).

PR 38/2015 and BAPPENAS Regulation 4/2015 regulates the procedure of cooperation between the Government and business entities in providing infrastructure. These regulations also limit the types of infrastructures that can be delivered through a PPP scheme:

a. transportation;

b. roads;

c. water resource and irrigation infrastructures;

d. drinking water supply infrastructures;

e. centralised water treatment facilities;

f. localised water treatment facilities;

g. waste treatment facilities;

h. telecommunication and informatics infrastructures;

i. electricity infrastructures;

j. oil and gas, and renewable energy infrastructures;

k. energy conservation infrastructures;

l. urban facilities;

m. education facilities;

n. sports and arts facilities;

o. infrastructures for specific zones;



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p. tourism infrastructures;

q. health infrastructures;

r. correctional facilities; and

s. public housing infrastructures.

Further, LKPP Regulation 29/2018 specifically regulates the procedure in procuring private entities for the implementation of PPP projects. Under this regulation, procurement can be carried out by way of tender or direct appointment. Direct appointment can only be performed under certain conditions, while a tender involves specific steps that are different to steps that apply in conventional procurements under the IPPR.

8 The Future



impact?

It is unlikely that the current regulation will be changed any time soon since PR 16/2018 has promulgated only recently. Other than the issuance of PR 16/2018, we are not aware of any other proposal from the Government to change or amend the regulations related to public procurement.




To date, there is no regulatory development that may impact the public procurement laws in Indonesia.

Acknowledgment

The authors would like to acknowledge the contribution of Radifan Khairi Nawir in the preparation of this chapter.

Email: [email protected].



Assegaf Hamzah & Partners is a multi-award-winning, full-service law firm based in Indonesia. The firm is one of the largest and most prominent

players in the Indonesian legal market, with over 100 fee earners and 23 partners, and has consistently gained top-tier recognition in various

international legal publications.

The firm has one of the top competition/anti-trust practices in Indonesia, having recently reaffirmed its prestigious ‘elite’ ranking by Global

Competition Review 2018. As the team comprises both senior economists and senior legal practitioners, clients benefit from the complete advisory

services offered. Some team members have served at senior levels of the Commission prior to joining the firm, leading to an excellent working

relationship between the two.

The firm is a member of Rajah & Tann Asia, a full-service network of established firms based in 10 countries across Asia. The network allows the

firm and other members to work effectively and seamlessly within Asia and beyond. Additionally, the firm also has dedicated Japan and China desks

in its Jakarta office to facilitate coordination with clients from these countries.

Farid is a partner of AHP’s competition/antitrust practice group with

extensive experience in public procurement law. He is a certified

public procurement expert in Indonesia by the National Public

Procurement Agency. He handled many bid-rigging cases related to

the procurement of medical devices, furniture, infrastructure and

construction projects. In his years of practice, Farid works with clients

across a wide range of sectors, including telecommunications,

pharmaceutical, automotive, motorcycle, energy & mining, oil & gas,

banking, and insurance.

Farid has also written numerous articles related to competition and

public procurement matters, as well as actively participated as a

speaker in several international and national workshops and trainings.

He currently serves as the Secretary General of the ASEAN

Competition Institute and Chairman of the Education and Training

Division in the Indonesian Competition Lawyers Association.

Berla specialises in competition/antitrust and public procurement law.

His extensive experience in the public procurement arena is affirmed

by his two certifications: procurement expert by the National Public

Procurement Agency; and procurement lawyer by the International

Federation of Purchasing and Supply Management. His experience

ranges from reviewing standard procurement documents to advising

on procurement processes to assisting in various bid-rigging cases.

Berla advises and represents contracting authorities and tenderers in

numerous public procurement matters, for instance he advised an

Indonesian state-owned enterprise engaged in the plantation industry

on a procurement process, assisted an Indonesian state-owned

pharmaceutical enterprise in relation to its bid-rigging allegation, and

assisted the Indonesian government to recruit a procurement agent.

Berla is regularly invited to speak in training and workshops related to

competition and public procurement law. He is also an active member

of ASEAN Competition Institute, Indonesian Procurement Lawyer

Association and Indonesian Competition Lawyer Association.

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Farid Fauzi Nasution


Capital Place level 36 & 37

Jl. Jenderal Gatot Subroto Lot. 18

Jakarta 12710

Indonesia

Tel: +62 21 2555 7800 Email: [email protected] URL: www.ahp.co.id

Berla Wahyu Pratama


Capital Place level 36 & 37

Jl. Jenderal Gatot Subroto Lot. 18

Jakarta 12710

Indonesia

Tel: +62 21 2555 7800 Email: [email protected] URL: www.ahp.co.id



109

Chapter 14


A&L Goodbody

Anna-Marie Curran

Jessica Egan

Ireland




The substantive procedural rules which apply to public, utilities and defence procurements in excess of EU thresholds are contained in four pieces of legislation:

■ the European Union (Award of Public Authority Contracts) Regulations 2016 (SI 284/2016) (Public Contracts Regulations) which implements Directive 2014/24/EU into Irish law;

■ the European Union (Award of Contracts by Utility Undertakings) Regulations 2016 (SI 286/2016) which implements Directive 2014/25/EU (Utilities Regulations) into Irish law;

■ the European Union (Award of Concession Contracts) Regulations 2017 (SI 203/2017) (Concessions Regulations) which implements EU Directive 2014/23/EU into Irish law; and

■ the European Union (Award of Contracts Relating to Defence and Security) Regulations 2012 (SI 62/2012) (Defence Regulations) (as amended) which implements Directive 2009/81/EC into Irish law.

The rules setting out the remedies for a breach of the substantive procurement rules are contained in the three pieces of legislation:

■ the European Communities (Public Authorities’ Contracts) (Review Procedures) Regulations 2010 (as amended) (SI 130/2010) (Public Contracts Remedies Regulations);

■ the European Communities (Award of Contracts by Utility Undertakings) (Review Procedures) Regulations 2010 (as amended) (SI 131/2010) (Utilities Remedies Regulations); and

■ the European Union (Award of Concession Contracts) (Review Procedures) Regulations (SI 326/2017) (Concessions Remedies Regulations).




of the legislation?

The Irish public procurement regime is based on the EU regime which has as its objective the free movement of goods, services and works within the EU. The award of contracts which have the potential for cross-border trade must be conducted in accordance

with General Principles of EU law including the principles of equal treatment, non-discrimination, mutual recognition, proportionality and transparency.



Water, energy, transport and postal sectors

The Utilities Regulations govern the award of contracts in the utilities sector above EU thresholds (i.e. water, energy, transport and postal services). The rules are slightly less rigorous than the public sector regime.

Defence

The Defence Regulations govern the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security.

Construction procurement

The Capital Works Management Framework (CWMF) comprises a suite of standard procurement documents, model forms, works contracts, as well as guidance notes, which apply to the conduct of public sector capital works projects in Ireland. The documents are available at www.constructionprocurement.gov.ie.



public procurement?

The Freedom of Information Act 2014 (the FOI Act) applies to almost all public bodies in Ireland. Any person may request “records” under the FOI regime including records relating to tendering procedures. There are exemptions under the FOI Act which apply where records are confidential or commercially sensitive. Tender-related records are not exempt as a class. Tenderers are normally requested to indicate in their tenders, with supporting reasons, any information which should be regarded as confidential.

Commercial and non-commercial state bodies in Ireland are subject to the Code of Practice on the Governance of State Bodies (2016) (Code). The Code provides that it is the responsibility of the relevant Board to satisfy itself that the requirements for public procurement are adhered to. Transparency is a key theme of the Code and competitive tendering is advocated as the standard procedure in the procurement process of State Bodies. Non-competitive procurement must be recorded and reported to the relevant Minister.


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agreements?

The substantive procurement Regulations require contracting authorities and contracting entities to apply no less favourable treatment to the economic operators and signatories of the GPA.


Contracts



The Regulations apply to “contracting authorities” and “contracting entities”.

Contracting authorities include the State (i.e. Ireland), regional and local authorities, bodies governed by public law and associations formed by one or more such authorities or one or more such bodies governed by public law. A body governed by public law is defined under the Regulations as a body which:

a) is established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character;

b) has a legal personality; and

c) has any of the following characteristics:

i. is financed, for the most part, by the State, a regional or local authority, or by another body governed by public law;

ii. is subject to management supervision by an authority or body referred to in (i); or

iii. has an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, a regional or a local authority, or by another body governed by public law.

Contracting entities include contracting authorities and “public undertakings” which pursue activities in the utilities sector (i.e. gas, heat, electricity, water, transport, port, airport, postal services and fuel industries). A “public undertaking” is an undertaking over which a contracting authority may directly or indirectly exercise a dominant influence by virtue of ownership, financial participation or rules governing the undertaking.

The definition of contracting entities also includes bodies which pursue a “prescribed activity” and which have been granted special or exclusive rights by a competent authority of a Member State.


The Regulations apply to works contracts and concessions, services contracts and concessions and supplies contracts, as well as to mixed procurement contracts with a value above certain financial thresholds.



The Regulations apply to all contracts valued in excess of the certain financial thresholds (excluding VAT) which are updated every two years. The current thresholds (applicable from 1 January 2018) are as follows:

The Concessions Regulations apply to all concessions contracts valued in excess of €5,548,000 (excluding VAT).

For supplies and services contracts below the EU thresholds, public bodies are required to comply with the Public Procurement Guidelines for Goods and Services (2017). Under the Guidelines, contracts valued above €25,000 (excl. VAT) and up to the EU thresholds should be advertised as part of a formal tendering process on the Irish procurement website “www.etenders.gov.ie” using the open procedure. Contracts valued above €5,000 (excl. VAT) may be awarded on the basis of responses to specifications sent by email to at least three suppliers/service providers. For contracts below €5,000 (excl. VAT), contracts may be awarded on the basis of verbal quotes from one or more competitive suppliers.

Regardless of value, all contracts below the EU thresholds which are of “cross-border interest” are subject to EU Treaty principles.


The aggregation rules under the Regulations provide that in certain cases, the value of contracts must be aggregated and where the value of these purchases taken together exceeds the relevant thresholds, the Regulations will apply.

The general rule under the Regulations is that a procurement must not be subdivided with the effect of preventing it from falling within the scope of the Regulations.

Where a contract is to be awarded in the form of separate lots, account must be taken of the total estimated value of all such lots. The Regulations will apply where the aggregate value of the lots is equal to or greater than the relevant thresholds.

There are also “annual aggregation requirements” which require services or supply contracts of the “same type”, awarded within a one-year period to be aggregated.

The aggregation rules are relatively detailed and subject to exemptions in certain cases.



EU Directive 2014/23/EU on concession contracts was implemented into Irish law by the Concessions Regulations. Under the Concessions Regulations, a “concession contract” is defined as a contract for pecuniary interest concluded in writing by means of

Public Contracts (excluding VAT)

Works contracts €5,548,000

Supply contracts/service contracts/design contests by central government authorities

€144,000

Supply contracts/service contracts/design contests by sub-central contracting authorities

€221,000

“Light Touch” services (see Annex XIV of the Directive 2014/14/EU)

€750,000

Utilities Contracts (excluding VAT)

Works contracts €5,548,000

Supply contracts/service contracts/design contests

€443,000

“Light Touch” services (see Annex XVII of Directive 2014/25/EU)

€1,000,000

A&L Goodbody Ireland


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which one or more contracting authorities or contracting entities entrust the execution of works, or the provision and the management of services, to one or more economic operators. The consideration must consist in the right to exploit the works or services or in that right together with payment. Concession contracts must also involve a transfer of risk to the concessionaire.



The Regulations regulate the award of single and multi-supplier framework agreements. The maximum term for a framework agreement is four years under the Public Contract Regulations and eight years under the Utilities Regulations. The substantive procedural rules in the Regulations apply to the award of framework agreements. The award of call-off contracts may be done by awarding directly from the framework or by re-opening competition. The Office of Government Procurement has established a large number of centralised framework agreements for use by public sector bodies. A list of the centralised frameworks is available on the OGP’s website at www.ogp.gov.ie.


into lots?

It is possible under the Regulations to divide contracts into lots and to limit the number of lots which may be awarded to a single entity. The Public Contracts Regulations require contracting authorities to document the reasons for not subdividing a contract into lots.



Under the Regulations, purchasers must treat all suppliers equally and cannot discriminate based on the place of establishment. EU Treaty principles apply to all contracts with a cross-border interest. The principle of transparency requires a degree of advertisement sufficient to allow suppliers in other Member States the opportunity to express an interest or to submit tenders.

3 Award Procedures




There are several different award procedures under the Regulations. There is a free choice to use the open and restricted procedures whereas the competitive procedure with negotiation and the competitive dialogue are available only in limited circumstances. The open procedure is the most commonly used procedure in Ireland for public sector bodies. Contracting entities under the Utilities Regulations have a free choice of procedure and they most commonly use the negotiated procedure.

A negotiated procedure without a prior call for competition may only be used in exceptional circumstances specified under the Regulations. For example, it may be used: (i) where no tenders or no suitable tenders are received; (ii) where the works, supplies or services may only be prescribed by a particular operator; or (iii) for reasons of extreme urgency not attributable to the contracting authority.

There are no prescribed procedures under the Concessions Regulations which generally provide for a lighter touch regime.


The Regulations provide that when fixing the deadline for receipt of tenders or requests to participate, contracting authorities should take account of the complexity of the contract and allow sufficient time for submitting the necessary information and preparing tenders.

In line with the 2014 Directives, the Public Contract Regulations set out the rules governing minimum timescales. For open procedures, the minimum time limit for receipt of tenders is 35 days from the day after the date of dispatch of the Contract Notice to the OJEU. For restricted procedures and for competitive procedures with negotiation, the minimum timescale for receipt of requests to participate is 30 days, and for receipt of tenders is 30 days. For the competitive dialogue procedure, the minimum timescale for receipt of requests to participate is 30 days, and there is no minimum deadline for receipt of tenders. Certain reductions in timescales are available if a Prior Information Notice has been published or where there is a state of urgency.

The minimum timescales under the Utilities Regulations are more flexible. For example, for the negotiated procedure, the general timescale for requests to participate is generally 30 days and not less than 15 days. The minimum timescale for receipt of tenders is 10 days.


tenderers?

Regulation 57(1) of the Public Contracts Regulations specifies the mandatory grounds upon which a contracting authority shall exclude an economic operator from participation in a procurement procedure. A contracting authority is obliged to exclude an economic operator from the procurement process where it becomes aware that the economic operator concerned has been convicted of one or more of the following offences within the last five years:

■ participation in a criminal organisation;

■ corruption;

■ fraud;

■ terrorist offences or offences linked to terrorist activities;

■ money laundering or terrorist financing; and

■ child labour and other forms of trafficking in human beings.

Regulation 57(8) of the Public Contract Regulations lists a number of discretionary grounds upon which the contracting authority may exclude an economic operator from participation in a procurement procedure. These include:

■ where the contracting authority can demonstrate by any appropriate means a violation of applicable obligations in the fields of environmental, social and labour law that apply at the place where the works are carried out or the services provided that have been established by European Union law, national law, collective agreements or by international law;

■ where the economic operator is bankrupt or is the subject of insolvency or winding-up proceedings, where its assets are being administered by a liquidator or by the court, where it is in an arrangement with creditors, where its business activities are suspended or it is in any analogous situation arising from a similar procedure under the law of the State;



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■ where the contracting authority can demonstrate, by appropriate means, that the economic operator is guilty of grave professional misconduct, which renders its integrity questionable;

■ where the contracting authority has sufficiently plausible indications to conclude that the economic operator has entered into agreements with other economic operators aimed at distorting competition;

■ where a conflict of interest cannot be effectively remedied by other, less intrusive, measures;

■ where a distortion of competition from the prior involvement of the economic operator in the preparation of the procurement procedure, cannot be remedied by other, less intrusive, measures;

■ where the economic operator has shown significant or persistent deficiencies in the performance of a substantive requirement under a prior public contract, a prior contract with a contracting entity or a prior concession contract, which led to early termination of that prior contract, damages or other comparable sanctions;

■ where the economic operator has been guilty of serious misrepresentation in supplying the information required for the verification of the absence of grounds for exclusion or the fulfilment of the selection criteria, has withheld such information or is not able to submit supporting documents required; and

■ where the economic operator has undertaken to unduly influence the decision-making process of the contracting authority, or obtain confidential information that may confer upon it undue advantages in the procurement procedure or where the economic operator has negligently provided misleading information that may have a material influence on decisions concerning exclusion, selection or award.

Rules governing the selection criteria for shortlisting tenderers are set out under Regulation 58 of the Public Contracts Regulations. This states that the selection criteria to be imposed on an economic operator as a requirement for participation in a procurement procedure may relate to the following:

■ suitability to pursue a professional activity;

■ economic and financial standing; and

■ technical and professional ability.

All requirements for participation in a procurement procedure must be “related and proportionate” to the subject matter of the contract concerned.

The Utilities Regulations provide that where a contracting entity is a contracting authority, the mandatory and discretionary grounds in Regulation 57 (1) and (8) of the Public Contracts Regulations apply. In all other circumstances, the contracting entity may “establish objective rules and criteria for the exclusion and selection of tenderers or candidates” in accordance with Regulation 85(1) of the Utilities Regulations.




The Public Sector Regulations and the Utilities Regulations require contracts to be awarded on the basis of the most economically advantageous tender. Contracts may be awarded on the basis of price or cost alone or on the basis of price together with quality. The evaluation of cost must be carried out using a cost-effectiveness approach including life-cycle costing. The award criteria must be related to the subject matter of the contract. The Public Sector Regulations and the Utilities Regulations provide that the award

criteria may comprise criteria relating to technical merit, aesthetic and functional characteristics, accessibility, design for all users, social, environmental and innovative characteristics, the organisation, qualifications and experience of staff assigned to performing the contract where the quality of staff assigned can have a significant impact on the level of contract performance or after sales service and technical assistance and delivery conditions.

The Office of Government Procurement has published an Information Note on incorporating social considerations into Public Procurement (available at www.ogp.gov.ie).


low tenders?

In line with the 2014 Directives, a contracting authority must require tenderers to explain the price or costs proposed in a tender which appears to be abnormally low. Tenders may only be rejected where the evidence supplied does not satisfactorily account for the low level of price or costs proposed. A contracting authority must reject a tender where it has been established that the prices are abnormally low because of non-compliance with applicable obligations in the fields of environmental, social and labour law. In addition, where it is established that a tender is abnormally low because the tenderer has obtained State aid and the tenderer is unable to provide that the aid is compatible with the internal market, the tender must be rejected.


The contracting authority must award the contract to the tenderer which has been identified as submitting the most economically advantageous tender having regard to the published award criteria. A contract award notice must be published in the Official Journal of the European Union within 30 days following conclusion of the contract.


bidders?

Unsuccessful bidders must be informed of the reasons for the contract award decision at the time of notification of the contract award decision. The notification letter must state the exact standstill period applicable to the contract. Tenderers that have submitted an admissible tender must be informed of the name of the successful tenderer or in the case of a framework agreement, the names of the parties to the agreement and the characteristics and relative advantages of the tender selected. If a tender is being rejected, the unsuccessful bidder must be informed of the reasons for the decision of non-equivalence or for the works, supplies or services not meeting the performance or functional requirements.

In RPS v Kildare County Council [2016] IEHC 113, the Irish High Court held that in order to set out the characteristics and relative advantages of the successful tender, the contracting authority must at least mention the matters which should have been included in the applicant’s tender or the matters contained in the successful tenders. The statement of reasons must therefore be sufficiently detailed to explain how the successful tender was advantageous by reference to particular matters, respects, examples or facts supporting a general assertion of relative advantage.



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Contracting authorities routinely procure their requirements jointly by using multi-supplier framework agreements or dynamic purchasing systems usually established by a central purchasing body. The Office of Government Procurement has established a large number of centralised framework agreements for use by public bodies. The Local Government Operational Procurement Centre has also formed a procurement platform called SupplyGov.ie, which facilitates local authorities and other State agencies in the procurement of certain goods, works and services under various frameworks and dynamic purchasing systems.


In line with the 2014 Directives, Regulation 45 of the Public Contracts Regulations and Regulation 71 of the Utilities Regulations permit a contracting authority to authorise or require tenderers to submit variant bids. The contracting authority must indicate in the contract notice or procurement documents whether or not variants are permitted and must state the minimum requirements to be met by the variant bid. Where variants are permitted, the contracting authority must ensure that the chosen award criteria can be applied to variants meeting those minimum requirements as well as to conforming tenders which are not variants.


The Regulations require contracting authorities to take appropriate measures to effectively “prevent, identify and remedy conflicts of interest arising in the conduct of procurement procedures so as to avoid any distortion of competition and to ensure equal treatment of all economic operators”. “Conflicts of interest” include any situation where a relevant staff member has, directly or indirectly, a financial economic or other personal interest that might be perceived to compromise his or her impartiality and independence in the context of the procurement procedure. If a conflict of interest cannot be resolved by other less intrusive measures, it may constitute a discretionary ground for exclusion of an economic operator from the procurement process.




The rules on market engagement and the involvement of potential bidders are set out at Regulations 40 and 41 of the Public Contracts Regulations and Regulations 65 and 66 of the Utilities Regulations. These provide that before commencing a procurement procedure, a contracting authority may conduct market consultations with a view to preparing the procurement and informing economic operators of the authority's procurement plans and requirements. A contracting authority/entity may seek or accept advice from independent experts or authorities or from market participants. The advice may be used in the planning and conduct of the procurement procedure, where the use of such advice does not have the effect of distorting competition or result in a violation of the principles of non-discrimination and transparency.

Where, in a procurement procedure, a candidate or tenderer, or an undertaking related to a candidate or tenderer has previously advised the contracting authority or has otherwise been involved in the preparation of the procurement procedure, the contracting

authority must take “appropriate measures” to ensure that competition is not distorted by the participation of that candidate or tenderer. These measures must include communication to the other bidders of relevant information exchanged in the preparation of the procurement procedure and the fixing of adequate time limits for the receipt of tenders.

A bid should only be excluded from a procurement procedure where there are “no other means to ensure compliance with the duty to treat economic operators equally”.




For contracts above EU thresholds, the provisions on exclusion and exemptions from the public procurement regime correspond to the exclusions and exemptions as provided for in the 2014 Directives. These exemptions include contracts for the acquisition or rental of land or buildings, employment contracts, certain legal services contracts, and certain financial services contracts. As with all derogations from the public procurement rules, any exclusions or exemptions are narrowly interpreted. As discussed at question 4.2 below, the Regulations exclude certain “in-house” and shared services arrangements from their scope contracts where certain conditions are met.




The Irish rules in relation to in-house arrangements and contracts between public bodies are based on the 2014 EU Directives.

Both the Public Contracts Regulations and the Utilities Regulations exclude from their scope contracts awarded by a contracting authority to a legal person where the contracting authority exercises over the legal person control (which is similar to that which it exercises over its own departments) and provided that 80% or more of the activities of the controlled legal person are carried out in the performance of tasks entrusted to it by the contracting authority. There must be no private capital participation in the controlled legal entity. This is known as the “Teckal” or “in-house” exemption.

The Utilities Regulations (and the Concessions Regulations) also provide an exclusion for contracts awarded to an “affiliated undertaking”. An affiliated undertaking is an entity which either consolidates its accounts with the contracting entity under Directive 2013/34/EU or which is subject to the dominant influence of the contracting entity.

5 Remedies



For above threshold contracts, there are three principal sets of remedies regulations which apply to the public sector, the utilities sector and to the award of concessions contracts, i.e.:

i. the European Communities (Public Authorities’ Contracts) (Review Procedures) Regulations 2010 (SI 130/2010) as amended (the Public Sector Remedies Regulations);



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ii. the European Communities (Award of Contracts by Utility Undertakings) (Review Procedures) Regulations 2010 (SI 131/2010) as amended (the Utilities Remedies Regulations); and

iii. the European Union (Award of Concession Contracts) (Review Procedures) Regulations (SI 326 of 2017) (the Concessions Remedies Regulations).

The Defence Regulations set out the review procedures and remedies for a breach of the substantive rules in the Defence Regulations.

Contracting authorities are obliged to observe a standstill period between notice of the contract award decision and the reasons for the decision to the unsuccessful bidders and conclusion of the contract. The standstill period must be at least 14 days if the notice is sent electronically (or 16 days if sent by any other means).



For contracts below EU thresholds, aggrieved parties may bring an application for judicial review in the High Court. Leave must first be obtained from the Court to bring the application.


sought?

The process for review under the Remedies Regulations involves bringing a statutory form of judicial review proceedings in the High Court under Order 84A of the Rules of the Superior Courts.

An application can be made to transfer the case to the Commercial Court (which is a division of the High Court), which has jurisdiction to hear certain commercial cases where the value of the case exceeds €1 million. Most procurement cases are transferred to the Commercial Court.

Proceedings for below threshold contracts are brought in the High Court by way of application for judicial review.


remedies?

The time limit for initiating review proceedings under the Remedies Regulations is 30 calendar days after the applicant was notified of the decision, or knew or ought to have known of the alleged infringement. An application for a declaration that the contract is ineffective must be made within six months after the conclusion of the relevant contract.

While the High Court has power to extend the limitation period, the High Court takes a restrictive approach and tends not to grant applications for extensions of time.

For ordinary judicial review proceedings, applications for certiorari (i.e. set aside of the decision) must be made within three months from the date when grounds for the application first arose. The Court can extend time where there is a good reason; however, again, the courts are relatively strict on granting extensions of time.


periods?

While the general limitation period for an application for a declaration of ineffectiveness is six months from conclusion of the contract, this timeframe can be shortened to 30 calendar days where:

i. the contracting authority has published an award notice in the OJEU and where, in the case of a contract awarded without prior publication of a contract notice in the OJEU, the award notice sets out the justification for not publishing a contract notice;

ii. the contracting authority has notified each tenderer or candidate concerned of the outcome of the tender process and that notice contained a summary of the reasons for the rejection of their tender in accordance with the requirements of the Remedies Regulations; or

iii. for a contract based on a framework agreement or a dynamic purchasing system, the contracting authority notified each tenderer or candidate concerned of the outcome of the tender process in accordance with the requirements of the Remedies Regulations.


Under the Remedies Regulations, the High Court may set aside, vary or affirm a decision, declare a reviewable public contract ineffective, impose alternative penalties on a contracting authority and may make any necessary consequential order. The Court may also make interlocutory orders with the aim of correcting an alleged infringement or preventing further damage. The Court may also suspend the operation of a decision or a contract and may award damages as compensation for loss resulting from an infringement.


remedies is made?

While it is possible for a review application to be heard within six months, the length of time varies considerably. The length of time will depend on the complexity of the case, the level of discovery and whether an application to lift any automatic suspension is made.



In Sanofi Pasteur v Health Service Executive [2018] IEHC 566, while the main grounds of challenge were dismissed by the High Court, in relation to a claim that the contracting authority had failed to provide reasons in relation to certain sub-criteria, the Court directed the contracting authority to provide full reasons including the characteristics and relative advantages of the successful tender within a period to be fixed by the Court.

In Word Perfect Translation Services Limited v The Minister for Public Expenditure and Reform (No.3) [2018] IECA 156, the Court of Appeal set aside a contract award decision on the basis that the contracting authority had erred in its tender assessment.

In Gaswise Limited v Dublin City Council [2014] IEHC 56, the High Court granted an order quashing the entire procurement process for the award of a multi-supplier framework agreement for the maintenance and repair of boilers in public housing owned by the contracting authority.

In RPS Consulting Engineers Limited v Kildare County Council [2016] IEHC 113, the High Court ordered the contracting authority to provide to the unsuccessful bidder a statement of the reasons including the characteristics and relative advantages and, in particular, the principal specific facts and matters by reference to which each characteristic or advantage could be judged within 15 days of the date of judgment.

In Advanced Totes Ltd. v Bord na gCon [2006] IESC 17, the Supreme Court granted an order of certoriari quashing the decision



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of the Irish Greyhound Board for the award of a contract for the provision of totalisator services. The Irish High Court subsequently granted an injunction prohibiting the use of the original successful tenderer's equipment which had already been installed under an interim arrangement.

In Clare Civil Engineering v Mayo County Council [2004] IEHC 135, the High Court held that the contracting authority had erred in its assessment of tenders and that it was liable in damages to the unsuccessful bidder “for whatever recoverable losses” were suffered by the unsuccessful bidder.



Contracting authorities may include exclusion or limitation of liability clauses in their tender documents which seek to limit or exclude their liability to a successful tenderer in the event of the awarded contract being set aside at a later date by the courts.


Procedure







In line with the 2014 Directives, the Regulations permit the amendment of a concluded contract without a new procurement procedure in prescribed circumstances. These include where:

a. the procurement documents include a “clear, precise and unequivocal” review clause that provides for the proposed modification;

b. the modification involves the provision of additional goods, works or services by the original contractor, and a change of contractor cannot be made for economic or technical reasons and would cause significant inconvenience or substantial duplication of costs for the authority;

c. the need for modification is a result of unforeseeable circumstances (which a diligent authority could not foresee) and the modification does not alter the overall nature of the contract;

d. there is a change to the contractor or concessionaire as a result of an unequivocal review clause or a corporate restructuring; and

e. the value of the modification is minimal, provided that the modification does not alter the overall nature of the contract.

The Public Contracts Regulations limit price increases to 50% of the value of the original contract in respect of scenarios b and c listed above. The Public Contracts Regulations and the Utilities Regulations require a contracting authority which has modified a contract under the circumstances listed in b or c above, to publish a notice to that effect, in the OJEU.



The scope to negotiate with a preferred bidder under the Public Sector Regulations following the submission of final tenders is limited. Generally, negotiation of final bids is only permitted under

the competitive dialogue procedure while all bids other than final bids can be negotiated in the competitive procedure with negotiation. Contracting authorities must comply with General Principles of EU Law in the conduct of their negotiations.


signature?

As discussed at question 6.1 above, the Regulations permit certain changes post-contract signature in limited circumstances.



signature?

The Regulations do not provide for a situation where a contract may be transferred to another entity post-contract signature.




them?

The Irish Regulations do not contain special rules in respect of privatisations but State aid rules apply. The Code of Practice for the Governance of State Bodies requires that the disposal of assets of State bodies, or the granting of access to public property or infrastructure, should be by way of auction or competitive tendering process where the value of the assets/property is at or above €150,000.



The Regulations do not contain special rules in relation to PPPs.

8 The Future



impact?

There are no proposals to change the procurement laws in Ireland at present.




As of 18 October 2018, all public procurement communication and information exchange must be conducted electronically. This means that it is now mandatory for all contracting authorities to advertise, submit and receive all procurement documents electronically.

In keeping with the requirements of the European Directive on eInvoicing (2014/55/EU), Irish public bodies must be able to receive and process electronic invoices by 18 April 2019, with sub-central Government having the option to postpone this until April 2020.



Irel

and


Anna-Marie Curran

A&L Goodbody

IFSC, 25-28 North Wall Quay

Dublin 1, D01 H104

Ireland

Tel: +353 1 649 2227 Email: [email protected] URL: www.algoodbody.com

Jessica Egan

A&L Goodbody

IFSC, 25-28 North Wall Quay

Dublin 1, D01 H104

Ireland

Tel: +353 1 649 2323 Email: [email protected] URL: www.algoodbody.com

A&L Goodbody’s team of procurement law specialists are at the cutting edge of procurement law in Ireland and the EU. Our clients include public

bodies and utilities as well as small and large suppliers bidding to the public and utilities sectors. We are recognised in the market for our pragmatism

and speed in delivering first-class advice. We have acted in most of the leading High Court procurement cases in Ireland and Northern Ireland both

for public bodies and unsuccessful tenderers. We advise on all aspects of procurement law.

Anna-Marie Curran is a Partner and Head of the Procurement Law

team in A&L Goodbody. She has extensive experience in contentious

and non-contentious procurement law. She advises a wide range of

clients in the public, utilities and private sectors on all aspects of

procurement law. She has represented clients in procurement cases

in the Irish and Northern Ireland courts. Anna-Marie is a regular

speaker at conferences nationally and internationally. She is a lecturer

on the procurement law diploma courses at the Law Society of Ireland

and the Honourable Society of the Kings Inns, Dublin and a former

Chairperson of the Irish Society for European Law. Anna-Marie has

been ranked as one of the 10 most highly regarded procurement

practitioners globally by the International Who's Who of Procurement Lawyers. She is recommended by all the leading legal directories for

procurement law.

Jessica Egan is a solicitor on the EU, Competition & Procurement

team at A&L Goodbody. In addition to EU and Irish competition law,

Jessica regularly advises a wide range of clients in the public, utilities

and private sectors on contentious and non-contentious public

procurement matters. Jessica's experience includes acting for clients

in the Irish High Court and training several public sector bodies on the

application of the 2014 public procurement directives. Jessica has an

Advanced Diploma in Public Procurement from the Honourable

Society of Kings Inns and is an active member of the Irish Society of

European Law.



117

Chapter 15


Legance Avvocati Associati

Filippo Pacciani

Ada Esposito

Italy




Public procurement in Italy is governed by the Public Contracts Code (Legislative Decree no. 50/2016, which entered into force on April 19, 2016 and was recently amended by Legislative Decree no. 56/2017 and Law Decree no. 50/2017 converted into Law 96/2017, hereinafter together referred to as the “Code”).

The Code applies to public works, supply and service contracts and concessions awarded by contracting authorities and other awarding entities, as defined by the Code.

The Code abrogated:

■ the former public contracts code (Legislative Decree no. 163/2006) with immediate effect from the date of its publication in the Italian Official Gazette; and

■ the implementing regulation (Decree of the President of the Republic no. 207/2010), save for a limited number of provisions which will be repealed upon the entry into force of the secondary sources.

The Code does not provide for a consolidated implementing regulation but for several secondary sources, such as Ministerial Decrees and guidelines issued by the National Anti-Corruption Authority (“ANAC”).

Specifically, the Code provides for the adoption of a huge secondary regulation and in particular of:

■ 14 Decrees to be issued by the Minister for Infrastructure and Transport (“MIT”);

■ 15 Acts to be issued by the ANAC;

■ six Decrees to be issued by the Prime Minister; and

■ 15 Decrees issued by other Ministers.

The following guidelines have been approved by the ANAC so far:

(i) Guideline no. 1: General guidelines regarding the award of architectural and engineering services. Resolution no. 973 of September 14, 2016, published in the Italian Official Gazette, General Series no. 228 of September 29, 2016 – updated with Resolution no. 138 of February 21, 2018, published in the Italian Official Gazette, General Series no. 69 of March 23, 2018.

(ii) Guideline no. 2: Most economically advantageous tender. Resolution no. 1005 of September 21, 2016, published in the Italian Official Gazette, General Series no. 238 of October

11, 2016 – updated with Resolution no. 424 of May 2, 2018, published in the Italian Official Gazette, General Series no. 120 of May 25, 2018.

(iii) Guidelines no. 3: Designation, role and tasks of the person responsible for the procedure regarding the award of public procurements and concessions. Resolution no. 1096 of October 26, 2016, published in the Italian Official Gazette, General Series no. 1096 of October 26, 2016 – updated with Resolution no. 1007 of October 11, 2017, published in the Official Gazette, General Series no. 260 of November 7, 2017.

(iv) Guideline no. 4: Procedures for the award of public contracts having an amount below the EC thresholds, market investigations, implementation and management of the lists of the economic operators. Resolution no. 1097 of October 26, 2016, published in the Italian Official Gazette, General Series no. 274 of November 23, 2016 – updated with Resolution no. 206 of March 1, 2018, published in the Italian Official Gazette, General Series no. 69 of March 23, 2018.

(v) Guideline no. 5: Selection criteria for the tenders’ commissioners and registration of the experts in the national mandatory list of the selection boards’ members. Resolution no. 1190 of November 16, 2016, published in the Italian Official Gazette, General Series no. 283 of December 3, 2016 – updated with Resolution no. 4 of January 10, 2018, published in the Italian Official Gazette, General Series no. 28 of February 3, 2018.

(vi) Guideline no. 6: Indication of means of proof and deficiencies in the performance of a previous contract that can be considered significant for the demonstration of the exclusion circumstances pursuant to article 80, par. 5, let. c). Resolution no. 1293 of November 16, 2016, published in the Italian Official Gazette, General Series no. 2 of January 3, 2017 – updated with the Resolution no. 1008 of October 11, 2017, published in the Italian Official Gazette, General Series no. 260 of November 7, 2017.

(vii) Guideline no. 7: Enrolment in the list of the contracting authorities and entities operating by means of direct awards towards their own in-house companies according to art. 192 of Legislative Decree no. 50/2016. Resolution no. 235 of February 15, 2017. Published in the Italian Official Gazette, General Series no. 61 of March 14, 2017 – updated with the Resolution no. 951 of September 20, 2017, published in the Italian Official Gazette, General Series no. 236 of October 9, 2017.

(viii) Guideline no. 8: Use of negotiated procedures without prior publication of the contract notice in case of non-fungible public supply contracts and public services. Resolution no. 950 of September 13, 2017. Published in the Italian Official Gazette, General Series no. 248 of October 23, 2017.


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(ix) Guideline no. 9: Monitoring by contracting authorities on the activity of the economic operator in public-private partnership contracts. Resolution no. 318 of March 28, 2018. Published in the Italian Official Gazette, General Series no. 92 of April 20, 2018.

(x) Guideline no. 10: Award of the private security service. Resolution no. 462 of May 23, 2018. Published in the Italian Official Gazette, General Series no. 138 of June 16, 2018.

(xi) Guideline no. 11: Indications about the verification of the limit provided by the article 177, paragraph 1, of the Code for the public entities or for the private concessionaire holding a works or services concession not awarded by means of a public competitive procedure in compliance with European Union Law or on a project financing basis. Resolution no. 614 of July 4, 2018. Published in the Italian Official Gazette, General Series no. 178 of August 2, 2018.

Moreover, some implementing Decrees have been adopted by the Presidency of the Council of the Ministries, the MIT and other Ministries. In particular:

(a) Decree of the President of the Council of the Ministries issued on August 10, 2016 and published in the Italian Official Gazette no. 203 of August 31, 2016 concerning the composition of the Control Centre (Cabina di Regia).

(b) Decree of the MIT no. 248 of November 10, 2016, published in the Italian Official Gazette no. 3 of January 4, 2017 relating to super-specialist work categories.

(c) Decree of the MIT no. 263 of December 2, 2016, published in the Italian Official Gazette no. 36 of February 13, 2017 regarding the requirements for the operators in architectural and engineering services.

(d) Decree of the MIT dated December 2, 2016, published in the Italian Official Gazette no. 20 of January 25, 2017 concerning the publication of the calls for tenders in the IT sector.

(e) Decree of the Ministry of Interior issued on March 21, 2017, published in the Italian Official Gazette no. 81 of April 6, 2017 concerning the monitoring of relevant infrastructures and criminal infiltrations.

(f) Decree of the Ministry of Economic Development no. 122 of June 7, 2017, published in the Italian Official Gazette, no. 186 of August 10, 2017 concerning meal ticket services.

(g) Decree of the Ministry of Justice June 17, 2016, published in the Italian Official Gazette no. 174 of July 27, 2016 concerning the approval of the schedules of the consideration based on quality for the design performances.

(h) Decree of the Ministry of National Heritage and Culture no. 154 of August 22, 2017, published in the Official Gazette no. 252 of October 27, 2017 concerning the public works regarding cultural heritage.

(i) Decree of the MIT no. 567 of December 7, 2017, published in the Italian Official Gazette, General Series no. 12 of January 16, 2018, concerning the test of major infrastructure projects awarded through general contract.

(j) Decree of the MIT dated February 12, 2018, published in the Italian Official Gazette, General Series no. 88 of April 16, 2018, concerning the tariff for the registration of members of selection committees and the relevant remuneration.

(k) Decree of the MIT no. 49 of March 7, 2018, published in the Italian Official Gazette, General Series no. 111 of May 15, 2018, concerning guidelines for the works supervision activity.




of the legislation?

The discipline set forth by the Code is based on the basic principles underlying the EU Treaty and EU Directives, in particular the principles of freedom of movement of goods, freedom of establishment and freedom to provide services, as well as the principles deriving therefrom, such as equal treatment, non-discrimination, mutual recognition, proportionality, transparency, environmental protection and energy efficiency.

The public procurement legislation both aims to ensure the opening-up of public procurement to competition and to allow contracting authorities to achieve the so-called “Best Value for Money”.

The provisions of the public procurement legislation should be interpreted in accordance with the aforementioned principles.



The Code lays down not only the rules regarding the ordinary sector, but also for special sectors, well-known as utilities, which include: (i) gas and heat; (ii) electricity; (iii) water; (iv) transport services; (v) ports and airports; (vi) post services; and (vii) extraction of oil and gas, exploration for, or extraction of, coal or other solid fuels.

Utilities are subject to specific provisions, in particular concerning the type of tender procedures.

Moreover, the Code provides for a special regulation – mainly setting out publicity and procedural rules – regarding contracts in the following fields: (i) social services; (ii) cultural heritage; and (iii) research and development.

Public procurements in the defence and security sectors are currently governed by the Code and Legislative Decree no. 208/2011, implementing the Directive no. 2009/81/EU (“Defence Decree”). The Defence Decree sets forth special rules with regard to contracts falling within its scope.

Therefore, the principle applicable to public procurements of transparency and competition are balanced with the elasticity and flexibility requirements that have to be met in the defence and security sector. In general terms, the Defence Decree provides for a simplification and speeding up of the awarding procedures of the contracts falling within its scope and it sets out specific economic and technical requirements due to the distinctiveness of the sector.

Regarding the application of the Code and the Defence Decree, it must be said that:

■ pursuant to article 1 paragraph 6, the Code provides that its rules are applicable to public contracts awarded in the defence and security sectors, save for the contracts falling within the scope of the Defence Decree; and

■ the Defence Decree shall be applied to contracts awarded for: (a) the supply of military equipment, including any parts, components and/or sub-assemblies thereof; (b) the supply of sensitive equipment, including any parts, components and/or sub-assemblies thereof; (c) works, supplies and services directly related to the equipment referred to in points (a) and (b) above for any and all elements of its life cycle; and (d) works and services for specific military purposes or sensitive works and services, unless otherwise provided by the same Defence Decree.

Legance Avvocati Associati Italy


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public procurement?

Law no. 136/2010 lays down strict measures on the traceability of financial flows and is aimed to prevent criminal infiltration in the public procurement sector.

Pursuant to the abovementioned law, all operators involved in public works, supply and services contracts must use “dedicated” bank accounts for every financial transaction relating to the public procurement. Specifically, all financial transactions should be made by bank transfer or other traceable payment methods and should indicate a specific tender identification code – the so-called CIG – or alternatively, the unique project code (“CUP”). All parties involved in the public procurement procedures, such as purchasers, contractors, sub-contractors and suppliers must be compliant to the new regulation. The procedure is compulsory and the relevant obligations must be expressly mentioned in each public contract; otherwise, the contract is null and void. The breach of the traceability rules could result in the termination of the contract and the application of pecuniary sanctions ranging from 5% to 20% of the relevant transaction amount.

Finally, it is worth saying that the scope and most debatable aspects of the new regulation were further clarified and/or extended by the ANAC resolution no. 4 of July 7, 2011, recently updated by the ANAC resolution no. 556 of May 31, 2017 taking into account the more recent provisions introduced by the Code. In particular, the Authority sets out the scope of the traceability regulation which applies to works and services concessions, as well as contracts not already covered, in whole or in part, by the Code, but subject to the general principles set forth by the EU Treaty and EU Directives (see question 1.5 below).



agreements?

The Code has implemented the EU public procurement Directives, i.e. (i) Directive 2014/23/EU on the award of concession contracts, (ii) Directive 2014/24/EU on the public procurement, and (iii) Directive 2014/25/EU, coordinating the procurement procedures for the award of the same contracts by entities operating in the water, energy, transport and postal services sectors (hereinafter together referred to as the “EU Directives”).

However, the scope of the Code is wider than the EU Directives, since it provides for all awarding procedures for contracts both above and below EU thresholds and it contains further rules that are not provided for by the EU Directives, although it is inspired by the same principles.

Regarding the Government Procurement Agreement (“GPA”), its purpose is to open up this business to international competition as much as possible. In particular, it is designed to make laws, regulations, procedures and practices of government procurement more transparent and to ensure that they do not protect domestic products or suppliers, or discriminate against foreign products or suppliers.

Lastly, it must be noticed that the provisions of the EU Directives and the GPA are closely aligned, and as a direct consequence the Code – which in turn implements the Directives – ensures de facto compliance by Italy with the GPA.


Contracts



The Code applies to the following categories of entities:

(i) contracting authorities, which means the State, any regional or local authorities (or associations formed by local authorities), as well as any national or local public entities and the so-called bodies governed by public law. “Bodies governed by public law” means bodies that have all of the following characteristics: (a) they are established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; (b) they have legal personality; and (c) they are financed, for the most part, by the State, regional or local authorities, or by other bodies governed by public law, or are subject to management supervision by those authorities or bodies, or have an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities, or by other bodies governed by public law;

(ii) contracting entities which pursue one of the activities referred to in Articles 115-121 or in Annex II of the Code and award a concession for the pursuit of one of those activities, and which include one of the following:

(a) the contracting authorities carrying out one of the activities referred to in letter (b) above;

(b) public undertakings, which means any undertaking over which the contracting authorities may exercise, directly or indirectly, a dominant influence by virtue of their ownership thereof, their financial participation therein, or the rules which govern it. A dominant influence on the part of the contracting authorities shall be presumed in any of the following cases, in which those authorities, directly or indirectly: (1) hold the majority of the undertaking’s subscribed capital; (2) control the majority of the votes attaching to shares issued by the undertaking; or (3) can appoint more than half of the undertaking’s administrative, management or supervisory body; and

(c) entities other than those referred to in points (a) and (b), but which operate on the basis of special or exclusive rights. Entities which have been granted special or exclusive rights by means of a procedure in which adequate publicity has been ensured and where the granting of those rights was based on objective criteria shall not constitute contracting entities within the meaning of point (c); and

(iii) other contracting entities, which means specific private entities subject to the application of the Code (e.g., private work and service concessionaires, private entities holding building permits subject to the Code for performance of works requested for urbanisation such as roads or car parks).

The entities considered in points (ii) and (iii) apply only specific parts of the Code.


The following types of contracts are subject to public procurement legislation:

(a) public works contracts, as intended contracts related to the execution or both the executive design and execution of works indicated under Annex I of the Code or the realisation, by whatever means, of a work corresponding to the requirements specified by the contracting authority;



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(b) public service contracts;

(c) public supply contracts, the object of which is the purchase, lease, rental or hire, with or without the option to buy, of products; and

(d) public-private partnership (“PPP”) contracts, which include: public works and public services concessions; availability contracts; and financial lease contracts of public works, the object of which is the provision of financial services and the realisation of public works.



Article 35 of the Code lays down specific thresholds, in particular:

(i) EUR 5,548,000 for public work contracts and concessions;

(ii) EUR 144,000 for supply and service contracts and public design contests awarded by contracting authorities which are listed as central government authorities under Annex III (i.e. Ministries);

(iii) EUR 221,000 for supply and service contracts and public design contests awarded by sub-central contracting authorities; and

(iv) EUR 750,000 for social service contracts and other specific services listed under Annex IX.

The Code is also applicable to public contracts in utilities whose value is equal to or higher than:

(i) EUR 5,548,000 for public work contracts;

(ii) EUR 443,000 for supply and service contracts and public design; or

(iii) EUR 1,000,000 for social service contracts and other specific services listed under Annex IX.

In synthesis, the procedural rules provide for contracts above EU thresholds and must allow any EU entity to participate in the procedure.

Moreover, the Code also provides for a set of simplified procedural rules applicable to the below threshold procurement. On this regard, the regime is tailored on domestic competition.

The pivotal difference between the abovementioned procedures concerns the advertising means of the tender notices and calls for tender which are published, in the first case, in the Official Journal of the European Union and, in the second case, on the ANAC specific website and on the contracting authority profile.

Lastly, the Code does not provide for any specific rules concerning the awarding procedure of contracts below a certain threshold (EUR 40,000).


There are certain aggregation rules to calculate the estimated value of a public contract for the purpose of the EU thresholds. First of all, the estimated value shall be based on the total amount payable, net of VAT, as estimated by the contracting authority, and shall take account of any form of option/renewal of the contract. When the contracting authority provides for prizes or payments to candidates or tenderers, it shall take them into account for the calculation of the contracts’ estimated value.

With regards to public works contracts, calculation of the estimated value must consider both the cost of the works and the total estimated value of the supplies necessary for executing the works and actually required. Such information is made available by the contracting authorities.

In this regard, the Code clarifies that the choice of method used to calculate the abovementioned value may not be made with the intention of excluding it from its scope.

The Code provides also for methods for calculating the estimated value of certain types of contracts as well as contracts subdivided into lots.

Moreover, articles 35 and 167 set out anti-avoidance rules. In particular, no public contract or concession may be subdivided to get out of the scope of the Code.



The Code gives a comprehensive view of the concession contracts in Part III.

Public works/services concessions are defined by article 3, let. uu) and vv) as agreements concluded in writing by means of which one or more contracting authorities entrust to an operator a complex of activities, as the realisation of works or the definitive or executive design and the realisation of works (or, in case of service concession, the supply and operation of services) in exchange for the economic exploitation of the work or service, even accompanied by a public contribution, with assumption of the operating risk connected with the operating of the work or the service.

The work and service concession may be tailored as PPP contracts and subject to the regime set forth in Part IV.

The operating risk is the exposure to the vagaries of the market, which could be a demand or a supply risk, or both. The concessionaire shall be deemed to assume operating risk when it is not granted to recoup the investments made or the costs incurred in operating the works or the services which are the subject-matter of the concession under normal operating conditions. The part of the risk transferred to the concessionaire shall involve real exposure to the vagaries of the market, such that any potential estimated loss incurred by the concessionaire shall not be merely nominal nor negligible.

Specific rules are set forth by the Code with regard to awarding procedures and publication means of the calls for tender relating to concessions, as well as duration, conditions for the revision of the financial and economic plan, cases of early termination, sub-contracts, changes permitted post-contract signature, etc.



Framework agreements are specifically laid down by the Code. Pursuant to article 54, the contracting authorities may enter into framework agreements in accordance with the procedures provided for by the Code. Save for exceptional cases, such agreements shall have a maximum duration, specifically: (i) of four years regarding the ordinary sectors; and (ii) of eight years concerning utilities sectors.

Before the awarding of the framework agreement, the contracting authorities apply the regular procedure rules provided for the specific public tender.

After the awarding, the Code distinguishes between two cases and in particular when there is only one economic operator or more than one.

In the first case, the single contract is directly awarded to the economic operator according to the terms and conditions provided for by the framework agreement.



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In the second case, the contracting authority can follow different procedures in order to identify the specific contractor for the single agreement, with or without a new competitive bidding phase.

The parties cannot substantially modify the conditions set forth by the framework agreement and, in any case, the purchasers shall not use the framework agreement in violation of fair competition rules.


into lots?

Pursuant to article 51 of the Code, contracting authorities shall divide tenders into lots in order to foster the participation of small and medium enterprises in public procurement. If the tender is not divided into lots, the awarding entity shall motivate such decision. The contracting authorities specify in the contract notice or in the invitation letter if the offers can submit for one lot only or all of them and, furthermore, they may limit the number of lots that may be awarded to the same operator.



According to article 45 of the Code, Italian contracting authorities shall allow the economic operators established in EU Member States to take part in bidding procedures.

Regarding economic operators established in countries which have concluded international agreements on public procurement with the Italian Republic or the EU (e.g. the GPA), article 49 of the Code provides that Italian contracting authorities shall ensure to said foreign economic operators, a treatment no less favourable than that accorded to the economic operators established in Italy.

3 Award Procedures




The Code sets out rules for ordinary and special procedures.

Regarding the ordinary procedures, the contracting authority can choose between open tender procedures and restricted ones, and in particular:

(a) for open procedures, it publishes a call for tender and any interested economic operator may submit a bid according to the conditions and timescales set forth by the call for tender; and

(b) for restricted procedures, it will solicit economic operators to submit a request to participate in the tender and, subsequently, only the operators invited by the contracting authority may submit a bid.

Special procedures include:

(a) competitive procedure with negotiation: the contracting authority publishes a tender notice open to all the economic operators. The potential bidders shall file their request of participation indicating the qualitative requirements listed under the tender notice. On the basis of such information, the contracting authority invites the qualified bidder to negotiate;

(b) negotiated procedure without previous publication of the call for tender: as a matter of fact, such procedure is similar to a private negotiation, except for the fact that the awarding

authority will be required to apply the general principles of transparency, non-discrimination, equal treatment and proportionality; and

(c) competitive dialogue procedure: the contracting authority publishes a call for tender in which there is a list of both the requirements to be met by the competitors and the evaluation criteria of the bids. Any economic operator may request to participate in the tender procedure. Then, the contracting authority conducts a dialogue with the candidates admitted to that procedure, with the aim of developing one or more suitable alternatives capable of meeting its requirements, and on the basis of which the candidates chosen are invited to tender.

The competitive procedure with negotiation and the negotiated procedure without previous publication of the call for tender are characterised by a certain flexibility in terms of the participants’ capacity to discuss and/or negotiate with the awarding authority the conditions as set out in the tender documentation. More specifically, the negotiated procedure without previous publication of the call for tender can be used only under exceptional conditions (e.g. only one operator can perform the contract because of specific skills, protection of exclusive rights, urgency, etc.).

The competitive procedure with negotiation and the competitive dialogue procedure can be carried out upon the occurrence of specific conditions, and namely for the awarding of works, supplies and services contracts in the following cases:

(a) the needs of the contracting authority cannot be satisfied by means of immediately available solutions;

(b) the planning of new innovative solutions is required;

(c) a mandatory previous negotiation because of the features, complexity or financial/legal regulation of the scope of the contract or because of the risks connected thereto;

(d) the technical specifications cannot be precisely indicated by the contracting authority; and

(e) a previous tender procedure has been carried out but only irregular or not admissible tenders have been submitted.


Time limits to receive the requests to participate in the tender procedure and to receive the bids are provided by the Code, depending on the type of tender procedure.

In general, contracting authorities shall consider the complexity of the contract and the time required for drawing up all the required documentation by the participants. The minimum time limits for the receipt of requests to participate and bids are specifically set forth by articles 60, 61, 62, 64 and 65 of the Code in compliance with the EU Directives.


tenderers?

There are three sets of requirements which must be met by the bidders in order to participate in a public procurement procedure, namely:

(a) general morality requirements;

(b) economic and financial capacity; and

(c) technical and professional skills.

Requirements under letters (b) and (c) must be drawn up by the awarding authorities and proportionate to the subject-matter of the public procurement.



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The requirement under (a) is generally aimed to exclude from the tender: (i) entities which have been convicted of certain types of crimes (such as participation in a criminal organisation, corruption, bribery, fraud, terrorism, etc.); (ii) entities facing bankruptcy (or entering into a proceeding for the declaration of bankruptcy); (iii) entities which failed to pay social security contributions or taxes; (iv) subjects who have been found guilty of material professional misconduct; and (v) entities which rendered misrepresentations, etc.

In this regard, the Code specifies the offences causing exclusion. Furthermore, the ANAC explains which evidence is appropriate to demonstrate such exclusions by means of its guidelines.

Should a competitor make good any damage caused and adopt measures to prevent other crimes, it may be re-admitted to the procedure.

Moreover, the awarding authorities have been granted new powers in order to demonstrate, for the purposes of the exclusion, that the company was guilty of serious misconduct putting in doubt its integrity and reliability.

In case of missing or incomplete documentation filed by the operator participating in the tender procedure, the latter is entitled to regularise its position within 10 days from the relevant notice received from the contracting authority.




Fundamentally, public contracts can be awarded on the basis of the most economically advantageous tender criterion or, in specific and limited cases, on the basis of the lowest price criterion.

The most economically advantageous tender criterion is based on the best quality/price ratio. Such criterion specifically takes into account both the economical and the technical aspects (e.g. quality, price, technical merit, aesthetic, functional and environmental characteristics) allowing the awarding authority to pursue the best trade-off.

The tender documents establish the specific features to be assessed in accordance with the nature, object and characteristics of the contract and assign to each element a specific score.

The following criteria can be included and in particular:

(a) quality, including technical merit, aesthetic and functional characteristics, accessibility for disabled people, design for all users, certifications and attestations concerning safety and health of workers, such as OSHAS 18001, social and environmental characteristics, reducing energy consumption and environmental resources of the work or product, innovative features, marketing and related conditions;

(b) the possession of an EU Ecolabel in relation to the goods or services covered by the contract, in an amount equal to or exceeding 30% of the value of the supplies or services covered by the contract;

(c) the use and maintenance costs also regarding the consumption of energy and natural resources, pollutant emissions and total costs;

(d) the compensation of greenhouse gas emissions related to the company’s activities calculated using the methods established in accordance with the recommendation 2013/179/CE of April 9, 2013 on the use of common methodologies to measure and communicate the environmental performance throughout the life cycle of products and organisations;

(e) the organisation, qualification and experience of the personnel actually used in the contract, if the quality of the

personnel in charge can have a significant influence on the level of performance of the contract;

(f) the after-sales service and technical assistance; and

(g) the terms of delivery, such as the date of delivery, the delivery process and the terms of delivery or performance.

The lowest price criterion can be only used in the following cases:

(a) works up to EUR 2,000,000, awarded by means of ordinary competitive procedures on the basis of the executive designs;

(b) services and supplies with standard features or whose terms are defined by the market; or

(c) services and supplies below the EU threshold, with repetitive features and with no relevant technological or innovative content.

When using the lowest price criterion, the contracting authority shall give evidence of the grounds of such choice in the tender documentation.


low tenders?

Upon request of the contracting authority, economic operators shall provide the latter with explanations on the price or costs proposed in the tender where tenders appear to be abnormally low on the basis of a technical evaluation taking into account the fairness, reliability, sustainability and feasibility of the tender. Said explanation may in particular relate to: (a) the economics of the manufacturing process, of the services provided or of the construction method; (b) the technical solutions chosen or any exceptionally favourable conditions available to the tenderer for the supply of the products or services or for the execution of the work; and/or (c) the originality of the work, supplies or services proposed by the tenderer. Explanations are not admitted with respect to the work safety costs and personnel costs indicated by the tenderer.

The evaluation criteria of the abnormally low tenders depend on the contract award criteria (lower price or most economically advantageous tender).

Pursuant to article 97, paragraph 2 of the Code, when the award criterion is the lower price, the fairness of the tender shall be evaluated with respect to tenders presenting discounts equal to or higher than determined thresholds calculated on the basis of one of the specific financial methods listed in article 97 of the Code, as drawn by the contracting authority. Said calculation shall be made only when the number of the admitted tenders is equal to or higher than five.

When the award criterion is the most economically advantageous tender, the fairness of the tender shall be evaluated with regard to tenders presenting both scores relating to the price and the sum of the scores relating to other evaluation elements, both equal to or higher than four-fifths of the corresponding maximum scores provided by the call for tender.

The contracting authority shall assess the information provided by consulting the tenderer. It may only reject the tender where the evidence supplied does not satisfactorily account for the low level of price or costs proposed, taking into account the elements referred above.

Moreover, the contracting authority shall reject the tender where they have established that the tender is abnormally low because: (i) it does not comply with the applicable obligations in the fields of environmental, social and labour law established by union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X of the Code, as well as the applicable obligations set forth by article



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105 of the Code; (ii) the work safety costs indicated by the tenderer are disproportionate in respect of the characteristics of the works, services and supplies; and (iii) personnel costs indicated by the tenderer are lower than the minimum wage provided by the law.

Where a contracting authority establishes that a tender is abnormally low because the tenderer has obtained State aid, the tender may be rejected on that ground alone only after consultation with the tenderer where the latter is unable to prove, within a sufficient time limit fixed by the contracting authority, that the aid in question was compatible with the internal market within the meaning of article 107 of the TFEU. Where the contracting authority rejects a tender in those circumstances, it shall inform the European Commission thereof.

Lastly, when the award criterion is the lower price and the value of the contract is lower than the EU thresholds, the contracting authority may alternatively provide in the call for tender the automatic exclusion from the procedure of the tenders presenting discount percentages equal to or higher than the abnormality threshold calculated pursuant to the mentioned article 97, paragraph 2. The automatic exclusion is allowed only when the number of the admitted tenders is lower than 10.


Contracting authorities shall generally inform candidates and tenderers, as soon as possible, of any decisions reached concerning the award of the contract, including the grounds for any decision not to award a contract for which a call for tender was published.

In particular, pursuant to article 29, decisions made after the verification of the requirements as indicated in question 3.3, and consequently related to the admission and the exclusion of an operator in a tender procedure, must be communicated to the interested subjects within the two following days.

Moreover, article 76 establishes that the contracting authority shall communicate the awarding of the contract to the winner and the non-adjudication to the other competitors within the five following days.

However, according to the abovementioned article, in case of an application of any involved party, the contracting authority shall communicate within 15 days from the request:

■ the motives to every excluded candidate for the rejection of its offer; and

■ the name of the winner, the characteristics and relative advantages of the tender selected, to every candidate that has made an admissible tender.

However, it is worth noting that contracting authorities may decide to withhold certain information regarding the contract award, when the release of such information: (i) would impede law enforcement; (ii) would otherwise be contrary to the public interest; (iii) would prejudice the legitimate commercial interests of public or private operators; or (iv) might prejudice fair competition between them.


bidders?

On this matter, see question 3.6.


ANAC indicates and qualifies the contracting authorities that can carry out autonomous tender procedure. On the contrary, the non-

qualified contracting authority shall necessarily purchase works, supplies and/or services from or through a central purchasing body and they can be used also by qualified contracting authorities.

At State level, the most relevant purchasing body is Consip, a joint stock company wholly held by the Minister of Finance.

Should two or more awarding authorities, who also possess cumulatively the qualifications required, carry out together specific public procurements and concessions, they will be jointly liable for the fulfilment of the obligations arising from the Code.


The submission of the bids is grounded on the principle of the “sole bid” in order to ensure equal treatment among the competitors. As a result, according to case law, the candidates are not entitled to submit a plurality of bids or alternative bids.

Pursuant to article 95, paragraph 14 of the Code, the bidders are admitted to submit variants provided that (i) the contract is to be awarded on the basis of the “most economically advantageous bid” criterion, and (ii) the contract’s notice specifically authorises such variants. Furthermore, the awarding authorities shall indicate the minimum requirements to be met by the variants as well as the specific modalities for their submission.


Pursuant to article 42 of the Code, appropriate measures shall be taken by the awarding authorities to prevent and resolve any conflict of interest in the awarding procedures of contracts and concessions in order to avoid any distortion of competition, as well as to ensure equal treatment between tenderers.

Pursuant to the mentioned article 42, a situation of conflict of interest occurs whenever the personnel of the contracting authority or consultants who intervene in the awarding procedure or may, directly or indirectly, influence its outcome, have any financial, economic or personal interest which may jeopardise his/her impartiality and independence.

In such cases, they must inform the contracting authority and abstain from taking part in the relevant decisions, thereby avoiding incurrence of disciplinary responsibility.




In general terms, the potential bidders may not be directly involved in the preparation of a procurement procedure. Only in limited cases, the Code allows a partial involvement of the bidders.

In the competitive dialogue regulated by article 64 of the Code (see question 3.1), the potential bidders may be required to submit to the contracting authority innovative solutions on which – if evaluated of public interest – the subsequent phase of the procurement may be based.

Article 183, paragraph 15, of the Code also allows the private operators to submit to the contracting authorities project financing proposals including concession agreement schemes and connected economic and financial plans which – if evaluated of public interest – will be the reference documents to be used in the subsequent procurement procedure called by the contracting authority.

Moreover, article 165, paragraph 3, of the Code states that in case of concessions awarded through restricted procedures, the contracting



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authority may provide in the call for tender a prior consultation with the potential bidders in order to verify and preliminarily overcome any issues under a bankability perspective so to take into account the comments of the operators and adjust the tender documentation accordingly.

Lastly, the designs of relevant infrastructures having impacts on the environment and the urbanistic planning, to be identified through specific ministerial decries, shall be subject to a prior public consultation procedure. The outcomes of the consultation and the comments herein collected will be published by the contracting authorities and duly considered in the definitive design to put as basis in the tender procedure called by the contracting authority.




The public contracts, listed in articles 5 to 20 of the Code, are excluded in whole or in part from the scope of the Code. Among them, the Code shall not apply to:

(a) the acquisition or rental, by whatever financial means, of land, existing buildings or other immovable property or concerning rights thereon;

(b) the acquisition, development, production or co-production of programme material intended for broadcasting by broadcasters and contracts for broadcasting time;

(c) arbitration and conciliation services;

(d) certain legal services reflecting those ones listed in the EU Directives;

(e) financial services in connection with the issue, sale, purchase or transfer of securities or other financial instruments, central bank services and operations conducted with the European Financial Stability Facility and the European Stability Mechanism;

(f) employment contracts;

(g) certain civil defence, civil protection, and danger prevention services that are provided by non-profit organisations or associations, except patient transport ambulance services;

(h) public passenger transport services by rail or metro;

(i) certain political campaign services, when awarded by a political party in the context of an election campaign;

(j) the following concessions:

(i) concessions for air transport services based on the granting of an operating licence according to Regulation (EC) No 1008/2008 of the European Parliament and of the Council or to the Regulation (EC) No 1370/2007 regarding concessions for public passenger transport services;

(ii)concessions for operating networks intended for public services in connection with water production, transport and distribution and concessions for letting water into such abovementioned networks; and

(iii)service concessions for lottery services, which are covered by CPV code 92351100-7, awarded by a Member State to an economic operator on the basis of an exclusive right;

(k) contracts in the special sectors whose activity has been found by the European Commission directly exposed to competition on markets to which access is not restricted; and

(l) contracts awarded pursuant to international rules.

Pursuant to article 4 of the Code, the awarding of the abovementioned, excluded in whole or in part by the Code’s scope, must in any case follow the general principles of transparency, non-discrimination, equal treatment, proportionality, environmental protection and energy efficiency, by awarding, if possible, the relevant contracts through a beauty contest (i.e. if such an informal tender does not frustrate the special purposes of the exemption).




In-house agreements were previously regulated mainly by case law. For this reason, the Code introduces a specific regulation for in-house agreements, specifying that it does not apply to contracts awarded by a related company which fulfils the following requirement: (i) the contracting authority exercises a similar control over its own departments and the enterprise; (ii) at the same time, carries out more of the 80% of its activities with the controlling contracting authority or authorities or with companies controlled by the latter; and (iii) there is no private capital participation, save for the compulsory participation of specific private economic operators established by a national legislative provision compliant to the Treaties, providing that such participation is non-controlling and non-blocking and does not confer a decisive influence on the decisions of the controlled company.

Article 192 of the Code provides that a list of the awarding authorities operating by means of a direct award of contracts has been established within the ANAC.

Moreover, a less rigid and more flexible in-house arrangement is established in utilities.

In particular, the Code is not applied to the award of a contract from a contracting authority to a related company, the only condition being that such enterprise has realised in the last three years at least 80% of the billing for the contracting authority, or if such billing is not available because of the date of constitution, the company will realise it.

Lastly, pursuant to article 5, paragraph 6 of the Code, the agreements concluded between one or more contracting authorities do not fall within the scope of the Code provided that the following requirements are met:

■ the agreement establishes a cooperation between the awarding authorities aimed at ensuring that public services to be carried out are performed to reach mutual goals;

■ the implementation of such cooperation is governed solely by reasons of the public interest; and

■ the awarding authorities perform to the market less than 20% of the activities connected with the cooperation.

5 Remedies



According to Legislative Decree 104/2010 (hereinafter, referred to as the “Code of the Administrative Trial”), any dispute arising from, or connected to, awarding procedures of public works, services and supplies, including relevant claims for damages, falls within the exclusive jurisdiction of the administrative courts.



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Any measure adopted during the awarding procedures may be challenged by any interested party before the Regional Administrative Court (hereinafter, referred to as the “Administrative Appeal”).

The Administrative Appeal aims at obtaining the annulment of the challenged administrative measures (e.g., call for tender, exclusion of a candidate, etc.) in order to allow the claimant to participate in the tender or to be awarded with the contract: it depends on the specific stage of the procedure in which the administrative measure has been adopted by the contracting authority. However, if such a result cannot be obtained (e.g. because the contract has already been performed), alternatively, the claimant is entitled to claim for damages (including the loss of chances). In the same proceedings, the claimant can also ask for interim measures.

Should the Administrative Appeal be brought against the awarding measure (so-called “aggiudicazione”) and the latter be annulled, the administrative judge is entitled to declare the ineffectiveness, in whole or in part, of the contract in the specific cases listed under articles 121, paragraph 1 and 122 of the Code of the Administrative Trial.

The decisions issued by the Regional Administrative Court may be further appealed before the Council of State (Court of second instance). Exceptional remedies may also be lodged against the decisions of the Council of State (i.e. appeal to revoke the decision in the exceptional cases provided by article 395 of the Italian Procedural Civil Code and appeal before the Supreme Court for reasons of jurisdiction).

After the contract has been signed, any disputes arising from its performance fall within the jurisdiction of Italian Civil Courts, unless connected to the awarding procedure.

In 2014, the Code of the Administrative Trial introduced new provisions in order to reduce the length of the judicial proceedings, so as to have a judgment in reasonable time in order to avoid the contracting authority, the awarded company and the claimant being kept in an uncertain situation for too long and, meanwhile, the contract is not performed.



The following solutions have been provided as alternative remedies to the judicial protection before the Civil Court with a specific regard to the execution phase of the contract: (i) amicable agreement; (ii) arbitration; (iii) settlements; and (iv) pre-litigation advice issued by the ANAC obliging the parties to be compliant to them. Moreover, the ANAC has been granted the power to challenge the tender procedures measures contrary to its advice.

In particular, in April 2017, Law Decree no. 50/2017, converted with amendments, by Law no. 96/2017, amended article 211 of the Code introducing provisions aimed at strengthening the ANAC powers.

In particular, pursuant to article 211, paragraph 1-bis, the ANAC is entitled to challenge before the Administrative Courts the calls for tender and any administrative measures adopted by contracting authorities relating to contracts having a relevant impact whenever the ANAC believes that violations of the public contract rules occurred.

Moreover, article 211, paragraphs 1-ter and 1-quater state that the ANAC, if it considers that a contracting authority has adopted a measure affected by material violations of the Code, is entitled to issue a grounded opinion within 60 days starting from the acknowledgment of the violation, indicating specifically the

illegitimacy detected. The opinion is transmitted to the contracting authority. If the contracting authority fails to comply within the deadline given by the ANAC, in any case not higher than 60 days after the transmission, the ANAC may propose an appeal within the next 30 days before the Administrative Court.

The cases, the procedures or types of deeds in respect of which the ANAC exercises the powers referred above are identified by means of its own regulation, recently published in Official Gazette no. 164 of 17 July 2018.


sought?

Please refer to questions 5.1 and 5.2.


remedies?

The Administrative Appeal must be filed before the Administrative Regional Court within 30 days from the relevant notification or publication or, at the latest, from the acknowledgment of the challenged deeds. Should the calls for tender not be published, the abovementioned period starts from the date in which the contracting authority publishes the awarding notice and the consequent reasons of the choice. If such information is not included in the notice, the contract may be challenged no later than six months from the day following its signing.

The appeal before the Council of State must be filed no later than 30 days from the notification of the challenged decision. Should the challenged decision not be notified, the appeal shall be filed within three months from the publication of the decision.


periods?

The terms described under question 5.4 above are mandatory and they cannot be shortened in any circumstances.

However, it is worth noting that in 2016 some amendments to the Code of the Administrative Trial have been introduced in order to speed up the judicial proceedings in the sector of the public contracts and anticipate the challenges of specific deeds. In this respect, article 120, paragraph 2-bis of the Code of the Administrative Trial provided that any measures aimed at excluding or admitting candidates in an awarding procedure shall be challenged within 30 days from its publication on the website of the contracting authorities. The lack of challenges in such cases prevents any competitors from claiming any derivate illegitimacies of the subsequent deeds of the awarding procedures (e.g., awarding measures).


As anticipated, any disputes between the parties arising from the performance and interpretation of a signed contract fall within the jurisdiction of Italian Civil Courts, unless connected with the awarding procedure. Therefore, any breaches of the contract may be challenged before the Civil Court.

On the contrary, if the claimant has filed an Administrative Appeal, pursuant to articles 121 and 122 of the Code of the Administrative Trial, the signed contract may be declared ineffective by the administrative judge as a consequence of the breach of the awarding



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procedure. However, the ineffectiveness of a contract will generally depend on a range of further factors (e.g. public and private interests involved in the performance of the contract, the stage of performance of the contract, the possibility for the claimant to step-in the contract, the types of violation and the strategic nature of an infrastructure, etc.). Should the annulment not be obtained, the only remaining remedy will be the claim for damages.


remedies is made?

The timescale depends on a number of factors such as the claim’s nature, the legal issues of the case, and the workload of the courts. Nevertheless, the Code of the Administrative Trial provides for a special procedure aimed at accelerating proceedings relating to public procurement disputes. According to such a procedure, all the deadlines for notifying or filing acts before administrative courts (except for the ordinary appeal) are halved. The time generally requested to obtain an interim measure ranges from 15 to 30 days.

A definitive ruling is generally obtained within a year.



Under the Italian civil law system, the courts’ decisions are not binding precedents and it would not be helpful to provide specific examples of leading cases. In any case, there were decisions granting remedies and enforcement measures.



Some mitigation measures are available to the contracting authority to avoid an appeal by interested third parties or a declaration of ineffectiveness of the contract made by the judge, once the contract has been executed.

If a claim against the awarding procedure is expected to be made, the contracting authority is entitled to review, annul and amend any act of the awarding procedure through a self-protection procedure (so-called “autotutela”).

Should an appeal against the awarding procedure be lodged according to article 121, (a) and (b) of the Code of the Administrative Trial, the contracting authority may prevent the administrative judge from declaring the ineffectiveness of the contract respecting the following statements:

(i) clearly outline the motives justifying the negotiated procedure without advertising a call for tender before the start of the awarding procedure;

(ii) disclose the intent to sign the contract with a notice published in the Official European Journal or the Italian Official Gazette (so-called “avviso di trasparenza preventiva”); and

(iii) sign the contract not earlier than 10 days from the day following the notice under (ii) above.

Moreover, in the sector of the strategic infrastructures of national relevance, article 125 of the Code of the Administrative Trial sets forth that, save for the cases of material violations provided under articles 121 and 123 (e.g., lack of publication of the call for tender in the cases required by the European law), the annulment of the award of the contract does not affect the contract already executed, but only a compensation for damages may be required by the plaintiff.


Procedure







Legislation does not govern changes to the contractual contents. Generally, the rules outlined in the tender procedure and the contents of contracts are binding to the tenderers to respect the principle of equal treatment.

However, bidders may be allowed to propose some variation to contract specification, to the timetable, and to contract conditions, in order to better meet the contracting authority’s expectations and within the limits set forth by tender rules.

According to article 48, paragraphs 17 and 18, the changes to membership of bidding consortia are allowed in the event of bankruptcy of one member both in the course of the awarding procedure and during the performance of the contract. Moreover, article 48, paragraph 19 also allows the members of a bidding consortia to withdraw from the consortia for organisational internal needs provided that the remaining members of the consortia meet the requirements necessary to duly perform the works, services and supplies.



As a general rule, there is no scope for negotiation after the submission of tenders. A little margin of flexibility is only allowed in negotiated procedures and PPP contracts, depending on tender rules.


signature?

Pursuant to article 106, contracts and framework agreements may be modified without a new procurement procedure in the following cases:

(a) where the modifications, irrespective of their monetary value, have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses, which may include price revision clauses, or options. Such clauses shall state the scope and nature of possible modifications or options as well as the conditions of utilisation. They shall not provide for modifications or options that would alter the overall nature of the contract;

(b) for additional works, services or supplies by the original contractor that have become necessary and that were not included in the initial procurement and in particular when a change of contractor:

(i) cannot be made for economic or technical reasons such as requirements of interchangeability or interoperability with existing equipment, services or installations procured under the initial procurement; and

(ii)would cause significant inconvenience or substantial duplication of costs for the contracting authority;



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(c) when the modification:

(i) is due to circumstances which a diligent contracting authority could not foresee, including changes in law and administrative measures; and

(ii)does not alter the overall nature of the contract;

(d) where a new contractor replaces the one to which the contracting authority had initially awarded the contract as a consequence of either:

(i) an unequivocal review clause or option in compliance with point (a);

(ii)universal or partial succession into the position of the initial contractor, following corporate restructuring, including takeover, merger, demergers, acquisitions, insolvency, of another economic operator that fulfils the criteria for qualitative selection initially established provided that this does not entail other substantial modifications to the contract and is not aimed at circumventing the application of the Code; or

(iii)in the event that the contracting authority itself assumes the main contractor’s obligations towards its subcontractors; or

(e) where the modifications, irrespective of their value, are not substantial. A modification shall be considered substantial when:

(i) the contract or the framework agreement is materially different in character from the one initially concluded; or

(ii) one or more of the following conditions are met:

■ the modification introduces conditions which, had they been part of the initial procurement procedure, would have allowed the admission of candidates other than those initially selected or the acceptance of tender other than that originally accepted or would have attracted additional participants in the procurement procedure;

■ the modification changes the economic balance of the contract or the framework agreement in favour of the contractor in a manner which was not provided for in the initial contract or the initial agreement;

■ the modification extends considerably the scope of the contract; and

■ where a new contractor replaces the one to which the contracting authority had initially awarded the contract in cases other than those provided for under point (d) above.

In the cases under letters (b) and (c) above, the contract may be modified solely in cases where the increase in price does not exceed 50% of the value of the original contract or framework agreement.

Where several successive modifications are made, that limitation shall apply to the value of each modification. Such consecutive modifications shall not be aimed at circumventing the Code.

Similar provisions are provided with regard to concession agreements and PPP contracts by article 175 of the Code.



signature?

Transfer of a contract to another entity post-contract signature is not permitted, unless the transfer is the consequence of a corporate restructuring (merger, de-merger, transfer of going concern: see the answer to question 6.3, letter (d)).




them?

Privatisations do not fall within the scope of the Code. The disposal of participation held in State-controlled companies is governed by Law 474/1994, according to which the disinvestments of participations held by public entities, regardless of the value of the shares on sale, should take place through competitive tenders based on the general principles of transparency, non-discrimination, equal treatment and proportionality. The general criteria and the conditions of the disinvestment procedure shall be set forth by the Government. In addition, the privatisation of companies operating in the sector of the services of general interest shall follow the issuance of a prior opinion by the parliamentary committees.

In this context, it is worth mentioning that the current regime provided by Law 474/1994 in relation to the so-called “golden share” (i.e. special powers reserved to the public authorities which disinvest their participation in companies operating in strategic sectors such as defence, energy, infrastructures, telecomm-unications) was abrogated by Law Decree no. 21/2012, as converted with amendments by Law no. 56/2012 and subsequently amended by Law Decree no. 148/2012, well known as the Golden Powers Decree.

In order to conform the Italian system to the competition principles set forth by the European Law, the Golden Powers Decree changed the terms, the conditions and the scope of the special powers of the State exercisable on both public and private companies operating in the defence and national security sectors or holding assets of strategic relevance in the sectors of energy, transport, communications and high technologies (such as robotic, artificial intelligence, and critical technologies).

Particularly, the Golden Powers Decree establishes that certain corporate transactions involving companies carrying out strategic activities or holding asset in the abovementioned sectors, as better listed in specific implementing regulations (e.g., acquisition of participations higher certain thresholds from EU or extra-EU legal entities, mergers, demergers, transfers of business, relevant changes of the corporate purposes) shall be notified to the Presidency of the Council Ministers in order to allow the Government to prompt the special powers. The lack of notification results in the application of material fines against the legal entities involved in the transaction.

The scope of the special powers of the State depends on the type of the transaction or the sector of reference. They may include the imposition of any prescriptions, opposition to the purchase, and veto-power against the corporate transactions duly notified.

As a rule, the special powers are exercised within 10 days from the notification of the transaction.

Moreover, specific inter-company transactions, expressly listed by the implementing regulations, are exempted from the exercise of the golden powers, but they are subject to the notification obligations.



The new Code has introduced a pivotal change in the Italian legislation introducing a dedicated section to PPPs and implementing the EU Principles that were not expressly regulated.



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The Code defines PPP contracts as any contract concluded in writing by means of which one or more awarding authorities entrust a set of activities consisting of the realisation, the transformation, the maintenance and the operation of the works in return for the availability or the right to exploit them or the supply of a service connected with the work.

The Eurostat decisions are applicable to PPP contracts under the public accounting aspects.

A central point of the PPP regulation is the allocation of the risk on the contractor as well as the economic-financial balance. The awarding authority can provide for a public contribution in order to ensure the economic-financial balance through payments or by transferring real estate assets.

In order to foster the PPP system, the Code contains provisions aimed at ensuring the compliance of the contracts with the needs of the financing entities.

In particular, the PPP contracts can be assessed by the awarding authority only if the contractor demonstrates the availability of a financing. For this reason, its duration shall be initially set depending on the amortisation period of the investment and on the financing modalities to one or more economic operators, and its execution is subject to the financing of the works.

The contracting authorities shall provide in the tender documentation that the contract is terminated in the event that the financing agreement (or the bond to be issued) is not entered into by the contractor within a fair term not higher than 18 months from the execution of the PPP contract.

Moreover, the PPP contractors are allowed (i) to issue project bonds also derogating from the provisions of the Italian Civil Code, (ii) to strengthen the right of the financing entities to select the project company destined to step-in the concession in order to avoid any termination due to default of the concessionaire (so-called “step-in right”), and (iii) to receive specific indemnities in any case of early termination of the PPP contracts due to default of the contracting authorities, revocation for public reasons and withdrawal in case an agreement on the re-balancing of the financial plan is not reached between the parties.

The PPP scheme is set out by the Code to involve private parties in the maintenance and requalification of public areas and unused public buildings (“administrative exchange”, “baratto amministrativo”), granting also tax benefits to the private parties taking part in such initiatives.

8 The Future



impact?

In August 2018, the Ministry of Infrastructure and Transport opened a public consultation aimed at submitting a reform proposal of the Code.

The goal of the reform is to simplify the legal framework and to solve the more urgent critical issues which have arisen during the first years of application of the Code, as a consequence of the monitoring activities of the Ministry and reporting activities by the stakeholders.

The topics subject to the consultation are the revision of the figure in charge of the tender procedure (RUP), the qualification of the contracting authorities and the economic operators, derogations from the modalities for the award of the works, limitations to rebates, subcontracts and other relevant limitations, the role and powers of the ANAC and relevant guidelines, grave professional misconduct, joint contracts having as their object the design and execution of works, etc. Additional topics may be suggested by the stakeholders.

The public consultation closed on 10 September 2018. The reform proposal of the Code following the outcome of the public consultation is expected to be submitted by the Government in the next months. At this stage, it is not possible to predict the effective impact of the reform. In line with the goals of the Government, it is likely that the reform of the Code will lead to a general simplification of the current legal framework and to a reduction of the main legal restrictions limiting foreign investments in the country.

Furthermore, additional guidelines and ministerial decrees by the ANAC and the competent Ministries are expected to be adopted in the next months to supplement specific provisions of the Code.

It is also worth mentioning that currently under discussion is a proposal for a PPP contract format, put together by a working group established at the Ministry of Economy and Finance and formed of members of the ANAC, General Accounting Office and several institutional investors and Italian universities. The expected aim is to draft a bankable model of concession agreement, easily usable by the public administrations, to ensure a correct risk allocation and encourage investments in infrastructure within the main sectors of the country.




Please see the answer to question 8.1 above.



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Filippo Pacciani


Via di San Nicola da Tolentino, 67

00187 – Rome

Italy

Tel: +39 06 931 8271 Email: [email protected] URL: www.legance.it

Ada Esposito


Via di San Nicola da Tolentino, 67

00187 – Rome

Italy

Tel: +39 06 931 8271 Email: [email protected] URL: www.legance.it

Legance is an independent law firm with offices in Milan, Rome, London and New York.

Founded in 2007 by a group of acclaimed partners who grew up in the same law firm, Legance celebrates its 10th anniversary, distinguishing itself in

the legal market as a point of reference for clients and institutions.

Legance’s rapid growth, from 84 lawyers in 2007 to over 200 professionals in 2018, is undisputed evidence of its strength in legal services.

The law firm’s achievements are the result of a consistent strategy focused on creating value around the institutional nature of the firm, where the

value of the group is regarded as a trait that amplifies each individual’s qualities and skills. Legance has unquestionably positioned itself at the top

of the national and international markets, thanks to the constant attention to its clients’ needs, the careful evaluation of business goals and an

unconventional approach aimed at anticipating the clients’ needs.

It is not a coincidence that the name Legance evokes unity and excellence: these fundamental principles have been at the foundation of the law firm

from the beginning and have supported its standing.

Thanks to its strong international practice, Legance can support clients from several different geographical areas, and can organise and coordinate

multi-jurisdictional teams whenever required.

Independence, dynamism, responsiveness and internationality are the hallmarks of the firm.

Filippo Pacciani is the head of the Administrative Law department. He

deals with tender procedures aimed at awarding a complete range of

public contracts (i.e., works, services and supply contracts, work

concessions, public-private partnerships) assisting both contracting

authorities in structuring the tender process and leading companies

and/or lenders in participating in tender procedures and financing

public contracts respectively.

Ada Esposito is a managing associate in the Administrative Law

department of Legance. She assists national and international clients

taking part in public procurement biddings for works, services and

supplies contracts. Her main focus is on infrastructures (highways,

airport, ports, and railways), public utilities and privatisations, in

addition to PFI/PPP projects and the bankability of the relevant

agreements. She also provides legal assistance in relation to the

different steps of the procedures (from the pre-qualification to the

execution of the relevant agreements), supporting the clients in the

executive phase of the public contracts, and in relation to any issues

concerning the performance of the public contracts in general.



Chapter 16


Anderson Mōri & Tomotsune

Reiji Takahashi

Makoto Terazaki

Japan




Procurement procedures of the national government of Japan are generally regulated by the Accounts Act (Act No.35 of 1947, as amended, “Accounts Act”), the Cabinet Order concerning the Budget, Auditing and Accounting (Imperial Ordinance No.165 of 1947), the National Property Act (Act No.73 of 1948) and the Contract Management Regulations (Ministry of Finance Ministerial Ordinance No.52 of 1962). Procurement procedures of local governments are generally regulated by the Local Autonomy Act (Act No.67 of 1947) and the Local Autonomy Act Enforcement Ordinance (Government Ordinance No.16 of 1947). As for public private partnerships or privatisation, the Act on Promotion of Private Finance Initiative (Act No.117 of July 30, 1999, as amended, “PFI Act”) constitutes a part of the regulation on public procurement. In addition, the Act on Reform of Public Services by Introduction of Competitive Bidding (Act No.51 of 2006) provides procedures and regulation for market testing of public services.




of the legislation?

The key underlying principles of the regimes are ensuring “economic efficiency” (including competitiveness) and “fairness” (i.e. equal treatment) between both (a) the public and suppliers (tenderer), and (b) tenderers. In addition, in order to ensure “fairness”, ensuring “transparency” is essential. These underlying principles are the lens through which any interpretation of the legislation must be made, and legislative politics are determined in accordance with such principles.



With respect to (i) the introduction of supercomputers, (ii) procurement of non-R&D satellites, (iii) public procurement of computer products and services, (iv) public procurement of telecommunications products and services, and (v) public procurement of medical technology products and services, the

Japanese national government sets self-imposed regulations in an effort to improve accessibility for foreign companies to the Japanese market, which includes detailed contents of market research, specification documents, and public procurement procedures. These self-imposed regulations are required by “common consent among relating ministry as of March 31, 2015 (http://www.kantei.go.jp/jp/kanbou/26tyoutatu/huzokusiryou/h1-1.pdf (available only in Japanese))”. Except for those described above, no special rules are provided relating to defence procurement; however, many contracts for defence procurement are awarded at the discretion of the relevant governmental body (“Contracts at Discretion”) and not on a competitive basis, because the number of suppliers for defence goods is limited and goods for defence procurement require high technology and security. Due to the particular character of contracts for defence procurement, consideration for goods is determined by a cost calculation system. The definition of the proper “cost” often becomes a topic of discussion and is sometimes referred to a judicial court.



public procurement?

Acts such as the Promoting Proper Tendering and Contracting for Public Works Act (Act No.127 of 2000), the Act on Promoting Quality Assurance in Public Works (Act No.18 of 2005), the Criminal Act (Act No.45 of 1907) and the Antimonopoly Act (Act No.54 of 1947, as amended, “Antimonopoly Act”) set regulations on frauds (such as bribery), the Act on Prevention of Delay in Payment under Government Contracts, etc. (Act No.256 of 1949) regulates timing (and delay) of payments by government, and the Act on Promotion of Procurement of Eco-Friendly Goods and Services by the State and Other Entities (Act No.100 of 2000) promotes environmentally friendly procurement. In addition, information relating to public contracts may be disclosed in accordance with the Act on Access to Information Held by Administrative Organs (Act No.42 of 1999).

With respect to IT governance and management for public procurement, there exists a special guideline for maintenance and management of information systems, named “IT Governance and Management Guideline for Government Information Systems”, which provides common rules for public procurement of information systems and its project management.


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agreements?

Japan is a signatory to the WTO Agreement on Government Procurement (including “PROTOCOL AMENDING THE AGREEMENT ON GOVERNMENT PROCUREMENT”, as of March 30, 2012, the “Protocol”, “GPA”). To implement the provisions of the GPA, special provisions are stipulated in the Cabinet Order Stipulating Special Procedures for Government Procurement of Products or Specified Services (Government Ordinance No.300 of 1980), the Cabinet Order Stipulating Special Procedures for Government Procurement of Products or Specified Services in Local Government Entities (Government Ordinance No.375 of 1995), and other ministerial ordinances for government procurement subject to the GPA. The Protocol came into force in Japan on April 16, 2014. Between Japan and a country which has not accepted the Protocol, the previous agreement applies until the country accepts the Protocol.

In addition to the GPA, Japan has executed economic partnership agreements (“EPA”) with some countries. Between Japan and a country which is not a signatory to the GPA but is a signatory to EPA (such as India, Thailand and Republic of the Philippines), governmental procurement rules in EPA (if any) apply.

Other than the GPA and EPA, the Trans-Pacific Partnership Agreement (“TPP”) also provides governmental procurement rules in its Chapter 15.

Please see question 8.2 for details of the latest status of EPA and TPP.


Contracts



The regulation of public procurement applies mainly to national and local governments. Government-affiliated organisations stipulated in the Annexes of GPA, such as incorporated administrative agencies, usually have internal rules similar to the legislative regulations for public procurement.

Apart from domestic regulation, GPA is applicable not only to national and certain local governments, but also to certain incorporated administrative agencies, public research institutes, government financial corporations, public corporations, and similar bodies.

With respect to third-sector companies, GPA does not apply directly to such companies, but it is recommended by the national government that such a company shall adapt regulation of public procurement in consideration of GPA regulation.

As a general rule, public-interest corporations or stock corporations which are established by local governments pursuant to the Civil Code (Act No.89 of 1896) or Corporation Act (Act No.86 of 2005) are not covered. However, those corporations sometimes have internal rules similar to the legislative regulation for public procurement. GPA has a list of private entities wholly or partly owned by the national government, to which GPA is applicable.


The contracts covered by the regulation of public procurement are contracts which (1) result in the transfer of any economic value (generally money) of public entities, and (2) are entered into by public entities and private entities. The typical contracts covered are construction contracts, contracts which stipulate supplies of services (including completion of works) or transfers of properties rendered by a private entity.

Certain types of contracts, such as a build-operate-transfer contract and a public works concession contract, are not clearly stated by law as contracts covered by public procurement rules, but practically they are treated as such.



With respect to the domestic level, no specific financial thresholds for determining individual contract coverage exist, except that expenditure under each contract shall be within the amount permitted in a budget resolved by the council.

Special regulations are provided for goods and services with a value of the threshold amount stipulated in the Annexes of GPA. The threshold amounts and the current values in yen (which shall be adjusted every two years) are as follows (effective until March 31, 2020):

(I) National Government Entities:

(i) Supplies: 100,000 Special Drawing Rights (SDR) (15,000,000 yen).

(ii)Construction Services: 4,500,000 SDR (680,000,000 yen).

(iii)Architectural, engineering and other technical services: 450,000 SDR (68,000,000 yen).

(iv)Other Services: 100,000 SDR (15,000,000 yen).

(II) Local Government Entities:

(i) Supplies: 200,000 SDR (30,000,000 yen).

(ii)Construction Services: 15,000,000 SDR (2,290,000,000 yen).

(iii)Architectural, engineering and other technical services: 1,500,000 SDR (220,000,000 yen).

(iv)Other Services: 200,000 SDR (30,000,000 yen).

(III) Government-affiliated Organisations:


(ii)Construction Services by certain government-affiliated organisations categorised as Group A: 15,000,000 SDR (2,290,000,000 yen).

(iii)Construction Services by certain government-affiliated organisations categorised as Group B: 4,500,000 SDR (680,000,000 yen).

(iv)Architectural, engineering and other technical services: 450,000 SDR (68,000,000 yen).

(v) Other Services: 130,000 SDR (19,000,000 yen).

Notwithstanding the foregoing, the Japanese national government sets self-imposed regulations in an effort to improve accessibility for foreign companies to the Japanese market, and thereby the above standard for the threshold amounts and the current values in yen is adjusted as follows (changed parts from GPA standard are underlined):

(III) Government-affiliated Organisations:


Anderson Mōri & Tomotsune Japan


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(ii)Construction services by certain government-affiliated organisations categorised as Group A: No change from GPA.

(iii)Construction services by certain government-affiliated organisations categorised as Group B: No change from GPA.

(iv)Architectural, engineering and other technical services: No change from GPA.

(v) Other Services: 100,000 SDR (15,000,000 yen).


Although there is no specific provision explicitly prohibiting disaggregation, the intentional disaggregation of contract for the purpose of avoiding the application of the public procurement regulation is regarded as illegal. GPA explicitly prohibits intentional disaggregation.



As stated in question 2.2, public procurement rules are practically applied to concession contracts as well. In the PFI Act, there are rules on the “Right to Operate Public Facility, etc.”, which is regarded as a type of right based on a concession contract.

The term “Right to Operate Public Facility, etc.” means the right to implement a “Public Facility, etc. Operation Project”. The term, “Public Facility, etc. Operation Project” means a qualified project under the PFI Act; one in which a private company is given a right to operate a public facility (such as an airport), the ownership of which is held by a public entity, and receives usage fees as its own income.

See question 7.1 concerning the “Right to Operate Public Facility, etc.” and the relevant contract award procedure of Privatisations and PPPs.



There is no concept of framework agreements in the public procurement regulation in Japan.


into lots?

There are no such special rules on the division of contracts into lots.



In general, under applicable laws and regulations on public procurement, purchasers (public entities) do not owe particular obligations to suppliers (bidders) established outside Japan which are different from those of suppliers established in Japan. Note that, as mentioned in question 3.3 below, additional conditions for excluding/short-listing tenderers may be set by public entities. Such additional conditions sometimes contain qualification criteria which are relatively difficult for a foreign company to fulfil, such as the existence of an office or certain work experience in Japan.

3 Award Procedures




There are two main types of award procedures: (i) general competitive bidding; and (ii) designated competitive bidding. General competitive bidding is used as a general procedure, and designated competitive bidding as exceptional and permitted only when relevant ordinances, etc., specify as such under certain circumstances.

The main stages of general competitive bidding are as follows:

(a) Public notice for invitation.

(b) Responses to inquiries and/or on-site debriefing by a public entity.

(c) Confirmation of qualification for submission and notice thereof.

(d) Submission of proposals and bidding by tenders.

(e) Evaluation of proposals and bidding, and notice of appointee.

(f) Conclusion of agreement between appointee and public entity.

In cases of designated competitive bidding, (a) and (c) are omitted because tenders qualified for submission will have already been appointed by a public entity and the public entity shall prepare and disclose the list for such qualified tenderers.

In addition to two types of award procedures, Contracts at Discretion are available when strict conditions set by regulation are satisfied.


For procurements subject to GPA, generally there must be a period of at least 40 days between the date of public notice for invitation to tender and the deadline for submission of tenders. This period will be extended to 50 days in most cases. For procurements to which GPA is not applicable, this period is 10 days.


tenderers?

There is an explicit provision of law which sets a list of conditions that tenderers must satisfy. Additional conditions for excluding/short-listing tenderers may be set by public entities and such additional conditions shall be established and disclosed to the public. In the case of procurement of construction, as a part of the qualification criteria, public entities usually require tenderers to obtain a certain grade of their capability from relevant public entities in accordance with their performance record, size of company, number of employees, etc. As to procurement by local governments to which GPA is not applicable, local governments may, as a part of the qualification criteria, require tenderers to have their offices located in a specific city if such an additional requirement is regarded as appropriate and reasonable in light of the type and nature of the relevant contract.



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There is a principle that a tenderer who offers the best (from the perspective of the tenderee) price for proposal and bid shall be generally appointed; that is, price has been the sole relevant factor. However, nowadays, a tenderer who offers the most benefit to the relevant public entity shall generally be appointed; i.e., that public entity shall consider various factors including not only price but other conditions (such evaluation method is called the “Comprehensive Evaluation Method”). Both methods for evaluation are provided in relevant national and local laws, and the Local Autonomy Act Enforcement Ordinance provides provisions to establish and disclose criteria for such evaluation, as there are no more specific rules in relevant national laws.

Especially for construction works by national government, almost all the tenders are implemented though the Comprehensive Evaluation Method. In the Comprehensive Evaluation Method, factors other than price, like execution plan, experiences in similar work, and the ability of technical personnel, are set as evaluation criteria. For more detailed and complicated projects (especially PFI projects), more detailed and segmented criteria are set, and the evaluation process is often conducted by an independent committee consisting of various experts, such as academic experts, lawyers, accountants, although such an independent committee is not mandatory.


low tenders?

Under the Accounts Act and the Local Autonomy Act, if it is found likely that the person who should be the counterparty to the contract will not satisfactorily perform the terms of the contract for the price that the person has offered, or if it is found to be extremely inappropriate to conclude the contract with the person who should be the counterparty for the price that the person has offered because of the likelihood that doing so will disrupt the establishment of a fair transaction, national and local governments may select the person who offered the lowest price from among the other persons who made offers within the range determined by the target price, as the counterparty to the contract.

In addition, the Local Autonomy Act allows local governments to, when necessary, set a minimum contract price in their procurement process.


The contracting authority may establish its own criteria for each tendering process, and may request in the notice for invitation of bids that the bidders submit necessary materials to prove that they satisfy such criteria before submission of a bid. The contracting authority may deem any bid submitted by those who do not meet such criteria invalid.


bidders?

Although there is no specific statutory rule concerning debriefing, the Ministry of Land, Infrastructure, Transport and Tourism (“MLIT”) has issued a notice which internally requires its regional development bureaux to establish a Bidding Monitoring Committee

which, when a request for explanation is filed by an unsuccessful bidder, gives an explanation and conducts an investigation and issues its non-binding recommendation. The Ministry of Defence also has a similar committee: the Fair Bidding Investigation Committee. Local governments generally establish the same kind of organisation by their internal rules.


There is no explicit rule on joint procurements, and joint procurements are rarely implemented in practice. However, in several PFI projects, multiple public entities have executed agreements on the procedure of joint procurement and allocation of disbursement of the cost of procurement procedure and the project, and subsequently implemented procurement procedures jointly.


The Act on Promotion of Securing Quality of Public Works (Act No.18 of 2005) sets the rules to promote a technical proposal from tenderers. This Act provides that when public entities require tenderers to submit technical proposals, such public entities must publish the criteria by which they will evaluate such proposals. The Act further provides that if any proposal submitted by tenderers relies on novel techniques or innovation, public entities may change the target price.


There is no explicit rule on conflict of interest in public procurement regulation in Japan. However, it is often provided in the public notice of invitation or request for qualification that conflict of interest with a member of the evaluation team or unfair advantages are some of the reasons for disqualification.




Each of the national and local governments adopts its calculation standard of the target price of contract. In the application of their standards, public entities conduct market engagement or request potential bidders to provide their quotations as referential information.

Any unfair conduct, such as leakage of a target price which is not disclosed in the procurement process, could constitute an offence under the Penal Code (Act No.45 of 1907) and the Act on Elimination and Prevention of Involvement in Bid Rigging, etc. and Punishments for Acts by Employees that Harm Fairness of Bidding, etc. (Act No.101 of 2002).




Laws relating to public procurement apply to public entities and contracts specified in questions 3.1 and 3.3, and there is no other specific rule regarding the principal exclusions/exemptions.



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There is no explicit rule concerning “in-house” arrangements. Any contract between national or local governments is classified as an “administrative contract” and is considered conceptually different from the contract by which a procurement regulation would be applicable.

5 Remedies



As a general rule, if a bidder suffers loss due to an intentional act or negligence of the public officer in charge of the bidding procedures, the bidder can file a lawsuit against the government to seek compensation for the loss based on the State Redress Act (Act No.125 of 1947).

In addition to the filing of a lawsuit against the government in the courts, as regards public procurement to which GPA is applied, Japan has established a system to provide non-discriminatory, timely, transparent and effective procedures to file complaints. The national system will handle complaints about procurements by the national government and related entities. Complaints about procurements by local governments and related entities to which GPA is applied are handled by each local government. The rules of challenge procedures of the national system have been established under the authority of the Cabinet. This challenge system is called the “Government Procurement Challenge System” (“CHANS”).

Under those rules, any supplier who believes that a specific case of government procurement has breached the provisions of GPA or other prescribed stipulations may file a complaint with the Government Procurement Challenge Review Board. If the board finds that the procurement was made in breach of GPA, etc., the board will prepare its recommendation for remedial actions such as starting a new procurement procedure, redoing same procurement, re-evaluating the tenders, and awarding a contract to another supplier or terminating the contract.

With respect to more details of CHANS, please see the website of the Cabinet Office of the Japanese Government (http://www5.cao.go.jp/access/english/chans_main_e.html).



The procedure of explanation, investigation and non-binding recommendation by the Bidding Monitoring Committee or similar organisation established by local governments described in question 3.6 constitute possible remedies.


sought?

As stated in question 5.1, under the complaint system, a complaint shall be filed with the Government Procurement Challenge Review Board.


remedies?

The complaint filed with the Government Procurement Challenge Review Board must be filed (if at all) within 10 days from the date when the supplier knew or should have known the basis of the complaint.


periods?

No measures are available to shorten limitation periods.


As stated in question 5.1, the State Redress Act (Act No.125 of 1947) provides monetary compensation for loss. Under the State Redress Act, the plaintiff is required to prove that: (a) the public officer intentionally or negligently violated the provisions of the law; (b) the plaintiff has suffered loss; and (c) the causation between the intentional act or negligence and the loss.

Concerning the remedies (though not-binding) available under the system of the Government Procurement Challenge Review Board, see question 5.1.


remedies is made?

The Government Procurement Challenge Review Board will review the complaint within seven business days and may dismiss the complaint if: (a) the complaint was not filed within the prescribed period; (b) the complaint is not related to GPA; (c) the complaint is meaningless or the violation is de minimis; (d) the complaint is not filed by a supplier; or (e) the complaint is not appropriate for review by the board. If the board accepts the complaint for review, the board will notify the complaining party and the procurement entity thereof, and publicly announce the filing of the complaint. The procurement entity is required to participate in the proceeding. Any supplier interested in the government procurement subject to the complaint can participate in the proceeding by notifying thereof to the board within five days after the public announcement.

If a complaint is filed before signing a contract for the procurement, the board will as a rule make a request to the governmental entity to suspend the contract procedure promptly, within 10 days after the filing of the complaint. If a complaint is filed within 10 days after the making of a contract for the procurement, the board will as a rule make a request to suspend the performance of the contract promptly. Within 14 days after the date of receipt of a copy of the complaint, the government entity is required to file a report containing tender documents, an explanation in response to the complaint, and additional information necessary for the resolution of the complaint. The board will ask the complaining party and the government entity to submit assertions, an explanation and evidence, and review the complaint. The board may call a witness or expert or have a public hearing on the contents of the complaint. The board will prepare a report on its findings within 90 days (50 days in case of a complaint involving public construction work). The board may expedite the proceeding on application by the complaining party or the procurement entity.



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In the report, the board will decide whether all or part of the complaint is upheld and whether the procurement was made in breach of GPA. If the board finds that the procurement was made in breach of GPA, the board will prepare its recommendation for remedial actions, taking into account such circumstances as the degree of defect in the procurement procedures, the degree of disadvantage caused to the suppliers, the degree of breach of GPA, the extent of the performance of the contract already made, the degree of the burden on the government, the urgency of the procurement and the effect on the business of the procurement entity. The procurement entity, as a rule, is required to follow the recommendation by the board, although the recommendation by the board is regarded as not legally binding. If the procurement entity does not follow the recommendation, it must notify the board thereof with a reason within 10 days (60 days in the case of public construction work) after the receipt of the recommendation.

As to a lawsuit against the government to seek compensation for the loss based on the State Redress Act, the length of the period until obtaining a court order depends on the complexity of the case − it usually takes more than a year.



In the case which IBM filed with the Government Procurement Challenge Review Board in relation to the procurement of an information-processing system by MLIT in 2008, the board issued its report dated December 25, 2008, in which it found that the evaluation criteria were not appropriate in light of relevant rules set in relation to GPA, and the board further issued its recommendation requiring MLIT to re-evaluate the proposal by tenderers.



If the procurement entity has been required by the board to suspend execution or performance of contract because a complaint has been filed, they may override such a requirement if they determine that they cannot adhere to such a requirement because of urgent and compelling circumstances.


Procedure







There is no explicit rule on changes during the procurement procedure.

However, the general understanding is that changes to specifications or contract conditions, etc. are basically not permitted during and after a procurement procedure, as such factors are deemed as a prior condition, so that if changes to contract specification, timetable and contract conditions are regarded as material, then public entities are required to restart that procurement procedure reflecting those changes. In the case of contracts at discretion, such changes are generally more easily permitted.

Concerning changes to the membership of bidding consortia, although there is no explicit rule, the general understanding is that the changes to the membership are not allowed without prior approval of the government, and the government gives its approval only when there is a compelling reason.



After the submission of a final tender, changes to the final tenders and the terms of the contract are basically not permitted during a procurement procedure and after a contract award, unless such a change is de minimis.


signature?

There is no explicit rule concerning the changes after contract signature.

In practice, the general understanding is that changes are permitted if such changes are mutually agreed, have justifiable reason and are not material.



signature?

There is no explicit rule concerning the transfer of a contract.

The contract used in public procurement in Japan generally contains a provision which prohibits a contracting party from transferring its rights and obligations under the contract without prior approval of the contracting authority.




them?

The PFI Act provides a very general idea of procedures for privatisations and PPPs, but there is no provision which specifically provides details of the procurement procedure applicable to privatisations and PPPs. There exist documents named as “guideline” published by the Cabinet Office, which holds jurisdiction over the PFI Act: (I) its guideline of the “Right to Operate Public Facility, etc.” (“Concession Guideline”), which is regarded as a type of right based on concession contract; (II) the model contract of privatisations and PPPs; and (III) its guideline of the model procedure.

The principal issues and changes described in the guidelines above are as follows:

(I) Principal issues in the new guideline of the “Right to Operate Public Facility, etc.”:

(i) How to establish the “Right to Operate Public Facility, etc.” and the contents of such a right.

(ii)How to conduct the public facilities operation project by the holder of “Right to Operate Public Facility, etc.”.

(II) Principal changes in the guideline of a model contract:

(i) How to allocate various risks in a concession contract of the public facilities operation project implemented by the holder of “Right to Operate Public Facility, etc.”.



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(III) Principal changes in the guideline of model procedure:

(i) How to evaluate properly any proposal of a tenderer which proposed a privatisation project before procurement procedure started when the public entity adopted such a proposal.

(ii)Whether negotiation of contract is acceptable under the current system of procedure.

In order to promote concession projects in Japan further, the PFI Act was amended as of June 20, 2018, and accordingly the Concession Guideline was amended as of October 18, 2018. Main features of these amendments are as below:

(i) Enforcement of assistance by the government for both public and private entities to promote privatisations: both public and private entities which take on concession projects may consult directly with the Cabinet Office, and the Cabinet Office can provide answers or advice, which was not permitted before these amendments.

(ii) Special exemptions of the Local Autonomy Act in case of privatisations: these amendments exempt some procedures required under the Local Autonomy Act for concession projects of certain types and make it easier to proceed.

(iii) Special exemption of cancellation compensation for early redemption of municipal bonds in case of privatisations of water supply: at present, local governments manage water supply projects by themselves with a loan from the central government in the form of municipal bonds, and such municipal bonds prevent local governments from promoting concession projects of water supply since such concession triggers cancelation compensation for early redemption of the municipal bonds. These amendments exempt the relevant cancelation compensation and make it easier to take on water supply concessions.

Other than the PFI Act, there is no explicit rule applicable in common to the privatisation of public enterprises. In Japan, when a certain public enterprise is to be privatised, the government usually establishes a special act applicable to the privatisation.



In Japan, privatisations and PPPs are not singled out for special treatment. Within the general rules and regulations of public procurement, the guidelines of the PFI Act discuss how to apply those rules and regulations appropriately to PFI/PPP projects, as stated in question 7.1.

8 The Future



impact?

Proposals to change the law are not applicable as of November, 2018.




After the United States’ withdrawal from intercompany negotiations for (old) TPP, the remaining 11 countries (Japan, Vietnam, Brunei Darussalam, Malaysia, Singapore, Australia, New Zealand, Chile, Peru, Mexico and Canada) agreed on the revised version of the TTP, the Comprehensive and Progressive Agreement for New Trans-Pacific Partnership (so-called “TTP11”). TTP11 is a free trade agreement involving the above 11 countries, which includes provisions regarding less restrictive access to markets, equal treatments between nationals and foreigners, and freedom of investments into signatory countries. It became effective on December 30, 2018.

In relation to public procurement, TTP11 provides (i) non-discriminatory treatments for overseas companies, (ii) introduction of fair and transparent procurement procedures, and (iii) efforts to use English upon announcement of the procurement plan. Japanese government has announced that no amendments/additions need to be made on the existing laws, orders and ordinances relating to public procurement because TTP11 is almost equivalent to GPA, which has already applied to public procurement in Japan. Further attention, however, will still be required as to whether previous practices (in particular, lower and internal rules in each governmental organisation and each local government) for the public procurement will change or not, since there are some differences between TTP11 and GPA.

In addition, Japan-EU EPA was signed in July, 2018. After completing preparation for necessary procedures in both parties, it is supposed to become effective in both jurisdictions. Japan-EU EPA incorporates GPA as basic rules for government procurement, but added some rules to GPA. Such additional rules are intended to enhance equal access to public procurement in Japan. For example: (i) procurement plans need to be uploaded to the Internet; (ii) the relevant prior experience in Japan may not be required for participation; (iii) technical qualification certified in the EU must be accepted in Japan; (iv) EU companies may not be treated in a discriminatory manner upon reviewing under the relevant laws and regulations; and (v) complaints from suppliers need to be reviewed in a non-discriminatory, timely and transparent manner. At present, it is not clear whether implementation of Japan-EU EPA requires any amendment to existing laws, orders and ordinances in Japan, so it still needs to be watched.



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Reiji Takahashi


Otemachi Park Building

1-1-1, Otemachi, Chiyoda-ku

Tokyo 100-8136

Japan

Tel: +81 3 6775 1051 Email: [email protected] URL: www.amt-law.com/en

Makoto Terazaki


Otemachi Park Building

1-1-1, Otemachi, Chiyoda-ku

Tokyo 100-8136

Japan

Tel: +81 3 6775 1170 Email: [email protected] URL: www.amt-law.com/en

Anderson Mōri & Tomotsune has approximately 430 Japanese lawyers (bengoshi), 30 lawyers qualified in foreign jurisdictions, approximately 230

other professional staff including patent lawyers, immigration lawyers, foreign legal trainees, translators and paralegals, and approximately 320 other

general staff members as of November 1, 2018.

Anderson Mōri & Tomotsune has a wide-ranging public sector transaction practice including privatisation, PPP and PFI. We have acted for national

and local governments in relation to many PFI/PPP projects in various sectors, including airports, satellites, prisons, hospitals, water, sewage, waste

disposal, renewable energy, etc. We provide extensive legal services covering not only implementation of various projects through public

procurement procedure but also disputes in public procurement. Our attorneys have experience working in many public entities, including ministries

and quasi-governmental organisations, and include the former Deputy Secretary of Ministry of Economy, Trade and Industry and the former Director-

General of the Cabinet Legislative Bureau.

Admitted: Japan 1997; New York 2002.

Education: The University of Tokyo (LL.B., 1995); the Legal Training

and Research Institute of the Supreme Court of Japan (1997); and

University of Virginia, School of Law (LL.M. 2001).

Social Activities: Assistant Professor, University of Tokyo School of

Law (2007– 2010); Adjunct Lecturer, University of Tokyo School of Law

(2010–2016); and Member of Study Group of Contract Management,

Ministry of Defence (2010–present).

Professional Experience: Anderson Mōri & Tomotsune (1997–

present); and Allen & Overy, London Office as a foreign associate

(2001–2002). His practice areas of focus includes PFI, PPP,

privatisation, public procurement, project finance and structured

finance. He is native in Japanese and fluent in English.

Admitted: Japan 2007.

Education: The University of Tokyo (LL.B., 2004); the University of

Tokyo School of Law (J.D., 2006); and the Legal Training and

Research Institute of the Supreme Court of Japan (2006–2007).

Social Activities: Adjunct Lecturer, University of Tokyo School of Law,

2008–2010; and worked for MLIT Civil Aviation Bureau (December

2011–June 2013).

Professional Experience: He is co-supervising editor of translation

for “FIDIC Conditions of Contract for Construction Multilateral

Development Bank Harmonised Edition (For Building and Engineering

Works Designed by the Employer) (FIDIC Red Book MDB)” (AJCE

August 2011); and (co-)author of other various publications. His

practice areas of focus includes corporate and M&A, PFI, trade and

regulation, finance (including capital markets) and litigation. He is

native in Japanese and fluent in English.



Chapter 17


Stibbe Benjamin Marthoz

Luxembourg




The Law of 8 April 2018 on public procurements (the “Law”) implemented Directives 2014/24/EU (the Public Sector Directive) and 2014/25/EU (the Utilities Sector Directive). It repealed the Law of 20 June 2009 on public procurements.

The Law is applicable as from 20 April 2018.

The Law is divided into four main books, each governing a specific field:

a) Book 1 applies to every procurement procedure (national procedures below EU thresholds, above EU thresholds and utilities sectors);

b) Book 2 applies to procurements above EU thresholds (public sector);

c) Book 3 applies to procurements regarding utilities sectors; and

d) Book 4 governs questions of governance in public procurements.

The Grand-Ducal Regulation of 8 April 2018 (the “Regulation”) puts the Law into effect and provides the details governing the different procurement procedures. It has the same structure as the Law and is divided into four main books, each one detailing the rules applying to the corresponding book of the Law. The Regulation is currently subject to modifications. The draft of the text modifying the provisions of the Regulation has already been submitted to the opinion of the Council of State and is currently being amended by the Government. The new provisions of the Regulation will soon be adopted and published in the Official Journal.

The Ministry Regulation of 20 April 2018 provides for and standardises the special specifications for public contracts in a specific technical regulation. This new text repeals the Grand-Ducal Regulation of 24 March 2014, with effect from 24 April 2018, and only applies for public works procurement.

The Ministry Regulation of 31 July 2018 institutes standardised general conditions regarding general contractual stipulations and standardised special conditions for technical specifications, and applies to all public works contracts related to the building sector; it also institutes standardised special specifications for public works contracts.

The Grand-Ducal Regulation of 27 August 2013 also brings the Law into effect by providing for conditions regarding the use of electronic means in public procurement procedures. This Regulation has also been brought into effect by a Ministry Regulation of 2 December 2013, which cites the conditions for the use of the public procurement portal. The Grand-Ducal Regulation of 27 August 2013 is also currently subject to modifications, pursuant to the adoption of the Regulation. The draft of the text modifying the provisions of the Grand-Ducal Regulation of 27 August 2013 has already been submitted to the opinion of the Council of State and is currently being amended by the Government (same procedure as for the modification of the Regulation). The new provisions of the Grand-Ducal Regulation of 27 August 2013 will soon be adopted and published in order to clarify the use of electronic means in public procurement procedures.




of the legislation?

The principles of general Luxembourg constitutional and administrative law apply.

The fundamental principles governing public procurement in Luxembourg are provided for in Article 10 of the Law and can be summarised as follows:

a) contracting authorities shall treat economic operators equally, without discrimination and act with transparency;

b) contracting authorities ensure that, during the procurement, the issues and problems related to the environment and promoting sustainable development are considered;

c) contracting authorities shall inform the economic operators as soon as they have taken decisions about their tenders delivered under a public procurement procedure; and

d) contracting authorities may use electronic means in procurement procedures in accordance with the rules set out in the Regulation.



Specific rules exist concerning the award of public procurement contracts in the “special sectors” (i.e. in the water, energy, transport and postal services sectors).


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With regard to procurement rules tailor-made for defence and security markets, Directive 2009/81/EC on defence and security procurement has been implemented by Law of 26 December 2012 on public procurement in the fields of defence and security (this Law was finally adopted following the decision of the European Commission to refer an appeal to the Court of Justice of the European Union against Luxembourg for failure to implement the Directive).



public procurement?

The principles of general Luxembourg constitutional and administrative law apply.

In general, Regulation on Non-Litigious Administrative Procedure ensures the right of the public to access their administrative files. Pursuant to the Law, the contracting authority shall notify its awarding decision to unsuccessful tenderers and communicate the factual and legal reasons for the rejection of their bids.



agreements?

The Law transposes the 2014 Directives on public procurement, which are in turn influenced by the GPA rules.

Luxembourg is also a party to the Agreement on Government Procurement (“GPA”) and is thus bound by its provisions, which impose rights and obligations. Articles 62 (Book 2) and 122 (Book 3) of the Law confirm the application of the GPA. The GPA was recently amended by a protocol negotiated by the European Commission on behalf of the Member States and was integrated into the European legal framework through a decision of the Council of 2 December 2013.


Contracts



Article 2 of the Law enumerates contracting authorities covered by the public procurement rules in the ordinary sectors.

These contracting authorities are principally the “public authorities” (e.g. the State and municipalities (“Communes”)), and the public entities fulfilling the following criteria:

■ having legal personality;

■ being established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; and

■ being financed, for the most part, by the State, regional or local authorities, or other bodies governed by public law; being subject to management supervision by those bodies; or having an administrative, managerial or supervisory board, more than half of whose members are appointed by those bodies.

In accordance with the European Directives, the Luxembourg legislation has a broader field of application in the special sectors. In addition to the contracting authorities mentioned in the ordinary

sectors, the special sectors rules also include “public undertakings” (i.e. any undertaking over which the public authorities have a dominant influence) and some private entities (Article 87 of the Law).


The public procurement rules cover contracts for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities, having as their object the execution of works, the supply of products or the provision of services.

Public works contracts cover public contracts having as their object one of the following:

a) the execution, or both the design and execution, of works related to one of the activities within the meaning of Annex II of the Law;

b) the execution, or both the design and execution, of a work; or

c) the realisation, by whatever means, of a work corresponding to the requirements specified by the contracting authority exercising a decisive influence on the type or design of the work.

Public service contracts cover all public contracts having as their object the provision of services other than those referred to in the definition of public works contracts.

Public supply contracts cover public contracts having as their object the purchase, lease, rental or hire-purchase, with or without an option to buy, of products. A public supply contract may include, as an incidental matter, siting and installation operations.



All contracts are subject to Luxembourg procurement legislation. As a principle, the publication of the announcement of the contract is required, even when the European threshold values are not met, unless the negotiated procedure without publication can be used. European publication is obligatory if the thresholds laid down by the European Commission are exceeded.


It is forbidden to split up contracts that are to be considered as one work, supply or service contract, and that are valued above the threshold values for the purpose of obtaining different contracts that are below those values.

Furthermore, it is forbidden to subdivide a contract into different contracts in order to avoid the application of the European threshold values.



Concessions contracts are defined by the Law of 3 July 2018 on the awarding of concessions contracts.

Article 5, 1) of the Law of 3 July 2018 defines concessions contracts as being works or services concessions, as defined in points a) and b):

a) “works concession” means a contract for pecuniary interest concluded in writing by means of which one or more contracting authorities or contracting entities entrust the execution of works to one or more economic operators, the

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consideration for which consists either solely in the right to exploit the works that are the subject of the contract or in that right together with payment; and

b) “services concession” means a contract for pecuniary interest concluded in writing by means of which one or more contracting authorities or contracting entities entrust the provision and the management of services other than the execution of works referred to in point a) to one or more economic operators, the consideration of which consists either solely in the right to exploit the services that are the subject of the contract or in that right together with payment.

The award of a works or services concession shall involve the transfer to the concessionaire of an operating risk in exploiting those works or services encompassing demand or supply risk or both. The concessionaire shall be deemed to assume operating risk where, under normal operating conditions, it is not guaranteed to recoup the investments made or the costs incurred in operating the works or the services which are the subject-matter of the concession. The part of the risk transferred to the concessionaire shall involve real exposure to the vagaries of the market, such that any potential estimated loss incurred by the concessionaire shall not be merely nominal or negligible.



Article 22 of the Law provides for the possibility to conclude framework agreements in the ordinary sectors. In conformity with the European Directives, more flexibility with regard to the award of framework agreements exists in the special sectors (Article 130 of the Law).


into lots?

Article 11 of the Law provides that a contract can be divided into lots. Articles 2 to 7 of the Regulation provide for the rules governing the division into lots. In the ordinary sectors, contracting authorities may decide to award a contract in the form of separate lots and may determine the size and subject-matter of such lots. For public contracts, in the execution of which several professions, trades or industries are concerned, special rules apply.



In general, contracting authorities must treat suppliers (in addition to contractors and service providers) in an equal, non-discriminatory and transparent way. The principles of equal treatment, non-discrimination, mutual recognition, proportionality and transparency apply especially to economic operators that are settled in the European Union.

3 Award Procedures




Luxembourg public procurement legislation previously made a distinction between the award to the lowest regular tender and the award to the regular and most advantageous tender, according to the

criteria mentioned in the contracting documents. Although a tender may still be awarded on the basis of price or costs alone, this terminological distinction has been abandoned in the Law. All public contracts are awarded to the most economically advantageous tender. The most economically advantageous tender is determined:

■ on the basis of the sole price;

■ on the basis of the cost, using a cost-effectiveness approach, such as life-cycle costing; or

■ on the basis of the best price-quality ratio, which shall be assessed on the basis of criteria, including qualitative, environmental and/or social aspects, linked to the subject-matter of the public contract in question.

The following three types of procurement procedures are the most common:

■ an open procedure, in which all interested contractors may submit tenders;

■ a restricted procedure with or without publication, in which only those contractors that are invited by the contracting authority may submit tenders; and

■ a negotiated procedure, which allows the contracting authority to consult the economic operators of its choice and to negotiate the terms of the contract with one or more of them. In the ordinary sectors, this procedure can only be chosen in limited cases listed in the Law.

Other types of procurement procedures, such as the competitive dialogue, innovation partnership and the negotiated procedure without prior publication also exist on the basis of Luxembourg law. These procedures can only be used on the basis of the conditions provided by law.


The main principles can be summarised as follows:

■ Tenders have, in principle, at least 42 days to submit a tender for open procedures. For restricted procedures, there is a timescale of 27 days to submit a request to participate and 30 days to submit a tender.

■ In certain cases, such as urgency, special rules on minimum timescales apply. In these cases, the time limit is reduced to a minimum of 15 days.


tenderers?

In accordance with the requirements of the European public procurement rules, the Law contains rules concerning the situations in which a contracting authority has the obligation to exclude candidates that have been convicted of offences such as participation in a criminal organisation or corruption. This Royal Decree also deals with situations in which a contracting authority has the possibility (not the obligation) to exclude candidates; for example, in cases of non-compliance with the obligations concerning the payment of social security contributions.

Concerning the short-listing of tenderers, it should be noted that the selection of the tenderers must be based exclusively on the selection criteria contained in the tender notice and on the basis of documents enumerated in the tender notice as being required for the selection. The selection criteria may refer to technical and/or professional ability and economic and financial standing.

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The contracting authority must award the contract to the most economically advantageous tender. This tender may be awarded on the basis of price or costs alone. It is also possible to award the contract on the basis of both economic and quality criteria, which may include environmental or social value considerations if these have a sufficient link with the subject of the tender.


low tenders?

An obligation exists for contracting authorities to demand justification for abnormally low tenders (either the total price or costs). The rules set out in the Grand-Ducal Regulation for the price analysis are applicable. In Luxembourg, if a tender is 15 per cent below the average price, the economic operator is required to produce a price analysis. If this analysis does not explain the low offer, it can be rejected.

A contracting authority has an amount of discretion to decide whether a price is “abnormal”, unless a specific threshold needs to be respected. In these award procedures, an obligation may exist to demand justification for abnormally low tenders if the total price is at least 15 per cent below the average total price submitted by the tenderers.


The criteria for the award of the contract should enable tenders to be compared and assessed objectively, and must be mentioned in the contract documents or in the tender notice.

The contracting authority must make a motivated decision when deciding on the selection of tenderers (in cases where the procedure consists of two phases; the first phase is the submission of applications for participation in the procedure), or when deciding on the award of the contract.


bidders?

Pursuant to the Law, the contracting authority shall notify its awarding decision to unsuccessful tenderers and communicate the reasons for the rejection of their bids. The contract with the successful bidder can only be signed after the expiry of a period of at least 15 days begins to run from the date of notification of the rejection of the offer to other competitors. Thus, the administrative withdrawal of the award decision (in the event of a valid objection) within this delay is possible before the signature of the contract.


In the event that two (or more) contracting authorities wish to set up the joint realisation of public works contracts, public supply contracts, or public service contracts, article 25 of the Law provides the possibility of a joint procurement. The contracting authorities may designate one of the contracting authorities to act as their authorised representative during the award and execution of the contract.

Luxembourg public procurement rules also provide the possibility to make purchases using a central purchasing body, or on the basis of a framework agreement.


In principle, an economic operator must submit its best and final offer immediately.

The Grand-Ducal Regulation provides for that a contracting authority may, in the special specifications, consider different implementation/performance options for one particular or more slips of the price schedule which must then be specified, or provide for the possibility of admitting alternative technical solutions for which it sets the criteria to which they must respond. In case of alternative technical solutions, the desired result of the service must be clearly defined by the special specifications.

Unsolicited variants from the bidder are not eligible.

If variants are requested by the contracting authority, the tender schedule will provide for total prices and prices/units for each eventuality.

For public contracts under EU thresholds, it is permissible for the tenderer to make an offer for all possibilities of performance/ implementation envisaged in the special specifications, or for only one of them. Its offer is valid regardless of the choice made between the basic offer and the variant(s).

Where the special specifications contain variant(s) and alternative technical solutions, the result of the tender is established by a unique ranking of all tenders received and the selection of the successful tenderer must be made in accordance with the awarding criteria specified in the special specifications.


Article 13 of the Law of 8 April 2018 states that conflict of interest exists if a civil servant, public authority figure or any other person intervenes in the award and the performance of a public contract, in the situation where the person involved has direct or indirect, financial, economic or other personal interests that may be considered to compromise their impartiality and independence with regard to the award or execution of a public contract.

Contracting authorities shall take appropriate measures to effectively prevent, identify and remedy conflicts of interest arising in the conduct of procurement procedures, so as to avoid any distortion of competition and to ensure equal treatment of all economic operators.




Before launching a procurement procedure, contracting authorities may conduct market consultations with a view to preparing the procurement and informing economic operators of their procurement plans and requirements. For this purpose, contracting authorities may, for example, seek or accept advice from independent experts or authorities or from market participants. That advice may be used in the planning and conduct of the procurement procedure, provided that such advice does not have the effect of distorting competition and does not result in a violation of the principles of non-discrimination and transparency (Article 26 of the Law).

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The Luxembourg legislation concerning exclusions/exemptions is in accordance with the European Directives. Therefore, the public procurement rules do not apply to, for example, service contracts awarded on the basis of an exclusive right or the acquisition or rental of existing buildings.




In principle, the relations between contracting authorities concerning the awarding of public contracts are subject to the same public procurement rules as the relations between a contracting authority and a private entity.

There are, however, three general exceptions to this principle:

■ The first exception concerns the award of contracts between two contracting authorities (in-house contracts), on the basis of the conditions stipulated in article 8(1) of the Law and the case law of the European Court of Justice.

■ The second exception concerns certain types of situations in which contracting authorities together seek to ensure the performance of their public tasks, according to the conditions stipulated article 8(4) of the Law and the case law of the European Court of Justice.

If one of these exceptions applies, the award of the contract will not be subject to the public procurement rules.

5 Remedies



The Law of 10 November 2010 establishing procurement remedies implemented Directive 2007/66/EC.

The rules of the Law of 10 November 2010 are applicable to procedures above the threshold for European publication.

The Law (also applicable under EU thresholds), as well as the Law of 10 November 2010, contains a standstill obligation on the basis of which, within a time frame of 15 days between the notification of the award decision and the contract conclusion with the chosen tenderer, a suspending procedure before the President of the Administrative Court can be introduced.

The aggrieved bidder may submit via an attorney-at-law an action for annulment before the administrative court. An appeal against the decision may be brought before the administrative court of appeal. The Supreme Court has no jurisdiction for administrative matters.

The contentious appeal is an objective appeal, whose central issue is to decide whether the contested act is legal.

The appeal period is three months, which starts to run from the correct notification of the decision of rejection or award (with reasons for the refusal and remedies). A notification is correct if the decision was notified directly to the addressee, gives explanations on the grounds of the decision and provides information about legal remedies and

delays within which they may be exercised. Without a correct notification of the decision, the delays for appealing do not run.

The procedure is of a written nature.

The Law of 21 June 1999 on administrative procedures provides fixed and compulsory periods to notify briefs.

Following the filing of the request with the clerk of the Tribunal:

a) the contracting authority shall notify its brief in answer within a three-month period;

b) the applicant shall then notify its reply within a one-month period; and

c) the contracting authority shall finally notify its reply within a one-month period.

The attorneys-at-law shall then be convened for the pleadings in the months following the last notification of defendant’s brief.

A decision from the Tribunal shall not be expected before a nine-month or one-year period from the filing of the request.

The Law of 10 November 2010 establishing procurement remedies provides more details on the remedies for contracts falling within the scope of the European Directives.

If a contracting authority is seeking damages, it must then appeal to the civil courts.



The Law of 10 November 2010 also includes rules on remedies regarding concession contracts and for procurements in the fields of defence and security.

For the other contracts, due to lack of specific proceedings, general Luxembourg (civil or administrative procedural) law can be applied. Various measures can be requested, ranging from the suspension or annulment of the different decisions taken by the contracting authority, to the suspension or annulment of the contract and damage claims.

These measures can often be combined, even if all of them cannot necessarily be brought before the same judge.


sought?

Suspension or annulment procedures against a decision of a contracting authority are brought before the Administrative Courts (administrative court (tribunal administratif) and administrative court of appeal (cour administrative)).

The civil courts are competent to examine claims for damages regarding the award of public procurement contracts and for all disputes concerning the execution of these contracts.


remedies?

A contract may not be concluded following the decision to award a contract before the expiry of a period of:

a) at least 10 calendar days with effect from the day following the date on which the contract award decision is sent to the tenderers and candidates concerned if fax or electronic means are used; or

b) at least 15 calendar days with effect from the day following the date on which the contract award decision is sent to the tenderers and candidates concerned if other means of communication are used.

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Tenderers shall be deemed to be an “interested party”, and are thereby permitted to take action if they have not yet been definitively excluded. Exclusion is definitive if it has been notified to the tenderers concerned and has either been considered lawful by an independent review body or can no longer be subject to a review procedure. Candidates shall be deemed to be an interested party if the contracting authority has not made available information about the rejection of their application before the notification of the contract award decision to the tenderers concerned.

Regarding the procedural rules, the provisions of the ordinary law governing procedures before the administrative courts apply. Article 11 of the Law of 21 June 1999 provides that the stay of execution of an administrative decision during the appeal proceedings can be decreed only on the double condition that:

a) the execution of the contested decision may cause serious and definitive harm; and

b) the means invoked with the support of the appeal directed against the decision appear serious.

The demand for a stay of execution is to be presented by distinct application addressed to the Chair of the Tribunal and must meet the conditions planned for any appeal before the administrative courts of law.

The contracting authority or contracting entity is obliged to defer to the award decision until the notification of the President’s order.


periods?

No provision of the laws provide for exceptions in order to shorten the standstill period.


The conclusion of the contract deprives a third party, in principle, of the possibility to obtain rehabilitation in natura, i.e. the possibility of being able to still obtain the award of the contract itself.

Third parties can nonetheless still try to obtain the suspension/annulment of the contract before the civil courts.

Furthermore, damage claims can be introduced before the civil courts (district court – Tribunal d’arrondissement).


remedies is made?

This is highly dependent upon the type of procedure, the facts of each case, and the availability of the competent court.

Judicial proceedings may take a few weeks (e.g. suspending proceedings of extreme urgency before the President of the district court sitting in summary proceedings), or one to two years (e.g. annulment proceedings before the Administrative Courts or damages claims before civil courts).



The Luxembourg judicial system does not recognise the principle of “precedents”.

Nonetheless, the jurisprudence of the Administrative Courts in particular (judgments of the civil courts and tribunals are only rarely published) is deemed a relevant source of law with respect to the enforcement of public procurement legislation.



No specific legislation exists in this regard.


Procedure







The Law provides that, in the event of important changes regarding prices, salaries or contract performance clauses arising between the initial tender and the completion of the contract, the contract may be:

a) cancelled:

■ upon request of the contracting authority, in the event of an act constituting force majeure; or

■ upon request of the successful tenderer, in the event that the date of the beginning of the performance of the works is in excess of 40 days; or in the event that the contracting authority modifies the contract to impose a variation of more than 20 per cent of the contract value;

b) adapted:

■ The Regulation provides that, in any procurement procedure, the contracting authority may stipulate a procedure for the adaptation of the contract. In the absence of such a stipulation, the common rule from the Grand-Ducal Regulation of 8 April 2018 shall apply:

■ upon request of one of the parties, in the event of an unforeseen variation of the prices or salaries because of new legal rules since the bidding; or

■ upon request of one of the parties, in the event of an important and unforeseen fluctuation of the prices or salaries based on official quotation; or

c) modified:

■ upon request of one of the parties, in the event of an act constituting force majeure; or

■ upon request of the successful tenderer, in the event that the date of the beginning of the performance of the works exceeds 40 days, based on the fault of the awarding authority; in the event the contracting authority modifies the contract to impose a variation of more than 20 per cent of the contract value; or in the event that the contractual delay is in excess of more than 40 days.

In any of the above-mentioned cases, the request shall in general be notified to the other party using a formal notice (registered letter) providing the reasons justifying a cancellation, an adaptation or a modification of the contract.

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Luxembourg legislation does not deal specifically with this situation. However, the following principles seem to apply. After a submission of a “Best and Final Offer” (“BAFO”), the contracting authority may allow or request certain changes to the tender; for example, to clarify understandings reached during negotiations or to rectify a material error. However, there can be no violation of the equal treatment of the tenderers, and these changes cannot have an impact on the overall ranking of the final tenders. Furthermore, the general balance between the rights and obligations of the parties, as determined by the specifications and the BAFO, should not be altered.


signature?

Apart from the situations mentioned under question 6.1, the Law or the Regulation do not provide for any other specific situation giving place to a post-contract signature.



signature?

No specific legislation exists in this regard. Please see question 6.1.




them?

Luxembourg legislation does not contain specific rules regarding privatisations. If a privatisation results in the procurement of goods, works and/or services, it is, in principle, subject to the public procurement rules in the same way as any other contract.



There are some laws which aim to facilitate the use of PPPs, e.g. by authorising public authorities to participate in joint ventures. These laws often concern a particular matter (e.g. schools, hospitals, etc.) and may provide for subsidies.

8 The Future



impact?

The regulatory framework implementing the 2014 European Directives (Law and Regulation – see question 1.1) entered into force on 20 April 2018. No major changes to this regulatory framework are expected in the near future.





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Benjamin Marthoz

Stibbe

6, rue Jean Monnet

L-2180

Luxembourg

Tel: +352 26 61 81 17 Email: [email protected] URL: www.stibbe.com

Stibbe is a Benelux law firm with main offices in Amsterdam, Brussels, and Luxembourg and branch offices in Dubai, London and New York. Stibbe

offers full legal service, both advisory work and litigation, in all areas of law, such as administrative law, banking & finance, corporate/M&A, private

equity and investment funds, employment & pensions, energy, EU, competition & regulated markets, insolvency & restructuring, intellectual property,

litigation & arbitration, planning & environment, real estate & construction, tax, and TMT.

Stibbe consists of more than 390 lawyers. Stibbe’s Luxembourg office comprises about 35 lawyers, of whom four are partners. As a full-service firm,

our lawyers work in multidisciplinary teams with the aim to deliver top notch and pragmatic advice. We build close business relationships with our

clients that range from local and multinational corporations to state organisations and public authorities. We realise that understanding their

commercial objectives, their position in the market and their sector or industry, allows us to render suitable and effective advice.

Benjamin is in charge of the Administrative and Public Law practice at

Stibbe Luxembourg. He combines practical experience with a clear

understanding of his clients’ markets in order to give them suitable and

effective advice. Benjamin specialises in regulations and litigation with

regard to administrative matters, such as public procurement, town

and country planning, competition, telecoms, public contracts, tax

litigation, and public service employment. Benjamin is a member of

the board of directors of the ALEDC, the Luxembourg association for

the study of competition law, and of the Luxembourg association for

environmental law. Benjamin was admitted to the Luxembourg Bar in

2005 (List II) and as Avocat à la Cour (List I) in 2007.

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Chapter 18


Mamo TCV Advocates

Dr. Joseph Camilleri

Dr. Matthew Cutajar

Malta




The main legislative documents governing public procurement in Malta are the Public Procurement Regulations (S.L. 174.04), which replaced the Public Contracts Regulations of 2010, the Public Procurement of Entities operating in the Water, Energy, Transport and Postal Services Sectors Regulations (S.L. 174.06), which replaced the similarly named regulations of 2005, the Public Procurement of Contracting Authorities or Entities in the fields of Defence and Security Regulations (S.L. 174.08) and the Concession Contracts Regulations (S.L. 174.10). These enactments are hereinafter together referred to as the “Regulations”.

The Regulations were issued under the Financial Administration and Audit Act (Chapter 174 of the Laws of Malta) and they prescribe (inter alia) the substantive and procedural rules governing the procurement of works, supplies and services by contracting authorities and entities, the functions and powers of the Director and the Department of Contracts, the Contracts Committees, the Procurement Committees and the Departmental Adjudication Boards, and establish and regulate the Public Contracts Review Board (formerly known as the Public Contracts Appeals Board) and the Commercial Sanction Tribunals. Except for the Public Procurement of Contracting Authorities or Entities in the fields of Defence and Security Regulations, which were enacted in 2011, the other Regulations were issued in October 2016 and were intended to transpose into Maltese law the new Procurement Directives (Directive 2014/24/EU on procurement; Directive 2014/25/EU for entities operating in the utilities sector; and Directive 2014/23/EU on the award of concession contracts). The Emergency Procurement Regulations (S.L. 174.09), issued at the same time as the new Public Procurement Regulations of 2016, do not have any specific parallel in the Directives and envisage a relaxation of the rules generally applicable to public procurement, in the context of contracts with a value of less than €135,000, provided that the necessity to award such “emergency contracts” arises due to unforeseen surges in the use of supplies or as a consequence of issues of national health, security or strategic importance.

There are also other enactments which regulate specific aspects of public procurement; in particular, the remedies available to aggrieved tenderers. In this regard, reference is made to the Procurement (Energy and Fuels) Appeals Board Regulations (S.L. 497.06), the Procurement (Health Service Concessions) Review Board Regulations (S.L. 497.13), and the Concessions Review Board Regulations (S.L. 497.15).




of the legislation?

Regulation 39 of the Public Procurement Regulations sets out the basic principles of the procurement regime and specifically identifies the requirements of equal treatment, transparency and proportionality. The general principles underlying Malta’s public procurement regime are in fact derived from the TFEU and relevant case law developed by the European Court of Justice and the Court of First Instance. Apart from the above-mentioned requirements, one could also mention the following principles: the free movement of goods; the freedom to provide services; the freedom of establishment; and mutual recognition. Of relevance are also long-established tenets of administrative law, such as reasonableness, fairness and respect for the “rules of natural justice”. These underlying principles must be observed in the application and interpretation of local procurement legislation, and are relevant even where the contract falls below the Community thresholds and, generally, in matters not caught by the Public Procurement.



Contracting authorities operating in the field of defence (such as the Armed Forces of Malta) are regulated specifically by the Public Procurement of Contracting Authorities or Entities in the Fields of Defence and Security Regulations. These Regulations generally reflect the same principles underlying the other Regulations. However, there are certain exemptions that may apply to defence-related procurement, particularly the award of contracts which may be related to intelligence activities or which may relate to security-sensitive information. Furthermore, pursuant to article 346 of the TFEU, the Maltese Government would not be precluded from taking such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of, or trade in, arms, munitions and war material (provided that such measures do not adversely affect the conditions of competition in the internal market regarding products which are not intended for specifically military purposes).

The Public Procurement of Entities operating in the Water, Energy, Transport and Postal Services Sectors Regulations (S.L. 174.06) apply to procurement in the said sectors. Again, these Regulations are more or less based on the same principles as in procurement rules in other sectors, but they envisage particular exemptions, as in


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the case of so-called “power purchase contracts”; namely, contracts for the supply of energy or of fuels for the production of energy awarded by a contracting authority involved in the operation of fixed networks intended to provide a service to the public.



public procurement?

The performance of a public contract would be governed by applicable civil and commercial law, including, for example, the rules on contractual obligations and late payments.

Another noteworthy piece of legislation is the Administrative Justice Act (Chapter 490 of the Laws of Malta), which formalises and codifies the principles of good administrative behaviour to be observed by administrative tribunals, such as the Public Contracts Review Board. The Freedom of Information Act (Chapter 496 of the Laws of Malta), which is intended to create a right to information held by public authorities in order to promote added transparency and accountability in government, may also prove pertinent.

Provisions of a generic nature on the procurement by local councils and certain Maltese authorities may be found in the special laws governing them, such as the Authority for Transport in Malta Act (Chapter 499 of the Laws of Malta), and the Malta Travel and Tourism Services Act (Chapter 409 of the Laws of Malta) and the Local Councils (Procurement) Regulations (S.L. 363.186) which make the Public Procurement Regulations applicable to local councils.



agreements?

As a Member State of the European Union (the “EU”), Malta is bound to ensure compliance with the provisions of the Treaty on the Functioning of the European Union (the “TFEU”) and secondary legislation promulgated by European institutions, including the legislative package in the field of public procurement (in particular, the “New Public Procurement Directives” – Directive 2014/24/EU on procurement; Directive 2014/25/EU for entities operating in the utilities sector; and Directive 2014/23/EU on the award of concession contracts). Malta’s accession to the EU in 2004 entailed that it became a contracting party to the international agreements concluded between the Member States and one or more third countries (for example, the Agreement on the European Economic Area, the terms of which set out to what extent the EU’s public procurement regime extends to the EEA–EFTA States).

The EU is a party to the Government Procurement Agreement (“GPA”); accordingly, the provisions in relation to the GPA set out in the Public Procurement Directives were transposed into the Regulations.


Contracts



The Public Procurement Regulations apply to “contracting authorities”; i.e. the State, regional or local authorities, bodies

governed by public law, and associations formed by one or several of such authorities or bodies governed by public law.

The Public Procurement of Entities operating in the Water, Energy, Transport and Postal Services Sectors Regulations refer both to “contracting authorities” (which term is given the same definition as that given under the Public Procurement Regulations), as well as to “contracting entities”, namely contracting authorities and public undertakings that pursue one of the activities covered by the same Regulations (i.e. gas, heat and electricity, water, transport services, postal services, exploration or extraction of oil, gas, coal or other solid fuels, and the provision of airports and maritime, or inland ports, or other terminal facilities to carriers by air, sea or inland waterway), as well as other entities whose activities include any of the said activities, or any combination thereof, and that operate on the basis of special or exclusive rights granted by a competent authority of Malta.

The Public Procurement of Contracting Authorities or Entities in the Fields of Defence and Security also refer to “contracting authorities”, which is given the same definition as under the Public Procurement Regulations. In other words, there is no specific definition of “contracting authority” under these Regulations. Instead, it is the nature of the contract (i.e. whether it is related to the fields of defence and security) which establishes whether it is these Regulations which should apply or not.

Non-exhaustive lists of contracting authorities and entities are attached as Schedules to the Public Procurement Regulations and the Public Procurement of Entities operating in the Water, Energy, Transport and Postal Services Sectors Regulations.

The Emergency Regulations apply only to the government entities specified in the Schedule to the said Regulations, which are currently the Central Procurement Supplies Unit and the Civil Protection Department.


The Public Procurement Regulations govern the award of a “public contract”, which is defined as “any contract for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities and having as their object the execution of works, the supply of products or the provision of services”. A distinction is made between public works contracts, public service contracts and public supply contracts. The Public Procurement of Contracting Authorities or Entities in the Fields of Defence and Security follow the same definitions but apply specifically to contracts related to defence and security.

The Public Procurement of Entities operating in the Water, Energy, Transport and Postal Services Sectors Regulations apply to supply, works and service contracts, as defined therein, which have a value equal to or exceeding the prescribed thresholds.

The Concession Contracts Regulations apply to both works and services concessions. The defining elements of works or services concessions are that the consideration consists either solely in the right to exploit the works or services which are the subject of the contract or in that right together with payment, and that the operating risk is transferred to the concessionaire.

It is worth noting that the scope of application of the Public Procurement of Entities operating in the Water, Energy, Transport and Postal Services Sectors Regulations extends to entities other than contracting authorities or public undertakings, as mentioned under question 2.1 above. Furthermore, the Public Procurement Regulations contain specific provisions related to certain subsidised public works contracts.

Mamo TCV Advocates Malta


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Additionally, non-governmental organisations (“NGOs”) are generally requested to issue a call for tenders following “the spirit of the Public Procurement Regulations” when awarding a contract which will be subsidised through public and/or EU funds.



The Public Procurement Regulations apply irrespective of the estimated value of the contract, but different procurement regimes apply depending on different thresholds. Where the estimated value is less than €144,000, the procedure is administered by the contracting authorities themselves without the need to involve the Director of Contracts, with a simpler procurement process applicable in the case of contracts with a value of less than €10,000. Where the estimated value exceeds €144,000, the process is administered by the Director of Contracts and the applicable rules are generally more detailed and onerous. In those cases where, in terms of the regulations, the procedure is administered by the Ministerial Procurement Unit (rather than by the contracting authority), the Director of Contracts is involved only where the estimated value of the contracts exceeds €250,000.

As far as the Public Procurement of Entities operating in the Water, Energy, Transport and Postal Services Sectors Regulations are concerned, the award of contracts which have a value exceeding €443,000 are issued, administered and determined by the Director of Contracts on behalf of the contracting authorities, whereas contracts with a lesser value are issued directly by the contracting authority concerned.

The Public Procurement of Contracting Authorities or Entities in the Fields of Defence and Security concern the award of contracts which have a value, excluding VAT, estimated to be no less than €134,000 in the case of supply and service contracts and €5,186,000 in the case of works contracts.

The general rules set out in the Concession Contracts Regulations apply to all concession awards irrespective of value, but the requirements are more onerous (particularly in relation to publicity and publication of contract notices) in the case of works and services concessions with an estimated value exceeding €5,548,000.

All the indicated values are net of VAT.


The Regulations prescribe how the estimated value of a contract is to be calculated, so as to avoid circumvention of the application of the Regulations. As a general rule, contracting authorities are not allowed to establish an estimated value of a contract with the intention of avoiding, or to adopt any mechanism, including the sub-division of public contracts, the purpose of which is to circumvent the application of, in part or in whole, the Public Procurement Regulations.

Similarly, the Public Procurement of Entities operating in the Water, Energy, Transport and Postal Services Sectors Regulations prescribe that contracting entities may not circumvent these regulations by splitting works projects or proposed purchases of a certain quantity of supplies and/or services, or by using special methods for calculating the estimated value of contracts. Similar rules apply in the Concession Contract Regulations.



Since 2016, in line with the Concessions Directive, the award of concession contracts is regulated by a specific legal notice, the Concession Contracts Regulations. Concessions are defined as follows:

(a) “works concession” means a contract for pecuniary interest concluded in writing by means of which one or more contracting authorities or contracting entities entrust the execution of works to one or more economic operators, the consideration for which consists either solely in the right to exploit the works that are the subject of the contract or in that right together with payment; and

(b) “services concession” means a contract for pecuniary interest concluded in writing by means of which one or more contracting authorities or contracting entities entrust the provision and the management of services other than the execution of works referred to in paragraph (a) to one or more economic operators, the consideration of which consists either solely in the right to exploit the services that are the subject of the contract or in that right together with payment.

The definition continues to specify that:

The award of a works or services concession shall involve the transfer to the concessionaire of an operating risk in exploiting those works or services encompassing demand or supply risk or both. The concessionaire shall be deemed to assume operating risk where, under normal operating conditions, it is not guaranteed to recoup the investments made or the costs incurred in operating the works or the services which are the subject-matter of the concession. The part of the risk transferred to the concessionaire shall involve real exposure to the vagaries of the market, such that any potential estimated loss incurred by the concessionaire shall not be merely nominal or negligible.

Prior to the entry into force of the new Regulations in 2016, legal notices issued in 2015 had already provided remedies to candidates who feel aggrieved by the award of “concessions”. The above-mentioned Concessions Review Board Regulations in particular establish a Board which can hear complaints by candidates who feel aggrieved by any decision of a procuring entity in relation to the procedure for the award of a concession, including any decision to disqualify a tenderer or the inclusion of specifications prejudicial to the rights of the candidate. The Procurement (Health Services) Concessions Review Board Regulations provide similar remedies in the specific context of health services. These Legal Notices have not been repealed by the new Regulations, although one presumes that they will be of lesser relevance now that specific remedies are provided under the Concession Contracts Regulations.



The Public Procurement Regulations allow the conclusion of framework agreements, specifying the procedure to be used. These are similar to the procedure in the award of other public contracts, subject to a number of conditions, including that the framework agreement may not be for a term greater than four years except in exceptional cases, and provided that such an agreement does not lead to a distortion of competition.



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into lots?

Contracts may be divided into lots and special rules apply. The contracting authorities may limit the number of lots that may be awarded to one tenderer.



In a public procurement context, the same rules would apply for suppliers established outside the jurisdiction as to suppliers within the jurisdiction. In line with principles of fairness and transparency, terms of public calls for tenders should not be such as to discriminate directly or indirectly against a particular section of bidders.

3 Award Procedures




As a general rule, the procurement of services, supplies and works must be made by public contract after a call for tenders.

In terms of the Public Procurement Regulations, equipment, stores, works or services are procured departmentally if the estimated value of the contract does not exceed €135,000 (this type of contract will not be discussed further in this chapter).

Public contracts above the €135,000-value threshold (including those equal to or above the EU value thresholds) are issued, administered and determined by the Department of Contracts on behalf of the contracting authority, except for cases where the call for tenders is published by the Ministerial Procurement Unit in the name of one of the Contracting Authorities mentioned in Schedule 16 to the Public Procurement Regulations – in such case, the Ministerial Procurement Unit manages the procedure for contracts up to a value of €250,000. Public contracts required by contracting authorities listed in Schedule 3 to the Regulations are issued, administered and determined by those contracting authorities themselves.

Contracts with an estimated value exceeding €120,000 must, in principle, be awarded through an open or restricted procedure, at the choice of the contracting authority. In specific cases and circumstances, other methods of procurement may be used. These reflect the procurement methods envisaged in the Directives and are:

■ The “competitive procedure with negotiation”: this is subject to approval by the Director of Contracts who may authorise its use in specific situations – for instance, when the needs of the authority cannot be met through readily available solutions, when the required technical specifications cannot be precisely established or where, following an open or restricted procedure, only irregular or unacceptable tenders are submitted.

■ The “innovation partnership” also requires approval by the Director of Contracts and is available when the needs of the contracting authority cannot be met by purchasing products, services or works already on the market.

■ The “competitive dialogue” may be applied for a particularly complex contract. It is a procedure in which any economic operator may request to participate and whereby

the contracting authority conducts a dialogue with the candidates admitted to that procedure, with the aim of developing one or more suitable alternatives capable of meeting its requirements, and on the basis of which the candidates chosen are invited to tender. The Director of Contracts must give approval.

■ The “negotiated procedure” is available only in very specific circumstances with the approval of the Director of Contracts, since it implies that a contract may be awarded without prior publication, for instance in cases of extreme urgency.

■ Procurement rules also apply to “design contests”, namely contests organised as part of a procedure leading to the award of a public service contract and contests with prizes and payments to participants.

Contracting entities subject to the Public Procurement of Entities operating in the Water, Energy, Transport and Postal Services Sectors Regulations may choose between the open procedure, the restricted procedure, the negotiated procedure with prior call for competition, the innovation partnership, competitive dialogue, the negotiated procedure without prior call for competition and design contests. All the procedures mentioned (apart from open and restricted procedures) may only be used in particular cases.


Regulation 52 of the Public Procurement Regulations establishes the general principle that in setting time limits, contracting authorities shall take account of the complexity of the contract and the time required to draw up tenders. There are then specific articles setting minimum time limits. Thus, in the case of open procedures, the minimum time limit for receipt of tenders is 35 days from the date of sending the contract notice, which may be shortened to 15 days when a prior information notice has been issued. In restricted procedures, the minimum time limit for receipt of requests to participate is 30 days from the date of call for tenders, reducible to 15 days in cases of urgency. The time limit for receipt of tenders is also 30 days (from the date of invitation to tender), which may be shortened to 10 days when a prior information notice is issued or when there are duly substantiated urgent reasons. In a competitive procedure with negotiation, the minimum time limit for receipt of requests to participate shall be 30 days from the date of the contract notice and the same minimum time limit applies for receipt of initial tenders. The “shortened” time limits applicable to the restricted procedure apply to the competitive procedure with dialogue. The minimum time limit to participate in an innovation partnership procedure shall be 30 days from the date on which the contract notice is sent or from the publication of the call for competition, and the same time limit applies in a competitive dialogue.

There are no minimum timescales governing the actual evaluation and award of the tenders, although calls for tenders would indicate tentative time frames which contracting authorities try to abide by.


tenderers?

The Public Procurement Regulations have introduced detailed rules on the blacklisting of candidates. Briefly, economic operators who, in the previous five years, have been convicted in a final judgment, which has become res judicata in relation to certain serious crimes, such as corruption, fraud, money laundering and human trafficking, should be excluded from participation in procurement proceedings. The Director of Contracts also has the discretion to blacklist the economic operator for two years in other specified situations, for



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instance where such economic operator has shown significant or persistent deficiencies in the performance of public contracts or has influenced the award of a contract or attempted to obtain confidential information. In both situations, the blacklisted candidate has a right of appeal before the Commercial Sanctions Tribunal. The Tribunal itself may also blacklist an economic operator at the request of the Director of Employment and Industrial Relations in case of breach of employment laws.

Economic operators assisting the contracting authority or the Director of Contracts in the preparation of the contract documents are not excluded from participating in the same (except as a last resort), provided it can be shown that their involvement in the preparation of the contract documents does not confer any advantage over other participants.

Apart from the above, candidates may be chosen on the basis of selection criteria related to (a) suitability to pursue the professional activity, (b) economic and financial standing, and (c) technical and professional ability. The criteria chosen for a particular tender procedure should be indicated in the contract documents, in accordance with the relevant provisions of the Regulations.

In procedures which envisage short-listing, such as in the case of the competitive dialogue procedure, the pre-determined award criteria (referred to under question 3.4 below) must be applied in order to reduce the number of tenders or solutions to be discussed.

The minimum number of suitable candidates in the restricted procedure must be five, and three in the competitive procedure with negotiation, the competitive dialogue procedure and the innovation partnership. In any event, the number of candidates invited must be sufficient to ensure genuine competition.




In line with the EU Directives, contracting authorities are obliged to base the award of public contracts on the most economically advantageous offer (“MEAT”), whereby various criteria relating to the subject-matter of the contract are taken into consideration (e.g. price, delivery date, cost-effectiveness, quality, aesthetic and functional characteristics, technical merit, profitability and technical assistance). The award criteria must be set out in the relevant contract documents, with the relative weighting (or, if this is not possible, in descending order of importance).

In the open procedure, the individual tenders are then assessed by an evaluation committee, which would generally include technical people with specialist knowledge, in light of the requirements of the tender documents and the criteria indicated. Where the Prime Minister determines that the adjudication of tenders for the award of any particular contract requires special expertise, knowledge, skills or other specialist knowledge, a Special Contracts Committee may be set up to evaluate the tender.


low tenders?

In terms of the Public Procurement Regulations, Contracting Authorities shall require economic operators to explain the price or costs proposed in the tender where tenders appear to be abnormally low in relation to the works, supplies or services. The explanations may, in particular, relate to the economics of the manufacturing process, of the services provided or of the construction method, the technical solutions chosen or any exceptionally favourable

conditions available to the tenderer for the supply of the products or services or for the execution of the work, the originality of the work and supplies or services proposed by the tenderer. Moreover, the contracting authority may also request information to ensure compliance with environmental and labour law obligations, compliance with rules relating to subcontracting, and the possibility of the tenderer obtaining State aid. Failure by the economic operator to send his explanations within the written timeframe imposed by the contracting authority shall be deemed as acceptance from the economic operator that his tender is abnormally low.

The contracting authority will then proceed to assess the information provided by consulting the tenderer. It may only reject the tender where the evidence supplied does not satisfactorily account for the low level of price or costs proposed. Moreover, should the contracting authority conclude that the abnormally low price is a result of a breach of the bidder’s obligations (for instance, in relation to labour law or State aid), the bid will also be rejected as “irregular”.


At the conclusion of the process of evaluation as described in question 3.4 and, depending on the contract award criteria chosen, the evaluation committee provides the contracting authority, the Ministerial Procurement Unit or the Director of Contracts, as the case may be, with a report indicating the preferred bidder, who is then informed of the choice.


bidders?

Both successful and unsuccessful bidders should be notified of the decision by fax or electronic means and, where applicable, through the Government e-procurement platform. The decision should also be affixed to the notice board of the contracting authority and the Public Contracts Review Board.


Contracting authorities may acquire supplies or services intended for contracting authorities from one of the central purchasing bodies (currently the Department of Contracts or the Malta Information Technology Agency) or using a framework agreement or dynamic purchasing system operated by a central purchasing body. With the approval of the Director, two or more contracting authorities may agree to perform certain procurements jointly.


Tenderers can submit “variants”, provided that this is indicated in the contract notice. In cases where tenderers are allowed to submit such alternative solutions, the contracting authority must state the minimum requirements to be met by the variants and any specific requirements for their presentation in the contract documents; only variants meeting such minimum requirements may be taken into consideration.


“Conflicts of interest” are specifically defined in the Regulations as, at least, “any situation where any person, including staff members of



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the contracting authority or of a procurement service provider acting on behalf of the contracting authority, who are involved in the conduct of the procurement procedure or may influence the outcome of that procedure have, directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement procedure”. Generally speaking, any potential conflict of interest should not only be flagged, but measures should also be taken to remove such conflict. This is also in line with decisions of the Court of Appeal and the Public Contracts Review Board, both of which are generally very rigorous in condemning not only actual, but also potential, conflicts of interest.




Apart from rules relating to different types of procurement procedures as referred to in question 3.1 above, there are no specific rules on market engagement. It should be noted, however, the involvement of potential bidders in the actual preparation of a procurement procedure could be considered to give those bidders an undue advantage and could lead to their exclusion from an eventual procurement process.




The exclusions and exemptions set out in the Public Procurement Directives have been transposed in the Regulations.




The principles established by the European Court of Justice regarding “in-house” administrative arrangements apply (in particular, the Teckal case), and the Regulations follow both European case law and the Directives in this regard. Thus, the Public Procurement Regulations expressly provide that they do not apply to public service contracts awarded by a contracting authority to another contracting authority or to an association of contracting authorities on the basis of an exclusive right which they enjoy pursuant to a law, regulation or administrative provision which is compatible with the TFEU. Specific exclusions regarding the award of contracts to “affiliated undertakings” and to contracting entities are also laid down in the Public Procurement of Entities operating in the Water, Energy, Transport and Postal Services Sectors Regulations.

5 Remedies



The Public Contracts Review Board (the “Review Board”), established in terms of the Regulations, has a central role in the provision of remedies under the legislation. The Board’s duties include the function to address: (a) concerns or complaints raised

before the closure of a submission of a tender by candidates or persons having an interest in obtaining a particular public contract; (b) complaints raised by tenderers or candidates relating to exclusions, non-compliant offers, contract award decisions or cancellations of a procurement procedure after the closing date and time set for the submission of the said call; and (c) requests for the “ineffectiveness” of public contracts exceeding the values set out in Schedule 5 to the Act (for instance, where a public contract has been entered into without following the requirements of the Regulations).

The Review Board is also tasked with providing remedies in awards procedures under the Concession Contracts Regulations. Thus, prospective candidates may file a reasoned application prior to the closing date of a call for competition, for instance, in the case of alleged discriminatory specifications, or to correct errors or ambiguities. There is also a right of appeal to the Board following the award. In the case of concessions, recourse is also available to the Concessions Review Board or the Procurement (Health Service Concessions) Review Board, according to the nature of the concession awarded; although how these alternative remedies will co-exist is yet to be seen.

Decisions of the Review Board are subject to appeal to the Court of Appeal in its superior jurisdiction.



On the basis of article 469A of the Code of Organisation and Civil Procedure (Chapter 12 of the Laws of Malta), the Courts of Justice of Civil Jurisdiction may enquire the validity of administrative acts or declare them null, invalid or without effect in a limited number of cases. Predominantly, this jurisdiction is exercised where the administrative act is in violation of the Constitution, is ultra vires, or is otherwise contrary to law. However, the cited article does not apply if the mode of contestation or of obtaining redress, with respect to any particular administrative act before a court or tribunal, is provided for in another law.


sought?

Remedies may primarily be sought from the Review Board, although the Director of Contracts also has residual functions, including the discretion to cancel the award of a contract awarded in breach of the Regulations, even after the time established to file an appeal.

The Commercial Sanctions Tribunal has the competence to hear appeals related to blacklisting of commercial operators and to consider requests by the Director of Employment and Industrial Relations to blacklist specific economic operators.

The Civil Courts also have jurisdiction as already outlined in questions 5.1 and 5.2.


remedies?

As a general rule, objections from an award decision may be appealed within 10 days and a subsequent appeal to the Court of Appeal should be filed within 20 days from the Review Board’s decision.

Requests for a declaration of ineffectiveness of a contract should be made within 30 days from publication of a contract award notice (including justification of the decision to award the contract without



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prior publication of a contract notice) or from the date when a candidate concerned is informed of the signing of the contract or, in any other case, within six months from the day following the signing of the contract.


periods?

Limitation periods are statutory and can neither be shortened, nor extended.


As indicated above, the Review Board may consider a contract to be “ineffective” and to declare the contract as null from the date of the decision by the Review Board in certain specific situations, such as if the contracting authority has awarded a contract without prior publication of a contract notice in the Official Journal of the European Union, without this being permissible in accordance with Directive 2004/18/EC. Fines may also be imposed on the contracting authority.

Otherwise, the only remedy available to an interested party after the signing of the contract would appear to be an action for damages before the Civil Court.


remedies is made?

The administrative review process contemplated in the Regulations (before the Public Contracts Review Board) is relatively quick; complaints and objections would generally be determined within a two-month period.

In terms of the law, appeals from decisions of the Review Board have to be decided by the Court of Appeal by no later than four months from the notification of all interested parties with the appeal application. In the meantime, the contract may not be awarded.

Other judicial procedures (such as any action for damages or administrative review cases under article 469A) are not bound by a statutory term and would be lengthier. Unfortunately, it is not uncommon for judicial remedies to be given after a number of years.



There have been several situations where the Review Board or the Court of Appeal have re-admitted an aggrieved bidder into the evaluation process, or cancelled the award to a particular bidder, including cases where the Court of Appeal actually overturned a contract award ordered by the Review Board and reconfirmed the original decision taken by the contracting authority to award the contract to the plaintiff. Some of the more notable and recent judgments include:

i. Ok Limited (C-3506) vs Direttur tal-Kuntratti et, decided by the Court of Appeal (Superior Jurisdiction) on 18 July 2017 (121/17);

ii. Bonnici Bros Projects Limited (C-83649) u Shapoorji Pallonji (Malta) Limited (C-74260), it-tnejn formanti l-konsorzju SP BB International JV vs Onorevoli Ministru għas-Saħħa et, decided by the Court of Appeal (Superior Jurisdiction) on 30 July 2018 (234/2018, 235/2018 and 236/2018);

iii. Project Technik Ltd vs Direttur Ġenerali tal-Kuntratti et, decided by the Court of Appeal (Superior Jurisdiction) on 13 April 2018 (8/2018); and

iv. Quattro Labs Limited Pro Et Noe vs Malta College Of Art, Science And Technology Et, decided by the Court of Appeal (Superior Jurisdiction) on 13 April 2018 (543/2017).

Until amendments were introduced in 2013, an appeal from a decision given by the Review Board did not suspend the award of the contract. This led to situations where the Court, in its judgment, could cancel a contract after its award. This scenario is now more difficult to envisage since a contract may only be awarded after judgment by the Court of Appeal.

Typically, other remedies outside those set out in the Public Procurement Regulations are significantly harder to obtain. For instance, requests for the issuing of warrants of prohibitory injunction (which could potentially be used to stop the award of a contract) are generally rejected. The Courts have held that such a warrant is an extraordinary measure which should not be applied when the plaintiff has the possibility to file a claim for damages (Dr. John L. Gauci v Director of Contracts (First Hall of the Civil Court, 18 July 2008)), or when the plaintiff has failed to exercise “ordinary remedies” provided in the law (Dr. Kenneth Grima noe vs Id-Direttur Ġenerali tal-Kuntratti, 26 March 2013).



Apart from mitigation measures envisaged in the Regulations themselves (for instance, anti-avoidance rules regarding the calculation of the value of a contract, rules relating to contract of interest, blacklisting), tender documents and contract conditions generally include specific clauses stating that certain actions, such as approaching the evaluation committee members during the evaluation period, will lead to disqualification.


Procedure







The underlying principles to be observed when changes are made during the award procedure are, primarily, the principles of equal treatment, non-discrimination, and transparency. Thus, any such modifications should be notified to all bidders and should not be such as to unfairly prejudice any of the bidders. Such principles would imply, for instance, and changes which may not alter the subject-matter of the contract, or which would not substantially change the basic parameters set out in the tender documents. Where rules on how changes may be effected are set out in the tender document, the contracting authority would need to abide by such rules which it has set for itself.



As a rule, any negotiations which would lead to a material change in the bid are prohibited. An exception where negotiation with the



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preferred bidder is explicitly allowed following submission is in those procurement methods in the case of a “negotiated procedure”, which is only permissible in specific exceptional circumstances.


signature?

The legislation envisages modifications of a contract post-signature without a new procurement procedure, but only in very specific circumstances (for instance, in the case of additional works which may become necessary or where modifications are not substantial), and under very definite rules. In the case of tenders exceeding €135,000, such modifications require a formal request by contracting authorities which should include a number of elements, including the reasons which brought about the need for this modification and the written consent of the contractor. The Director has the discretion to permit such modifications.

If economic operators become aware of any changes (e.g. through the local media) and feel that such changes are unlawful, they may decide to institute procedures to have the tender procedure cancelled or to claim damages.



signature?

The Department of Contracts and Contracting Authorities are generally very strict in prohibiting the transfer of a contract to another entity post-contract. In exceptional circumstances, this may be allowed; however, the authorities would generally still insist on the original tenderers remaining jointly responsible for the obligations undertaken in the contract.




them?

The Regulations do not contain any special rules in relation to privatisations. Where a privatisation would entail the procurement of works, supplies or services by a contracting authority or entity, it would be subject to the relevant provisions of the Regulations. As a general rule, compliance with EU law (including the State aid rules) would need to be ensured in such cases.



Regulations do not contain any special rules on PPPs or PFIs. Insofar as a PPP project is based on a public contract in terms of the Regulations, the relevant public procurement regime would apply. In any case, a PPP arrangement would nevertheless be subject to the rules of the TFEU and the general principles of EU law, which may necessitate the award of the PPP contract by way of a competitive procedure.

8 The Future



impact?

The Legal Notices issued in 2016 are quite major in their implications and it is therefore unlikely that there will be any substantial changes in the law in the near future. However, there have been some slight amendments and there could be further changes to clarify issues which might arise in relation to the interpretation and application of the new provisions.




We are not aware of any regulatory developments that could have an impact on the law in the short term.



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Dr. Joseph Camilleri

Mamo TCV Advocates

Palazzo Pietro Stiges

103, Strait Street

Valletta VLT 1436

Malta

Tel: +356 2540 3000 Email: [email protected] URL: www.mamotcv.com

Dr. Matthew Cutajar

Mamo TCV Advocates

Palazzo Pietro Stiges

103, Strait Street

Valletta VLT 1436

Malta

Tel: +356 2540 3000 Email: [email protected] URL: www.mamotcv.com

Joseph Camilleri joined Mamo TCV Advocates in 2003 and has been

a partner in the firm since July 2015. Joseph works in the Litigation

and Alternative Dispute Resolution department, and in this capacity,

he has represented public authorities and private clients in

proceedings before Civil Courts and administration tribunals, and in

arbitration suits. He has appeared in both general and specialist

cases, including shipping and aviation claims and asset repossession

proceedings. Joseph also regularly handles administrative law cases,

with public procurement law being one of his areas of expertise. In this

regard, he is sought by both public entities and corporate clients for

legal advice and representation in litigation related to the award and

the execution of public contracts. He has also advised international

clients on PPP opportunities in Malta.

We are one of Malta’s top-tier law firms, with significant depth and expertise across a broad range of practice areas. As an integrated corporate and

commercial legal practice, we pride ourselves on our service delivery. We always strive to exceed the expectations of our clients as we provide them

with expert advice and legal insight.

With a team of over 700 lawyers and professionals from other disciplines, we are confident of our ability to continuously act as a point of reference

for our clients.

Over the years we have built strong relationships with our clients and we remain committed to supporting them at all times as they face complex

business and legal issues, as well as trying to adapt to changing markets and regulatory landscapes.

For the past few years, Mamo TCV has been top ranked by The Legal 500, IFLR 1000, Martindale-Hubell, Chambers Global and Chambers Europe.

Matthew Cutajar joined Mamo TCV Advocates in 2013 and is an

Associate within the firm’s Litigation department. His main areas of

practice comprise general civil and commercial law, as well as

litigation and dispute resolution in connection with aviation and

shipping law, planning law, and procurement and state aid. He has

represented various clients, including major corporate entities, in

proceedings before the inferior and superior Courts as well as the

Tribunals of Malta.

Matthew also has a background in financial services law and worked

within Mamo TCV’s relative department for over a year after joining the

firm. His work primarily entailed assisting local and foreign clients with

the setting up and licensing of collective investment schemes, as well

as advising clients operating within the payment services sector.

He was called to the Bar in 2015 and is a member of the Malta

Chamber of Advocates.



155

Chapter 19


Tunde & Adisa Legal Practitioners

Ayobami Tunde

Ifeoluwa Gbarada

Nigeria




The Public Procurement Act, 2007 (the “PPA”) is the primary legislation which establishes the National Council on Public Procurement and the Bureau of Public Procurement (the “Bureau”) as the regulatory authorities responsible for the monitoring and oversight of public procurement in Nigeria. It covers items such as:

a) the objectives and functions of the Bureau;

b) fundamental principles for procurements;

c) principles and procedures for the organisation of procurements, such as the approving authority, procurement planning and implementation;

d) procurement methods, procurement surveillance and review; and

e) guidelines for the disposal of public property.

There are also subsidiary regulations, such as Public Procurement Regulations for Goods and Works Regulations, 2007 (“PPRGWR”) and the Public Procurement Regulations for Consultancy Services Regulations, 2007 (“PPRCSR”).

The PPRGWR was prepared for use by procuring entities and service providers participating in publicly financed contracts, and covers items such as:

a) details of the institutional and regulatory framework for public procurement;

b) eligibility criteria to bid for and execute contracts; and

c) procedures for bid preparation, submission, opening, evaluation and award of contract.

The PPRCSR applies to all procurement of consulting services by all procuring entities – except where a waiver is first obtained under the Act – and covers items such as:

a) eligibility criteria to bid for and execute contracts for the procurement of consulting services which exclude physical services; and

b) organisation of procurement operations.

Finally, most states in Nigeria have their own public procurement legislation which regulates public procurement activities within the respective state.




of the legislation?

The basic underlying principles of the regime are competition, transparency, efficiency and value for money. Whilst these principles form the core of the implementation of the PPA by the Bureau, they are are not defined or interpreted in detail. However, they are relevant to the interpretation of the legislation. For example, Section 24 of the PPA provides for open competitive bidding and transparency is equally ensured; an example is the bid opening process, as provided for in Section 30 of the PPA, which is made public and bids are opened in the presence of bidders, their representatives or interested members of the public to ensure transparency.



The PPA generally governs public procurement across all sectors; however, as listed in question 1.1 above, the PPRGWR and PPRCSR are area-specific.

The Bureau of Public Procurement and other participating entities are also regulated by certain guidelines such as the Public Procurement Manual (“PPM”), which contains in simplified details the provisions of the PPA. Other special rules which are established in line with the PPA are the Code of Conduct for Public Officers Involved with Procurement, the Complaints Procedure under the Public Procurement Act, the Budget Implementation Process Handbook and a detailed list of approved thresholds for service-wide applications.



public procurement?

The Fiscal Responsibility Act, 2007 provides for prudent management of the nation’s resources, ensures long-term macro-economic stability of the national economy, and secures greater accountability and transparency in fiscal operations, which aims to reduce significant corruption and irregularity within public procurement processes.

In the bid to fight official corruption and introduce transparency and accountability into the government procurement process, the Federal Government of Nigeria established an agency known as the


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Budget Monitoring and Price Intelligence Unit in 2003, to evaluate contracts and tenders, and to ensure strict compliance with civil service procedures.

The Code of Conduct Bureau and Tribunal Act, 1991 gives the Code of Conduct Bureau the mandate to establish and maintain a high standard of public morality in the conduct of government business and to ensure that the actions of public officers conform to the highest standards of public morality and accountability. The Economic Financial Crimes Commission and Independent Corrupt Practices Commission, backed up by their respective enabling laws, such as the Economic and Financial Crimes Commission Establishment Act, 2004, the Money Laundering Act 1995, the Money Laundering (Prohibition) Act, 2004 and the Corrupt Practices and other Related Offences Act, 2000, are government transparency enforcement institutions charged with the responsibility of enforcing laws that relate to money laundering and associated offences, as well as ensuring transparency and accountability in the public procurement process.



agreements?

Although Nigeria has been a member of the WTO since 1 January 1995, it is not a signatory to the WTO Agreement on Government Procurement and has not acceded to it. The EU and some members of the Economic Community of West African States (“ECOWAS”) have executed the Ecowas Partnership Agreement (“EPA”). However, Nigeria is yet to execute the same.


Contracts



The PPA describes the following entities as purchasers: ministries; the extra ministerial offices; Government agencies; parastatals and corporations.

However, a new bill to amend the PPA is being deliberated upon at the National Assembly and if passed into law will widen the category of purchasers to include the House of Representatives, the Senate, the High Court, as well as the Court of Appeal.


In line with the PPA, contracts for public procurement are goods, works and services carried out by the Federal Government and all procurement entities, as well as other entities which derive at least 35% of the funds appropriated or proposed to be appropriated for any type of procurement described in the PPA from the Federation Share of Consolidated Revenue Fund with the exception of special goods, works and services involving national defence or national security – unless the President’s express approval has been first sought and obtained (Section 15, PPA).



There are financial thresholds which are revised from time to time by the National Council on Public Procurement and enforced by the

Bureau of Public Procurement. Currently. there are financial thresholds with limits based on the approving authority, for example, the current financial threshold for contracts for goods to be approved by the Bureau of Public Procurement, as well as the Federal Executive Council, is N100,000,000 (one hundred million naira) and above; while the Ministerial Tenders Board can approve contracts for goods from N5,000,000 (five million naira) and above, but not less than N100,000,000 (one hundred million naira).


In principle, value estimates are limited to the value of individual procurements and the regulations do not specifically spell out an aggregation rule; however, a tenderer is required by the Standard Bid Document to submit only one (1) tender for each individual contract either individually or as a partner in a joint venture (JV), and is required to demonstrate resources and experience sufficient to meet the aggregate of the qualifying criteria and approved threshold for the individual lots. There is no express provision in the regulations with respect to the aggregation of multiple contracts to determine whether the purchase is above the approved threshold.



Concession contracts in Nigeria are described as Public-Private Partnerships, defined by the National Council for Public Private Partnerships as a “contractual agreement between a public agency (federal, state or local) and a private sector entity”. In 2008, the Federal Government of Nigeria established the Infrastructure Concession Regulatory Commission (“ICRC”) under the Infrastructure Concession Regulatory Commission (establishment, etc.) Act, 2005 to regulate Public Private Partnership (“PPP”) endeavours of the Federal Government.

Most of the respective State Governments have their respective Public Private legislation which guides their dealings in this regard.



There are no definite rules for the conclusion of framework agreements; however, upon being awarded the contract, the successful bidder is invited by the awarding authority to execute the agreement within the time period of the validity of the bid. The terms of the contract are not to differ materially from the terms included in the bid document. The regulations also provide for certain terms that should be included in the contract document, such as the scope of work to be performed, the goods to be supplied, the rights and obligations of the procuring entity and the supplier/contractor, and the functions of the engineer/architect/construction manager if one is to be employed by the procuring entity in the supervision of the contract, including payments and advances to be made.


into lots?

To qualify for a multiple number of lots in a package for which tenders are invited, the tenderer is to demonstrate having resources and experience sufficient to meet the aggregate of the qualifying criteria for the individual lots. The tender document allows tenderers to quote separate prices for one or more lots, it also allows

Tunde & Adisa Legal Practitioners Nigeria


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the procuring entity to award one or multiple lots to more than one tenderer following the methodology set out in the Standard Bid Document.



In order to minimise the foreign exchange risk for bidders in an International Competitive Bid (“ICB”) procedure, the bidders can bid in foreign currencies. This results in bids being presented in a wide variety of currencies which is then converted to a single common currency, generally to Nigerian naira. These conversions are made using the prevailing selling rates established for similar transactions by the Central Bank of Nigeria on the specified date.

Under the ICB, bidding opportunities are advertised internationally, and all eligible bidders are given equal opportunities to participate.

3 Award Procedures




The award procedure adopted by the procuring entity depends on the type and magnitude of the award, the value, local obtainability and cost of goods and services. The exigency within which the goods and services to be procured is considered in the choice of an award procedure.

The PPA sets out three (3) different procedures for awards. These procedures are stated below:

■ Part VI (sections 25–38) prescribes the procedure for an open invitation to bid, either by way of national competitive bidding or ICB. From time to time, the Bureau of Public Procurement (“BPP”) sets the monetary threshold for which awards are given under this method.

■ Part VII (sections 39–43) provides for special and restricted methods of procurement by way of a two-stage tendering process as well as a restricted tendering process. A two-stage tendering process is required where it is not feasible for the procuring entity to formulate detailed specifications for the goods required or identify the characteristics of the services required, or where the character of the goods are subject to rapid technological advances. Though the open competitive bid procedure also applies in the two-stage tendering process, the procuring entity solicits proposals that relate to technical or other characteristics of the goods/services and at the first stage engages in negotiations with suppliers whose proposals have been selected for consideration. At the second stage, it may formulate, delete or modify any aspect of the characteristics of the goods/works/services and shall evaluate the final tenders to ascertain the successful tender in an open competitive bid. The restricted bid process is utilised for efficiency, for example if the goods are available from only a limited number of suppliers, the procuring entity shall invite only tenders from the suppliers who can produce the goods.

■ Part VIII (sections 44–52) provides for expressions of interest to provide services for ascertained and unascertained needs (procurement of consultants). Under the procedure to request for ascertained needs, the procuring entity solicits for expressions of interest or applications to pre-qualify to provide the services by publishing a notice to this effect in two national newspapers and the procurement journal. Where the value of the services is less than N1 million, or with the approval of the BPP if it is of a such a low value that only national consultants will be interested, the procuring

entity may, without placing any notice, request between three (3) and ten (10) tenders to submit proposals to provide the services.


The PPA generally does not prescribe time limits as such time limits are dependent on the goods/services to be procured which will inform the bid validity period as stated in the standard bid document; however, for the procurement of consultant services, Section 48 of the PPA states that the procuring entity shall allow sufficient time for the preparation of requested proposals, but shall in no case give less than 30 (thirty) days and no more than 90 (ninety) days between the issue of the notice or request and the deadline for submission.


tenderers?

Section 31 of the PPA provides for the examination of bids upon submission by the procuring entity to ensure that they meet eligibility requirements stipulated in the bidding documents, they have been duly signed, are substantially responsive to the bidding documents and are generally in order. The procuring entity is permitted to seek clarification from the tenderers in carrying out this examination, but during this process changes cannot be made to the prices or substance of the bid, nor can an unresponsive bid be made responsive. The following are considered as major deviations and lead to the rejection of bids at the initial stage: unacceptable sub-contracting; unacceptable time schedule if time is of the essence; unacceptable alternative design; and unacceptable price adjustment. The status of the bidder is also considered, and the bid shall be rejected if he/she/it is ineligible, not pre-qualified or uninvited. Bids submitted to the wrong location are also not considered.




Section 32 of the PPA provides for the way bids are evaluated, the objective being to determine and select the lowest evaluated responsive bid. The following processes are undertaken in evaluating tenders: checking of deviations; checking of omissions with quantification of the same; application of discounts; clarification with bidders of questionable deviations; conversion to common currency; calculation and tabulation of the bid amount with domestic preference where applicable; determination of the lowest calculated prices in order of rank; post-qualification of bidders; where applicable, listing of rejection of all bids where justifiable; and revealing the decision for rejection of bids where justifiable. Generally, factors to be considered in evaluating tenders are stipulated in the solicitation documents for each bid.

In the procurement of consultancy services, factors considered other than price are the qualification, experience, reliability and managerial competence of the consultant, the effectiveness of the proposal submitted, the effects the acceptance of the proposal will have on the balance of payments position and foreign reserves of the Government, national defence and security considerations. Section 49(1), PPA.

After completion of the evaluation process, the procuring entity is expected to prepare a bid evaluation report setting out the process of evaluation.



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low tenders?

In the line with the regulations, if the bid prices are marginally low, the bidder is requested to prove to the satisfaction of the procuring entity how the bidder intends to procure such items/perform the works/provide the services as per the quoted rates; for such purposes the bidder may be asked to provide a rate analysis. If the procuring entity is of the view that the justification/explanation provided by the bidder is unacceptable, and hence the bidder would fail in the performance of its obligations within the quoted rates, a higher performance security may be requested to mitigate such risks; where the bidder is unable to provide such additional performance security, their bid will be rejected. The PPA prohibits changes in prices after a bid has been submitted.


The PPA provides that successful bids shall be those that are submitted by the lowest cost bidder from the bidders responsive as to the bid solicitation; however, where the procuring entity can show good grounds as derived from the Act, they may not select the lowest cost bidder. Upon selection of the successful bid, a notice of the acceptance is issued by the procuring entity to the successful bidder.

In line with Section 36 of the PPA, the provision of a Performance Guarantee shall be a precondition for the award of any procurement contract upon which any mobilisation fee is to be paid, provided however it shall not be less than 10% of the contract value in any case or an amount equivalent to the mobilisation fee requested by the supplier or contractor – whichever is higher.

Prior to contract award, the procuring entity is to ensure that budgetary provision is confirmed to meet the cost of the contract. Thereafter, the Letter of Acceptance is issued within the validity period of the bid.


bidders?

Section 31 (9) and (15) of the PPA provides that in all cases of rejection, a letter stipulating the reasons for rejection is to be sent promptly to unsuccessful bidders; however, the bidders are not permitted to amend the bid to become compliant.


The Standard Bidding Document (“SBD”) for the procurement of works and goods contains certain listed requirements to be met by all partners of a joint venture. The figures for each of the partners of a JV are to be added together to determine the tenderer’s compliance with the minimum qualifying criteria.

The SBD also provides that for a JV to qualify, each of its partners must meet at least 25% (twenty-five percent) of the minimum criteria for an individual tenderer, and the lead partner, at least 40% (forty per cent) of the minimum criteria. Failure to comply with this requirement will result in rejection of the JVA tender. Subcontractors’ experience and resources are not considered in determining a tenderer’s compliance with the qualifying criteria.

The SBD further provides that if a contractor is a joint venture company, all of the parties shall be jointly and severally liable to the procuring entity for the fulfilment of the provisions of the contract

and shall designate one party to act as a leader with authority to bind the joint venture. The composition or the constitution of the joint venture is not to be altered without the prior consent of the procuring entity.


In line with Rule 105 of the PPRGWR, if the bid document asks for alternative bids or designs, the bidders are to first quote the price for the base method and specifications indicated in the bid document and secondly indicate the price for the deviation or alternative solution. Only the alternative bid of the substantially responsive lowest evaluated bid shall be considered for contract award.


Section 57 of the PPA which outlines the code of conduct for public procurement provides rules on conflicts of interest in clause 10-12. It states that any person engaged in public procurement who has assumed or is about to assume a financial or business relationship that might involve a conflict of interest must immediately declare to the authorities any actual or potential interest. Section 12 further outlines situations where a conflict of interest can be said to exist.

Also, in accordance with the PPM, an individual, firm or its affiliates which provided consultancy services for the preparation and implementation of a project is disqualified from subsequently providing goods and works for the same project in order to prevent a conflict of interest.

Procurement Unit Heads are to maintain Conflict of Interest Registers in which all their officers declare, by recording in the register, whenever they are likely to enter a conflict of interest situation which may have an impact on their relationship with the procuring entity.




The regulations do not specify rules on market engagement; however, a procuring entity during its planning procedures is expected to carry out market and statistical surveys to be used in preparing an analysis of the cost implication of the proposed procurement.

Section 16 (24) of the PPA specifically provides that persons who have been engaged in preparing for a procurement are not expected to bid for the procurement either as the main or sub-contractor, and are not to co-operate in any manner with bidders in the course of preparing their tenders.




The major exclusions are in relation to the category of suppliers, contractors and consultants by the BPP and the same is listed in Section 16 (8) (a-g) of the PPA. An example is where there is verifiable evidence that any supplier, contractor or service provider has given or promised a gift of money or any tangible item in an attempt to influence any action, decision making or the continuation



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of any procurement activity or use of a supplier, contractor or service provider who has failed to perform or to provide due care in performance of any public procurement during the last three years prior to the commencement of the procurement proceeding in issue.

The PPA also excludes the procurement of special goods, works and services involving national defence or national security unless the President’s express approval has been first sought and obtained.




The PPA provides for the award of contracts to a single source which is categorised as direct procurement in Section 42 of the PPA. Instances are given for the implementation of direct procurement, one of which is if such procurement concerns national security and it is determined that a single source procurement is the most appropriate method of procurement. However, in this situation, the procuring entity is to include on the record of procurement proceedings a statement of the grounds for its decision and the circumstances in justification of single-source procurements.

5 Remedies



The PPA provides for administrative review to be requested by a bidder where an omission or breach has been made by a procuring entity. The complaint is to be made to the accounting officer within 15 (fifteen) working days from the date the bidder first became aware of the circumstance; the accounting officer is to decide in writing within 15 (fifteen) working days. The Act further provides that where the bidder is not satisfied with the decision of the accounting officer, the bidder shall within 10 (ten) working days from the date of communication of the decision of the accounting officer make a formal complaint to the BPP. The BPP is required by the Act to decide within 21 (twenty-one) working days; if the bidder is unsatisfied with the decision of the BPP, they may appeal at the Federal High Court within 30 (thirty) days after receipt of the decision.



Remedies can only be sought in the court of law as stated in question 5.1 above.


sought?

In line with the PPA, remedies can only be sought before the Accounting Officer, the BPP and the Federal High Court. Appeals are heard by the Court of Appeal and the Supreme Court.


remedies?

As detailed in question 5.1 above.


periods?

There are no statutorily provided measures to shorten limitation periods.


This will be provided for in the letter of award/contract executed between the parties. The contract may provide for alternative dispute resolution measures such as arbitration. Otherwise, aggrieved parties may seek redress in the court of law and make an appeal to the Court of Appeal and a further appeal to the Supreme Court.


remedies is made?

Prior to execution of the contract, the timescale is as detailed in question 5.1 above. Upon execution of the contract, the timescale will be based on the length of the court proceedings.



In Nigeria, there are no particular leading cases in this regard; however, a noteworthy case showing the manner in which remedy measures can be obtained in a bidding process is the case of BFI Group Corporation v. Bureau of Public Enterprises (2012), which reached the apex court, the Supreme Court. BFI appealed against the decision of the Court of Appeal which affirmed the decision of the Federal High Court in the matter. BPE had advertised for expression of interest by interested bidders for a contract. BFI was awarded the contract but was requested to pay 10% of the bid price within 15 days which was contrary to the provision of the bid document. The inability to meet this demand led to the unilateral relinquishment of the award by the procuring entity. The Supreme Court allowed the appeal in this case and ruled in favour of BFI.



In procurement for works, the regulations mandate the contractor to provide, in the joint names of the contracting authority and the contractor, insurance cover from the start of the project to the end in certain stipulated amounts and deductibles for the following events which are due to the contractor’s risks: loss of, or damage to, the works, plant, and materials; loss of, or damage to, equipment; loss of, or damage to, property; and personal injury or death.

The contracting authority may also resort to dispute resolution measures as contained in the contract.



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Procedure







The legislation provides for changes in contract specifications, conditions and timetable as the law provides that the procuring entity may request suppliers or contractors to extend the period of validity. Modifications are also permitted by the tenderers as long as it is made before the deadline for the submission of the bids.



In line with Section 39 (5) of the PPA, during a two-stage tendering method, the procuring entity may engage in negotiations with the short-listed bidders with respect to any aspect of its tender.

There is no reference to the scope of negotiation in the regulations with respect to the final selected bidder.


signature?

In line with the PPA, changes may occur in the quantity of works done, requiring amendments to the contract agreement. Such agreement is executed by a change order or a variation order, provisions for which are provided for in the Special Conditions of Contract and are justified in the reports on contract execution. For example, if the aggregate amount of the variations (due to quantity changes and extra works orders issued) is within the contingency provision (which should be 10% maximum), the accounting officer of the procuring entity may approve the change order with notification to the BPP.

Also, if an amendment to the contract, a change order, or an extension would increase the original contract price by more than 15% (fifteen percent), the BPP has the authority to approve or reject such changes. If such change is rejected, the BPP is to propose alternative less costly modifications or recommend a reduction in the scope and size of the contract.



signature?

The legislation does not have a direct provision for subcontracting; however, the PPM provides that if there will be subcontracting, the same must have been provided for in the bidding document for the works contract, which would have indicated the extent to which subcontracting is permitted and whether the proposed subcontractor has to be named in the bid. If the same was not stated by the successful bidder at the bidding stage, it is not to be permitted post-contract signature.




them?

There are no special procurement rules on privatisation, but if privatisation is to be categorised as a public contract, the legislation guiding the activities of the Bureau of Public Enterprises shall apply. It is the Bureau of Public Enterprises that is responsible for privatisation in Nigeria. Some of the principal issues that arise with privatisation in Nigeria is the dearth of capital by private firms to manage the business after incurring large costs in purchasing the assets. The poor response on the payment for essential services supplied is also a discouraging factor to new owners in privatisation. Also, there is some level of high-handedness on the part of the private owners due to the fact that the option of buy-back by the public sector is usually not enforced.



There are no special procurement rules on PPPs in Nigeria but if PPPs are to be categorised as a public contract, the ICRC (establishment) Act 2005, which mandates the Infrastructure Concession Regulatory Commission to manage PPP processes in Nigeria, shall apply. Under the PPP model in Nigeria, the private sector manages the overall project – design, construction, operations and maintenance – and is directly responsible for service delivery to users. This varies from the guidelines for public procurement where the public sector is majorly responsible for all project management roles and is directly responsible for service delivery to users.

Some of the principal issues that arise in relation to PPPs in Nigeria are the irregularity of information dissemination between the public and private sector, which sometimes leads to the development of PPP contractual terms that the public sector may later fail to accede to or administer. Also, the lack of an enabling environment in terms of strong legal and regulatory framework, and enforcement bodies has equally weakened the operations and management of PPPs.

PPPs also suffer the effect of political pressure and increased tariffs, which makes infrastructure services more expensive to provide.

8 The Future



impact?

There have been several attempts to debate on the amendment of the Public Procurement Act which has suffered various setbacks at the National Assembly since 2016. However, the debate has commenced again and the Public Procurement (Amendment) Bill, 2018 just passed the first reading on 3 July 2018 at the House of Representatives. The timescale for the enactment of the Act is uncertain as Nigeria operates a bicameral legislature which makes the process of law making longer, as deliberation and consideration of many interests and implications of the bill is required.



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Ayobami Tunde


48, Opebi Road

Ikeja, Lagos

Nigeria

Tel: +234 8023 5688 77 Email: [email protected] URL: http://tundeadisa.com

Ifeoluwa Gbarada


48, Opebi Road

Ikeja, Lagos

Nigeria

Tel: +234 6055 2128 Email: [email protected] URL: http://tundeadisa.com

Ayobami, who is co-founder of the Firm T & A Legal, specialises in real

estate and commercial practice areas. He has helped several

organisations in negotiations for Concession Agreements and

Property Development Agreements; he has built key contacts in this

area and has become a key figure in land matters including perfection

of title, regularisation, creation of co-ownership structures and project

finance in real estate development.

He has garnered a wealth of experience in corporate and commercial

legal practice and has built a strong commercial practice, particularly

on helping companies run their businesses in line with national and

international corporate governance principles and practices.

He is a go-to person for providing innovative solutions in complex

commercial transactions and helping companies manage their

business and financial risks.

Tunde & Adisa Legal Practitioners (“T & A Legal”) is an innovative first-class commercial law firm with branches in three (3) commercial cities in

Nigeria, providing global legal and advisory services to clients. It is peopled by intelligent and vibrant lawyers who recognise the demand of their

clients to consummate professionalism with integrated, innovative and practical solutions.

T & A Legal believes in integrity, values excellence and refuses to produce services less than excellent. Hard work is our nature and ensuring we get

the job done within the set deadlines is paramount. We believe in innovation and with every given task we make use of cutting edge technology to

serve our clients better.

Ifeoluwa is an associate with T & A Legal and a transactional legal

practitioner with four years’ experience in various areas of commercial

law practice such as corporate governance, business advisory,

intellectual property and company secretarial duties, providing expert

legal advice to business start-ups and adept companies across

diverse industries daily.

She has acquired relevant experience in commercial law practice,

ranging from incorporation of companies, post-incorporation changes

to drafting/reviewing agreements, conducting due diligence and

offering legal advice, as well as company secretarial services, to

companies.

She has a passion for personal growth and excellence which

motivated her to acquire a project management certification and

pursue membership of the Chartered Institute of Personnel

Management (“CIPM”). She is also a student member of the Institute

of Chartered Secretaries and Administration of Nigeria and enjoys

writing and research.

However, some of the provisions of the bill which would have a direct impact on the regime are the additional functions of the BPP which now includes the maintenance of a national base of particulars and classification of suppliers and consultants. The BPP has also been charged with the responsibility of performing procurement audits and reviews and, upon approval of the National Council on Public Procurement, submit such report to the President, Senate President and the Chief Justice of Nigeria annually. The new bill also provides for the development, promotion and support of training and professional development of public personnel involved in procurement by the BPP, as well as the assistance and support of local business communities to become competitive and efficient suppliers to the public sectors.

The new bill seeks to widen the scope of application of the PPA to cover procurements made by the national defence and national

security agencies, House of Representatives, Senate, High Court, as well as the Court of Appeal. It is intended that the Judiciary at different levels would be included as an approving authority.




There are no regulatory developments expected to impact directly on the law at this time other than mentioned in question 8.1, as the amendment of the PPA will influence other related regulations or guidelines. However, the BPP is fast taking advantage of technology to simplify and hasten the process of procurement and has introduced an e-procurement system for its operations.



Chapter 20


Wikborg Rein Advokatfirma AS

Alf Amund Gulsvik

Hanne Zimmer

Norway




As a result of the new EU Directives on public procurement, 2014/23/EU, 2014/24/EU and 2014/25/EU, new laws and regulations entered into force in Norway on January 1 2017. As a member of the European Economic Area (“EEA”), Norway has implemented the directives into national law, which is consequently fully harmonised with the applicable EU legislation.

Public procurement in Norway is regulated by the Public Procurement Act, and its accompanying regulations: the Public Procurement Regulation (for the public sector); the Utilities Regulation; and the Defence and Security Regulation. In addition, and as a result of Directive 2014/23/EU, a Regulation on Concessions Procurement has also been adopted. The Act sets out the general principles applicable independently of the chosen award procedure, and the Regulations set out the more detailed rules for each sector.

Moreover, the Regulation on the Complaints Board for Public Procurement regulates the procedural rules applicable to the Norwegian Complaints Board. The Regulation was not subject to any amendments in connection with the implementation of the new EU Directives, but the Norwegian Government has chosen to reintroduce the Complaints Board’s authority to impose penalties on illegal direct procurement. This authority had been transferred to the Courts when Norway implemented the Remedies Directive (2007/66/EC) in 2012.




of the legislation?

Through the adoption of the new legislation, the Act’s objects clause was shortened to clarify the purpose behind the legislation, that is, to ensure efficient use of public resources and secure the public’s trust by ensuring that public procurement is carried out with integrity and with regard to public interests.

Some amendments were also made to the provision setting out the general principles. The provision lists the principles of equal treatment, foreseeability, competition, proportionality and verification. The principles of transparency and non-discrimination have been removed, as they are deemed to be covered by the principle of equal treatment and foreseeability. These modifications

were not meant to lead to any material changes; however, the general principles no longer correspond to the principle of transparency set out in the EU Directives, which potentially can cause some difficulties in interpretation.

The principles are actively used in the interpretation of the legislation.



As mentioned above under question 1.1, there are four Regulations covering different sectors:

■ The Public Procurement Regulation covers procurements of goods, services and works by contracting authorities in the public sector.

■ The Defence and Security Regulation establishes rules for procurement in the field of defence and security.

■ The Utilities Regulation provides rules for the procurement of goods, services and works by contracting entities (“utilities”) operating in the water, energy, transport and postal services sectors.

■ The Concessions Procurement Regulation applies to awards of concession contracts by public authorities and utilities.



public procurement?

The Freedom of Information Act sets out the rules regarding the public’s access to procurement documents.

According to the Act, information regarding suppliers and their tenders may be withheld by the contracting authority until the award has been made. Thereafter, the information is open to anyone requesting access. In spite of the foregoing, some information is always subject to the duty of confidentiality, such as trade secrets, so the suppliers are usually asked to hand in both a censured and a non-censured version of their tender. The Contracting Authority is nevertheless responsible to make its own assessment of what constitutes trade secrets.



agreements?

As a member of the EEA, Norway has an obligation to implement EU law on public procurement and to ensure a uniform


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interpretation. Consequently, Norwegian legislation shall be interpreted and applied in accordance with EU law and EEA law, including case law from the ECJ and the EFTA court.

Norway is a member of GPA (the WTO Government procurement agreement).


Contracts



In accordance with the EU Directives, the law applies to contracting authorities, which can be sub-divided into three categories:

1) The State, regional and local authorities.

2) Bodies governed by public law, meaning a body: (i) established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; (ii) that has legal personality; and (iii) that is financed, for the most part, by the State, regional or local authorities, or by other bodies governed by public law; or is subject to management supervision by those authorities or bodies, or has an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities, or by other bodies governed by public law.

3) Associations formed by one or more of the bodies mentioned above.


All supply, service and works contracts are covered by the legislation. For excluded contracts, see below under questions 4.1 and 4.2.



The national threshold has increased from NOK 1,100,000 to NOK 1,300,000 for supply, works and service contracts. Due to new EU thresholds, the threshold for public service contracts for social and other specific services has increased to NOK 6,950,000. Procurements below these thresholds, but over NOK 100,000, are only subject to the lenient rules in part I of the Regulation, and are consequently not governed by the duty to publish a contract notice. Procurements with a value under NOK 100,000 are not as such covered by the legislation.

Part II applies to contracts between NOK 1,300,000 and the EU threshold, which is NOK 1,300,000 for the government’s supply and service contracts, NOK 2,000,000 for other contracting authorities’ supply and service contracts, and NOK 51,000,000 for works contracts. Part III applies to procurements over the EU threshold. Part IV applies to contracts for health and social care services over NOK 6,950,000 and Part V for design contests with a value of at least NOK 1,300,000. The Public Procurement Act applies regardless of the value of the procurement.

The EU threshold is NOK 51,000,000 for all concession contracts and, in the utility sector, the threshold is NOK 4,100,000 for supply and service contracts, NOK 51,000,000 for works contracts and NOK 9,250,000 for health and social care contracts. In the defence and security sector, the threshold is NOK 4,100,000 for supply and service contracts and NOK 51,000,000 for works contracts.


The Public Procurement Regulation contains provisions on aggregation which correspond to the EU Directives.

In general, contracts must be aggregated for the purpose of calculating their total value. This also applies if the contracting authority procures services, works or uniform supplies by separate lots. The estimated value of all of the lots must be aggregated to decide whether the threshold is reached.



A new Regulation on Concession Contracts entered into force on January 1 2017. “Concession Contracts” are defined as a service or works contract where payment consists either solely of the right to exploit the works or services (that are the subject of the contract), or such a right together with payment, and where the operational risk is transferred from the contracting authority to the supplier.



Norway has used the option in the EU Directives to ensure that contracting authorities may conclude framework agreements. The main rule for duration of framework agreements is four years in the public sector, eight years in the utilities sector and seven years in the defence and security sector. The EU regulation applies for call-offs under a framework agreement, but the contracting authority has more flexibility below the EU thresholds.


into lots?

The contracting authority is obliged to consider the division of contracts into lots. If the contracting authority chooses not to divide the contract into lots, it must give a short reason for his decision in the tender documents. The contracting authority can further restrict how many lots can be awarded to the individual suppliers.



The Procurement Act regulates that only suppliers established in the EEA or that have been given rights under the GPA or free trade agreements have a right to participate in a public procurement. There is, however, no ban on contracting authorities allowing suppliers from other states taking part in the public procurement.

3 Award Procedures




The following procedures are available:

a) Open procedure.

b) Restricted procedure.

c) Negotiated procedure.

Wikborg Rein Advokatfirma AS Norway


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d) Competitive dialogue.

e) Innovation partnership.

In the public sector, contracts with an estimated value above the EU thresholds shall, as a main rule, be awarded after an open or restricted procedure. The negotiated procedure and the competitive dialogue procedure can be used only if specific conditions are met. For contracts below the EU thresholds, the contracting authority is free to clarify and negotiate, but is obliged to give information in the tender documents whether the intention is to negotiate.

For contracts subject to the Utilities Regulation, the contracting authority can choose between open and restricted procedure, as well as negotiated procedure with prior publication and competitive dialogue. In the defence and security sector, the contracting authority can choose restricted and negotiated procedure with prior publication, but competitive dialogue is subject to certain conditions.

As of January 1 2017, the new procedure of innovative partnership has also been available in both the public and the utilities sectors. The Norwegian Government considers innovative partnership as a new type of contract awarded using the negotiated procedure rather than as a new procedure.


■ Open procedure: the minimum time limit for the receipt of tenders is at least 30 days after the contract notice has been sent.

■ Restricted procedure: the minimum time limit for receipt of requests to participate shall be 30 days after the contract notice has been sent. The time limit for submitting tenders shall be at least 25 days after the invitation to tender has been sent.

■ Negotiated procedure: the minimum time limit for requesting participation is 30 days after the contract notice has been sent. The time limit for submitting tenders shall be at least 25 days after the invitation to tender has been sent.

■ Competitive dialogue and innovation partnership: the minimum time limit for requesting participation is 30 days after the contract notice has been sent. There are no fixed deadlines for submitting tenders.

■ For contracts below the EU thresholds: the contracting authority shall provide a deadline that is deemed to be appropriate.

For contracts subject to the Utilities Regulation, the following apply:

■ Open procedure: the minimum time limit for the receipt of tenders is at least 30 days after the contract notice has been sent.

■ All other procedures: as a main rule, the minimum time limit for receipt of requests for participation shall be 30 days after the contract notice has been sent, and under no circumstances less than 15 days. The time limit for submitting tenders can be agreed between the contracting authority and the tenderers and cannot under any circumstances be shorter than 10 days.

All deadlines to submit tenders must be extended by five days if the tenders are not submitted by electronic means.


tenderers?

The Public Regulation and the Utilities Regulation both allow the contracting authority to limit the number of participants in the restricted procedure, the negotiated procedure, in a competitive

dialogue and in an innovation partnership on the basis of objective criteria set out in the contract notice.

The Regulation contains more detailed rules on mandatory exclusion of tenderers which have been found guilty of corruption, money laundering, fraud or participation in a criminal organisation. A tenderer may also be excluded if he is bankrupt, is being wound up, his affairs are being administered by the court or similar, is the subject of proceedings for a declaration of bankruptcy, for an order for compulsory winding up or administration by the court or for an arrangement with creditors or similar proceedings, has been convicted of an offence concerning his professional conduct by a judgment which has the force of res judicata, has been guilty of grave professional misconduct (and the contracting entity can furnish proof of this circumstance), or has not fulfilled obligations relating to the payment of social insurance fees or taxes in the country in which he is established or the country in which the procurement takes place.




These rules correspond to those of the EU Public Procurement Directives. This means that the evaluation of tenders shall be based on the price or cost, using a cost-effectiveness approach, such as life-cycle, and may include the best price-quality ratio, which shall be assessed on the basis of criteria, including qualitative, environmental and/or social aspects, linked to the subject-matter of the public contract in question.


low tenders?

Contracting authorities shall require economic operators to explain the price or costs proposed in the tender where tenders appear to be abnormally low in relation to the works, supplies or services, and can reject the offer if the cost level cannot be sufficiently explained. However, if the tender is abnormally low as a result of breach of regulations on the environment, working and social conditions or collective agreements, the contractor is obliged to reject the offer.


In accordance with the EU Directives, the tenderer with the lowest price, the lowest cost or the best price-quality ratio shall be awarded the contract. A letter informing the bidders, which states the reasons for the award, shall be sent to all suppliers that have applied for tendering and/or have submitted a tender.


bidders?

National legislation does not provide any obligation or procedure for debriefing unsuccessful bidders, further than the written decision stated above (see question 3.6). However, contracting authorities can do so if they wish.


It is possible to use central purchasing bodies both in the public and the utilities sectors. Contracting authorities may also cooperate on an ad hoc basis.



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Alternative bids are only accepted if the contracting authority has explicitly stated in the contract notice that alternative bids are allowed.


The Public Administration Act sets out rules on conflicts of interest which are applicable to the public administration.




In accordance with the EU Directives, contracting authorities may conduct preliminary market consultations with a view to preparing the procurement, informing the market and to seek advice, provided that such advice does not have the effect of distorting competition or violating the principle of equal treatment. The contracting authority shall in any event take appropriate measures, such as communication of relevant information to other tenderers and the fixing of adequate time limits for the receipt of tenders.




The legislation on exclusions and exemptions is in line with the EU Procurement Directives. Defence and security procurements may, in accordance with Article 123 of the EEA Agreement, be excluded if necessary to prevent disclosure of information contrary to essential national security interests.

Under the Utilities Regulation, the EFTA Surveillance Authority has granted exemptions to Norway under Article 30 in the previous Directive 2004/17/EC for contracting entities in the postal sector, generation and wholesale of electricity and for the exploration and production of crude oil and natural gas.




This is now regulated in both the public and utilities sectors, and corresponds to the EU Directives.

The legislation does not apply to contracts awarded within a single entity, neither to extended in-house arrangements provided that the following criteria are met: (i) the contracting authority exercises over the legal person concerned a control which is similar to that which it exercises over its own departments; (ii) more than 80% of the activities of the controlled legal person are carried out for the contracting authority or by other legal persons controlled by that contracting authority; and (iii) there is no direct private capital participation in the controlled legal person.

Furthermore, the legislation does not apply to public-public cooperation.

5 Remedies



Available remedies are governed by the Public Procurement Act. The supplier can challenge an award of a public contract by filing a complaint to the Complaints Board, but this has no suspensive effect and the Complaints Board’s decisions are only advisory, except for cases of direct illegal awards where the Complaints Board has the authority to impose a penalty fee on the contracting authority.

However, in addition to imposing a penalty fee, the courts can award damages, consider a contract ineffective and shorten the duration of a contract. In the standstill period, the courts can also grant an interim injunction to suspend the right to sign the contract until the case is settled in court. The courts can only set aside a decision by a contracting authority, but cannot make a new decision.



It is possible to file a complaint with the EFTA Surveillance Authority, but this is not a commonly used procedure.


sought?

Remedies can be sought before the ordinary courts or the EFTA Surveillance Authority. The Complaints Board can impose a penalty fee for illegal direct awards.


remedies?

An interim court order cannot be awarded after the contract has been signed. Consequently, it has to be issued within the standstill period, which is normally 10 days.

Application for nullification of the contract, shortening of the duration of the contract or imposition of a penalty before the civil courts has to be raised within a time limit of two years after the contract was entered into. Provided that the contracting authority has either issued a contract award notice in accordance with the relevant procurement regulations, or notified the affected tenderers of the conclusion of the contract, the time limit in is 30 days from the date the notice was published/given to the tenderers. The 30-day time limit is suspended if a complaint regarding illegal direct awards is filed before the Complaints Board (KOFA).

Complaints to KOFA must be made no later than six months after the contract was signed, or six months after the contracting authority has cancelled the procurement or rejected all tenders. For complaints regarding illegal direct awards, the time limit is set to two years.

Claims for damages are subject to a three-year general limitation period.


periods?

The limitation periods mentioned in question 5.4 are mandatory and cannot be shortened by any of the involved parties. However,



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according to the Public Procurement Regulation and the Utilities Regulation, a contracting authority that considers that it has the right to undertake a direct award can prevent possible sanctions for such an award if it publishes a notice for the intent to award the contract directly (“intensjonskunngjøring”).


After the signing of the contract, the tenderers can either file a complaint before KOFA to receive an advisory opinion, or before the civil court. The remedies available before the civil courts are as mentioned above under question 5.1.


remedies is made?

An application for interim measures will be temporarily granted based on the written request from the supplier, but the contracting authority may request a court hearing to make a final decision as to whether an interim measure shall be granted. Such a process may take two to four weeks.

An application for damages will normally be concluded within three to eight months if not appealed.

Complaints to KOFA are concluded within 12 months at the moment, but the time fluctuates according to the caseload of KOFA. If the contracting authority is awaiting KOFA’s decision before signing the contract, KOFA will usually decide the case within two months.



The leading cases on remedies concern claims for compensation for loss of contract. The Supreme Court’s ruling in Rt. 2001 page 1062 (Nucleus) establishes the criteria for obtaining damages for loss of a contract, i.e. loss of net profit. The court held that the tenderer must prove (i) that the contracting authority has committed a material breach of the procurement legislation, and (ii) that there is clear preponderance of evidence that the tenderer would have been awarded the contract if that breach had not been committed.

For the time being there is a contradiction between the ruling in Rt. 2001 page 1062 (Nucleus) and the advisory opinion given by the EFTA Court (case E-16/16) to the Court of Appeal (Frostating) in the case “Fosen-Linjen” (LF-2015-187242). The EFTA Court held that a simple breach of procurement legislation is sufficient to trigger liability. The Court of Appeal (Frostating) concluded that the EFTA Court’s advisory opinion did not appear to be clearly correct, and maintained material breach as a criteria for obtaining damages for loss of a contract. The case was appealed to the Supreme Court in 2018.

Moreover, the Supreme Court’s ruling in Rt. 1997 page 574 (Firesafe) establishes the criteria for awarding a tenderer damages representing the costs of preparing a bid and of participating in an award procedure. According to the judgment, the tenderer must substantiate that it would not have participated in the tender procedure had it known that errors would occur.



There are no mitigation measures available for contracting authorities.


Procedure







The contracting authority can make changes in the tender documents prior to the deadline for submitting tenders, as long as the changes are not “substantial”. This applies for procurements both under and over the EU threshold. The tenderers shall receive immediate notification of the amendments made, and six days before the deadline for submitting the tenders.

Changes to a membership of bidding consortia pre-contract award are not specifically regulated in the Norwegian procurement legislation. According to case law, there are limitations on making such changes.



When using the negotiated procedure, negotiations may be conducted with the bidders. However, after the contracting authority has called for the submission of a final tender, only clarifications may be made to the tenders.


signature?

Amendments and modifications can be made in a public contract as long as it does not materially modify/change the contract. The doctrine, first developed by the European Court of Justice in the Pressetext case, has been codified in Norwegian legislation in line with the new EU Directives.



signature?

Transfer of a contract to another supplier is only permitted when it is a consequence of an unequivocal review clause that has been subject to announced competition, or in a situation of universal or partial succession into the position of the initial contractor, following corporate restructuring, including takeover, merger, acquisition or insolvency, of another economic operator that fulfils the criteria for qualitative selection initially established. This presupposes that no other substantial modification of the contract is made.




them?

No, there are no special rules in relation to privatisations in Norwegian procurement legislation.



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Alf Amund Gulsvik

Wikborg Rein Advokatfirma AS

Dronning Mauds gate 11

Pb. 1513 Vika

0117 Oslo

Norway

Tel: +47 22 82 75 49 / +47 97 16 32 10 Email: [email protected] URL: www.wr.no/en

Hanne Zimmer Wikborg Rein Advokatfirma AS

Dronning Mauds gate 11

Pb. 1513 Vika

0117 Oslo

Norway

Tel: +47 22 82 75 48 / +47 93 61 12 35 Email: [email protected] URL: www.wr.no/en

Alf Amund Gulsvik has worked exclusively on public procurement for

14 years with all sorts of procurement, focusing in particular on health,

IT, transport, defence and utilities. He is a regular lecturer on

procurement including JUS (the Norwegian Bar Association Education

Service). He is a co-author of “Procurement in a nutshell”.

He has previously worked in the Ministry of Government

Administration on the laws and regulations for public procurement and

in the EU Commission legal service.

Wikborg Rein is an international law firm with over 230 lawyers working in our offices in Oslo, Bergen, London, Singapore and Shanghai. Our unique

and long-standing presence overseas enables us to offer our clients the benefit of our extensive international expertise.

Wikborg Rein’s broad range of legal services includes public procurement law. Our procurement team comprises some of Norway's leading

specialists within this field of law. The team assists both procuring entities and suppliers in the tender process, both in the preliminary stages, during

the process, with negotiations and competitive dialogue, in connection with complaints to the contracting authority and to the public procurement

complaints board. We are also engaged in dispute resolution in this area of law (temporary injunctions and claims for damages). The team also

hosts public procurement courses for contracting authorities and suppliers.

Hanne Zimmer has through her seven years of experience from EFTA

Surveillance Authority's competition and state aid directorate, and nine

years from private practice, extensive experience within competition,

state aid, public procurement and general EU/EEA law. She also has

litigation experience in public procurement and telecoms regulation.



There are no special rules in relation to PPPs in Norwegian procurement legislation.

8 The Future



impact?

There are no existing proposals.




The new legislative package that entered into effect on January 1 2017 did not include a new regulation on defence and security procurement. It is expected that the existing regulation on defence and security procurement will be updated.



Chapter 21


ALFARO, FERRER & RAMIREZ

Annette Bárcenas Olivardía

Paulette Michineau

Panama




Law 22 of 2006 (as last modified by the Law 67 of 2017) regulates the public procurement of “Concessions and all other contracts not regulated by special Law”. Executive Decree No. 40 of April 10, 2018 regulates Law 22 of 2006. Decree No. 21-Leg of March 28, 2018 regulates the bonds to guarantee the contractual obligations of the State.




of the legislation?

The regulations of Law 22 state that the actions of those involved in public procurement will be based on the principles of transparency, economy, responsibility, efficiency, publicity, due process and equality of the proponents.



There are special regulations applicable for specific sectors, such as ground transportation, social security, and the Panama Canal Authority.



public procurement?

Yes. Anti-corruption laws and anti-money laundering laws are relevant to public procurement.



agreements?

International treaties of which Panama is a signatory are incorporated into the national legislation and therefore have the status of law. Any international agreement related to public contracting will also be observed along with local regulations.


Contracts



Central Government, autonomous and semi-autonomous entities, municipalities, community boards, financial intermediaries and corporations in which the State owns 51% or more of its shares or assets, as well as those made with public funds or national assets for: (i) the acquisition or lease of goods by the State; (ii) the execution of public works; (iii) the disposition of State property, including its lease; (iv) provision of services; (v) operation or administration of assets; and (vi) concessions or any other contract not regulated by special law. Relevant legislation allows for the execution of public contracts for public interest projects with an educational nature and scientific research through Private Interest Foundations and Public Interest Associations, duly authorised by Executive Branch (Órgano Ejecutivo).


See the answer to question 2.1 above.



Law 22 contemplates the concept of the “reference price” which is established by the bidding entities, after conducting market research of the goods, services or works that are to be acquired. This price will be the basis for determining the percentage of risk or onerousness of a proposal, when these criteria are applied.

When preparing the bid documents, the bidding entity must include the reference price, which also has to be included in the information of the notice of the call to participate in the public bid.

In addition, when the price does not exceed US$250,000.00, the entity may issue a Purchase Order instead. When the price exceeds US$250,000.00, the entity shall issue a Public Contract.


No, there are not.


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Law 5 of 1988 regulates the concession contracts for the execution of public works. There are also other concession rules applicable to different entities, i.e., Tocumen International Airport, Transit and Ground Transportation Authority, etc.



The goods, services or works included in framework agreements are arranged in an Electronic Catalogue of Products and Services, which public entities can access directly and through which issue a purchase order to suppliers, simplifying the purchasing process. For these agreements to be valid, they must contain the signature of the General Directorate of Public Procurement.


into lots?

It is prohibited to divide subjects into lots, resulting in contracts of less value in order to avoid the appropriate administrative procedure, and the authorisations and approvals provided in the law.



There is no distinction between local and foreign suppliers. General obligations of purchasers (public entities) are: to comply with the obligations contemplated in the contract, so that the contractor can timely execute and fulfil its obligations; to proceed in a timely manner so that their actions do not cause greater inconvenience to the contractor; to receive the goods, services and works from the contractors and issue the reception document in the manner as contemplated in Law 22; to receive the accounts presented by the contractor and, if necessary, return them within a maximum period of three days, with a written explanation of the reasons; and to make the payments within the term established in the bid documents and contract.

3 Award Procedures




(i) Minor Contracting (Contratación Menor): for the acquisition of goods, services or works that do not exceed US$50,000.00, complying with a minimum number of formalities.

(ii) Public Procurement Procedure (Licitación Pública): for the acquisition of goods, services or works that exceed US$50,000.00. In this procedure, the price is the determining factor, provided that all the requirements and technical aspects required in the bid specifications are met.

(iii) Public Procurement Procedure for Best Value (Licitación por Mejor Valor): for the acquisition of goods, services or works with a high level of complexity and with a contract amount greater than US$100,000.00. In this selection procedure,

economic, administrative, technical and financial aspects are weighted, and the contract is awarded to the participant that obtains the highest score, provided that the participant complies with the minimum obligatory requirements established in the corresponding bid specifications. It is important to mention that in this procedure the price shall not represent less than 40% or more than 49% of the total points for the award.

(iv) Public Procurement Procedure for Best Value with Separate Evaluation (Licitación por Mejor Valor con Evaluación Separada): for the acquisition of goods, services or works with a high level of complexity and with a contract amount greater than US$100,000,000.00. In this procedure, the price shall not represent less than 40% or more than 49% of the total points for the award. The contracting entity will prepare a budget for the project. Said amount will be known as the estimated price, which will be kept in a sealed envelope in a vault of the National Bank of Panama, and will be revealed after the technical proposals are opened.

(v) Public Procurement Procedure for Framework Agreements (Licitación para Convenio Marco): the procedure for selecting one or more participants with whom a contract called a framework agreement is signed, where prices and specific conditions for goods and services are established, as well as the execution of works that do not imply a high level of complexity, during a defined period of time. In this procedure, the selection criteria are defined by the General Directorate of Public Procurement according to the needs of the State.

(vi) Public Procurement Procedure of Reverse Auction (Licitación de Subasta en Reversa): a bidding and counter-bidding procedure to obtain the best price for goods, services or works for an institution or institutions, within a certain period of time.

(vii) Auction of Public Assets (Subasta de Bienes Públicos): a procedure in which the State can offer its movable assets and real estate for sale or lease.

There are also exceptional and special contracting and procurement procedures in case of emergencies, as well as the pre-qualification of participants. However, these procedures are applied less frequently.


Depending on the amount and complexity of the contracting of goods, services or works, the publication of the notice of call to participate in a bid (“aviso de convocatoria”) will be made taking into consideration the following minimum periods:

1. Contracts for goods and services: (a) no less than three business days, if the contract amount is greater than US$10,000.00 and does not exceed US$50,000.00; (b) no less than five business days, if the contract amount is greater than US$50,000.00 and does not exceed US$175,000.00; and (c) no less than 30 business days, if the contract amount is greater than US$175,000.00.

2. Contracts for works: (a) no less than three business days, if the contract amount is greater than US$10,000.00 and does not exceed US$50,000.00; (b) no less than five business days, if the contract amount is greater than US$50,000.00 and does not exceed US$300,000.00; (c) no less than 10 business days, if the contract amount is greater than US$300,000.00 and does not exceed US$3,000,000.00; (d) no less than 15 business days, if the contract amount is greater than US$3,000,000.00 and does not exceed US$7,000,000.00; and (e) no less than 30 business days, if the contract amount is greater than US$7,000,000.00.

ALFARO, FERRER & RAMIREZ Panama


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However, the contracting entity may establish a term of less than 30 business days in the contracting of goods, services or works, which, in no case, will be less than eight business days, in the following cases:

1. when the contracting entity has published a notice in the Electronic Public Procurement System “PanamaCompra”, not less than 30 business days before the deadline for the presentation of the proposals, which contains a description of the public act, the approximate deadlines for the submission of proposals and, when appropriate, the conditions for participation in said act and the address where the documentation relating to the contract can be obtained;

2. when an entity contracts merchandise or commercial services that are sold or offered for sale and that are regularly purchased and used by non-governmental buyers for non-governmental purposes; and

3. when there is a state of emergency, duly accredited, that makes it impractical or not feasible to meet the deadline. In this case, the contracting entity will issue a resolution in this regard, which must be published in the Electronic Public Procurement System “PanamaCompra”.


tenderers?

Individual or legal entities, whether national or foreign, included in any of the following situations are not permitted to participate in a tender or sign contracts with the State:

i) be delinquent in the payment of a fine for the breach of a contract or purchase order or be unable to contract with the State;

ii) having intervened in the preparation, evaluation, adjudication or conclusion of a contract selection procedure, or an exceptional contracting procedure;

iii) have been convicted in Panama, by final judicial sentence, to the accessory penalty of disqualification to exercise public functions, as well as to the sanction of disqualification from contracting with the State;

iv) have been declared to be in liquidation status;

v) have provided false information which is required in accordance with Law 22;

vi) in the case of a foreign legal entity, not being legally constituted in accordance with the regulations of its own country, or not having complied with the provisions of the applicable national legislation for its operation;

vii) until a contract for negligent or fraudulent breach has been administratively resolved, in accordance with the procedure established in Law 22;

viii) in the case of natural persons, have been convicted, in the five years preceding the contracting, by final judicial decision for crimes against the Public Administration, money laundering or any other crime against the economic order, terrorism or the financing of terrorism or any other crime against collective security, crimes against the economic patrimony, and crimes against the public faith, with one or more prison sentences issued by a Panamanian court; and

ix) in cases where majority shareholders’ (holders of 51% or more of the shares of a company) directors, officers or legal representatives have been condemned by final judicial sentence for the crimes described above, provided that the offence is linked to the activities of the company or its affiliated companies, consortiums or shareholders.




Depending on the type of procedure, factors such as experience, technical specifications of products, and price are to be evaluated.


low tenders?

When a public entity considers it necessary, it may include in the terms of the bid a margin of risk. In these circumstances, economic proposals that are below the percentage of the reference price may be rejected or be subject to a risk analysis, as determined by the bidding entity, in order to assess its technical and economic feasibility.


If the contracting public entity considers that the formalities established by Law 22 (including those specified in the bid documents) have been complied with, it shall adjudicate or declare the selection of the contractor void, by reasoned resolution, within a period not exceeding five business days.


bidders?

The Proposal Bond (“Fianza de Propuesta”) should be returned to the bidder. The bidder may also ask the public entity for certain documents presented with the offer to be returned (i.e. original documents, certifications, etc.).

Also, when the resolution appears in the Procurement System “PanamaCompra”, all bidders are to be informed about the result of the bidding process, including unsuccessful bidders, who are free to present a Contesting Action (Recurso de Impugnación, please see our answer to question 5.1).


Two or more persons may present the same proposal jointly (consortium). They will be jointly and severally liable before the State. Therefore, any actions, facts and omissions that occur during the bid process and the execution of the contract, will affect all members of the consortium.

The terms, conditions and extent of the participation of the members of a consortium in the presentation of their proposal or execution of the contract may not be modified without the prior consent of the contracting entity.


Rules for alternative bids are contemplated in the bid documents. The bidding entity will define what is to be considered an alternative bid on each case and the rules applicable.


Public servants may not enter into contracts, either by themselves or through interposed persons, with the entity or body in which they



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work, nor participate in this capacity as owners, partners or shareholders of the proponent or as administrators, managers, directors or legal representatives of the proponent in a bid. This is also applicable to the members of the boards of public entities and companies owned by the State.

Any person who is hired as a consultant to prepare studies, feasibility projects, diagnostics, plans, designs and other objects that are related to a project may not participate, by itself or through another person, in the future act of contractor selection due to conflict of interest.




It is not allowed due to conflict of interest.




When facts or circumstances arise for which the conduction of procedures to select contractors jeopardises the satisfaction of the State’s interests, the relevant public entities may follow procedure of exceptional contracting (i.e. in cases of “obvious urgency” which prevents the bid from being conducted).




Public Procurement Law does not apply to in-house arrangements.

5 Remedies



(i) Claim Action (Acción de Reclamo): a Claim Action can be filed before the General Directorate of Public Procurement (Dirección General de Contrataciones – “DGCP”) against any illegal or arbitrary act or omission that occurs during the contractor selection procedure before the awarding or declaration of desertion of a selection procedure.

(ii) Contesting Action (Recurso de Impugnación): a Contesting Action can be filed before the Administrative Tribunal of Public Procurement (Tribunal Administrativo de Contrataciones Públicas – “TACP”) by participants that consider themselves affected by a resolution that awards, declares deserted a selection procedure, rejects the proposals or any act that affects the objective selection of the contractor, in which the participants consider that illegal or arbitrary actions or omissions have been committed. It should be noted that in the case of public procurement covered by the U.S.‐Panama Trade Promotion Agreement, the deadline to submit this action is longer than the standard term (10 business days instead of five). The action must be filed together with a Contesting Action Bond, for an amount equal to a percentage of the value of the contesting participant’s proposal (10% for goods and services; and 15% for works).

(iii) Appeal Action to the Administrative Resolution of the Contract (Recurso de Apelación a la Resolución Administrativa del Contrato): participants may appeal the resolutions that administratively resolve (terminate) a contract, by announcing the appeal to the contracting entity and supporting it before the TACP.



No. Remedies should be exercised in the administrative sphere, pursuant the provisions of Law 22 (see the answer to question 5.1 above).


sought?

See the answer to question 5.1 above.


remedies?

Claim Action: any time during the bid process and before the issuance of the award resolution or the resolution declaring the bid void (“desierto”).

Contesting Action: within a period of five working days, counted from the notification of the resolution object of the challenge.

Appeal: it has to be announced within five working days after the notification of the resolution, and supported within the next five working days.


periods?

None. The limitation periods contemplated in Law 22 apply.


It depends on the act that is to be challenged. For example, if the State decides to terminate the contract (“administrative resolution”), the contractor can appeal before the TACP. If the contracting entity applies fines, the contractor can request for the entity to reconsider the decision, and the decision can also be appealed.


remedies is made?

Claim Action: maximum of 10 business days to admit the claim and for the contracting entity to send the report to the DGCP. After this term elapses, the DGCP will have five business days to resolve the claim from the moment it receives the administrative file. If the DGCP fails to solve the claim within such term, the TACP will solve the claim within five business days from the moment it receives the administrative file.

Contesting Action: two business days for the action to be admitted (if time elapses without a decision from the TACP, it would be understood that the action has been admitted); after that, TACP notifies the filing of the action to the bidding entity, which has three business days to send its report, which could be extended for another five business days in certain cases mentioned in Law 22. TACP will solve the action within 10 business days or will open a 10-business-



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day phase to prepare evidence (in case there are technical issues). Once this phase has finished, two days to submit pleadings will follow and the TACP will have 10 business days to solve the action, and a never more than 60 business days. If this period elapses without a decision, the decision of the contracting entity will be considered confirmed by the TACP.

Appeal: there is no timescale for the TACP to solve an appeal. It suspends the effects of the appealed decision.



In our most recent experience, pre-qualification of the Fourth Transmission Line of Energy. The evaluation committee suggested that one of the proponents was disqualified. After the submission of observations (comments) to the evaluation committee’s report, it was decided that pre-qualification applied.



The State requires different types of bonds (proposal bond; advanced payment bond; performance bond) to guarantee the proposal submitted to the public entity, the execution of the contract, and the reimbursement of the amount paid to the contractor in advance. In case of a breach, the respective bond will be executed.

In case of concessions, the entities can conduct inspections to verify that the contractors are complying with their obligations under the contract.

Law 22 also contemplates the exorbitant power of unilateral termination of the contract by the contracting entity (grounds for resolution and administrative rescue).


Procedure







Any change to a public contract has to be made via addendum. The type and object of the contract cannot be modified.

In any case, the sum of all the modifications made to a contract during its term may not exceed 40% of the total amount originally agreed.



The scope of negotiation is very small, since the format of the contract (with terms and conditions) is part of the bid comments.


signature?

See the answer to question 6.1. Usually, changes to the contract relate to public interest.



signature?

Transfer of a contract to another governmental entity is not regulated. On the other hand, public contracts contemplate the right of the contractor to assign the contract. The latter is subject to approval of the public entity, based on compliance of certain requirements by the potential new contractor (i.e. technical, financial, etc.).




them?

No, there are not.



Currently, no. Notwithstanding, a law project is being prepared on this matter.

8 The Future



impact?

The last modification of Law 22 was in 2017 (see the answer to question 1.1). Note that Presidential elections are going to take place in May, 2019, and some political candidates have announced plans to introduce changes to this regime.




No, there has not.

Acknowledgment

The authors would like to acknowledge the contribution of Luis Horacio Moreno IV in the preparation of this chapter. Luis is an Associate in our Energy, Telecommunications & Public Contracting Department, where he advises on public procurement, energy, telecoms, public transportation administration and regulatory work.



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Annette Bárcenas Olivardía


AFRA Bldg., 11th Floor

54th Street, Samuel Lewis Ave.

Obarrio, Panama City

Panama

Tel: +507 263 9355 Email: [email protected] URL: www.afra.com

Paulette Michineau


AFRA Bldg., 11th Floor

54th Street, Samuel Lewis Ave.

Obarrio, Panama City

Panama

Tel: +507 263 9355 Email: [email protected] URL: www.afra.com

Since our foundation back in 1965, we have evolved into a law firm with an international presence. Today, we have more than 35 full-time lawyers

serving our clients, and an office staff in excess of 150 collaborators. Our 16 partners are highly regarded and are prestigious individuals. All of our

attorneys are committed to our clients’ goals. We ethically aim to empower our clients through the services we provide.

AFRA also has offices in the British Virgin Islands, where staff concentrate on our international corporate services.

Validation of our skillset and client approvals have been demonstrated and recognised by The International Financial Law Review (IFLR). AFRA was

named Panama’s National Law Firm of the Year (2018). We have also been detailed in many publications by Chambers and Partners. The Latin Lawyer and The Legal 500 recognise us as leaders in industry and commend us in various practice areas.

Annette Bárcenas Olivardía is the head of our firm’s Public Services

and Public Procurement Departments.

She has long-standing experience leading regulatory and

administrative work involving energy-related activities, telecomm-

unications and public transportation, as well as due diligence

processes and mergers and acquisitions. Annette is well-known for

her strength in representing and advising clients on public bidding

processes, and thereafter advising clients on the negotiation of the

contracts awarded by the corresponding governmental office.

Annette’s experience also encompasses leading clients through their

financing process for the public projects awarded.

Paulette Michineau is an Associate in our Energy, Telecommunications

& Public Contracting Department, where she takes charge of handling

administrative and regulatory matters, public procurement,

telecommunications and energy law.



Chapter 22


Wolf Theiss

Peter Daszkowski

Marcin Rudnik

Poland




The current public procurement system in Poland is based on the Act of 29 January 2004 Public Procurement Law (the “Act”). The Act defines the scope of application of public tenders, entities obliged to apply the Act, rules and procedures for awarding contracts, legal protection measures, control of public procurement and competent authorities in public procurement matters. Together with additional detailed regulations enacted on the basis of the Act, it creates a comprehensive set of rules on public procurement in Poland.

Furthermore, there are many provisions related to public procurement spread over many detailed laws, including, but not limited to: the Civil Code (applicable to public procurement contracts); the Public Finance Act; competition law (applicable to information which is considered to be a business secret and grounds for the rejection of tenders); employment law (a contractor might be required to hire employees under an employment contract); and criminal law (applicable to grounds for the exclusion of contractors from a public tender).

The Polish public procurement system is harmonised with European Union legislation and, therefore, foreign contractors can expect a similar level of competitiveness and transparency as in the rest of the EU.




of the legislation?

The basic principles of public procurement are:

■ fair competition and equal treatment of contractors (Article 7); and

■ openness and transparency throughout the procurement procedure (Article 8).

Moreover, the contracting authority may not limit competition by stipulating a contract award or qualification criteria that may be discriminatory and act as means of limitation of competition or protection of a local market.

In case law, these principles often serve as guidelines for individual cases and help interpret particular legal provisions in practice.



The Act does not apply to a number of areas listed in Article 4 of the Act (see question 4.1 below) for which specific provisions of different legislation might apply. In addition, concessions and public-private partnerships are regulated by separate legislation (see questions 2.5 and 7.2 below).

The Act itself, however, provides also for various special rules for tenders in the area of defence and safety, the mining sector, utilities contracts, airport/harbour management, social services, etc.



public procurement?

Apart from the provisions governing public procurement, a particularly important piece of legislation that a contracting authority must obey pertains to public funding. The principle of liability of an official for violation of the public finance discipline is derived from the above-mentioned legislation. Officials who use public funds may be financially responsible and may also be relieved from their duties.

Moreover, the rules on access to public information may oblige the contracting authority to release certain information/documents to third parties not participating in the tender proceedings. On the other hand, relevant anti-competition provisions limit the contracting authority from releasing data that was marked as confidential.



agreements?

The Polish public procurement law is compliant with EU legislation. Regulations are updated on an ongoing basis to remain compliant with EU law. Additionally, Poland is a party to the World Trade Organization Agreement on Government Procurement (GPA).


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Contracts



The Act exhaustively lists types of entities which are obliged to apply its provisions when concluding a public contract. In general, the following groups of entities are included: State Treasury units; governmental bodies; any regional and local (self-governmental) authorities; public sector entities; as well as other entities (not only public) that carry out proceedings in connection with a specific sector of the economy, such as natural gas extraction or construction works, financed with more than a 50% share of public funds.


The Act defines three types of contracts that fall within its scope: delivery contracts; works contracts; and services contracts.

Concession and PPP contracts are covered by separate legislation.



The most important financial thresholds are the following:

■ EUR 30,000 – the Act is applied to contracts exceeding this value only;

■ EUR 144,000/221,000/443,000/750,000 – “EU threshold” for different types of delivery and service contracts; and

■ EUR 5,548,000 – “EU threshold” for construction works.

EU thresholds play a significant role because certain types of contracts below the EU thresholds are not governed by the Act (see question 4.1 below).


The contracting authority cannot avoid application of the provisions of the Act by: (i) combining orders that, if separately granted, require application of different provisions of the Act; or (ii) dividing orders into separate orders to avoid a total estimate of their value in order to avoid the thresholds. The expected total value of the contract should always serve as the basis for the calculation; any extensions or options must also be included.



Under a concession contract, the contracting authority entrusts a licensee with the execution of construction works or the provision of services (and management of those services) for remuneration consisting either: (i) solely in the right to exploit the works/services that are the subject of the contract; or (ii) in that right together with payment. In either case, the licensee bears the economic risk related to the exploitation of a work/service.

The Act does not apply to concession contracts as they are governed by the Act of 21 October 2016 on concession contracts for works or services.



Framework agreements are to be awarded based on the same rules as regular public tenders; that is, after conducting the applicable proceedings.

The purpose of a framework agreement is to set conditions for public procurement that may be awarded in a given period; in particular, prices and (if necessary) the quantities envisaged. The value of a framework agreement is the total value of orders that the contracting authority intends to grant during the agreement period. A framework contract may be concluded for a period not exceeding four years. Under the conditions specified in the framework agreement, the contracting authority performs the public procurement with the contractor with whom the contract was concluded.


into lots?

Generally, it is forbidden to divide contracts with the intention of lowering the value for each separate order (or part thereof) to avoid the application of relevant thresholds.

However, the contracting authority does have some ability, in its discretion and generally not as an obligation, to divide an order into parts. However, according to case-law of the National Chamber of Appeal, in a situation where the lack of division of an order into parts may result in a restriction of competition, the contracting authority should divide the order. The division of public procurement into parts often helps encourage the involvement of small and medium enterprises in the process. Therefore, if an order cannot be divided into parts, then the contracting authority should describe why in detail.



There are no special provisions in this regard and contractors located outside of Poland are not restricted from participating in public procurement in Poland. It is perhaps worth noting that a branch of a foreign enterprise cannot apply for a public contract (due to the lack of legal personality).

3 Award Procedures




There are several award procedures listed in the Act. Each award procedure has strict requirements as to how to conduct the proceedings and the circumstances in which it can be applied. There are two basic categories of procedures:

■ open tendering (“przetarg nieograniczony”) – following a public contract notice, all interested contractors may submit their tenders; and

■ restricted tendering (“przetarg ograniczony”) – following a public contract notice, contractors submit requests to participate in the public tender procedure, and tenders may be submitted only by contractors invited to submit their tenders.

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The Act allows complete freedom to the contracting authority in choosing between open and restricted tendering.

Specific conditions are listed in the Act regarding the use of the following specific award procedures:

■ Negotiated procedure with publication (“negocjacje z ogłoszeniem”) – a procedure in which, following a public tender notice, the contracting authority invites the contractors admitted to participate in the tender procedure to submit initial tenders and negotiates terms with them excluding price and then invites the group to submit final tenders (including price).

■ Negotiated procedure without publication (“negocjacje bez ogłoszenia”) – a procedure in which the contracting authority negotiates the terms of the contract with contractors of its choice and subsequently invites them to submit their offers.

■ Competitive dialogue (“dialog konkurencyjny”) – a procedure in which, following a public tender notice, the contracting authority conducts a dialogue with selected contractors and invites them to tender. The application conditions are the same as those stipulated in the negotiated procedure with publication.

■ Single-source procurement (“zamówienie z wolnej ręki”) – a procedure in which the contracting authority awards a contract after having negotiated with only one contractor. A textbook example of the single-source procurement would be a contract in which the services can only be provided by one contractor for technical reasons of an objective nature.

■ Request for quotations (“zapytanie o cenę”) – a procedure in which the contracting authority sends a request for quotations to contractors of its choice and invites them to submit tenders. The procedure of request-for-quotations has been restricted to only the following supplies and services: a) those that are publicly available; b) those with established quality standards; and c) those with a contract value lower than the “EU thresholds”. This procedure is highly simplified and works as follows: 1) the contracting entity invites the contractors to submit tenders by providing them a simplified version of the Specification of Essential Terms of the Contract together with the invitation; and 2) the cheapest tender is selected by the contracting authority.

■ Electronic bidding (“aukcja elektroniczna”) – a procedure in which contractors are able to enter the data necessary for the tender online using a form available on a website. Contractors must submit successively more advantageous tenders (bidding) in this automated process. Contracting authorities may decide to award contracts in this mode regardless of the subject of the contract.


The dates for submitting offers are very specific; however, they vary depending on the public procurement procedure. As a rule, in an open tender, the deadline for submitting offers is 35 days from the publication of the contract notice.

In a restricted tender, the deadline for both submitting an application for admission to a proceeding and submitting an offer is, in principle, 30 days.


tenderers?

The Act enumerates mandatory and discretionary grounds for an exclusion of tenderers. The most significant mandatory grounds are failure to meet the conditions to participate in the proceedings, final conviction of members of corporate bodies of specific “white

collar” crimes (for example, forgery or bribery), non-payment of taxes or social contribution payments (where there has been a final judgment), presenting false or misleading information, attempts to influence the contracting authority to obtain confidential data, and offers submitted by companies from the same capital group.

The discretionary grounds include, in particular, non-fulfilment of prior public tenders or concession contracts and certain violations of labour, environmental or social law.




The criteria for the evaluation of offers are determined by the particular contracting authority; however, the criteria must refer to price, cost and other relevant items, in particular:

■ quality, including technical parameters, aesthetic and functional properties;

■ social aspects, including occupational and social integration of persons, accessibility for the disabled and taking into account the needs of users;

■ environmental aspects, including energy efficiency of the subject of the contract;

■ innovative aspects;

■ organisation, professional qualifications and experience of persons appointed to perform the contract; and

■ after-sales service and technical assistance, delivery conditions, such as delivery date, delivery method and delivery time or period of implementation.

Price may be the only or the predominant factor (with a value exceeding 60%) if quality standards of all the important aspects of the subject of the tender are sufficiently defined.


low tenders?

A tender is abnormally low if the presented offer is at least 30% lower compared to the total value of the tender determined by the contracting authority or compared to the average price of all the submitted offers.

In such a case, the contracting authority must ask for explanations regarding the price in the performance of the contract. The contractor bears the burden of justifying that its offer is not abnormally low. If the explanations are not sufficient, the contracting authority will reject the offer.


The rules for awarding a contract differ depending on the chosen procedure. The general rule is that the contracting authority chooses the most advantageous offer, based on the criteria indicated in question 3.4 above. Then the contracting authority informs all participants which offer was selected and, if the decision on awarding the contract is not appealed, concludes a contract with the selected contractor.


bidders?

The contracting authority must immediately inform all contractors of the selection of the best offer, giving the name and address of the

Wolf Theiss Poland


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selected contractor. Contractors also receive information about excluded tenderers, rejected offers, as well as about the annulment of the proceedings. In each of the above cases, the contracting authority is obliged to provide factual and legal justification.


Contractors may jointly participate in tender proceedings. The most popular structure for joint participation is a consortium, i.e., a contractual obligation of two or more entities to jointly participate in a proceeding. In a consortium, it is necessary to appoint a representative to represent the consortium in the proceedings. Generally, the participation of a consortium in the proceedings is identical with the participation of a single contractor.


Pursuant to the Act, the issue of allowing a variant offer lies with the contracting authority. Information about the possibility or obligation to submit such an offer and the relevant requirements can be found in the contract notice. Failure to meet such requirements may result in the offer being rejected.


The contracting authority must exclude a contractor from a tender proceeding if:

■ the contractor concluded an agreement with other contractors that may distort competition;

■ two contractors belonging to the same capital group submitted separate offers in the same tender proceedings; or

■ the contractor engages a person who participated in the preparation of the proceedings.

The contracting authority may exclude a contractor from a proceeding if the contractor or persons authorised to represent the contractor are associated with the contracting authority, persons authorised to represent the contracting authority, members of the tender committee, etc.




The contracting authority, before initiating a procurement procedure, may inform contractors about plans and expectations concerning the contract; in particular, it may conduct a technical dialogue, ask experts, public authorities or contractors for advice or providing information to the extent necessary to prepare a description of the subject of the contract, specification of essential terms of the contract and specification of contract terms. In practice, technical dialogue is not used very often, as contracting parties mainly use market research. Technical dialogue is more commonly used before preparing public-private partnership contract award procedures.

The Act does not regulate “market insight”, although the value of a contract must be determined by the contracting authority on the basis of the total estimated remuneration of the contractor. In order to ensure diligence, the contracting party, in cases where there is no publicly available information allowing for estimating the value of the order may contact selected contractors asking them to present a valuation.




The list of circumstances that exclude the application of the Act is very detailed and extensive. In general, these circumstances can be divided into several groups:

■ specific types of contracts such as obtaining title to real estate, employment contracts, purchasing media, arbitration services;

■ specific contracts awarded by a specific body: National Bank of Poland or Bank of the National Economy (Bank Gospodarstwa Krajowego) pertaining to the financial market;

■ contracts governed by international agreements and contracts co-funded by international organisations if the relevant international legislation provides for own rules of contracting;

■ the value of the contract does not exceed EUR 30,000; and

■ specific contracts in which the value does not exceed EU thresholds (see question 2.3 above) such as R&D services, science projects, artistic performances, revitalisation programmes, arms contracts, utilities contracts, etc.




Pursuant to the Act, the contracting authority may grant internal contracts by using a single-source procedure, as long as the following conditions are met:

■ the contracting authority exercises (direct or indirect) control over the legal person, equivalent to the control exercised over its own units, involving dominant influence over the strategic goals and important management decisions relating to the affairs of that legal person;

■ more than 90% of the activity of the controlled legal person involves the execution of tasks entrusted to it by the contracting authority controlling it directly or indirectly; and

■ no private capital is directly involved in the controlled legal person.

5 Remedies



Section VI of the Act covers legal remedies, in particular detailed information on the means available to the contractor that had an interest in obtaining the contract and who suffered or could suffer damage as a result of the violation of the provisions of the Act.

The basic remedy is to lodge an appeal with the National Chamber of Appeal. Depending on the circumstances, the deadlines for lodging an appeal are five, 10 or 15 days from a specific event; for example, from the announcement of tender, exclusion of a contractor, awarding a contract, etc. If an appeal is lodged, as a rule the contracting authority may not conclude the contract until it is resolved. Information about the appeal is immediately sent to other contractors, who may join the proceedings if they have a legal interest.

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There are no other types of proceedings or applications outside of the Act.


sought?

As indicated in question 5.1 above, the appeal is lodged with the National Chamber of Appeal.

The National Chamber of Appeal’s decision may be appealed to a common court. The district court for the seat of the contracting authority is competent in this respect. There is no further appeal or cassation claim against the court’s decision.


remedies?

The Act regulates the deadlines in which appeals can be lodged to the National Chamber of Appeals. The general rule defines the terms as five, 10 or 15 days from the date of sending a notification based on the actions of the contracting authority or from the date of publication of the announcement in the EU Official Journal or the Polish Public Procurement Bulletin.


periods?

There are very limited options for shortening limitation periods in connection with initiating a review process.

The contractor may submit a motion to the National Chamber of Appeal to repeal the prohibition to conclude the agreement. The National Chamber of Appeal may waive the prohibition to enter into a contract if non-conclusion of the contract: (i) could have a negative public interest effect, in particular, in the fields of defence and security; or (ii) non-conclusion could outweigh the benefits of protecting all interests that are likely to be suffered.


In cases in which there are significant breaches of the tender procedure, it is possible to claim that the contract should be invalidated. For example, a contract is subject to invalidation if:

■ the contract notice regarding future proceedings was not published;

■ the contract was awarded without compulsory tender selection proceedings;

■ single source procurement or negotiation without publication proceedings were applied contrary to provisions of law; or

■ provisions of the framework agreement were violated.

Also, the President of Public Procurement Office has, under certain conditions, the right to apply to the court for annulment of the contract; however, this right expires four years from the date of concluding or amending the contract.


remedies is made?

The National Chamber of Appeal has 15 days to examine the case. In practice, these terms are observed. Usually, the verdict is announced within approximately five days from the date of the hearing. During the announcement of the judgment, the justification is not read, and the parties must wait up to three additional days to obtain the written justification.

The decision of the National Chamber of Appeal may be appealed to the civil court within seven days from the date of delivery of the decision of the National Chamber of Appeal.



Even though the Polish legal system is continental, the application of procurement law is influenced by case law.

One of the main case law examples pertains to the Warsaw Waste Incineration Plant. A Chinese contractor was awarded a PLN 1 billion (approx. EUR 233.5 million) contract for construction of a waste incineration plant. This decision was challenged by other participants of the proceedings who were offering to complete the contract for PLN 1.7 billion (approx. EUR 397 million) and claimed that the Chinese contractor made false declarations as to its experience and ability to perform the contract. The National Chamber of Appeal excluded the Chinese contractor from the proceedings and ordered a repetition of the selection procedure.



There are no mitigation measures available to contracting authorities.

If an appeal is lodged, the contracting authority may either: (i) agree with the objections of a contractor and, as a result, perform, annul or repeat the relevant action in the tender proceedings; or (ii) submit a response to the appeal (in writing or orally) in which the authority may address all charges from the appeal.


Procedure







The contracting authority is allowed to introduce changes to contract specifications, the timetable or contract conditions; however, it needs to grant an additional time period for the participants to adjust to these changes.

After an offer is submitted, the contractor or, in the case of a joint offer, members of the consortium, cannot be replaced by a different contractor.

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There is no possibility of negotiating the final tender with the preferred bidder. It is only possible in a negotiated procedure without publication. However, this mode can be carried out only under specific circumstances; for example, an urgent need to award an order for reasons not attributable to the contracting authority.


signature?

Generally, changes to the provisions of a concluded contract are prohibited, with the exception of the following:

■ changes that are provided for in the contract notice or specification of essential terms of the contract;

■ changes that concern the implementation of additional supplies, services or construction works from the previous contractor, not covered by the basic order; and

■ a need to change the contract as a result of circumstances that the contracting authority, acting with due diligence, could not have foreseen.



signature?

The transfer of a contract to another entity post-contract signature is not permitted. However, in the case of a general succession (for example, a merger) the contract might, by operation of law, be transferred to the merging entity.




them?

The basic rules regarding privatisation are provided for in the Act on privatisation and commercialisation of state enterprises dated 30 August 1996; however, in practice, the process of privatisation of big state enterprises has come to a halt. In general, privatisation procedures must follow rules of transparency, non-discrimination and equal treatment. An exception is that the State Treasury may be granted special corporate rights in completely or partly privatised strategic entities.

The principal issues are more practical than legal and are connected with the fact that the State Treasury is not flexible in agreeing on privatisation terms. Moreover, an investor often needs to give certain investment promises as well as agreeing to safeguard a certain employment level.



The Act is applicable to PPPs in limited cases; in particular, it applies to the selection of a private partner. In general, PPPs are regulated by the Act on Public-Private Partnerships (the “PPP Act”). The PPP Act regulates the cooperation between a contracting authority and a private partner regarding joint implementation of a project. The main principles are joint performance of the undertaking, fair competition, value for money and risk division.

The PPP Act was recently amended and both the partner selection process and the performance phase have become much more flexible, as well as friendlier for financing parties. Similar to privatisation, the biggest issues are rather practical. Very few PPP projects are well prepared from the side of the public partner, which makes it difficult for the private partner to calculate the costs/risks of participation. As a consequence, the bankability of such projects is also problematic.

8 The Future



impact?

The Polish government has declared that a completely new act on public procurement is needed; however, no drafts have been published yet. The declared objectives are to simplify and make the procedures more flexible, and to concentrate and aggregate similar orders.




There are no regulatory developments which are expected to impact on the law.

Acknowledgment

The authors would like to thank Marcin Żak, a legal advisor and member of the Real Estate and Construction practice group, and Monika Gaczkowska, an Associate and member of the IP/IT and Corporate and M&A practice groups, for their invaluable assistance in the preparation of the chapter.

Wolf Theiss Poland


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Peter Daszkowski

Wolf Theiss

Mokotowska 49

00-542 Warsaw

Poland

Tel: +48 22 378 8900 Email: [email protected] URL: www.wolftheiss.com

Marcin Rudnik

Wolf Theiss

Mokotowska 49

00-542 Warsaw

Poland

Tel: +48 22 378 8900 Email: [email protected] URL: www.wolftheiss.com

Peter Daszkowski is the Co-Managing Partner of Wolf Theiss in

Poland. For over 20 years he has been advising major international

corporations on various M&A transactions, including privatisations,

banking and finance matters as well as project and real estate

transactions. He also represents clients in major litigation and

arbitration proceedings. He advises international clients on nearly

every aspect of Polish corporate and business law as well as on real

estate and labour law. His career experience includes advising

leading European banks and entrepreneurs on project finance

matters, on restructuring loans and securities. He advised a leading

international technology company on implementation of an electronic

toll collection system in Poland. Peter has particular experience of

public procurement and PFI/PPP contracts.

Peter is a graduate of the University of Bonn and a German qualified

lawyer admitted to the Bar in Germany and in Poland. He is the author

of numerous legal publications.

Wolf Theiss is one of the leading law firms in Central, Eastern and South-Eastern Europe (CEE/SEE). We have built our reputation on a combination

of unrivalled local knowledge and strong international capability. We opened our first office in Vienna 60 years ago. Our team now brings together

over 340 lawyers from a diverse range of backgrounds, working in offices in 13 countries throughout the CEE/SEE region.

Over 80% of our work involves cross-border representation of international clients. Our full range of services covers: Banking & Finance; Business

Crime; Capital Markets; Competition & Antitrust; Compliance; Corporate/Mergers & Acquisitions; Dispute Resolution; Employment Law; Energy &

Renewables; Infrastructure; Intellectual Property & Information Technology; International Arbitration; Investment Funds; Life Science; Real Estate &

Construction; Regulatory & Procurement; Retail and Tax.

We have concentrated our energies on a unique part of the world: the complex, fast-developing markets of the CEE/SEE region. Through our

international network of offices, we work closely with our clients to help them solve problems and create opportunities.

Marcin Rudnik is a Senior Associate and a member of the Dispute

Resolution, Competition and Antitrust and Real Estate and Public

Procurement practice groups of Wolf Theiss in Poland. He focuses on

advising and representing clients in civil, administrative, insolvency

and arbitration proceedings regarding construction contracts, real

estate, corporate and competition law. He has participated in

numerous public procurement, PPP and project finance transactions,

mostly on the side of lenders, and also advises clients on construction

and development matters, including FIDIC contracts, as well on the

leasing of commercial and industrial premises.

Marcin studied law at the Universities of Gdańsk and Toruń, the

University of Regensburg, Germany, and was awarded an LL.M.

degree. He also graduated from the English and European law school

organised in cooperation with the University of Cambridge. He is

admitted to the Polish Bar and speaks Polish, English and German

fluently.

Wolf Theiss Poland


181

Chapter 23


Morais Leitão, Galvão Teles, Soares da Silva & Associados

Margarida Olazabal Cabral

Ana Robin de Andrade

Portugal




The principal relevant piece of legislation is the “Public Contracts Code” (hereinafter “PCC”), approved by Decree-Law no. 18/2008 of 29 January, amended by Law 59/2008 of 11 September, Decree-Law no. 223/2009 of 11 September, Decree-Law no. 278/2009 of 20 October, Law no. 3/2010 of 27 April, Decree-Law no. 131/2010 of 14 December, Law 64-B/2011 of 30 December, Decree-Law no. 149/2012 of 12 July, Decree-Law no. 214-G/2015 of 2 October, Decree-Law no. 111-B/2017 of 31 August and, most recently, Decree-Law no. 33/2018 of 15 May. The PCC, which transposed EU Directives 2014/23/EU, 2014/24/EU, 2014/25/EU and 2014/55 EU, covers public procurement rules and the material regime regarding public contracts.

There are other relevant diplomas, namely:

■ the Administrative Procedural Code (approved by Decree-Law no. 4/2015 of 7 January), which contains the general rules on administrative procedures; and

■ the Procedural Code of the Administrative Courts (approved by Law no. 15/2002 of 22 February and amended by Decree-Law 214-G/2015 of 2 October), which contains the rules on litigation regarding pre-contractual procedures and public contracts.




of the legislation?

The basic underlying principles are those of legality, public interest, impartiality, proportionality, good faith, protection of legitimate expectations, sustainability and responsibility, as well as those of competition, publicity and transparency, equal treatment and non-discrimination.

The referred principles are relevant since they constitute limits to the activity of the contracting authorities, as well as guidelines as to how the rules ought to be interpreted.



Yes, the PCC has special rules regarding procurement by awarding entities in the water, energy, transport and postal services sectors.

Regarding defence, a specific legal framework is provided by Decree-Law no. 104/2011 of 6 October, which is applicable for the purchase of contracts for military and sensitive equipment, contracts for public works, supply contracts, and contracts to provide services regarding military and sensitive equipment, as well as contracts for public works, supply contracts and contracts to provide services aiming to pursue military goals.



public procurement?

The general rules on administrative procedures (listed within the Administrative Procedural Code) apply on a subsidiary basis to public procurement, and certain transparency rules are contained therein.



agreements?

The PCC transposes EU Directive nos. 2014/23/EU, 2014/24/EU and 2014/25/EU of 26 February and EU Directive no. 2014/55/EU of 16 April.

Pursuant to the Constitution, EU law and international agreements prevail over national law.


Contracts



Article 2 of the PCC considers as awarding entities:

■ The Portuguese State.

■ Autonomous Regions.


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■ Local authorities.

■ Public institutes.

■ Independent administrative authorities.

■ The Bank of Portugal.

■ Public foundations.

■ Public associations or associations financed or controlled by the above-mentioned entities.

■ Bodies governed by public law (any legal entity, either public or private, specifically created to satisfy needs of a general nature, whose economic activity is not subject to the logic of market competition, namely due to its non-profit nature or non-covering losses resulting from its activity, and that are mainly financed or controlled, or whose management or supervisory board members have been, in majority, appointed by the entities referred to above or by other bodies governed by public law).

■ Legal entities which are mainly financed or controlled, or whose management or supervisory board members have been, in majority, appointed by a body governed by public law.

■ Associations where one or more body governed by public law or entity referred to in the previous paragraph is a part of, as long as it is mainly financed, controlled or has the majority of the members of its board of directors or supervisory body, directly or indirectly, appointed by such entities.

Article 7 of the PCC also considers as awarding entities:

■ Any legal entities not included in Article 2 that pursue their activity in the water, energy, transport or postal services sectors, regarding which any of the entities referred to in Article 2 may exercise, directly or indirectly, a dominant influence.

■ Any legal entities not included in Article 2 which enjoy special or exclusive rights, not granted through an international tender procedure, whereby such rights:

■ reserve to such an entity, either solely or together with another entity, the exercise of one or several activities in the water, energy, transport or postal services sectors; and

■ substantially affect the capacity of any other entity to exercise one or more of those activities.

■ Any legal entities composed exclusively by awarding entities referred to in Article 7, or that are mainly financed, controlled or have the majority of the members of their board of directors or supervisory body, directly or indirectly appointed by such entities, and exercise their activity in the water, energy, transport or postal services sector.

Please note that entities that do not qualify as awarding entities pursuant to Articles 2 and 7 of the PCC may be subject to PCC procurement rules, if the contracts (works contracts or services contracts related to works contracts) are to be subsidised by more than 50% by an awarding entity.

Public work concessionaires that are not awarding entities may be subject to certain procurement rules when contracting public works contracts.

Entities not qualified as awarding entities that have special or exclusive rights in the exercise of public service activities granted by any of the awarding entities referred to in Articles 2 and 7 of the PCC must respect the principle of non-discrimination in terms of nationality.


The PCC is applicable to all contracts where the object of which is, or may be subject to, competition. In this regard, the PCC states

especially that the following contracts are considered to be subject to competition: public works contracts; concessions of public works; concessions of public services; lease or supply of goods; rendering of services; and company incorporation contracts.



Yes. Depending upon the choice of the award procedure, there may be a threshold for individual contract coverage (Articles 19 to 21 of the PCC).

Open and restricted tender with pre-qualification

For public works, the open or restricted tender procedures may be adopted, irrespective of the contract value if the notice is published in the Official Journal of the European Union (“OJEU”). If the notice is not published in the OJEU, the contract value cannot exceed €5,548,000.

The same applies to the lease and supply of goods contracts and services contracts. However, in this case, if the announcement is not published in the OJEU, the contract value cannot exceed €144,000 and €221,000 depending on the awarding entity.

As for other types of contracts – excluding concession of public works and services and company incorporation contracts – the open and restricted tender procedures may be adopted, irrespective of the contract value if the notice is published in the Official Journal of the European Union (“OJEU”).

Urgent public tender

This procedure allows the awarding authority to lease and to purchase, as a matter of urgency, commonly used goods or services and public works, the adoption of which depends on two issues:

■ the award criteria must be the price or costs; and

■ the contract value is less than €144,000, €221,000 for the lease and purchase of goods or services (depending on the type of awarding entity) and less than €300,000 for public works.

Direct award

For public works, the contract value must be less than €30,000.

For the supply and lease of goods, as well as service contracts, the contract value must be less than €20,000.

As for other types of contracts – excluding concession of public works and services and company incorporation contracts – the direct award procedure can only be chosen if the contract value is less than €50,000.

Nevertheless, in some cases, (if prior consultation is not possible) a direct award may be adopted irrespective of the contract value, namely when:

■ No competitor has presented any proposal, or all proposals have been rejected in a previous open or restricted tender, as long as the specifications and the minimum technical requirements are not substantially altered.

■ In cases of urgency, where the deadlines regarding other procedures cannot be met due to unforeseeable events, provided that the circumstances are not attributable to the awarding entity.

■ For technical or artistic reasons, or due to the protection of exclusive rights, the contract can only be granted to a determined entity.

Please note that the awarding entities referred to in Article 7 of the PCC are only subject to the procedures of the PCC for what concerns the following contracts:

■ Regarding public works, contracts equal to or above €5,548,000.

Morais Leitão, Galvão Teles, Soares da Silva & Associados Portugal


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■ Regarding leasing or supply of goods and acquisition of services, contracts equal to or above €443,000.

■ Regarding acquisition of social services or other services specified in Annex IX to the PCC, contracts equal to or above €1,000,000.

■ Regarding public works concessions and public service concessions, all contracts.

Prior consultation

In this procedure at least three entities are invited to bid.

For public works, the contract value must be less than €150,000.

For the supply and lease of goods, as well as service contracts, the contract value must be less than €75,000.

As for other types of contracts – excluding concession of public works and services and company incorporation contracts – the prior consultation procedure can only be chosen if the contract value is less than €100,000. A prior consultation may also be adopted irrespective of the contract value in the cases referred above (see in this regard, the direct award section).


Contract value is the main criterion for choosing the award procedure, and the PCC has a very wide notion of contract value to prevent procurement avoidance.

The PCC establishes that the value of the contract may not be fractionated with the intention of avoiding any rules established in the PCC.

Moreover, the PCC also establishes, as a general rule, that when obligations of the same kind, which could be included in a single contract, are divided into several separate contracts, the total value of those contracts cannot exceed the value allowed by the corresponding award procedure, had only one contract been signed.



As a general rule, these contracts should be awarded by a public or restricted tender by pre-qualification, by a negotiation procedure or by a competitive dialogue procedure.

A public works concession is defined as a contract whereby a contracting party undertakes to build, or to design and build, a public work, receiving, in consideration, the right to exploit it for a certain period of time and, if so determined, the right to the payment of a price.

Public service concession is defined as a contract whereby a contracting party undertakes to manage, in its own name and under its responsibility, an activity of public service, during a certain period of time, being paid by the financial results of such management or directly by the grantor.



In broad terms, general rules on procurement are applicable to the conclusion of a framework agreement.

In any case, the choice of a procedure for the execution of a framework agreement pursuant to Articles 19 to 21 of the PCC (please see question 2.3 above) only allows the execution of contracts pursuant to the framework agreement, as long as the sum of contractual prices of all contracts are inferior to the thresholds set therein.


into lots?

Yes. When obligations of the same kind, which could be included in a single contract, are subject to more than one procedure, the choice of the procedure must take into account:

(a) the sum of the value of all procedures, when formation of all the contracts to be entered into occurs simultaneously; or

(b) the sum of all contractual prices regarding contracts which are already entered into and the value of all procedures still in course, whenever the formation of these contracts takes place within one year, and as long as the awarding entity had foreseen the need for the launching of subsequent procedures at the time of the launch of the first procedure.

There are some exceptions to the above-mentioned rule.

As an incentive for small and medium-sized companies, the decision of not dividing the contract into lots must be justified by the awarding entity when related to:

■ Lease or supply of goods and rendering of services contracts, when the contract value exceeds €135,000.

■ Public works contracts, when the contract value exceeds €500,000.

Furthermore, it is also possible to limit the number of lots to be awarded to the same bidder.



Purchasers are subject to the principles of competition, equal treatment, non-discrimination and transparency.

3 Award Procedures




The PCC provides for the following main award procedures: (i) open tender; (ii) restricted tender (by previous qualification); (iii) direct award; (iv) negotiation procedure; (v) competitive dialogue; (vi) prior consultation; and (vii) partnership for innovation.

(i) Open tender: this procedure starts with a publication of a notice. Any interested party may submit a bid which shall be assessed pursuant to the award criteria established in the tender documents. In this regard, the Jury shall prepare a report, subject to comments by the bidders, which shall constitute the grounds for the awarding of the successful tenderer by the awarding entity. In certain cases, an urgent open tender may take place.

(ii) Restricted tender (by previous qualification): contrary to the open tender, not all interested parties may submit a bid. Applications are presented, and only the parties that are considered as qualified candidates, pursuant to certain technical and financial requirements, are invited to submit bids.

(iii) Direct award: a procedure whereby the awarding entity invites one entity to present its bid.

(iv) Negotiation procedure: similar to the restricted tender; however, the bids are negotiated between the bidders and the awarding entity.

(v) Competitive dialogue: a procedure whereby the awarding entity discusses the technical means, as well as the inherent



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legal and financial structure of the contract. It includes the following phases: submission of the applications together with the qualification of the candidates; the presentation of the solutions and dialogue with the qualified candidates; and presentation and analysis of the proposals together with the award of the contract.

(vi) Prior consultation: a procedure whereby the awarding entity invites at least three potential bidders to present their bids. The awarding entity may negotiate with the bidders the aspects regarding the execution of the contract to be entered into.

(vii) Partnership for innovation: a procedure intended for the development and acquisition of innovative works, products and services. This procedure integrates three stages, which can be adapted according to the complexity and financial relevance of the partnership to be celebrated. Therefore, it has the: (i) submission of applications stage; (ii) submission of proposals for research and development projects stage; and (iii) analysis of proposals for research projects stage and agreement of the partnership.

The cases where an open tender (and urgent open tender), a restricted tender (by previous qualification), prior consultation and a direct award can be chosen, are referred to in question 2.3 above.

The negotiation procedure and the competitive dialogue may be adopted by the awarding entity when:

■ Its needs cannot be met without the adaptation of easily available solutions.

■ The goods or services include the design of innovative solutions.

■ It is not objectively possible to award the contract without prior negotiation due to specific circumstances relating to its nature, complexity, legal and financial montage or due to the risks associated with it.

■ It is not objectively possible to precisely define the technical specifications by reference to a standard, European technical approval, common technical specifications or technical reference.

The partnership for innovation may be adopted when the award entity intends to carry out research activities and the development of innovative works, products and services, irrespective of their nature and areas of activity, with a view to their subsequent acquisition, provided that these correspond to the levels of performance and maximum prices previously agreed between it and the participants in the partnership.


Minimum timescales to present applications or bids are established by the PCC. The awarding entity may broaden the timescales in the procedure documents, pursuant to Article 63, paragraph 1 of the PCC.

■ Open tender: if the notice is not subject to publication in the OJEU, the minimum time limit to submit bids is six days, unless the proceeding concerns the formation of public works contracts, in which case the time limit is 14 days. If the works are clearly simple, the 14-day time limit can be reduced by six days. If the notice is subject to publication in the OJEU, the minimum time limit is 30 days, which can be reduced to 15 days in cases of urgency duly grounded by the awarding entity. In the cases of urgent open tender, the time limit is 24 hours on working days (for purchase or leasing of movable property or purchase of services) and 72 hours on working days (for public works).

■ Restricted tender: if the notice of the tender is not subject to publication in the OJEU, the minimum time limit for

presenting the application is six days. If the notice needs to be published in the OJEU, the minimum time limit to present the application is 30 days, which can be reduced to 15 days in case of urgency duly grounded by the awarding entity. Once selection of the applicants is made, the minimum time limit to submit bids is, where no notice is published in the OJEU, six days (14 days for public works) after the invitation is sent. When the notice is published in the OJEU, the time limit to submit bids is 25 days after the invitation is sent.

■ Direct award: no minimum timescale.

■ Prior consultation: no minimum timescale.

■ Negotiation procedure: the minimum time limit for presenting the applications is 30 days. This time limit may be reduced by seven days if the notice is sent electronically to publication.

■ Competitive dialogue: the timescale for the presentation of the applications is the same as the restricted tender. As for the presentation of the solutions, no minimum timescale is defined in the PCC. The minimum timescale to present bids is 40 days.

■ Partnership for innovation: the negotiation procedure regime shall be subsidiary applicable to the partnership for innovation.


tenderers?

The tenderers are excluded if any of the impediments to tender or submit an application, described under Article 55 of the PCC, are verified (namely, if the tenderer is declared insolvent, if a member of the board of directors of the tenderer has been convicted of certain serious crimes or by a crime which affects his professional conduct, if the tenderer has been declared guilty of serious professional misconduct, if he has social security or tax debts, if the tenderer rendered assistance to the awarding entity in the preparation of tender documents that granted it an advantage that distorts normal competition conditions, if the tenderer has unduly tried to influence the decision of the awarding entity, tried to obtain confidential information susceptible to grant him/her any advantage, or provided misleading information relevant to the exclusion, qualification or awarding of the tender, if the tenderer is subject to conflict of interests, or if the tenderer has proved relevant deficiencies regarding the execution of at least one public contract in the previous three years).

In the restricted tender, the awarding entity may adopt one of two possible models to short-list tenderers: (i) the simple model, where qualification of the candidates is made by a simple pass or fail test on minimum technical or financial requirements; or (ii) the complex model, where selection of the candidates is made on the basis of the criteria of the larger technical and financial capacity, which implies an evaluation model. Short-listing in the negotiation procedure and in the competitive dialogue is the same as in the restricted procedure.

There is no short-listing of tenders in the open tender procedure or in the prior consultation procedure. Also, there is no short-listing in the direct award procedure, since the awarding entity only invites one entity to present its bid.




The award criterion is of the most economically advantageous tender, which can be determined based on one of the following:



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■ The best price-quality ratio (where the awarding criterion is composed of several factors regarding several aspects subject to competition).

■ Lowest price or costs (only aspect subject to competition).

The best price-quality ratio involves a mandatory evaluation model, whereby only the factors subject to competition are reflected. Except from specific cases regarding organisation, qualifications and experience of personnel, the factors and sub-factors may not regard aspects, qualities, characteristics or other elements of facts regarding the bidders themselves. The model shall have a clear explanation of all the factors and sub-factors relating to the execution of the contract subject to competition, the weight of each factor and sub-factor, the scoring scale of each elementary factor or sub-factor, as well as a mathematical expression or description of the ordered set of attributes that enable the granting of partial scores.

In duly justified cases, the awarding entity may choose not to submit the price or costs to competition but, instead, to establish a fixed or maximum price in the tender documents.


low tenders?

Awarding entities may determine, in the tender documents, the situations in which a price or a cost is considered to be abnormally low, with regard to the price deviation from average or other criteria deemed suitable. The awarding entity must justify the need to establish the fixing of the abnormally low price or cost, as well as the criteria that presided to such definition.

Awarding entities must justify the decision to exclude any abnormally low tenders and, previous to that decision, it is mandatory to request tenderers to provide clarifications, in writing.




bidders?

The decision of the contract award is notified simultaneously to all bidders of the procedure together with the Final Report prepared by the Jury.


The PCC provides for four methods.

Awarding entities may form a group of awarding entities in order to enter into a contract whose performance is of their interest or a framework agreement that all may benefit from. It is also possible for awarding entities to jointly manage dynamic purchasing systems as well as to perform joint purchases through the use of electronic catalogues.

In addition, awarding entities referred in Article 2 of the PCC may constitute purchasing centres in order to centralise the contracting of public works, supply of goods and services.


Variant bids may only be submitted if the tender documents allow for such submission.


The Administrative Procedural Code (APC) has rules on the guarantees of impartiality (Articles 69 to 76). Such rules contain a provision stating that any holder or agent of a public administration body that has an interest, by himself or as a representative of other person, in an administrative procedure (namely, a public tender) is prohibited from participating or intervening in such a procedure. According to the law, the person who is subject of the impediment should communicate it immediately and suspend its intervention in the procedure, otherwise a serious disciplinary penalty will result. The actions taken and the contracts concluded in violation of these rules are voidable under the law.

Please note that the APC also contains rules setting up impediments to the provision of consultancy services to public entities, whenever such services were provided in the last three years to private parties participating in the administrative procedure at hand.




Prior to the opening of a public contract formation procedure, the awarding entity may engage in informal consultations with the market, namely requesting the opinion of experts, independent authorities or economic agents. Market engagement may not subvert the logic of market competition or violate the principles of transparency and non-discrimination. In this regard, the awarding entity must take adequate measures to avoid any distortion of competition, namely, to disclose to other bidders any relevant information exchanged with another bidder in the preparation of the tender (by publicising such information in the tender documents). It is also important to mention that any assistance in the preparation of tender documents may constitute an impediment to bid, if such assistance granted the interested party an advantage that distorts competition.




The PCC is not applicable to certain contracts, as follows:

■ Certain contracts signed pursuant to international conventions to which the Portuguese State is a party, or within specific procedural rules of an international organisation to which Portugal is a member.

■ Contracts signed pursuant to rules applicable to public procurement determined by an international organisation or an international financial institution where the contracts in question are financed in full by that organisation or institution.

■ Contracts signed pursuant to development cooperation instruments, with an entity based in one of its signatory States and for the benefit of that State, provided that it is not a signatory to the Agreement on the European Economic Area.

■ Contracts signed pursuant to the provisions of Article 346 of the Treaty on the Functioning of the European Union.

■ Contracts signed pursuant to an international agreement or arrangement relating to the parking of troops and involving undertakings from a Member State to a third country.

■ Labour administrative contracts and individual employment contracts.



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■ Contracts for the donation of movable property in favour of any awarding entity.

■ Contracts for the acquisition, donation, barter, lease of immovable property or similar contracts.

■ Contracts for the acquisition, development, production or co-production of programmes aimed at audiovisual media services and broadcasting by audiovisual media and broadcasting entities and supply contracts of broadcasting programmes.

■ Contracts for peripheral services or certain delegations of the awarding entities referred to in Article 2 located outside the national territory.

■ Contracts whose object is not subject to market competition.

■ “In-house” contracts (contracts entered into by an awarding entity with another entity whereby: (i) the awarding entity has direct or indirect control, alone or together with other awarding entities, over such an entity, which is similar to the control over its own services; (ii) such an entity carries more than 80% of its activity in the benefit of one or several awarding entities that have such control over it; and (iii) there is no direct participation of private capital in the controlled entity, except in what concerns participation without control or blocking powers and with no decisive influence over controlled entity).

■ Contracts that have to be entered into with an awarding entity holding special rights.

■ Grant and subsidy agreements.

■ Incorporation of company contracts, whose capital is to be held exclusively by awarding entities referred to in Article 2, paragraph 1.

■ Contracts for the acquisition of financial services related to the issuance, purchase, sale or transfer of securities or other financial instruments and their ancillary services, as well as contracts to be executed in pursuance of monetary and exchange rate policies or of reserves management.

■ Contracts for the acquisition of financial services of issuance and management of public debt and State treasury management.

■ Contracts between awarding entities and public purchase centres for the rendering of services regarding centralised purchases.

■ Contracts concluded under the provisions of the legal regime for public contracts in the field of defence and security.

■ Contracts which, under the terms of the law, are declared secret or whose execution must be accompanied by special security measures and when the essential defence and security interests of the State so require.

■ Contracts for the acquisition of research and development services.




Please see question 4.1 with regard to what concerns “in-house” contracts.

5 Remedies



Articles 267 to 274 of the PCC provide for the administrative

challenge of decisions taken within the contract formation procedure and of the tender documents. Administrative challenges must be presented within five working days, and they do not have a stay effect on the procedure. In any case, if there is no decision on the administrative challenge, the following acts cannot be performed: a) a qualification decision; b) the beginning of the negotiation phase; and c) the awarding of the decision. For judicial remedies, please see question 5.2 below.



The Procedural Code of the Administrative Courts (PCAC) provides for judicial remedies: the challenge of tender documents; and the challenge of administrative acts regarding pre-contractual procedure. These are urgent proceedings, only applicable to public works contracts, concessions of public works and services and supply of services and supply or lease of goods. Judicial challenge under the PCAC must be filed within one month after the notification of the act or, in its absence, of the knowledge of such act. Please note that the challenge of awarding acts automatically suspends the effects of such an act or the performance of the contract, if it has been already executed. The awarding entity and interested parties may ask the judge to lift such a suspensive effect, if the deferral of the execution of the awarding act is harmful to public interest or to other interests at a disproportionate level.

Regarding other types of contracts, judicial challenge is also possible, but under the general regime of the PCAC. The PCAC also provides for specific injunctions in the pre-contractual field.


sought?

The non-judicial remedies (administrative challenges) can be sought before the awarding entities, whilst the judicial remedies can be sought before the Administrative Courts (or Arbitration Courts, if arbitration is referred in the tender documents).


remedies?

Please see questions 5.1 and 5.2.


periods?

No measures can be taken to shorten limitation periods.


Judicial remedies are also available against the contract itself. The following persons have legal standing for such purpose:

■ the parties;

■ a party that has been jeopardised by the fact that a legal pre-contractual procedure was not adopted;

■ a party that has judicially challenged an administrative act regarding the formation of the contract;

■ a party that, having participated in the pre-contractual procedure, considers that the contract does not correspond to the terms of the award; and



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■ a party that considers that the contract does not correspond to the specifications which justifiably resulted in its non-participation in the procedure, although the necessary requirements for such an effect were met.


remedies is made?

The timescale may vary according to the complexity of the case and of the Administrative Court itself.



Remedies measures are usually easily obtained whenever the chosen pre-contractual procedure is not the legal procedure considering the estimated value of the contract, and whenever there is flagrant violation of procedural rules.



There are cases in which the awarding entities may not comply with the Court judgment: (i) when it is objectively impossible to do so; or (ii) when compliance would cause severe damages to the public interest.

In addition, Article 283 of the PCC, which addresses annulment of the contract based on procedural defects, provides mitigation measures. The annulment effect may be disapplied by the Court when, considering the private and public interests at stake and the gravity of the violation of law, the annulment of the contract is considered by the Court as disproportional or contrary to good faith.


Procedure







The PCC allows amendment to the tender documents prior to the deadline for submission of tenders. If the amendment is substantial, there will be an extension of the deadline for submission of tenders.

After the submission of tenders and prior to the contract award, no substantial changes to the tender documents are allowed. It is not possible to change membership of bidding consortia on a pre-contract award stage.

After the contract award, and before the signature of the contract, some adjustments to the draft of the contract may be proposed by the awarding entity if:

■ the adjustments are required for public interest reasons; and

■ it is shown that the evaluation of tenders would have been the same had the adjustments been made before awarding the contract.



After the submission of a final tender, there is no scope for negotiation. It is only possible, after the award, for the awarding entity to propose some adjustments to the contents of the contract to be entered into if the same results from public interest requirements, and it is objectively shown that if the bid had included such adjustments, no alteration would exist in the ranking of the bids.


signature?

After the contract is signed, the contract may be changed if both parties so agree or by a Court decision. The law also allows unilateral amendments of the contract by the awarding entity for public interest grounds.

The contract may be changed on the grounds of public reason, or as a consequence of a change in circumstances. In any of the cases referred to above, the changes of the contract must respect the pre-award competition, the object of the contract and the initial economic balance of the contract (the economic balance may not be altered to put the awarded entity in a more favourable situation). Also, changes to the contract may not cause a change of price that exceeds 25% (if the contract is changed as a consequence of a change in circumstances) or 10% (if the contract is changed on public interest grounds) of the initial price.

In certain cases, unilateral modification gives rise to the financial rebalancing of the contract.



signature?

Transfer of the signed contract to another entity is not allowed:

(a) when the choice of the awarded entity was made by a direct award, where only one entity could be invited to bid;

(b) to entities included by impediments set forth in Article 55 of PPC; and

(c) where strong evidence exists that the transfer results from an act or agreement susceptible to falsified competition rules.

Except for the foregoing, transfer is possible, if that possibility is expressly provided for in the contract, and subject to authorisation by the awarding entity. Authorisation also depends upon:

(a) the previous submission by the potential transferee of all habilitation documents requested to the transferor; and

(b) the fulfilment, by the potential transferee, of minimum requirements regarding financial and technical capacity demanded of the transferor in the qualification phase, should that phase have occurred.

Please note that the contract may also refer that in case of default of the contracted party, an assignment to the subsequent bidder may take place as an alternative to termination by decision of the contracting authority.



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them?

Privatisations are not subject to the PCC. They are foreseen in Law no. 11/90 of 5 April, amended by the Law no. 50/2011 of 13 September, in cases of “reprivatisations” (privatisation of an entity which was previously nationalised) and in Law no. 71/88 of 24 May, in other cases. Both laws admit privatisations through open procedures, restricted procedures, and public offerings pursuant to the Securities Markets Code (the terms of it are different in each diploma).



Decree-Law no. 111/2012, of 23 May, defines the applicable rules to State PPPs.

The main issues related to PPPs are budget impact and the need to evaluate the affordability of the contract, as well as risk-sharing between public and private parties.

The launch and awarding of a PPP depend on certain requirements, such as:

(i) The study of the predictable budget impacts.

(ii) The clear enunciation of the partnership goals to the public sector and of the private partnership’s expected results.

(iii) The framing of partnership models and contractual structures that ensure, namely, that the financial effort of the public partner is apportioned with adequate terms and budget affordability.

(iv) The detailed identification of the risks to be assumed by each of the partners (the different risks of the partnership must be allocated between the parties in accordance with their ability to manage those risks).

The diploma also rules the renegotiation of PPPs.

8 The Future



impact?

No. The PCC has recently been amended by Decree-Law no. 33/2018 of 15 May.




No, there have not.



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Margarida Olazabal Cabral

Morais Leitão, Galvão Teles, Soares

da Silva & Associados

Rua Castilho, 165

1070-050 Lisboa

Portugal

Tel: +351 213 817 443 Email: [email protected] URL: www.mlgts.pt

Ana Robin de Andrade

Morais Leitão, Galvão Teles, Soares

da Silva & Associados

Rua Castilho, 165

1070-050 Lisboa

Portugal

Tel: +351 213 817 443 Email: [email protected] URL: www.mlgts.pt

Morais Leitão, Galvão Teles, Soares da Silva & Associados is an independent full-service law firm and one of the leading law firms in Portugal, with

more than 180 lawyers and offices in Lisbon, Porto and Funchal (Madeira). We have a significant international practice in all major areas of law and

represent multinational corporations, international financial institutions, sovereign governments and their agencies, as well as domestic corporations

and financial institutions. To address the needs of our clients throughout the world, particularly in the Portuguese-speaking countries, the firm

established the Morais Leitão Legal Circle, an international network based upon the sharing of values and common principles of action with the

purpose of establishing a platform that delivers high-quality legal services to clients around the globe. It encompasses a select set of jurisdictions,

including Portugal, Angola, Mozambique, Macau and Hong Kong. We also maintain close contacts with major law firms in Europe, the United States

and South Africa, and are the sole Portuguese member of Lex Mundi, the world’s leading association of independent law firms. Our Public Law team,

based in Lisbon and Porto, is widely recognised for its in-depth knowledge in all aspects of administrative law and all matters related therewith. We

seek to find the appropriate creative solutions to meet clients’ needs both in the private and in the public sector. Regarding public procurement, our

expertise in the field of pre-contract procedures and the implementation of agreements should be highlighted, as should our provision of specialised

services on a day-to-day basis to private entities (ranging from drafting proposals to entering and implementing agreements) and contracting entities

(ranging from designing agreements, and the appropriate procedure to adopt through to the termination of the agreement).

Margarida Olazabal Cabral joined the firm in 1998 and became a

salary partner in 2010. She is a member of the administrative and

public procurement and urban planning and environment teams.

Margarida is highly specialised in administrative law, mainly in areas

related to public contracts. She has experience with pre-contractual

matters (public tenders), as well as with the execution of public

contracts on behalf of public entities and private companies. In recent

years a major part of her activity has been dedicated to public-private

partnerships. She is listed in the International Who’s Who of Public Procurement Lawyers and as a leading Public Procurement specialist

by Chambers Global. She teaches at the Portuguese Catholic

University LL.M. programme. Margarida is the author of several

publications and books on public procurement and is often invited to

participate as a main speaker in lectures on the scope of

administrative law (public procurement and administrative litigation).

Ana Robin de Andrade joined the firm in 2000. She is a senior

associate with the administrative and public procurement and urban

planning and environment teams.

Ana also collaborates with the Africa Team – an internal structure that

guarantees, on a permanent basis, and in close cooperation with the

member firms of the Morais Leitão Legal Circle, personalised day-to-

day assistance to clients on matters that involve the African

Portuguese-speaking countries – in which she regularly assists clients

in the areas of administrative and public procurement law. Ana

practises mainly in the areas of public procurement and urban

planning, as well as in procedural matters and administrative litigation.

A major part of her practice is also dedicated to concession contracts

under a project finance regime. Ana Robin de Andrade often

participates in seminars and conferences related to public

procurement and administrative litigation matters.



Chapter 24


VASS Lawyers

Iulia Vass

Bianca Bello

Romania




As a European Union Member State, Romania’s legislation on public procurement reflects the transposition of the European directives in public procurement, namely Directive 2014/24/EU, Directive 2014/25/EU, Directive 2014/23/EU and the remedies Directives 89/665/EEC and 92/13/EEC as amended by Directive 2007/66/EC.

The core of the public procurement legislation (“PPL”) is thus formed of:

■ Law no. 98/2016 on public procurement (“Law no. 98/2016”);

■ Law no. 99/2016 on utilities procurement (“Law no. 99/2016”); and

■ Law no. 100/2016 on works concession contracts and services concession contracts (“Law no. 100/2016”).

Secondary legislation was also adopted for the application of these pieces of legislation:

■ Government Decision no. 395/2016 on the approval of the Application Norms of Law no. 98/2016 (“GD no. 395/2016”);

■ Government Decision no. 394/2016 on the approval of the Application Norms of Law no. 99/2016 (“GD no. 394/2016”); and

■ Government Decision no. 867/2016 on the approval of the Application Norms of Law no. 100/2016 (“GD no. 867/2016”).

In addition to the above general legal framework that provides the principal rules for organising and carrying out the award procedures, a remedies law was also adopted, namely Law no. 101/2016 on remedies and review procedures in the field of the award of public procurement contracts, utilities contracts and works and services concession contracts, as well as for the organisation and functioning of the National Council for Solving Complaints (“Law no. 101/2016”).

Also, the public procurement institutional framework is regulated by specific primary and secondary pieces of law, such as:

■ Government Decision no. 1037/2011 on the approval of the Regulation on organisation and functioning of the National Council for Solving Complaints (“Council” or “NCSC”);

■ Government Emergency Ordinance no. 13/2015 on the setting, organisation and functioning of the National Agency for Public Procurement (“NAPP”); and

■ Government Decision no. 634/2015 on the organisation and functioning of the NAPP.

These pieces of legislation are supplemented by:

■ part of the old tertiary legislation which remained applicable even after the adoption of the new PPL, consisting of orders adopted by the former National Authority for the Regulating and Monitoring of Public Procurement on the interpretation and application of certain legal provisions of the old PPL; and

■ new tertiary legislation consisting of orders adopted by the NAPP on the interpretation and application of the current PPL.




of the legislation?

Law no. 98/2016 provides the fundamental principles governing public procurement procedures, namely: non-discrimination; equal treatment; mutual recognition; transparency; proportionality; and accountability.

These principles are of paramount importance for the interpretation and application of PPL, as they create a general framework for the award of public procurement contracts. Moreover, any situation for which there is no express regulation shall be interpreted in light of these principles.



Some of the relevant special rules regard:

■ defence procurement – GEO no. 114/2011 for defence procurement applies to the award of contracts which refer to the supply of military products and/or of sensitive products, to works, products and services directly related to the aforementioned products and to works and services specific for military purposes or sensitive works and services;

■ technical specifications – technical specifications are subject to specific legal provisions relevant for the scope of the contract (e.g. constructions legislation, utilities legislation, energy legislation);

■ transportation – transportation is subject to regulations such as GEO no. 40/2011 with regard to procurement of road transport vehicles;


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■ biocidal products – a template of the award documentation for the procurement of biocidal products is approved by Order no. 1082/2016 of the ministry of health and the president of the NAPP; and

■ European funds – a significant number of procedures are carried out by economic operators and contracting authorities accessing European funds, the specific legislation, e.g. GEO no. 66/2011, GD no. 875/2011 or GD no. 519/2014, with regard to projects financed from European funds, being thus applicable.



public procurement?

Both contracting authorities and tenderers are bound by specific normative acts such as Competition Law no. 21/1996, Law no. 544/2001 on free access to information of public interest and Law no. 161/2003 on certain measures to ensure transparency in the exercise of public dignities, public functions and business environment, as well as the prevention and punishment of corruption.

Technical specifications are also subject to specific legal provisions relevant for the scope of the contract (e.g. constructions legislation, utilities legislation, energy legislation, public utilities services legislation, etc.).

Last but not least, as a significant number of procedures are carried out by economic operators who have accessed European funds, the complex legislation in this field is applicable as well.



agreements?

In 2006, Romania transposed for the first time the EU rules in force at that time, respectively Directive 2004/18/EC, Directive 2004/17/EC, Directive 92/13/EEC and Directive 89/665/EEC, which became the very basis of the PPL.

When acceding to the EU in 2007, Romania also became part of the GPA, thus being bound by this agreement.

In May 2016, the newly adopted directives, namely Directive 2014/24/EU, Directive 2014/23/EU and Directive 2014/25/EU were duly transposed by Romania as well.

The European treaties (Treaty on European Union – “TEU” and Treaty on the Functioning of the European Union – “TFEU”) and the Commission regulations are directly applicable.


Contracts



PPL covers the award of contracts by both public and private entities.

In terms of public entities, the contracting authorities acting as purchasers under Law no. 98/2016 are as follows:

1. central or local public authorities and institutions, as well as the structures thereto which have been delegated the capacity of authorising officers and who have responsibilities in the public procurement field;

2. public bodies; the public body is defined as any entity except for those provided for in paragraph one, which, regardless of their organisation and legal form, are: (i) established for the specific purpose of meeting general interest needs without having an industrial or commercial character; (ii) have legal personality; and (iii) are mostly financed by entities provided for in paragraph one or by other public bodies; or they are under the authority or in the subordination/coordination/ control of one of the entities provided for in paragraph one or of another public body; or more than half of its board of directors, or the members of its management or supervisory bodies, are nominated by one of the entities mentioned under paragraph one or by another public body; and

3. any association of one or several contracting authorities as defined under paragraphs 1 and 2.

As regards private entities, the provisions of Law no. 98/2016 apply to private entities acting as purchasers when they award services/works contracts that are directly financed for more than 50% by a contracting authority and the estimated value of the contract is equal to or above RON 994,942 (approximately EUR 221,000) for services contracts and RON 24,977,096 (approximately EUR 5,548,000) for works contracts.

The provisions of Law no. 98/2016 apply to works contracts fulfilling the above requirements and including one of the following activities:

■ civil engineering works; and

■ construction works for hospitals, facilities designed for sport, recreation and leisure, school and university buildings and buildings used for administrative purposes.


The national PPL provides for the following types of contracts: (i) services, works or supply public procurement contracts; (ii) services, works or supply utilities contracts; and (iii) services or public works concession contracts.



Romanian legislation stipulates several financial thresholds for determining individual contract coverage. As a consequence, contracting authorities must publish a contract notice/award notice in the Official Journal of the European Union (“OJEU”) in the following cases:

■ the estimated value of the supply or services contracts/framework agreements is equal to or above RON 648,288;

■ the estimated value of the supply or services contracts/frameworks agreements is equal to or above RON 994,942 for contracts awarded by the local/county council, Bucharest General Council, as well as public institutions in their subordination;

■ the estimated value of the services contracts/framework agreements is equal to or above RON 3,376,500 for social and other specific services (provided in Annex 2 of Law no. 98/2016); and

■ the estimated value of the works contracts/framework agreements is equal to or above RON 24,977,096.

A simplified procedure is applied for contracts/framework agreements with an estimated value below the above-mentioned thresholds but which exceed RON 135,060 for supply and services contracts, and RON 450,200 for works contracts. Within a

VASS Lawyers Romania


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simplified procedure, contract notices are published only in the Electronic System for Public Procurement (“ESPP”).

Below the threshold of RON 135,060 for every products or services purchase, or RON 450,200 for every works purchase, contracting authorities may purchase directly goods, services or works.


According to Law no. 98/2016, the contracting authority does not have the right to subdivide a public procurement contract in several separate contracts of lower value, nor to use calculation methods leading to a sub-evaluation of the estimated contract value, in order to avoid the application of the award procedures provided for in the law.

The rules on the estimation of the contract value follow the same reasoning and require, for each type of contract, that the contracting authority takes into account the total of all estimated amounts payable, net of VAT, including any form of option and any renewals of the contract as explicitly set out in the procurement documents. The same applies for services, supplies or works contracts awarded by lots, where the estimated value of the contract results from adding up the value of all lots.



The Romanian PPL does indeed provide special rules for concession contracts in Law no. 100/2016.

The works concession contract is defined as a contract for pecuniary interest, assimilated under the law to the administrative act, concluded in writing, by means of which one or more contracting entities entrust the execution of works to one or more economic operators, and in consideration of the works executed, the contractor receives from the contracting entity either solely the right to exploit the works, or this right together with the payment of an amount previously established.

The services concession contract is defined as a contract for pecuniary interest, assimilated under the law to the administrative act, concluded in writing, by means of which one or more contracting entities entrust the provision and management of services, other than the execution of works referred to above, to one or more economic operators, and in consideration of the services provided, the contractor receives from the contracting entity either solely the right to exploit the services, or this right together with the payment of an amount previously established.



PPL provides a series of special rules for the conclusion of framework agreements.

Firstly, contracting authorities are not allowed to improperly or abusively use framework agreements, so as to prevent, restrict or distort competition.

Secondly, contracting authorities do not have the right to conclude a framework agreement for more than four years (classic procurement) or eight years (utilities), except for extraordinary cases justified by the specific subject of the subsequent contracts to be awarded under the respective framework agreement.

Also, a framework agreement may be concluded with one or several economic operators. Should the framework agreement be concluded with several economic operators, the contracting authority is entitled to award the subsequent contracts either:

■ without reopening the competition;

■ by reopening the competition between the economic operators who signed the framework agreement; or

■ partially, without reopening the competition between economic operators and partially by reopening the competition, only if this possibility was provided in the award documentation and if the framework agreement sets out all the terms and conditions governing the execution of works/provision of services/supply of products subject to the framework agreement.

At the same time, once it concludes a framework agreement, in principle, the contracting authority is no longer entitled to initiate a new award procedure for a contract having as its subject the purchase of products/services/works included in the respective framework agreement, if the maximum estimated quantities were not exceeded or their exceeding does not represent a substantial amendment of the agreement.


into lots?

PPL provides a set of specific rules in relation to the division of contracts into lots.

Contracting authorities have the right to divide the contracts into lots provided that the procurement documents include the following information:

■ the object of each lot on a qualitative or quantitative basis; and

■ the dimensions of individual contracts adapted to better reflect the capacity of small and medium-sized enterprises.

If this is the case, the contracting authorities must justify their choice not to divide the contracts into lots.

The contracting authority mentions within the award documentation whether tenders can be submitted for one, more or all lots. Also, the contracting authority has the right to limit the number of lots which can be awarded to one tenderer.



Although not limited to the nationality criteria, from such perspective, the principles of non-discrimination, equal treatment and mutual recognition ensure access to public procurement procedures for suppliers outside the Romanian jurisdiction under similar conditions as for those of Romanian nationality.

As such, the principle of non-discrimination obliges purchasers to grant appropriate conditions for real competition, in order to enable any economic operator, irrespective of its nationality, to:

■ participate to the public procurement procedure; and

■ have the chance to become a contractor.

Also, the purchasers must set and apply, during the entire public procurement procedure, identical rules, requirements and criteria for all economic operators, to grant them equal chances to become contractors.

The mutual recognition principle obliges purchasers to accept products, services or works legally present on the European market, diplomas, certificates or any other documents issued by competent foreign authorities and, also, technical specifications equivalent to the national ones. The contracting authorities shall use e-Certis and request, in principle, those certificates or justifying documents available in e-Certis.



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3 Award Procedures




Law no. 98/2016 provides for the following award procedures:

■ Open procedure, within which any interested economic operator has the right to submit a tender. This procedure is carried out in one stage.

■ Restricted procedure, within which any economic operator is entitled to submit a request for participation, but only selected candidates are allowed to submit a tender. This procedure is carried out in two stages: submission of requests for participation and selection of candidates; and submission and evaluation of tenders.

■ Competitive procedure with negotiation, within which any economic operator is entitled to submit a request for participation, but only selected candidates are allowed to submit an initial tender, on the basis of which the contracting authority carries out negotiations for its improvement. The negotiated procedure is carried out in two stages: submission of requests for participation and selection of candidates; and submission of initial tenders and negotiations.

■ Competitive dialogue, within which any economic operator is entitled to submit a participation request, but only selected candidates are allowed to take part in the dialogue stage. The candidates remaining at the end of the dialogue stage are entitled to submit the final tender. This procedure is carried out in three stages: submission of requests for participation and selection of candidates; dialogue with the selected candidates; and submission and evaluation of final tenders.

■ Innovation partnership, a procedure applicable by the contracting authority for the development and subsequent purchase of innovative products, services or works, when the solutions available on the market at a certain moment do not satisfy its needs. This procedure is carried out in three stages: submission of requests for participation and selection of candidates; submission of initial tenders on the basis of which negotiations will be carried out with the contracting authority; and negotiations, submission and evaluation of the final tenders.

■ Negotiated procedure without prior publication, a special procedure applicable in one of the following situations: (i) when no tender/request for participation has been submitted within the open/restricted procedure or simplified procedure or when only inadequate tenders/requests for participation have been submitted, provided that the initial procurement requirements are not substantially amended and, upon request of the European Commission, a report is sent in this respect; (ii) when the works/products/services can be provided only by a certain economic operator; or (iii) as a strictly necessary measure when the timelines for the open/restricted procedure, competitive procedure with negotiation or simplified procedure cannot be met for reasons of extreme urgency brought about by unforeseeable events and not due to any form of action or inaction of the contracting authority.

■ Design contest, a special procedure through which the contracting authority purchases, mainly in the fields of town and country planning, architecture and engineering or data processing, a plan or a design by selecting it through a jury, on a competitive basis, with or without the award of prizes.

■ Award procedure applicable for social and other specific services provided in Annex no. 2 to Law no. 98/2016, which might be one of the award procedures mentioned above (if the estimated value is equal to or above the financial

threshold for publication in the OJEU) or a procedure established by the contracting authority (if the estimated value is below the financial threshold for publication in the OJEU). The contracting authority may reserve the right for certain economic operators (e.g. social enterprises, protected units) to participate in procedures for the award of public contracts exclusively for the health, social and cultural services covered by certain CPV codes.

■ Simplified procedure, the procedure applicable for the award of contracts below EU thresholds and above direct purchase thresholds, whereby the contracting authority requests tenders from several economic operators. This procedure is carried out either in one stage or several stages consisting in the selection of candidates, negotiation and evaluation of tenders.

As a general rule applicable for classic procurement, contracting authorities shall apply the open or restricted procedure. In specific circumstances, expressly provided by the law, the contracting authorities may award public contracts by means of other award procedures.

Additionally, Law no. 98/2016 provides for three special award procedures:

■ Framework agreement – the written agreement between one or more contracting authorities and one or more economic operators, the purpose of which is to establish the terms and conditions governing the public procurement contracts to be awarded during a given period, in particular with regard to price and, where appropriate, to quantities.

■ Dynamic purchasing system – the contracting authority has the right to use a dynamic purchasing system only through the ESPP and only for the purchase of everyday consumer products, the general features of which, available on the market, meet the needs of the contracting authority.

■ Electronic auction – the electronic auction can be used as a final stage of the open/restricted procedure, competitive procedure with negotiation or simplified procedure; upon reopening the competition between economic operators part of a framework agreement; or upon submission of tenders for the award of a contract within a dynamic purchasing system.


Romanian PPL provides several timescales for different steps depending on the specific procedure.

Thus, the law stipulates certain minimum timescales between the publishing of the contract notice in the OJEU/ESPP and the deadline for submission of tenders/requests for participation:

■ for open procedure – 35 days;

■ for restricted procedure, competitive procedure with negotiation, competitive dialogue and innovation partnership – 30 days; and

■ for simplified procedure – 10 days in case of services/supply contracts, six days in case of low complexity products supply contracts and 15 days in case of works contracts.

In the case of a design contest, the public authority sets an adequate and sufficient time limit between the publishing of the contest notice and the deadline for submission of projects in order to allow the economic operators to draft the projects. The contest notice has to be published in any case with at least 30 days before the deadline for submission of projects.

Most of the above timescales can be further diminished under certain conditions, such as publication of a prior information notice and/or accepting the submission of tenders through electronic means.



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Other timescales concern the establishing of the successful tenderer within 25 days from the date of submission of tenders or the publishing of the award notice within 30 days after the conclusion of the public procurement contract.


tenderers?

According to Law no. 98/2016, contracting authorities have the right to apply qualification and selection criteria with regard to: exclusion grounds of the candidate/tenderer; and the capacity of the candidate/tenderer.

On one hand, the exclusion grounds of the candidate/tenderer stipulated by Romanian PPL are those provided by Directive 2014/24/EU. All exclusion grounds are stipulated as mandatory under national law, the contracting authority thus being bound to exclude the economic operators falling under such cases. The exclusion grounds concern aspects such as: the economic operator being under a conflict of interest within or in connection to the procedure; the economic operator’s participation in the preparation of the procurement procedure leading to a distortion of competition; the economic operator having entered into an agreement with other economic operators aimed at distorting competition; or the economic operator having committed a serious professional misconduct which renders its integrity questionable. The grounds are conditional either upon the impossibility of the contracting authority to remedy the situation by taking other, less intrusive, measures (the first two grounds) or the contracting authority having reasonable enough evidence/concrete information/appropriate means of proof, such as a decision of the court or an administrative authority (the last two grounds).

PPL also provides the possibility of the tenderer/candidate to prove the taking of appropriate self-cleaning measures in relation to the exclusion grounds.

The absence of the exclusion grounds has also to be checked by the contracting authority in relation to the subcontractors proposed by the tenderer/candidate. Should such grounds occur, the contracting authority shall request the tenderer/candidate only once to replace the respective subcontractor.

On the other hand, the capacity criteria may concern only the following: suitability to pursue the professional activity; economic and financial standing; and technical and professional ability.

Contracting authorities may also require the submission of specific certificates attesting the compliance with certain quality assurance standards or with standards or environmental management systems, in which case the European standards series shall be taken into consideration.

Contracting authorities may establish minimum levels for the above-mentioned criteria and may request supporting documents. Those tenders not fulfilling the qualification criteria shall be rejected as unacceptable.

Within restricted procedures, competitive procedures with negotiation and competitive dialogue, the contracting authority shall select/preselect the candidates in accordance with the criteria and rules mentioned in the contract notice. Contracting authorities are also bound to mention in the contract notice the minimum and maximum number of candidates intended to be selected.




According to PPL, when awarding a public procurement contract,

the contracting authority has the obligation to appoint the persons in charge with the evaluation of tenders. These persons form the evaluation committee. In order to support the evaluation activities, the contracting authority may also appoint co-opted external experts.

The evaluation committee has the obligation to analyse and verify each tender from a technical and a financial point of view. Also, the evaluation committee has the obligation to check compliance with the qualification and selection criteria by analysing the content of the European Single Procurement Document (“ESPD”).

During the evaluation process, the evaluation committee establishes the clarifications and subsequent supplements, whether formal or confirmatory, necessary for the evaluation of each tender/request for participation and the period of time granted for the transmission of such clarifications. The term must be established in working days (as a rule, minimum of one working day) and the contracting authority cannot mention a specific hour within the deadline. If the tenderer does not transmit the required clarifications within the term established by the evaluation committee, or if the clarifications submitted are not conclusive, the tender shall be considered unacceptable.

Equally important, the evaluation committee has the right to correct, under certain conditions, any arithmetic errors, formal flaws or minor technical errors, only with the tenderer’s approval.

The evaluation committee must reject unacceptable, inadequate and non-conformant tenders. The successful tender must be established by the contracting authority within a term that should not exceed the validity period of tenders as established in the procurement documents. This period may be extended in duly justified cases, with the obligation for the contracting authority to inform the concerned economic operators within a maximum term of two days.

The contract is awarded to the tenderer who submitted the most economically advantageous tender. In order to establish the most economically advantageous tender, the contracting authority applies one of the following criteria: (i) lowest price (only for procedures under the JOUE publication thresholds); (ii) lowest cost; (iii) best quality-price ratio; or (iv) best quality-cost ratio. Best quality-price/quality-cost ratio is determined on the basis of evaluation factors including quality, environmental and/or social aspects, in connection with the subject of the contract.

Such factors may regard:

■ quality, including technical advantages, aesthetic and functional characteristics, accessibility, design concept for all users, the social, environmental and innovative characteristics, as well as marketing and conditions thereof;

■ organisation, qualification and experience of the staff assigned for performing the contract, if the quality of the staff assigned can have a significant impact on the quality level of contract performance; or

■ post-sale services, technical support and supply conditions, such as delivery time, delivery process and delivery or completion term.

Should two or more tenders be equivalent, the contracting authority can apply an additional criterion such as, exempli gratia, fighting unemployment. The additional criterion must be mentioned expressis verbis in the contract notice.


low tenders?

Present PPL does no longer provide for a threshold by reference to which the abnormally low price is to be ascertained. Such



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ascertainment is made by the evaluation committee as per market prices (through information such as statistical bulletins or stock market quotes).

In case of abnormally low tenders, contracting authorities have the obligation to: (i) request clarifications from the tenderer with regard to the price/costs proposed in the tender; (ii) assess the information provided by the tenderer; and (iii) reject the tender only when the evidence supplied does not satisfactorily account for the low level of price or costs proposed.

The clarifications required by the contracting authority may in particular relate to: (i) the economics of the price formation by referring to the manufacturing process, the services provided or the construction methods used; (ii) the technical solutions chosen and/or any exceptionally favourable conditions available to the tenderer for the supply of the products or services or for the execution of the work; (iii) the originality of the work, supplies or services proposed by the tenderer; (iv) compliance with the legal obligations in the environment, social and labour fields, during performance of the public procurement contract; (v) compliance with the obligations related to payment of subcontractors; and (vi) the possibility for the tenderer to benefit from state aid.


The contract is awarded to the successful tenderer based on the award criterion and evaluation factors specified within the contract notice and award documentation. The following conditions have to be met:

■ the respective tender complies with all requirements, conditions and criteria stipulated in the contract notice and award documentation; and

■ the respective tender was submitted by a tenderer fulfilling the qualification and, if the case, selection criteria, and does not fall under the exclusion grounds.

Should the contracting authority not be able to conclude the contract with the successful tenderer, due to a force majeure situation or a fortuitous impossibility of performance, the contract may be awarded to the tenderer ranked second provided that its tender is admissible.

After the evaluation of tenders is completed, the evaluation committee drafts the award procedure report, which shall be signed by all its members, including the president. The report must be approved by the head of the contracting authority.


bidders?

Contracting authorities have the obligation to inform all economic operators involved in the award procedure of the decisions regarding the result of the selection or the award procedure, in writing, no later than three days as of their issuance. The communication of the procedure’s result is drawn and based on the award procedure report.

Within this communication, the contracting authorities have to inform the unsuccessful tenderers/candidates of the reasons that led to the decision, as follows: (i) to each rejected candidate, the concrete reasons which led to the rejection; (ii) to each rejected tenderer, the concrete grounds which led to the rejection; (iii) to any admissible but unsuccessful tenderer, the characteristics and relative advantages of the winning tender(s) in relation to its tender, as well as the name of the successful tenderer; and (iv) to any admissible tenderer, information regarding the development and the progress of the negotiations and dialogue with the tenderers.

The contracting authority is entitled not to disclose the above information if the disclosure would: (i) impede the application of a legal provision; (ii) be contrary to public interest; (iii) prejudice the legitimate commercial interests of the economic operators; or (iv) prejudice fair competition.


According to Law no. 98/2016, any association of one or more contracting authorities is also a contracting authority.

The setting-up of centralised procurement units, as well as the conditions under which contracting authorities purchase products/services from such units and the conditions under which the centralised procurement units award public procurement contracts/framework agreements for other contracting authorities, may be established through government decision or the decision of the local deliberative authorities.

An example in this regard is represented by the National Office for Centralised Procurement which was established through GEO no. 46/2018 as a public institution, under the subordination of the Public Finances Ministry. The National Office for Centralised Procurement was designated as a centralised procurement unit which is supposed to provide the following activities in the name and on behalf of the users (i.e. contracting authorities): (i) the conclusion of framework agreements; and (ii) the management of dynamic purchasing systems. The users shall conclude subsequent contracts pursuant to the framework agreements signed by the National Office for Centralised Procurement or public procurement contracts within the dynamic purchasing systems managed by the Office.


When variants are requested/allowed, the technical specifications have to provide the minimum requirements that tenders must observe and any other specific requirements for the submission of variants, in particular whether variants can be submitted only together with a tender which is not an alternative.

Variants which do not meet these minimum requirements shall not be taken into consideration by the contracting authority.


Pursuant to Law no. 98/2016, contracting authorities are bound to take all necessary measures in order to avoid, identify and remedy situations leading to a conflict of interest for the purpose of avoiding distortion of competition and ensuring equal treatment of all economic operators.

The conflict of interest situations are expressly regulated by the legal provisions. Thus, for example, the following persons are not entitled to participate in the verification/evaluation of requests for participation/tenders:

■ persons who hold social parts, parts of interest, shares of the subscribed capital of one of the tenderers/candidates, supporting third parties or subcontractors, or of the persons that are part of the board of directors/management or supervisory body of one of the tenderers/candidates, third supporting parties or subcontractors;

■ husbands/wives or close family relatives up to the second degree included, with persons who are part of the board of directors/management or supervisory body of one of the tenderers/candidates, supporting third parties or subcontractors; or



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■ persons ascertained or with regard to whom there is reasonable evidence/concrete information that they may have a personal/financial/economical/any other kind of interest, or they may be in another situation which is likely to affect their impartiality and autonomy in the process of verification/ evaluation of requests for participation/tenders.

At the same time, the law sanctions with the exclusion from the procedure, any tenderer/candidate/subcontractor/supporting third party that has, as members of its board of directors/management or supervisory body, and/or has shareholders or significant associates, persons who are husbands/wives or a close family relative up to the second degree included, or who have commercial relations with either persons holding positions of decision within the contracting authority or the public procurement services provider involved in the award procedure. The same sanction applies for the candidate/tenderer that nominated such persons as persons mainly designated with the execution of the contract.

For this purpose, the members of the evaluation committee and the co-opted experts are requested to submit a statement on their own liability confirming the absence of conflict of interest and contracting authorities have to mention in the award documentation the persons holding such positions of decision and/or the name of the public procurement services provider.




Before launching a procurement procedure, when it intends to purchase products, services, or works of high technical, financial, contractual complexity or in fields with quick technological progress, the contracting authority may conduct market consultations for the purpose of preparing the procurement and informing economic operators of its procurement plans and requirements.

Contracting authorities may invite independent experts, public authorities or economic operators and may hold individual or common meetings or open events for the interested persons/organisations in order to discuss the proposed advice/suggestions/recommendations or subjects of general interests (e.g. the structure of the market; prices tendencies and other commercial elements specific to the field of interest; technical, innovative, social integration aspects or those related to environment protection, that might be valorized in the award procedure).

The advice/suggestions/recommendations may be used or implemented by contracting authorities in the planning and conduct of the procurement procedure, provided that such advice/suggestions/recommendations do not have the effect of distorting competition and/or violating the principles of non-discrimination and transparency.

The market consultation process is initiated by publishing in the ESPP, as well as any other means, of a notice regarding the consultation. The contracting authority has the obligation to publish in the ESPP the result of the market consultation; at the latest, before launching the procedure.




Certain public contracts are excluded de jure from the scope of Law

no. 98/2016. Exempli gratia, PPL shall not apply to the following public contracts:

■ contracts for which the contracting authority is bound to apply the utilities legislation;

■ contracts which the contracting authority is bound to award pursuant to a specific procedure: (i) established through a legal instrument creating international public law obligations, such as an international convention, concluded in compliance with the provisions of the EU Treaties between Romania and one or more states which are not members of the EU or subdivisions thereof, and which have as their subject the supply of goods, provision of services or performance of works destined for the implementation or exploitation of a project in common by the signatory states or as a result of applying a specific procedure provided by the European legislation, in the context of programmes and projects for territorial cooperation; or (ii) established by an international organisation;

■ contracts having as their subject the purchase or lease, by any financial means, of lands, existing buildings, other real estate or rights over such real estate;

■ contracts regarding the purchase, development, production or co-production of programmes designed for broadcasting, awarded by radio-broadcasting services suppliers;

■ contracts regarding the provision of arbitration and conciliation services;

■ contracts regarding the provision of financial services related to the issuance, purchase, sale or transfer of equity or other financial instruments;

■ employment contracts;

■ services contracts awarded to another contracting authority/contracting entity/association of contracting authorities, based on an exclusive right to provide those services pursuant to laws or normative administrative acts, to the extent that they are compatible with the TFEU; or

■ contracts the award and performance of which are included in the category of state secret information, as well as contracts requiring the imposition of special security measures in order to protect national interests, in certain conditions.




PPL does not apply to contracts concluded exclusively between two or more contracting authorities should the following conditions be met: (i) the contract establishes or implements a cooperation between the contracting authorities with the purpose of insuring that the public services are provided in order to meet common objectives; (ii) the purpose of the cooperation is exclusively based on considerations of public interest; and (iii) the contracting authorities perform on the free market less than 20% of the activities targeted by the cooperation.

Also, PPL does not apply to contracts concluded between a contracting authority and a public or private legal person when the following conditions are met: (i) the contracting authority exercises over the respective legal person a control similar to the one exercised over its own departments or services; (ii) more than 80% of the activities of the controlled legal person are performed in order to fulfil the tasks entrusted by the contracting authority exercising the control or by other legal persons controlled by the said contracting authority; and (iii) there is no direct private participation to the share capital of the controlled legal person, except for the participations which do not grant control or a veto right, but which are required by the applicable legislation in accordance with the



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TFEU and TEU and which does not exercise a determined influence over the controlled legal person. The same conditions apply also when the control is exercised by more contracting authorities.

5 Remedies



The remedies procedure against the acts issued by contracting authorities during award procedures include the following phases: complaint afore the NCSC (an administrative-jurisdictional body) or a tribunal (a judicial body); and appeal against the NCSC’s/tribunal’s decision. The prior notification procedure in front of the contracting authority was abolished by the latest amendments brought to the remedies law.

The harmed economic operator may file the complaint in front of the NCSC or in front of the tribunal from the headquarters of the contracting authority.

Pursuant to the latest legal amendments, economic operators have the obligation to submit in advance, together with the complaint, a bond amounting to 2% of the estimated/established value of the contract. The value of the bond is limited to: (i) RON 35,000 or RON 88,000 in the case of contracts where the estimated/established value of which is below the financial thresholds for publication in the OJEU; (ii) RON 220,000 or RON 880,000 in the case of contracts where the estimated/established value of which is equal to or above the financial thresholds for publication in the OJEU. In case the bond is not submitted, the complaint shall be rejected. The submitted bond is released upon request of the economic operator, after final settlement of the appeal or the cessation of the effects of the suspension of the award procedure and/or performance of the contract, within a minimum term of 30 days, if the contracting authority does not claim any damages against the economic operator.

Until the complaint is settled by NCSC/the tribunal, any interested economic operator can file a voluntary intervention claim. When ruling on the complaint, the NCSC/the tribunal shall also rule on this claim.

The decision of the NCSC/tribunal can be further appealed in front of the court of appeal where the public authority is headquartered. If the appeal is filed by a person other than the person that submitted the bond with the complaint, a bond amounting to 50% of the above-mentioned values had to be submitted in advance together with the appeal. The decision of the court of appeal is final.

Claims regarding compensations for damages caused during the award procedure may be filed separately before the tribunal from the headquarters of the contracting authority. The interested person may seek compensation for the damages caused by the contracting authority under the following conditions:

■ if the damages were caused by an act of the contracting authority or are a result of not solving within the legal term a request regarding the award procedure, the damages may be granted only after the act was annulled or if remedial measures were adopted by the contracting authority; and

■ if the damages consist of the expenses undergone for preparing the tender or participating in the procedure, the damaged party must not only prove the breach of the provisions of PPL, but also that the chance to win the contract was real and was lost because of the respective breach.



The remedies options with regard to public procurement procedures are limited to those provided by Law no. 101/2016.


sought?

Remedies can be sought before the NCSC/tribunal and the competent court of appeal, as per the answer to question 5.1 above.


remedies?

Complaints can be filed before the NCSC or the tribunal within five or 10 days from the day following the acknowledgment of the act of the contracting authority deemed illegal. If the claim regards the award documentation published in the ESPP, the date of acknowledgment is considered to be the date the award documentation was published.

The voluntary intervention claim can be filed within 10 days as from the date the complaint is published in the ESPP by the contracting authority.

The terms for filing the appeal before the competent court of appeal are different depending on whether the appeal refers to the NCSC’s or the tribunal’s decision, as follows: (i) 10 working days as of the date of the communication, for the appeal against the NCSC’s decision; and (ii) 10 days as of the date of the communication, for the appeal against the tribunal’s decision.

Claims for compensation for damages caused during the award procedure can be filed within a one year prescription term.


periods?

Law no. 101/2016 does not provide for measures to be taken in order to shorten the limitation periods, no such shortening being thus admissible.


Law no. 101/2016 provides that any interested person can request the total/partial absolute nullity of public procurement contracts/addendums in the following cases: (i) the contracts are concluded without the prior publication by the contracting authority of a contract notice; (ii) the contract should be framed in the category of contracts subject to the PPL, but the contracting authority concludes another type of contract, without complying with the legal award procedure; (iii) the contract/addendum thereto is concluded under less favourable conditions than the ones provided for in the financial and/or technical proposals included in the winning tender; (iv) the contract is concluded without regard to the qualification and selection criteria and/or the evaluation elements provided for in the contract notice on the basis of which the winning tender was selected, which led to altering the outcome of the procedure, by cancelling or reducing the competitive advantages; (v) the contract is concluded before the NCSC/court of law communicates its ruling upon the complaint, when a complaint was filed against the award procedure or in breach of such decision; (vi) the contracting authority awards the contract pursuant to an



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award procedure that was subject to the ex ante control and within which NAPP issued a conditional approval, and the contracting authority carried out and finalised the procedure without remedying the faults identified by NAPP; and (vii) the contracts are concluded in breach of the standstill periods.


remedies is made?

The NCSC has the obligation to rule upon the complaint within 15 days from the receipt of the public procurement file from the contracting authority or within five days where an exception occurs, which prevents an analysis of the complaint on the merits. However, in duly justified cases, the initial term can be extended only once with 10 days. In general, complaints are ruled upon within three to six weeks as of the date the complaint is filed, depending on its complexity.

The tribunal has the obligation to rule upon the judicial complaint within 45 days of its referral to the court.

Appeals filed against the administrative or judicial decisions must be solved within 45 days of their referral to the court. In general, appeals submitted afore the competent courts are ruled upon within an average timescale of one to two months.



Romania is well known as one of the EU Member States with the highest number of bid protests (in 2017, only 4,782 complaints were filed with the NCSC). Hence, during the past 10 years, VASS Lawyers has been representing clients in a large number of public procurement disputes in front of the NCSC, competent tribunals and courts of appeal.

In 2017/2018, VASS Lawyers obtained remedies in public procurement disputes concerning contracts in the fields of medical equipment and vehicles, construction & infrastructure, oil & gas, food industry and waste management, engineering services, IT&C, tubular materials and mining equipment or tourism, in contracts exceeding EUR 1.5 billion. Exempli gratia, the team of lawyers successfully represented its client, part of an international consortium of companies, declared winner of a high profile ambulances supply framework agreement, in numerous NCSC and court files regarding the complaints lodged by the competitors in the procedure, while in another procedure the firm insured the conclusion of a works contract for its client, after obliging the contracting authority to reassess and reject six tenders which were non-compliant with the minimum qualification criteria and technical specifications. Ground-breaking NCSC decisions were also obtained by the team for a world leader in chemical distribution. These decisions forced Romanian water companies all over the country to substantially change long time established practices regarding testing of chemical products that infringed the principles of transparency and fair treatment. Thus, these decisions significantly opened the competition on the relevant market.



After receipt of the complaint, the contracting authority may adopt remedial measures within a three-day period.

Any such measure must be communicated to the complainant, to the other economic operators involved in the award procedure, as well

as to the NCSC/tribunal, no later than one working day from the date when the measure was adopted.


Procedure







PPL provides for certain rules regarding changes of the award documentation during the award procedure, such as: (i) an erratum to the contract notice has to be published at least three working days before the initially established deadline for submission of tenders/requests for participation; (ii) the possibility to extend the deadline for submission of tenders if necessary; and (iii) the tenderer may submit, within the tender, proposals to amend the contract clauses within the tender documentation, but if the proposals are obviously disadvantageous for the contracting authority and the tenderer does not waive these amendments, even though asked to, the tender will be considered non-conformant. Certainly, contracting authorities may amend the tender documentation, within the limits imposed by PPL, exclusively before the deadline for submission of tenders.

It should be mentioned that the contracting authority is obliged to extend the deadline for submission of tenders in case the changes lead to adjustments/completions to the technical specifications that require additional time for potential tenderers.

Moreover, substantial amendments of the award documentation lead to the cancellation of the procedure when such amendments:

■ affect to such extent the elements that describe the context of public procurement that they have the effect of changing the main indicators characterising the outcome of the contract to be awarded, which affects the level of competition or changes the targeted market; or

■ lead to substantial changes in the qualification and selection criteria, as they extend their level or introduce new ones, thus restricting competition or favouring certain economic operators.



Given that the general rule in open and restricted tender procedures is that no changes are permitted to tenders already submitted (except for arithmetical errors, formal flaws and minor technical errors), prior to the award of the contract, there should be no negotiation with the preferred bidder following the submission of a final tender.


signature?

Upon conclusion of the contract, changes to a public procurement contract are permitted without a new procurement procedure under the following situations:

■ where the amendments, irrespective of their monetary value, have been provided for in the initial procurement documents as clear, precise and unequivocal review clauses, which may include price revision clauses;



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■ for additional works, services or supplies up to a maximum 50% of the value of the original contract, that have become necessary to be purchased from the original contractor and that were not included in the initial contract, where a change of contractor (i) cannot be made for economic or technical reasons such as requirements of interchangeability or interoperability with existing equipment, services or installations procured under the initial public procurement award, and (ii) would cause significant increase of costs for the contracting authority;

■ where all of the following conditions are fulfilled: (i) the amendment became necessary pursuant to circumstances which a diligent contracting authority could not foresee; (ii) the amendment does not alter the overall nature of the contract; and (iii) any increase in price is not higher than 50% of the value of the original contract/framework agreement;

■ where a new contractor replaces the one with whom the contracting authority initially concluded the contract as a consequence inter alia of an unequivocal review clause or an option provided in compliance with the legal provisions or of a universal or partial succession following corporate restructuring;

■ where the amendments, irrespective of their value, are not substantial; or

■ where all of the following conditions are fulfilled: (i) where the value of the amendment is below the thresholds set out for applying PPL; (ii) where the value of the amendment is below 10% of the initial contract value for services and supply contracts or 15% of the initial contract value for works contracts; and (iii) the amendment does not alter the overall nature of the contract or the framework agreement under which the contract is awarded.

Where the price of the contract is increased through several successive amendments, the cumulative value of the amendments cannot exceed 50% of the value of the initial contract.

An amendment to a public contract/framework agreement within the validity period is a substantial change when at least one of the following conditions is met:

■ the amendment introduces conditions which, had they been included in the initial award procedure, would have allowed the selection of other candidates than those initially selected or the accepting of another tender than originally accepted, or would have attracted more participants to the procedure;

■ the amendment changes the economic balance of the public procurement contract/framework agreement in favour of the contractor in a manner not provided for in the initial public procurement contract/framework agreement;

■ the amendment substantially extends the subject of the public procurement contract/framework agreement; or

■ a new contractor replaces the original contractor, in other cases than those provided by the law.

Furthermore, the adding of new subcontractors during the performance of the contract is allowed, provided that it does not lead to a substantial change of the contract.

Last, but not least, it is important to underline that any amendment of the public procurement contract shall not lead to the infringement of the public procurement principles of transparency, non-discrimination and equal treatment.



signature?

The transfer of a contract to another entity post-contract signature is allowed in one of the following situations: (i) as a consequence of an

unequivocal review clause or an option provided in compliance with the legal provisions; (ii) the rights and obligations of the initial contractor resulting from the contract are undertaken, as a result of a universal or partial succession following corporate restructuring, by another economic operator that fulfils the initial qualification and selection criteria as long as such amendment does not entail other substantial amendments of the contract and is not made for the purpose of eluding the application of the award procedures under the PPL; and (iii) if the contracting authority undertakes the obligations of the main contractor towards its subcontractors, respectively the subcontractors towards the contracting authority.




them?

Privatisations do not fall under the scope of PPL and are the subject of specific pieces of legislation.



Public private partnerships are regulated separately by GEO no. 39/2018 which was recently adopted and entered into force in May 2018. The new piece of legislation appeared as a result of the failure to implement PPP projects under the previous Law no. 233/2016, caused also by the fact that the methodological norms for the application of the law were not adopted.

GEO no. 39/2018 was adopted also in light of the provisions of Government Program 2018-2020, which proposes a significant increase in investments in order to achieve the objectives of economic growth and in order to strengthen the fiscal-budgetary sustainability. In this context, the Government has undertaken both to launch public investment projects with a significant impact on the economy and to stimulate private investment (e.g. through the implementation of public-private partnership projects).

In order to achieve these objectives, the National Commission for Strategy and Prognosis acquired competence in the preparation and award of strategic investment projects of the central public administration which are implemented in public-private partnerships.

Also, through G.D. no. 357/2018, the Government adopted a list of strategic investment projects to be prepared and awarded in a public-private partnership, by the National Commission for Strategy and Prognosis. The list includes projects such as the Ploiesti-Brasov highway, Bucuresti-Craiova-Calafat-Drobeta-Turnu Severin-Lugoj highway, construction of Bucharest South Airport, and the arrangement of Arges and Dâmbovita rivers for navigation.

Nevertheless, it remains to be seen in practice if, under the new legislation, PPP projects will actually be implemented successfully.

8 The Future



impact?

The new European public procurement directives have been



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transposed at national level. In this context, other legislative proposals are also currently subject to debate. As an example, a project of a Government Decision adopting the methodological norms of GEO no. 114/2011 for the award of defence procurement contracts has recently been under public debate, the purpose of which is to align the legal provisions in the field of defence procurement to the new PPL legislation.

New tertiary legislation has been issued and is expected to be further adopted by NPPA in order to clarify the interpretation and application of the new PPL.




A national strategy in the field of public procurement was approved through Government Decision no. 901/2015. This strategy proposes actions defining the Government’s policy with regard to the reformation of the national system of public procurement during 2015-2020. Its declared objective consists in the improvement of the Romanian public procurement system, through the transposition of the new European directives in the national legislation (which has already been done), reformation of the institutional framework and ensuring the functionality of the system.



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Iulia Vass

VASS Lawyers

10 Alexandru Deparateanu Street

Bucharest

Romania

Tel: +40 21 222 0977 Email: [email protected] URL: www.vasslawyers.eu

Bianca Bello

VASS Lawyers

10 Alexandru Deparateanu Street

Bucharest

Romania

Tel: +40 21 222 0977 Email: [email protected] URL: www.vasslawyers.eu

During the past 10 years, VASS Lawyers has grown to be the best boutique law firm in Romania specialised in Public Procurement, Concessions

and PPP.

The clients and the legal market itself has acknowledged its leading role in the field of public procurement. The Legal 500 EMEA, the independent

legal directory of the best law firms in the world drawn up based on clients’ feedback, has been recommending VASS Lawyers as a top-tier law firm

in public procurement and PPP since 2013. According to its 2017 edition, “VASS Lawyers is ‘unquestionably in the top-tier of law firms for PPP in Romania’. Iulia Vass ‘has built a great team that works like a Swiss watch’, handling a range of matters, such as assisting a significant European oil company with a fuel distribution project, and advising an unsuccessful bidder on a €150m road project. Bianca Bello is also involved in much of the key work”.

For the past three years, the Managing Partner Iulia Vass has also been acknowledged by The Legal 500 EMEA as the only Leading Individual for

the PPP and Procurement practice in Romania, being recommended as “outstanding, by international standards”.

As one of the first law firms in Romania specialised in public procurement, VASS Lawyers has advised a wide range of private investors and public

bodies upon aspects related to public procurement and PPP projects. The services provided include assistance and representation of economic

operators during the public procurement participation process, regarding bids submission, complaints filed during the award procedure of

procurement contracts and also during the conclusion, negotiation and performance of procurement contracts.

In its 10 years of practice, the firm worked closely with renowned clients from Romania and international markets such as Japan, Norway, Austria,

United Kingdom, Ireland, Germany, the Netherlands, Spain and the United States of America, covering complex sectors of business and industries

such as constructions, infrastructure, real estate, utilities, oil & gas, mass-media, IT, environment, defence and energy.

Iulia is the founding Managing Partner of VASS Lawyers and

acknowledged as one of the Romanian leading experts in public

procurement and public-private partnerships. Prior to setting up VASS

Lawyers, in 2008, she was head of the Public Procurement

Department of a top five law firm in Bucharest.

Iulia successfully assisted complex public procurement and PPP

projects in the fields of real estate and constructions, energy and

natural resources, utilities, infrastructure, mass-media, IT, defence,

food and environment, advising economic operators as well as

contracting authorities on the intricate process of organising and/or

participating in award procedures. She also has extensive experience

in representing clients before the National Council for Solving

Complaints and the competent courts in public procurement litigation.

During the past 12 years, Iulia has written and spoken widely on public

procurement and public-private partnerships, having an extensive

publishing activity and also being a constant presence at national and

international conferences in the field. She is an associate member of

the Procurement Law Academic Network.

Moreover, Iulia was acknowledged by The Legal 500 as a Leading

Individual for the PPP and Procurement practice, being characterised

as “outstanding, by international standards”. She is also

recommended by Global Law Experts, the guide of the world’s top

lawyers, for the Public Procurement field in Romania.

Iulia holds a Bachelor’s degree from the University of Bucharest Law

School and an LL.M. with distinction in Public Procurement Law and

Policy at the University of Nottingham. She also holds a Master’s

degree in International Relations – Conflict Analysis and Resolution

from the National School of Political Studies and Public Administration.

Bianca is a Partner of VASS Lawyers and acknowledged as an

exquisite expert in public procurement and public-private partnerships.

Prior to joining VASS Lawyers in 2009, she was a member of the

Public Procurement Department in one of the most renowned law

firms in Romania.

Bianca has significant experience in public procurement, being

involved in complex and high-value public procurement projects, with

a focus on constructions and real estate, infrastructure, energy, natural

resources, utilities and mass-media. She advises contracting

authorities and economic operators on the organisation of and

participation in award procedures of public procurement contracts, in

accordance with the Romanian legislation or EBRD policies, as well as

on the challenge of the decisions of contracting authorities. During the

past 10 years, she provided legal assistance for hundreds of public

procurement procedures, as well as representation before the

competent courts of law in projects exceeding EUR 1 billion.

Bianca’s professional experience is completed by the publishing of a

wide range of articles on public procurement and by the participation to

various national conferences.

Bianca holds a Bachelor’s degree from the University of Bucharest

Law School and a Bachelor’s degree from the Paris I Pantheon Sorbonne University, French-Romanian Law College of European

Studies. In 2008, Bianca obtained a Master’s degree in Business Law

from the University of Bucharest, Law School.



Chapter 25


Allen & Gledhill

Kelvin Wong

Tan Wee Meng

Singapore




The relevant legislation in Singapore in relation to public procurement is the Government Procurement Act (Cap. 120) (“Act”).

The Act generally gives effect to the WTO Agreement on Government Procurement (signed in Marrakesh on 15 April 1994 and entered into force on 1 January 1996) (“GPA”), and other international obligations of Singapore relating to procurements by the Government of Singapore and public authorities.

There are three pieces of subsidiary legislation made under the Act, namely the Government Procurement (Application) Order (“GP Order”), the Government Procurement (Challenge Proceedings) Regulations, and the Government Procurement Regulations 2014 (“GP Regulations”).

The GP Order specifies the states, authorities and procurements which are subject to the Act, as well as procurements that are excluded from the application of the Act.

The GP Regulations generally regulate procurements which are subject to the Act, and set out the types of procedure which may be used in undertaking procurements. The principles and procedures to be adopted in evaluating and awarding a procurement contract are subject to the Act.

The Government Procurement (Challenge Proceedings) Regulations address, in relation to procurements which are subject to the Act, procedural matters in relation to challenges brought by a supplier before the Government Procurement Adjudication Tribunal (“Tribunal”) to the Registrar of the Tribunal.

There are also a number of central procurement guidelines (“Guidelines”) published by the Ministry of Finance on the Government Electronic Business portal, at www.gebiz.gov.sg (“GeBIZ”). The Guidelines set out principles, policies and procedures governing public procurement for public entities, as well as information and guidance for suppliers. The Guidelines, however, do not have the force of law.

The Ministry of Finance has also issued a Public Private Partnership Handbook, first issued in October 2004 and revised in March 2012 (“PPP Handbook”). The PPP Handbook sets out guidelines relating to the structuring of public private partnerships (“PPPs”), the PPP procurement process and the management of a PPP. The PPP Handbook, however, does not have the force of law.




of the legislation?

(i) Fairness. Suppliers are to be treated fairly and the playing field is kept level. No particular supplier shall be treated more or less favourably than any other supplier.

This principle is entrenched in the relevant legislation. For example, the GP Regulations expressly recognise and provide for the application of the principles of national treatment and non-discrimination under various circumstances.

The GP Regulations also provide that a contracting authority is prohibited from providing a supplier any information regarding a particular procurement where such a provision might prejudice fair competition between suppliers.

(ii) Transparency. All procurement requirements, procedures and evaluation criteria (including the relative importance of such criteria) for quotations and tenders of a contracting authority are required to be made known to suppliers.

The GP Regulations expressly require contracting authorities to publish, in the Gazette or GeBIZ, certain prescribed information relating to the procurement as set out in the GP Regulations (including a notice of award after the award of a procurement contract). GeBIZ provides an accessible, fair and transparent portal for quotations and tenders to be called openly. It gives all suppliers an equal opportunity to participate (thus levelling the playing field, especially for smaller suppliers), rather than limiting the notice to suppliers who are informed by the relevant procuring agency/authority.

In addition, the GP Regulations expressly require a contracting authority to make available to suppliers tender documentation which contains such information as may be necessary to enable them to prepare and submit responsive tenders.

(iii) Value-for-money. In evaluating the bids submitted by the suppliers, contracting authorities are generally required to take into account factors other than the proposed price. Such factors include whether the bids submitted by the suppliers comply with the requirements set out in the tender specifications, the quality of the goods and services, timeliness in delivery, reliability and after-sales service, etc.

(iv) Anti-corruption. The GP Regulations provide that a contracting authority shall conduct procurement in a transparent and impartial manner that prevents corrupt practices. The then Minister for Finance, Mr. Tharman Shanmugaratnam also highlighted, in his parliamentary speech in 2012 relating to the review of government


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procurement processes, that Singapore’s system of public sector procurement is based, in addition to the foregoing principles, on “an unequivocal stance against corruption or any other abuse of trust placed in public officers”.



There are generally no mandatory or special rules relating to government/public sector procurement that are specific to a particular sector, or class of sectors, in Singapore. The rules applicable to “procurements” under the Act and its subsidiary legislation would generally apply to all procurements in the government/public sector.



public procurement?

Other laws of general application in Singapore may be relevant to public procurement. These include the Prevention of Corruption Act (Cap. 241), the Penal Code (Cap. 224), and the Official Secrets Act (Cap. 213). Generally, the Prevention of Corruption Act and the Penal Code regulate the corrupt solicitation, receipt, giving, promising or offering of gratification with a view to inducing, rewarding or favouring any person. The Official Secrets Act regulates the disclosure of official documents and information.

Furthermore, and as will be further elaborated in our responses below, the Act and its subsidiary legislation embody rules relating to transparency in government procurements. For example, contracting authorities are required to publish, in the Gazette or GeBIZ, certain prescribed information relating to the relevant procurement.



agreements?

Singapore is a signatory to the GPA and various bilateral and regional Free Trade Agreements. The purpose of the Act is to give effect to the GPA and Singapore’s obligations relating to procurements by the government and public authorities (including those under such Free Trade Agreements). Singapore’s public procurement framework is thus generally aligned with the standards and obligations of such international agreements.


Contracts



Under the Act, the Minister of Finance may declare any ministry or department of the Government of Singapore, organ of State or statutory board as a contracting authority for the purposes of the Act. A list of designated contracting authorities is set out in the Second Schedule of the GP Order (including various ministries, universities, and regulatory authorities/bodies).

Private entities are not covered under the Act (as purchasers). Sectoral/industry-specific regulation may, however, apply in the private sector (please refer to question 1.3 above).


The Act applies to procurements of specific goods and services by specific contracting authorities. Such goods and services are set out in the Third Schedule, Fourth Schedule and Fifth Schedule of the GP Order. Such services include auditing and book-keeping services, systems and software consulting services, electronic data interchange, data processing services, installation and assembly work, and general construction work for buildings. Such goods include mechanical power transmission equipment, plumbing, heating and sanitation equipment, pumps and compressors, measuring tools, and materials handling equipment.



The GP Order provides for financial thresholds (measured both in Singapore dollars and Special Drawing Rights) which a procurement, in relation to certain prescribed states (including Canada, the European Union, Japan, Hong Kong, Taiwan, the United States of America, Israel, Norway and Switzerland), must cross before it is subject to the Act. The applicable financial threshold varies depending on factors such as: (i) the identity of the relevant contracting authority; (ii) the goods and services which are the subject of the relevant procurement; and (iii) the state to which the relevant procurement relates.

For local procurements, where the procurement contract exceeds S$3,000, invitations for quotations and tenders for such contracts are required to be posted openly on GeBIZ.


Aggregation benefit. The GP Order provides for an “aggregation benefit” where the relevant contract of procurement is a recurring contract (i.e. being one of two or more contracts resulting from a single requirement for a procurement). In such an event, the “estimated value” of such a recurring contract shall, generally, be based on:

(i) the aggregate of the value of the consideration given by the contracting authority under similar recurring contracts concluded during the last financial year of the contracting authority, or the period of 12 months, ending before the relevant time; or

(ii) the aggregate of the estimated value of the consideration which the contracting authority expects, at the relevant time, to give under all recurring contracts which are part of the same procurement as such a recurring contract in the next financial year of the contracting authority commencing on or after, or during the period of 12 months commencing immediately after, the date on which such a contracting authority expects to award the initial recurring contract of that procurement.

Anti-avoidance rules. Paragraph 7(9) of the GP Order specifically prohibits the use of a basis of valuation under paragraph 7 of the GP Order, or the division of a procurement requirement, for the intentional avoidance of the application of the Act. The GP Regulations also contain certain anti-avoidance provisions. For example, a contracting authority is not permitted to prepare, adopt or apply technical specifications with a view to, or with the effect of, avoiding the application of the GP Regulations.

Allen & Gledhill Singapore


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There is no specific class of “concession contracts” under the Act, and there are generally no mandatory or special rules that are specific to such contracts. The rules applicable to “procurements” under the Act and its subsidiary legislation would generally apply to such contracts.



There is no specific class of “framework agreements” under the Act, and the expression “framework agreements” is not generally regarded as a term of art. There are generally no mandatory or special rules that are specific to such agreements. The rules applicable to “procurements” under the Act and its subsidiary legislation would generally apply to such contracts.

As a matter of practice, though, within the context of Singapore, framework agreements may be used in the procurement of common goods and services (the demand for which a contracting authority may wish to combine and aggregate to yield better value for money through economies of scale), but only where there are certain items in the relevant procurement contract that may be subject to price fluctuations. The contracting authority may appoint one or multiple suppliers to provide such goods or services, and once such a framework agreement has been established, the contracting authority (and any other contracting authorities for whose benefit such a procurement contract had been entered into) may procure from the appointed supplier(s) when the product or service is required.


into lots?

The GP Order expressly states that a procurement requirement shall not be divided by a contracting authority with the intention of avoiding the application of the Act. As mentioned, only procurement contracts, the values of which exceed certain financial thresholds, will be subject to the Act and its subsidiary legislation (please see further our response to question 2.3 above). The GP Order stipulates the principles in accordance with which the value of a procurement contract is to be determined, and in this context, makes clear that a contracting authority should not divide a procurement into lots with a view to lowering the value of such a contract, in order to avoid the application of the Act with respect to each such contract.



The Act generally gives effect to the principle that all suppliers (whether established inside or outside Singapore) are to be treated fairly. For instance, the technical specifications prepared by a contracting authority must not refer to any goods or service originating from a particular place, or which were supplied by a supplier from a particular place. In addition, contracting authorities are required to evaluate the financial capacities and the commercial and technical abilities of a supplier on the basis of that supplier’s business activities, regardless of whether the activities are inside or outside Singapore.

3 Award Procedures




The GP Regulations provide for three types of procedures which may be used by contracting authorities in undertaking a procurement: (i) open tendering; (ii) selective tendering; and (iii) limited tendering. Generally, a contracting authority may only use open tendering or selective tendering. Limited tenders may only be called in specific circumstances, as prescribed in the GP Regulations (e.g. when the open procedure or selective procedure was used but no tender was received, where goods to be procured are on a commodity market, etc.). Such tenders are by invitation only, and may be open to one or a few suppliers.

Where the open procedure is used, all interested suppliers may submit a tender. Contracting authorities typically call open procedure tenders to ensure transparency and fair competition, as well as to derive the best public value through open competition. Tender notices are posted openly on the GeBIZ website, and invite any supplier who may be interested to submit tenders based on the requirements specified.

Where the selective procedure is used, only suppliers invited to submit a tender may do so. The selective procedure is typically used for more complicated purchases with more sophisticated requirements. Typically, this procedure has two key stages – the short-listing of applicants via an open pre-qualification exercise, and thereafter, inviting such short-listed applicants to submit tenders.


Generally, contracting authorities are required, unless it is inconsistent with the contracting authority’s reasonable requirements, to provide a sufficient time period for suppliers to prepare and submit requests for participations and tenders, having regard to factors such as the nature and complexity of the procurement, and the extent of anticipated sub-contracting. The GP Regulations also stipulate the minimum time period which must be prescribed by contracting authorities, which is 40 days from the date on which:

(i) in the case of open tendering, the notice of intended procurement is published in an approved medium; and

(ii) in the case of selective tendering, the suppliers are notified that they will be invited to submit tenders, whether or not a multi-use list (which is a list of suppliers that a contracting authority has determined to satisfy the conditions for participation in that list, and that the contracting authority intends to use more than once) is used.

The minimum time limits specified above may be reduced in certain circumstances (e.g. if a state of urgency renders compliance with the relevant time limit impracticable). Nevertheless, even in such situations, such time limits cannot generally be less than 25 days or 10 days, depending on the circumstances.

The GP Regulations do not provide any minimum time period where limited tendering is used. Indeed, a contracting authority may, in such a situation, choose not to apply the provisions in the GP Regulations that provide for a sufficient time period to be given to suppliers to prepare and submit requests for participations and tenders (mentioned above).



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tenderers?

Where the open procedure is used, all interested suppliers may submit a tender on the GeBIZ website based on the specified requirements, after the notice inviting tenders has been posted by the relevant contracting authority.

However, a contracting authority may exclude a supplier from participation in a procurement, or treat a supplier as ineligible to tender for the procurement, or refuse to short-list the supplier for the procurement, on certain specified grounds. Such grounds include (i) the bankruptcy/insolvency of the supplier, (ii) where the supplier has been convicted of any offence involving fraud, dishonesty or moral turpitude, and (iii) where the supplier is guilty of furnishing any false information or document to the contracting authority.

Where the selective procedure is used, there are two stages of short-listing – first, short-listing suppliers to be invited to submit a tender (via an open pre-qualification exercise, or pursuant to a multi-use list maintained by the relevant contracting authority). Thereafter, the short-listed suppliers will be invited to submit tenders. A contracting authority is required to allow all qualified suppliers to participate in a particular procurement, unless the contracting authority states in the notice of intended procurement any limitation as to the number of suppliers that will be permitted to tender and the criteria for selecting the limited number of suppliers.

The GP Regulations do not prescribe any specific rules on excluding/short-listing tenderers where limited tendering is used. However, a contracting authority is prohibited from carrying out limited tendering with a view to avoiding competition or protecting suppliers established in Singapore or otherwise in a manner which is discriminatory against any applicable supplier.




Under the GP Regulations, a contracting authority shall only consider a tender for the award of the contract if (i) the tender, at the time of its opening, conforms to the essential requirements of the notice inviting tenders, the summary notice and the tender documentation, and (ii) the tenderer has satisfied the conditions of participation in the tendering procedure.

In evaluating the bids submitted by suppliers, contracting authorities are generally required to take into account factors other than the proposed price. Such factors include the quality of the goods and services, timeliness in delivery, reliability and after-sales service, and the ability of the supplier to meet the requirements and objectives of the tender (please refer to question 1.2 above). The evaluation of the bids submitted by suppliers should be carried out in a holistic manner.


low tenders?

Under the GP Regulations, if a supplier submits a bid offering a price that is abnormally lower than that of the bids submitted by other suppliers, the contracting authority may make enquiries from the supplier with the abnormally low tender, to ensure that such supplier has satisfied the conditions of participation and is capable of complying with the terms and conditions of the contract. The principle is that upholding value for money does not necessarily mean awarding the contract to the lowest bid.


A contracting authority has the discretion to decide not to award the procurement contract if it is of the opinion that it is in the public interest not to do so.

A contracting authority shall award the procurement contract to the tenderer which the contracting authority has determined to be capable of complying with the terms and conditions of the procurement contract and which, based on the evaluation criteria set out in the notice of intended procurement and the tender documentation, has submitted (i) where price is the sole criterion, the lowest price, and (ii) where price is not the sole criterion, the most advantageous tender.

A contracting authority is required to publish an award notice in the Gazette or GeBIZ no later than 72 days after the date of the award of a procurement contract. Such a notice shall contain the prescribed information set out in the GP Regulations (including the name and address of the supplier to whom the contract was awarded and the value of the contract awarded, or the highest and lowest offers taken into account in the award of the contract).


bidders?

Subject to certain exceptions, the contracting authority is required, as soon as possible after the award of a contract in respect of a procurement using open tendering or selective tendering, to inform all tenderers who had participated in the procedure of its decision on the award.

Upon request by an applicable supplier, a contracting authority shall promptly provide any information necessary to determine whether a procurement was conducted fairly, impartially and in accordance with the GP Regulations, including information on the characteristics and relative advantages of the successful tender. In cases where the release of information would prejudice competition in future tenders, a contracting authority which receives the information is not permitted to disclose it to any supplier, except after consulting with, and obtaining the agreement of, the person that provided the information. In addition, a contracting authority must not provide a supplier with any information regarding a particular procurement where such a provision might prejudice fair competition between suppliers.

Separately, a contracting authority is required to inform promptly any supplier that submits a request for participation in a procurement, or application for inclusion on a multi-use list, of the contracting authority’s decision with respect to the request or application. Where a contracting authority rejects such a request or application, ceases to recognise the supplier as qualified, or removes the supplier from a multi-use list, the contracting authority is required to inform the supplier promptly and, on the request of the supplier, provide the supplier promptly with a written explanation of the reasons for its decision.


The Act does not expressly provide for any specific methods in relation to joint procurements (being procurements undertaken by more than one contracting authority). The private sector is generally free to adopt such methods, approaches or vehicles in structuring their bids as may be available under general law.



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The Act does not expressly provide for any specific rules in relation to alternative/variant bids (i.e. alternative proposals submitted by suppliers to what was requested by the contracting authority in its notice of intended procurement). However, the conditions of individual tenders may address this possibility.


The GP Regulations expressly state that a contracting authority shall conduct procurement in a transparent and impartial manner that avoids conflicts of interest. There are also strict rules prescribed by the Act and its subsidiary legislation regulating the award of procurement contracts. For example, the GP Regulations stipulate that the identity of the supplier to whom a contracting authority must award the procurement contract (save that a contracting authority may decide not to award the contract at all, if it is of the opinion that it is in the public interest not to award such a contract) should be one which (a) has been determined by the contracting authority to be capable of complying with the terms and conditions of the contract, and (b) which, based on the evaluation criteria set out in the notice of intended procurement and the tender documentation, has submitted either the lowest price (where price is the sole criterion), or the most advantageous tender (where price is not the sole criterion). In addition, the GP Regulations also expressly state that a contracting authority shall not use options, cancel a procurement or modify awarded contracts in a manner that circumvents, amongst other things, these obligations of contracting authorities as set out under the GP Regulations.

In this regard, there have been recent cases in Singapore where certain procurements were brought under scrutiny on the grounds of the relevant procurement contracts being awarded to suppliers based on reasons that such suppliers were, in some way, related to the relevant contracting authority or the personnel therein. Decisions in relation to such cases are useful and instructive, and may shed light on such situations as referred to above.




The Act, and its subsidiary legislation, do not expressly provide for any specific rules on market engagement and involvement of potential bidders prior to a procurement procedure. However, under the GP Regulations, a contracting authority is prohibited from providing any supplier with any information which might prejudice fair competition between suppliers.




Under the GP Order, a procurement set out in the Seventh Schedule (e.g. one having security considerations undertaken by the Ministry of Home Affairs), or a procurement made by a contracting authority on behalf of an entity which is not a contracting authority, is not a procurement subject to the Act. The Sixth Schedule of the GP Order also sets out certain services, the procurement of which is not subject to the Act in relation to the United States of America (e.g.

supply of potable water for human consumption, police, public order, public safety and security services and compulsory social security services, and research and development services).

Additionally, a contracting authority may, under certain circumstances prescribed in the GP Order (e.g. where such exclusion is necessary for reasons of national security), exclude a procurement, or an act or measure in relation to a procurement, from the application of all or any regulations made under the Act to govern procurements subject to the Act.




We are not aware of any mandatory or special rules specific to “in-house” arrangements (in which a contracting authority awards the procurement contract to another contracting authority). Generally, contracts entered into within groups should be executed on an arm’s length basis.

5 Remedies



Under the Act, a contracting authority shall, in undertaking a procurement subject to the Act, comply with the regulations made under the Act to govern procurements subject to the Act. A breach of such a duty by the contracting authority may be the subject of a challenge brought before the Tribunal by a supplier to whom the duty is owed, and who has suffered, or reasonably risks suffering, loss or damage as a result of the breach.

A supplier who wishes to bring a challenge before the Tribunal (“Applicant”) shall, within 15 days from the date on which the facts constituting the basis of the challenge first took place, initiate a challenge by lodging with the Registrar a notice of challenge (and at such a time, deposit a sum of S$5,000 with the Registrar), paying the Registrar the relevant fee for bringing a challenge before the Tribunal (currently a sum of S$500), and serving a copy of the notice of challenge on the relevant contracting authority.

Upon receipt of such a notice of challenge, the Registrar of the Tribunal will (i) forward a copy of the notice to the contracting authority concerned, (ii) fix a time and place for the hearing of the challenge, and (iii) give 14 days’ notice of the hearing to the Applicant and the contracting authority concerned.

The Tribunal shall issue its determination on a challenge within 45 days from the date of lodgment of the notice of challenge by the Applicant unless there are exceptional circumstances justifying an extension of time. If the Tribunal makes a determination in favour of the Applicant, the Tribunal may, subject to the provisions of the Act, make certain orders, such as ordering any decision or action taken by the contracting authority concerned in relation to the procurement which is the subject of the challenge to be set aside.



The Act expressly states that where a contracting authority, in undertaking a procurement subject to the Act, commits a breach of its duty to comply with the regulations made under the Act to govern procurements subject to the Act, such a breach shall not be the



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subject of any proceeding in any court. Such a breach may, however, be the subject of a challenge brought before the Tribunal by a supplier to whom the duty is owed and who has suffered, or reasonably risks suffering, loss or damage as a result of the breach.


sought?

Challenges may be brought before the Tribunal.


remedies?

An Applicant shall, within 15 days from the date on which the facts constituting the basis of the challenge first took place, initiate a challenge in such form and containing such information as may be prescribed under the Act.


periods?

The Act does not provide for any measures to shorten the 15-day limitation period for the initiation of a challenge under the Act.


If the Tribunal makes a determination in favour of the Applicant, the Tribunal may make certain orders as prescribed under the Act. However, where the contract for the procurement has already been awarded, the Tribunal may only order the contracting authority to pay the Applicant the costs of participation in the qualification of suppliers, or the costs of tender preparation, reasonably incurred by the Applicant for the purposes of the procurement. Alternatively, if the Applicant had not incurred any of the foregoing costs, the Tribunal may award the applicant the costs of the challenge proceeding in accordance with the Act.


remedies is made?

The Tribunal shall issue its determination on a challenge within 45 days from the date of lodgment of the notice of challenge by the Applicant, unless there are exceptional circumstances justifying an extension of time. The Registrar shall, within seven days of the making of the determination or order, send certified copies of the determination or order to the Applicant and the relevant contracting authority.



We are not aware of any publicly reported cases of remedies measures having been obtained under the Act.



The contracting authority may seek judicial review of any determination or order of the Tribunal.


Procedure







In relation to modifications made by a contracting authority: Under the GP Regulations, where such modifications are to be made after the publication of a notice inviting tenders, but before the time for opening or submission of tenders specified in such a notice or the summary notice, if it becomes necessary to amend or re-issue such a notice or summary notice, the amendment or re-issue must be published in the Gazette or GeBIZ.

In relation to modifications made by a supplier: The Act and its subsidiary legislation do not contain express provisions dealing with the specific issue of whether modifications may be made by a supplier after submission by the supplier of its tender bid. Reference would need to be made to the conditions of tendering for the particular tender to ascertain the terms relating to the supplier’s right to modify its tender submission. In this regard, we would note that as a matter of practice, GeBIZ generally allows a supplier to revise its bid after submission as long as the tender remains open. Suppliers will, however, not be allowed to make any changes after the tender has closed. A contracting authority is required to ensure that any opportunity given to a tenderer to correct errors of form between the opening of tenders and the award of the contract does not result in discrimination against any other tender.



Under the GP Regulations, a contracting authority may conduct negotiations with any supplier (i) if the contracting authority has indicated its intent to conduct negotiations in the notice of intended procurement, or (ii) if it appears to the contracting authority that no one tender is obviously the most advantageous in terms of the evaluation criteria set out in the notice of intended procurement or tender documentation. In carrying out the foregoing, the contracting authority is required to (i) ensure that any elimination of suppliers from participating in the negotiations is carried out in accordance with the evaluation criteria set out in the notice of intended procurement or tender documentation, and (ii) when negotiations are concluded, provide a common deadline for the remaining participating suppliers to submit any new or revised tenders.


signature?

The Act, and the subsidiary legislation made under it, do not expressly provide for such changes. Once the procurement contract has been awarded and signed, changes to the procurement contract may be made in accordance with general contract law.



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signature?

The Act and its subsidiary legislation do not contain express provisions dealing with the specific issue of whether a contracting entity or a supplier may assign and transfer its rights and obligations under a procurement contract to a third party after such a contract has been entered into. Reference would need to be made to the terms of the contract itself to ascertain this. That said, in our experience, it is unlikely that the terms of a procurement contract would permit such an assignment and/or transfer without the consent of the other party.




them?

Privatisations of particular public functions are generally undertaken by way of statute, which set out the processes by which the functions are privatised. The statutory provisions will generally address the specific industry or sector-specific requirements which may arise in the particular privatisation.



The Ministry of Finance has issued a PPP Handbook, which serves as a set of guidelines as to the structure of PPPs and the PPP procurement process. The PPP Handbook does not have the force of law, but seeks to address the specific considerations and issues that may arise with respect to PPPs.

8 The Future



impact?

We are not aware of any proposals at the time of writing. However, the Ministry of Finance regularly reviews the procurement rules, and enhances and makes changes to the rules where necessary. The AGO’s recommendations in its report may also be relevant in shaping the law relating to, and the framework of, government procurement going forward.

Singapore recently ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”) on 19 July 2018. The CPTPP will enter into force on 30 December 2018, following the ratification by Mexico, Japan, Singapore, New Zealand, Canada and Australia. The CPTPP, among other things, commits parties to the CPTPP to setting transparent, objective and non-discriminatory tender specifications in government procurement, and establishes domestic procedures to aid companies in the event of a dispute involving the award of government projects. There is a possibility that the statutory framework governing public procurement in Singapore will require amendments in order to meet the commitments imposed by the CPTPP when it comes into force.




We are not aware of any proposed regulatory developments at the time of writing. Please refer to question 8.1 above.



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Kelvin Wong

Allen & Gledhill

One Marina Boulevard #28-00

Singapore 018989

Tel: +65 6890 7644 Fax: +65 6302 3048 Email: [email protected] URL: www.allenandgledhill.com

Tan Wee Meng

Allen & Gledhill

One Marina Boulevard #28-00

Singapore 018989

Tel: +65 6890 7518 Fax: +65 6302 3042 Email: [email protected] URL: www.allenandgledhill.com

Allen & Gledhill is an award-winning full-service South-east Asian commercial law firm which provides legal services to a wide range of premier

clients, including local and multinational corporations and financial institutions. Established in 1902, the Firm is consistently ranked as one of the

market leaders in Singapore and South-east Asia, having been involved in a number of challenging, complex and significant deals, many of which

are first of its kind. The Firm’s reputation for high-quality advice is regularly affirmed by the strong rankings in leading publications, and by the various

awards and accolades it has received from independent commentators and clients. Together with its associate firm, Rahmat Lim & Partners in

Malaysia and office in Myanmar, Allen & Gledhill has over 450 lawyers in the region, making it one of the largest law firms in South-east Asia. With

this growing network, Allen & Gledhill is well-placed to advise clients on their business interests in Singapore and beyond, in particular, on matters

involving South-east Asia and the Asia region.

Kelvin Wong is Co-Head of the Corporate & Commercial Department

and Head of the Energy, Infrastructure and Projects Practice at Allen &

Gledhill LLP. He regularly acts as counsel to key global and local

players in the energy, gas, petrochemical and specialty gas

production, waste treatment and disposal, water treatment and supply

sectors. Kelvin has considerable experience advising on project

development and structuring, and complex regulatory and

transactional issues.

Kelvin also advises on a broad range of general commercial

transactions, including public and private procurement (including

public-private partnerships), cross-border sale of goods, distribution

and agency, tolling arrangements, contract-manufacture and

equipment securitisation and leasing arrangements.

Kelvin is widely regarded as a leading authority and trusted advisor in

the energy, resources, petrochemical and utilities sectors, and is

consistently listed as a prominent Projects & Energy lawyer by many

notable publications, including IFLR1000, The Legal 500 Asia Pacific and Chambers Asia-Pacific.

Tan Wee Meng is a Partner in the Corporate and Commercial

Department at Allen & Gledhill LLP. His areas of practice encompass

Energy, Infrastructure and Projects, Technology, Media &

Telecommunications and Corporate & Commercial.

In the infrastructure space, his clients include infrastructure

conglomerates, energy market participants, international and regional

lenders, with whom he works closely with throughout the entire life-

cycle of their projects and investments. He has been involved in a

significant number of the major infrastructure public private

partnership projects in Singapore as well as a variety of projects

(including in the telecommunications, energy, storage and water

industries) across the region. In particular, he has extensive

experience with gas (natural gas and LNG), clean energy (solar and

waste-to-energy), water (waste water treatment, NEWater and

desalination plants), communications networks, data centres and

storage terminals. Wee Meng also advises on licensing and regulatory

matters in the relevant industry sectors such as electricity, gas and

communications.



Chapter 26


Fasken

Lara Bezuidenhoudt

Bontle Pilane

South Africa




The guiding principles of public procurement are set out in the Constitution of the Republic of South Africa, 1996 (Constitution). Section 217 of the Constitution requires that all public procurement be in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.

The Public Finance Management Act, 1999 (PFMA) regulates the processes to be followed when managing government finances at national and provincial level. Treasury Regulation 16 and 16A of the PFMA (TR 16A) contain detailed provisions dealing with public procurement.

The Local Government: Municipal Finance Management Act, 2003 (MFMA) provides similar guidelines for the management of public finances in respect of municipalities. The Municipal Supply Chain Management Regulations published in 2005 (MSCM Regulations) provide detailed guidelines for public procurement.

The Preferential Procurement Policy Framework Act, 2000 (PPPFA) requires organs of state to develop and implement a preferential procurement policy. The PPPFA provides a framework for achieving specific goals such as contracting with historically disadvantaged persons.




of the legislation?

The guiding principles of fairness, equitability, transparency, competitiveness and cost-effectiveness are not defined in the Constitution, MFMA or the PFMA; however, over time the courts have provided clarity on what is expected from state entities in relation to the principles. The requirement that the system be fair and equitable relates largely to the process, for example, that there should be no differences in the information provided to bidders and no bias on the part of the persons adjudicating the bid. The requirement for a procurement process to be carried out in a transparent manner promotes openness and accountability and also requires that reasons for an award be communicated to affected parties. Finally, public procurement must be competitive and cost-effective. This, for example, requires an institution to seek to achieve value for money.



The Standard for Infrastructure Procurement and Delivery Management (SIPDM) regulates procurement procedures and approvals for infrastructure projects by organs of state. The SIPDM is an instruction from National Treasury issued in terms of the PFMA. It applies to all infrastructure procurement in respect of building new infrastructure, or the rehabilitation, refurbishment or alteration of existing infrastructure. The SIPDM governs the life span of infrastructure procurement from the pre-feasibility planning and budgeting phase to the close out phase, hand-over, structured in nine stages. The SIPDM provides a framework for major capital projects of eight “gates”, each requiring permissions or approvals. Since its inception, the government has not embarked on many procurement projects and therefore the market does not have extensive experience with the SIPDM.

Some sectors have adopted a sector code in terms of the Broad-Based Black Economic Empowerment Act, 2003 (B-BBEE Act), which provides guidelines to increasing participation by historically disadvantaged persons in that particular sector. Once adopted, sector codes are binding on entities in the sector.



public procurement?

The award of a contract by an organ of state constitutes administrative action and therefore the provisions of the Promotion of Administrative Justice Act, 2000 (PAJA) are applicable. PAJA requires administrative action to be procedurally fair and provides remedies to enable an interested party to challenge an administrative decision which is not fair. In addition, the Promotion of Access to Information Act, 2000 (PAIA) enables affected persons to request certain information from organs of state. This Act is often used by unsuccessful bidders to gather information prior to challenging a decision. The Prevention and Combatting of Corruption and Corrupt Practices Act, 2004 (PCCA) makes a wide range of corrupt activities related to, among other things, public and private procurement, an offence.

The B-BBEE Act aims to increase access to the economy by historically disadvantaged persons. This Act contains formulations to calculate a level of empowerment called a B-BBEE score. This number is then used by organs of state when evaluating bids in accordance with the PPPFA.


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The Department of Trade and Industry’s National Industrial Participation Programme (NIP) requires all suppliers of products or services to organs of state in which the value of the imported content exceeds $10 million to participate in the South African economy through a combination of means, including export promotion, R&D collaboration, acquisition and technology transfers. The NIP obligation is for the equivalent of 30% of the exported portion of the contract.



agreements?

Although South Africa is a founding member of the WTO, it is not a signatory to the GPA, nor has it acceded to it. However, South Africa is a party to a number of Free Trade Agreements, Preferential Trade Agreements and Non-Reciprocal Trade Agreements.


Contracts



The PFMA applies to all national and provincial departments, national and provincial public entities, constitutional institutions and provincial legislatures. The MFMA applies to all municipalities, municipal entities and all national and provincial organs of state insofar as it relates to their financial interactions with municipalities. A national public entity is one which is established in terms of legislation, funded from the fiscus, and is accountable to Parliament. A provincial public entity is a provincial government business enterprise or an entity established in terms of legislation which is fully or significantly funded by public funds and is accountable to a provincial legislature. The PPPFA, B-BBEE Act, PAJA, PCCA and PAIA apply to all organs of state.


The legislation governing public procurement is applicable to all types of contracts in which the government purchases goods and services, including PPPs and infrastructure projects. In the recent judgment of Imperial Group Limited v Airports Company South African SOC Limited, the court found that when organs of state acquire services which they are required by their mandate to offer to the public, such as when a state-owned airport company leases kiosks and parking bays to acquire car rental services for the public, such procurement and contracts are also covered by procurement legislation.



There are no general financial value thresholds; however, the procurement of goods and services must be within the threshold values determined by the National Treasury in TR16A6.1 which is discussed in question 3.1 below. The thresholds applicable to municipalities are set out in the MSCM Regulations. The PPPFA requires that contracts valued below R50 million must be

adjudicated using the 80/20 preference point system. This means that 80% of the weighting is allocated to price, while 20% of the weighting is allocated for a system of preference; generally, points are awarded based on the bidder’s B-BBEE score. The 90/10 preference point system is used for contracts above R50 million.


There are no general rules, save for the one discussed in question 2.7 below. All public procurement must be carried out in accordance with the guiding principles set out in section 217 of the Constitution.



Concession agreements in South Africa are styled as public private partnerships (PPPs). A PPP is defined as a commercial transaction between an institution and private party in terms of which the private party performs an institutional function on behalf of the institution or uses state property for commercial purposes, assumes substantial risks while doing so and receives a benefit from doing so. PPPs for national and provincial departments and public entities are governed by TR16 which requires them to appoint a transaction advisor and run a competitive bidding process. The National Treasury’s approval is required at various points in the process. Section 120 of the MFMA regulates PPPs for municipalities. The consent of the municipal council is required for municipal PPPs. The details of the proposed municipal PPP must be made public and the views of the National Treasury and other affected national department must be sought.



The National Treasury is permitted to conclude a transversal contract which is a centrally facilitated contract for goods or services that are required by one or more institutions. All organs of state may participate in these contracts. State-owned entities must be authorised by their accounting authorities to participate and a municipality must satisfy itself that a competitive procurement process was followed and the contract was validly procured, that there are demonstrable discounts or benefits and the organ of state and service provider have consented in writing to the municipality’s participation (MSCM Regulation 32).


into lots?

National Treasury Practice Note No 8 of 2007/2008 provides that the procurement of goods and services may not be divided into lots merely to avoid using the prescribed method of procurement. As far as possible, a requirement for goods or services consisting of different parts should be procured as a single transaction. MSCM Regulation 12(3) contains a similar provision.



The legislation does not impose any obligations on purchasers when contracting with foreign suppliers.

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3 Award Procedures




National Treasury Practice Note No 8 of 2007/2008 prescribes the following thresholds and corresponding procurement procedures for national and provincial departments or public entities:

MSCM Regulation 12(1) prescribes the following thresholds and corresponding procurement procedures for municipalities:

Organs of state may lower but not increase the threshold values.


No specific time limits apply in respect of PPPs save to say the period provided must take account of the Constitutional principles such as fairness. Pursuant to TR16A3.6.3(c), bids must be advertised for a minimum period of 21 days. Municipal bid submission is at least 14 days after the date of advertising except for long-term transactions or transactions valued at over R10 million, in which the bid submission date must be at least 30 days after advertising. Both the PFMA and MFMA permit shorter time periods where there is urgency. The National Treasury’s Supply Chain Management – Guide for Accounting Officers and Authorities states that the bid invitation should specify a time period after which bids will cease to be valid.


tenderers?

There are no specific rules on excluding or short-listing bidders. Organs of state have some discretion in PPPs. The PPPFA enables organs of state to pre-qualify bidders based on a bidder meeting, a minimum B-BBEE score, a bidder being an exempted micro-enterprise or a qualifying small business or a bidder being willing to subcontract at least 30% of the value of the contract to certain

Threshold (including Value Added Tax)

Procurement Process

Below R2,000 Petty cash (subject to internal procedures)

Above R2,000 but less than R10,000

Three verbal or written quotes from a list (where available) of prospective suppliers


Written quotations from as many suppliers as possible

Above R500,000 Competitive bidding process

Threshold (including Value Added Tax)

Procurement Process

Below R2,000 Petty cash (subject to internal procedures)


Verbal or written quotes


Formal written price quotations from as many suppliers as possible

Above R200,000 Competitive bidding process

designated groups. Organs of state are also enabled to prescribe in the bid documents minimum functionality requirements criteria which are then used to exclude bidders who do not fulfil those criteria. Finally, the Department of Trade and Industry publishes minimum thresholds for local production and content per sector or sub-sector; organs of state must exclude any bidder who does not meet the threshold for the goods in the relevant sector or sub-sector.




Tenders are evaluated on the functionality criteria, price and the preference points allocated for B-BBEE. No considerations, other than those set out in the bid evaluation criteria specified in the bid documents, may be used in evaluating and adjudicating a bid.


low tenders?

Regulation 11 of the PPPFA enables organs of state to exclude a bidder who scores the highest points but whose bid is not market-related.


Section 2(1)(f) of the PPPFA states that the contract must be awarded to the bidder who scored the highest points unless objective criteria (which were disclosed in the bid documents) justify the award to another bidder. Awards in respect of goods and services procured in terms of the supply chain management rules must be published in the Government Gazette Bulletin, the eTender publication and other publications where the tender was advertised (TR16A.6.3(c)). Municipal awards must be published on the municipality’s website (MSCM Regulation 23(c)(iii)).


bidders?

There is no general rule on debriefing unsuccessful bidders. A person whose rights have been materially and adversely affected by administrative action may request adequate reasons in writing from that organ of state. In addition, PAIA may be used to obtain information which gave rise to the decision. PAIA does not require commercial information to be made available where it will prejudice a third party in a competitive bidding process.


The National Treasury is permitted by the PFMA to conclude a transversal contract which is a centrally facilitated contract for goods or services that are required by one or more than one institution.


The PPP Manual permits variant bids to be called for in an RFP and sets out guidelines for doing so. A variant bid may be considered in public procurement; however, since an organ of state must award a

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contract to the bidder who scores the highest number of points in a Request for Quotation or Request for Proposals, an alternative or variant bid will often fail because it does not meet the criteria set out in the bid document.


Both the PFMA and the MFMA state that officials involved in the supply chain management process must disclose conflicts of interest and recuse themselves from the decision-making process. Bidders are also required to disclose conflicts of interests in the standardised bid documents (SBD) published by the National Treasury and usually also in the RFP in PPPs.




There are no general rules; however, if they wish to engage with the market, organs of state usually use an Expression of Interest or a Request for Information. Although no legislative provision forbids the engagement of potential bidders in preparing a procurement procedure, such participation cannot compromise the procurement process such that it is no longer fair, equitable, transparent, competitive and cost-effective. A national or provincial department and a state-owned entity who wish to consider an unsolicited bid must do so in accordance with the criteria set out in National Treasury Practice Note No 11 of 2008/2009 or MSCM Regulation 37(2).




Although an organ of state may apply for an exemption from the provisions of the PPPFA, none have been granted to date. An exemption from the provisions of the PFMA and the MFMA may also be applied for in terms of sections 92 and 177, respectively. The PFMA (TR 16A6.4) and the MFMA (MSCM Regulation 36) permit organs of state to deviate from a competitive bidding process where it is impractical to procure goods and services through a competitive bidding process.




Regarding arrangements between public bodies; in The Chief Executive Officer of the South African Social Security Agency Others. v Cash Paymaster Services (Pty) Ltd 2012 (1) SA 216 SCA, the court found that the accounting officer was entitled to deviate from normal procurement procedure in order to procure a service directly from another organ of state provided that the decision was made on rational reasons and that such reasons were recorded in writing.

5 Remedies



Internal remedies available in an organ of state must be exhausted before a court may be approached for a review in accordance with section 8 of PAJA. The courts may grant any order that is just and equitable, including granting an interim or final interdict or setting aside the decision. An organ of state may disqualify a bidder or terminate a contract if the bidder submitted false information which affected the evaluation of the bid or where any subcontracting information was not disclosed. A penalty of up to 10% may be imposed on a bidder who subcontracts a portion of the tender without disclosing this. Finally, the bidder can be added to the National Treasury’s restricted suppliers list.



MSCM Regulation 50(1) requires municipalities to appoint an independent person to adjudicate public procurement disputes. These disputes may be escalated to the provincial and then National Treasuries. Other avenues, such as litigation, are not prohibited by legislation; however, internal remedies must be exhausted before a review based on PAJA is heard by a court. Once a contract has been concluded, that contract may dictate the remedies available in the event of a breach.


sought?

For bidders, the first port of call are the internal remedies, if any, and once those have been exhausted, the court may be approached for a judicial review.


remedies?

No general time limits exist for internal appeal procedures, but there are specific periods and processes in various pieces of legislation. PAJA requires that a judicial review is brought within 180 days after the internal appeal procedures, if any, have been exhausted.


periods?

A judicial review may be brought as soon as the internal appeal procedures have been exhausted. Where compelling grounds exist for urgent relief, the courts may be approached to grant an interdict preventing the implementation of the decision pending a full review of the decision.


In addition to those discussed in question 5.1, an organ of state may terminate a contract if the supplier or official committed any corrupt or fraudulent act during the bidding process or the execution of that contract (TR 16A.9.1(f)). A court, in a review, must make an order which is just and equitable such as setting aside the agreement.

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remedies is made?

Each organ of state sets out timescales applicable to internal remedies. A legal review must be launched within 180 days of the exhaustion of internal remedies or where none exist, on the date the person became aware of the decision and reasons. The review may take two years or longer to be resolved, depending on the caseload of the court. The court may also remit the decision back to the organ of state to reconsider, which will lead to further delays. In addition, if the decision of the court is appealed, the timescales will also be extended.



In Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer, South African Social Security Agency and Others 2014 (1) 604 (CC), the Constitutional Court determined that when making an inquiry into allegations of irregularities in a tender, a court must establish factually whether the irregularity took place, then legally evaluate the irregularity to determine whether it is a valid ground for review under PAJA. The materiality of the deviation from proper procedure must also be evaluated. The court found that the contract was irregularly awarded and set aside the administrative decision. The critical nature of the services being provided by the service provider (payment of social grants) necessitated the court to suspend its order to give the parties an opportunity to propose a just and equitable remedy.

In Trencon Construction (Pty) Ltd v Industrial Development Corporation of South Africa and Another 2015 (10) BCLR 1199 (CC), the organ of state had not awarded the bid to the highest-scoring bidder due to a material error of law. The remedy sought was substitution of the decision of the organ of state with a court order awarding the contract to the bidder who scored the highest number of points. The court held that even where there are exceptional circumstances, it must be convinced that an order of substitution is just and equitable in the circumstances. The test for substitution begins with an enquiry into whether the court is in as good a position as the administrator to make the decision. If the answer is affirmative, it must consider whether the decision is a foregone conclusion. Other relevant factors include delay, bias and incompetence. The court substituted its own order for that of the organ of state.

In State Information Technology Agency SOC Limited v Gijima Holdings (Pty) Limited 2018 (2) 23 (CC), the organ of state awarded a contract without following procurement processes. A lower court held that an organ of state may use PAJA to review its own decision and that the requirement to bring the review within 180 days is applicable. The Constitutional Court overturned this decision, finding that PAJA does not apply to public bodies. A public body wishing to set aside its own decision must therefore do so on the basis of the principle of legality.



There are not specific mitigating measures.


Procedure







The legislation does not specifically forbid a change in contract specifications; however, courts have found that an organ of state may not, in evaluating a tender, consider factors which were not disclosed in the tender documents as evaluation criteria. The legislation does not govern a change in the timetable.

The legislation does not specifically forbid changes to contract conditions (including extensions), provided that in evaluating a tender, factors which were not disclosed in the tender documents as evaluation criteria may not be used to evaluate.

The legislation does not specifically forbid changes in the membership of bidding consortia pre-contract award; however, this may be restricted in individual bid documents.



Organs of state are entitled to negotiate with the preferred bidder; however, this must comply with section 217 of the Constitution. Municipalities who engage in negotiations must ensure that the negotiation does not give the preferred bidder a second or unfair opportunity, is not to the detriment of another bidder and does not result in a higher price than the bid submitted (MSCM Regulation 24).


signature?

Post-contract signature changes are governed by the contract. In addition, the General Conditions of Contract published by National Treasury require any changes to be reduced to writing. In the event that the variation in the contract price exceeds 20% of the value for construction contracts or 15% for all other contracts, the approval of National Treasury is required (National Treasury Instruction Note on Enhancing Compliance Monitoring and Improving Transparency and Accountability in SCM published in 2011).



signature?

The General Conditions of Contract published by the National Treasury require the organ of state’s prior written consent to the assignment of the service provider’s obligations in the agreement.

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them?

There are no special rules and no government policy in relation to privatisation.



PPPs are governed by TR 16. The National Treasury has also published a manual which sets out procedures to be followed for PPPs, as well as Standardised Public Private Partnership Provisions which set out the key issues applicable to public private partnerships with a view to achieving substantial risk transfer, value for money and affordability for organs of state. Section 120 of the MFMA regulates PPPs for municipalities.

8 The Future



impact?

In 2017, the Minister of Finance announced a new legislation to be known as the Public Procurement Management Bill which seeks to revise, harmonise and consolidate the legislation and policy framework governing public procurement. A draft of the proposed legislation has not yet been made public. Once a draft is published it may take two years or longer for it to be enacted into law.




Amendments to the Public Audit Act, 2004 were promulgated in November 2018, but the date of commencement is yet to be determined. The amendments to the Public Audit Act, 2004 will, among other things, give the Auditor General enhanced authority to refer irregularities uncovered in an audit of an organ of state for investigation and to take appropriate remedial action. Although such irregularities may relate to public procurement, this legislation is not specific to public procurement.

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Lara Bezuidenhoudt

Fasken, incorporated in South Africa

as Bell Dewar Inc.

Inanda Greens, 54 Wierda Road West

Sandton, 2196

South Africa

Tel: +27 11 586 6038 Email: [email protected] URL: www.fasken.com/en/lara-bezuidenhoudt

Bontle Pilane

Fasken, incorporated in South Africa

as Bell Dewar Inc.

Inanda Greens, 54 Wierda Road West

Sandton, 2196

South Africa

Tel: +27 11 586 6033 Email: [email protected] URL: www.fasken.com/en/bontle-pilane

Lara Bezuidenhoudt is a partner in our Johannesburg office and highly

regarded for her skills in Public-Private Partnerships (PPPs) and

project finance, specifically, infrastructure development financing in

the transport, energy, telecommunications and mining sectors.

Lara has been at the forefront of advising on public/private

infrastructure development in Africa.

Lara is “prized for her experience in project finance” in regard to her

expertise within the field of Projects & Energy, according to Chambers Global.

Practising for more than 20 years in South Africa, one of the leading

countries in Africa, in the law, policies and systems established for

PPPs, she advises lenders, sponsors and government agencies.

Within this field, the inherent scale, complexity and risk, requires a

special mix of expertise and innovation in the approach to

development, procurement, financing and completing of projects;

Lara’s hands-on private and public sector experience provides

industry participants with the depth of knowledge and insights they

require.

The firm has had an established presence in Africa for over 130 years, with the firm in South Africa tracing its roots to 1879. With offices in

Johannesburg, London and in Canada’s major business centres, we access a growing network of business leaders and advisers throughout Africa

and beyond. Because business across the continent is powered by relationships, clients with interests in Africa benefit from our global connections.

We work with our colleagues across the firm to help our clients succeed. Our Johannesburg team has experience and expertise in all of Africa’s

established and growth industries, including mining, energy, infrastructure, healthcare, technology and finance.

Our offices are in Sandton, Johannesburg, home to the Johannesburg Stock Exchange and many corporate and investment banks, global audit firms

and the regional headquarters of many international businesses. We are able to serve clients in English, French and all of South Africa’s official

languages.

Bontle Pilane is a regulatory lawyer in the Corporate Commercial team

in Johannesburg advising clients in both the public and private sectors

and spanning diverse industries including telecommunications,

finance, transport, and regulatory authorities.

With a particular interest and experience in advising the public sector,

Bontle has used her background in commercial law to manage

significant public sector transactions, providing extensive financial and

commercial insights to clients.

Her experience includes general corporate advisory work, advising

state-owned entities on obtaining regulatory and financing approvals,

legislative drafting and review, and drafting and negotiating complex

agreements.

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Chapter 27


Ramón y Cajal Abogados, S.L.P.

Pablo Silván Ochoa

Carlos Melón Pardo

Spain




(i) Law 9/2017, of 8 November, on Public Procurement (LCSP), which establishes the basic regulations on public procurement and other general rules governing the State public sector procurement; (ii) Royal Decree 1098/2001, of 12 October, which approves general regulations implementing the LCSP; (iii) Royal Decree 817/2009, of 8 May, which partly implements the LCSP and regulates certain issues related to the classification of contractor companies, the Official Register of Bidders and Classified Companies held by the State, procurement panels and communications to the Official Register of Contracts; and (iv) Royal Decree 814/2015, of 11 September, which approves the regulation governing special procedures to review decisions in contractual and organisational matters and the Central Administrative Court for Contractual Appeals.

Furthermore, some Spanish autonomous regions (“Comunidades Autónomas”) have approved their own rules in public procurement matters, developing basic State laws.




of the legislation?

The governing principles of public procurement in Spain are the following: free access to tenders; disclosure and transparency in procedures; non-discrimination and equal treatment amongst bidders; effective use of public funds; guarantee of free and fair competition; budgetary stability and control of public expenditure; integrity; and awarding to the most advantageous bid in economic terms.



Yes. There are some: (i) Act 31/2007, of 30 October, on procurement procedures in the water, energy, transportation and postal services sectors (which rules the same matters covered by Directive 2014/25, albeit the law is not fully adapted to the regulations laid down in the Directive); (ii) Act 24/2011, of 1 August, on public procurement in defence and security matters; and

(iii) Act 8/1972, of 10 May, on the construction, conservation and exploitation of motorways under a concession.

The Spanish Parliament is currently processing a bill which will substitute Act 31/2007, once approved.



public procurement?

Yes, there are other provisions of Spanish law which are relevant to public procurement. Without being exhaustive, the following can be mentioned: (i) Act 19/2013, of 9 December, on Transparency, Access to Public Information and Good Governance (all public sector entities are obliged to publish information on their contracts and arrangements); (ii) Act 20/2013, of 9 December, to Guarantee Market Unity (forbidding certain practices restrictive of the free movement of goods and services, affecting public procurement, and also imposing duties to report public procurement information); and (iii) Act 14/2013, of 27 September, to back up entrepreneurs and their internationalisation (containing certain measures to promote public procurement with enterprises).



agreements?

Spain, as a European Union Member State, is subject to EU law in public procurement matters and, particularly, to both the principles set out in the EU treaties and the secondary EU law in force, currently comprising EU Directives 2014/23, 2014/24 and 2014/25 (Directives 2014/23 and 2014/24 have been implemented into Spanish law through the LCSP).

By virtue of the principles of primary and direct applicability of EU law, European Union rules in public procurement matters will prevail over domestic law.

It should be noted that the deadline for implementing the 2014/25 Directive into Spanish Law has already expired (18 April, 2016), which is the reason why it may directly apply in Spain until a new act is passed by the Spanish Parliament (see question 1.3 above).

The public procurement market in Spain is open to the signatory countries of the Government Procurement Agreement (GPA) within the framework of the WTO, as well as to Norway, Iceland and Liechtenstein, as Member States of the European Economic Area (EEA).


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Contracts

2.1 Which categories/types entities are covered by the


Public entities covered by law include: General State Administration; Spanish autonomous regions; local bodies; social security management entities and their common services; autonomous bodies; public universities; business public entities; other public law entities; and joint ventures of public entities. The LCSP applies also to certain public law corporations (such as commerce chambers).


The law applies, with a varying level of intensity, to two types of contracts: (i) administrative contracts, i.e. the following contracts executed by the Public Administration: (a) standard contracts (works, supply, services, concession of public works and concession of services); and (b) special contracts; and (ii) private contracts (only their preparation and award, as well as their amendment and some other less important matters, are regulated to a greater or lesser extent).



There are financial thresholds to ensure that contracts are governed by harmonised regulations, i.e. the application of rules implementing secondary EU Law:

■ Contracts for works and the concession of public works, for an estimated value that is equal to or greater than 5,548,000 euros.

■ Services concession contracts, for an estimated value that is equal to or greater than 5,548,000 euros.

■ Supply contracts and certain services contracts, for an estimated value that is equal to or greater than 221,000 euros, or 144,000 euros if awarded by the General State Administration, its autonomous bodies or Social Security management entities and their common services.

■ Subsidised works contracts, for an estimated value that is equal to or greater than 5,548,000 euros, or for works-related services, for an estimated value that is equal to or greater than 221,000 euros.


The LCSP includes rules to determine the estimated value of different types of contracts and to enable a division of the contractual object, by dividing it into lots.



The LCSP foresees special rules on the preparation, award, effects and cancellation of concession contracts both for public works and services.

The object of a public works concession contract is to build certain works or to execute specific tasks, including the restoration and repair of existing constructions, as well as the conservation and

maintenance of constructed components, in which the consideration provided to the concessionaire either consists of the right to exploit the works alone, or this right plus the payment of a price.

A services concession is a contract whereby the concessionaire provides a service which falls into the competence of a public entity and which may be exploited by private citizens.

A concessions contract will be performed at the concessionaire’s sole risk.



Yes. Framework agreements may be concluded with one or several enterprises in order to determine the conditions governing contracts of this same nature and with the same object, to be awarded over a certain period of time. These framework agreements should not be used abusively or in such a way as to hinder, restrict or distort competition. If concluded with several enterprises, there must be at least three. Such conclusion should be published on the contracting profile of the procurement body and in official daily publications. Subject to exceptions, the maximum term is four years.


into lots?

Yes. The object of a contract must be divided into lots when it is possible, as a way to enhance the participation of small and medium enterprises (SMEs) in the public procurement market. Anyhow, a contract may not be divided into lots in order to reduce its value and avoid any disclosure or other requirements applicable to the award procedure.



Procurement bodies must guarantee the equitable, non-discriminatory and transparent treatment of any bidders belonging to other European Union Member States, or to the European Economic Area. The treatment given to these bidders should be equivalent to that of national bidders.

In the case of OECD and WTO Member States, certain equitable treatment standards will apply.

In the case of bidders from third States, the principle of mutual recognition will apply.

3 Award Procedures




There are various types of award procedures foreseen in the LCSP: (i) open (any interested enterprise may apply), which may be ordinary, simplified or super simplified; (ii) restricted (any interested enterprise may request its participation, but proposals may only be made by enterprises which, following such prior request and based on their solvency, are selected by the procurement body); (iii) negotiated (only possible in the exceptional cases contemplated in the LCSP, where the award is made to a bidder duly selected by the procurement body, after consulting several candidates and negotiating the terms of the contract with one or more of these); (iv) competitive dialogue (only

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used for particularly complex contracts, where the procurement body leads a dialogue with the candidates selected, following their application, in order to discuss one or several solutions that are able to cover their needs and on which the elected candidates may base their bid); and association for innovation (by virtue of which some innovative contracts may be awarded). Minor contracts (those amounting to less than 40,000 euros in case of works contracts, or 15,000 euros in case of other contracts) may be directly awarded to any enterprise enjoying full legal capacity and the necessary professional qualifications, with some additional restrictions linked to the term and the object of the contract.


The ordinary timescale in which to make bids, in contracts subject to harmonised (EU) regulations, is 35 days. For contracts not subject to harmonised regulations, the timescale will be 15 days or 26 days for works contracts and public works concession contracts. Timescales to tender, award and formalise a contract are generally halved if the contract needs to be processed urgently. It is also possible to award the contracts on an emergency basis, subject to exceptional requirements.


tenderers?

Only Spanish or foreign, legal or natural persons may enter into contracts with the public sector if they enjoy full legal capacity, are not involved in any procurement prohibition (in accordance with Articles 71 ff. LCSP), and provide proof of their economic, financial and technical or professional solvency, or, in those cases required by the LCSP, of their classification.




Public procurement pursues a selection of the most advantageous bid, in financial and also in quality terms, chosen according to criteria directly linked to the object of the contract: quality; price; lifecycle cost; the updating formula used on any remuneration connected to the use of the works or provision of the service; the term of execution or delivery of the service; the cost of use; environmental characteristics or others linked to the satisfaction of social requirements, responding to the needs of particularly underprivileged social groups to which the users or beneficiaries of the contracted services belong; profitability; technical value; aesthetic or functional characteristics; availability; and cost of spare parts, maintenance, technical assistance, after-sale service or other similar factors. If a single award factor is taken into consideration, it will necessarily be the lowest price or any other based on the profitability.


low tenders?

Should the price of the contract be the only awarding criteria, the tender will be deemed as abnormally low pursuant to the rules set forth in Royal Decree 1098/2001 (Article 85). If there are any other awarding criteria, the rules on the evaluation of bids must be specifically established in the tender documents, otherwise it will not be possible to deem a tender as abnormally low.


These rules should be determined by the procurement body and described in the announcement, in the lists of specific administrative clauses or in the descriptive document. The procurement body will award the contract to the most advantageous bid, in financial and quality terms, selected further to said rules. The award must be reasoned, notified to the candidates or bidders, and simultaneously published in the contracting party’s profile.


bidders?

Notification of the award will in any case include the necessary information to enable an unsuccessful bidder to bring a sufficiently reasoned appeal against the award decision.


The LCSP foresees dynamic purchasing systems for the procurement of works, services and supplies for current use, with characteristics generally available on the market and which are able to cover the needs in question; it is also possible to execute a centralised procurement of supplies, works and services, under a general contract and with basically homogenous characteristics amongst the various bodies and authorities.


Each bidder may only make one proposal. However, if the award takes criteria other than the price into account, alternative or variant bids may be allowed, as long as the tender documents have expressly contemplated this possibility and specify which components are covered and in what terms.


Some of the procurement prohibitions established in Article 71 LCSP are aimed at avoiding conflicts of interest when awarding a contract, preventing bids from being made by persons related to the holders of the procurement body. Rules on incompatibilities and conflicts of interest amongst the various Public Administrations (e.g. Act 3/2015, Act 53/1984) serve the same purpose. In turn, Article 64 LCSP regulates conflicts of interest in public procurement in order to avoid any distortion in fair competition and to guarantee equal treatment.




The LCSP does not regulate the market engagement process from a general point of view. Nonetheless, in the competitive dialogue the bidders are specifically allowed to propose solutions, improvements and variants. Additionally, it must be taken into account that the LCSP forbids the market agents involved in the drafting of the tender documents from participating in the awarding procedure, as long as their participation may entail a restriction of fair and free competition.



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The LCSP excludes from its scope some businesses/agreements. The following are the main exclusions: (i) collaboration agreements between Public Administrations; (ii) collaboration agreements between Administrations and legal or natural persons subject to private law, as long as their object is not covered by the contracts regulated in the LCSP or in special administrative rules; (iii) financial services related to the issue, purchase, sale and transfer of securities or other financial instruments; (iv) management of in-house providing; (v) sale and purchase agreements, donations, exchange agreements, leases over real estate; and (vi) authorisations and concessions over assets belonging in the public domain.




Public sector bodies, institutions and entities will be treated as “in-house” providers of the awarding authorities if the following conditions are fulfilled: (i) the in-house service is controlled by the awarding authority in a similar way to how it controls its own services. In the case of companies, the entire capital stock should be state-owned; (ii) the in-house provider carries out most of its activity with the awarding authority (at least 80%); (iii) status as an in-house service should be expressly recognised in the incorporation rules or by-laws, specifying the regime applicable to any tasks that may be entrusted; (iv) in-house providers may not participate in the tenders called by the awarding authorities of which they are in-house providers; and (v) any contracts awarded by an in-house provider in order to perform a task entrusted will be governed by the LCSP.

5 Remedies



Yes. These remedies will depend on the type of contract. For the most relevant contracts from an economic point of view, all matters related to the preparation and award of the contract are subject to a special remedy in procurement matters; a contentious-administrative appeal is also possible. For administrative contracts not reaching the economic thresholds, all issues related to preparation and award of the contract, its effects and cancellation, are subject to an administrative appeal and a possible contentious-administrative appeal. For private contracts not reaching the economic thresholds, all issues related to contractual preparation and award are subject to an administrative appeal before the public body who holds control over the awarding private entity, while the issues regarding its effects and cancellation are examined by the civil courts.



Any public sector bodies, authorities and entities other than Public Administrations may use arbitration proceedings – pursuant to the

provisions of Act 60/2003, of 23 December – to settle any differences that may arise on the effects, performance and cancellation of their contracts.


sought?

Special remedies in procurement matters are filed before the Administrative Tribunals for Public Procurement (with state, autonomous or, in some cases, local status). Remedies brought in administrative channels are filed before the procurement body or the controlling public body of the procurement private entity. Contentious-administrative appeals are filed before the Contentious-Administrative Courts. Civil claims are filed before the Civil Courts.


remedies?

■ Special remedy in procurement matters: 15 days following notification of the challenged act. In some special cases, the term is 30 days or six months long.

■ Administrative appeal: one month following notification of the challenged act.

■ Contentious-administrative appeal: two months following notification of the challenged act.

■ Civil claim: the limitation period foreseen in private law to bring a claim, which is generally five years long.


periods?

It is not possible to adopt measures to shorten these limitation periods.


In administrative contracts, all matters related to contractual effects and cancellations are subject to an administrative appeal and, where appropriate, a contentious-administrative appeal.

In private contracts, all matters related to contractual effects and cancellation (except their amendment) are examined by the Civil Courts.


remedies is made?

There is a five-day term in which to settle a special remedy in procurement matters, following the date when pleadings are made/evidence conducted. The average timescale for the procedure overall is around 40 days.

The timescale in which to settle administrative remedies is one month (motion to set aside, “recurso de reposición”) or three months (remedy of appeal, “recurso de alzada”); either appeal may be presumed as dismissed if no express resolution is delivered over this period.

The timescale in which to settle contentious-administrative appeals or civil claims will depend on each jurisdictional body. The average timescale is between nine and 15 months.



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The Spanish review system for public procurement decisions is not based on precedent, but on positive law, which is why there are no particularly relevant cases. In practice, approximately 30% of all special remedies in procurement matters are upheld, for many different reasons (for example, inadequate drafting of the lists of terms, lack of reasoning in the awards, misapplication of award criteria, breach of mandatory legal provisions on solvency requirements). The percentage of successful administrative remedies and contentious-administrative appeals is smaller.



The contracting authority may waive the execution of a contract for public interest reasons, duly justified in the proceedings, or may set aside the procedure based on an irremediable infringement of rules on contractual preparation or the rules governing the award procedure, in any case before the award.

Subsequently, contracting authorities may only conduct an ex officio review of any null and void or voidable acts, in accordance with common administrative procedure rules.


Procedure







Though not expressly foreseen in the LCSP, it is standard practice for minor changes to be made to tender documents during the award process, as a remedy of errors, granting a new timescale in which to present bids. Material changes are not allowed, which is why in this case the parties would need to abandon the procedure under way and hold a new one.



In general, it is not possible for the bidders to negotiate any terms of the contract. Negotiation is only possible in a negotiated procedure and in a competitive dialogue procedure, as well in an association for innovation, on matters expressly determined by the contracting authority and in equality and transparency conditions amongst the bidders.


signature?

Public sector contracts may only be amended if this is foreseen in the lists of specifications or in the tender announcement, or in any of the situations exhaustively foreseen in the LCSP, on a restricted

basis. A change may not alter the essential conditions of the tender and award, and will be limited to introducing any variations that are strictly necessary to cover the objective cause in question; otherwise, the contract must be terminated.



signature?

The contract may be assigned to a third party provided that the technical or personal features of the assignor have not constituted a determining reason for the contract’s award, and if the assignment does not effectively restrict market competition. The assignee must hold the necessary capacity and solvency to perform the contract and the assignor must have executed at least 20% of all contractual services.

Furthermore, a contract will be automatically assigned in the event of a company merger, spin-off, contribution, transfer of undertakings or branch of activity.




them?

A disposal of securities representing the capital stock of publicly owned corporations constitutes an equity transaction and, as such, is excluded from the scope of application of the LCSP; these sorts of transactions are regulated by Act 33/2003, of 3 November, on the Property of Public Administrations and, where appropriate, by autonomous rules on the matter. If the State loses its controlling position, authorisation from the Council of Ministers will be necessary. The Consultative Privatisation Board created by the Council of Ministers Resolution of 28 June 1996 must necessarily issue an opinion as to whether the privatisation process and intended sale conform to the principles of disclosure, transparency and free competition.



The LCSP contemplates institutional PPP formulae in order to select the private partner participating along with the Administration in the capital stock of the companies awarding a concession of works or services.

8 The Future



impact?

As stated in question 1.5 above, the Spanish Parliament is currently processing a bill which will substitute Act 31/2007, implementing into Spanish law the provisions laid down in EU Directive 2014/25, on procurement procedures in the water, energy, transportation and postal services sectors.



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Pablo Silván Ochoa


Almagro, 16–18

28010, Madrid

Spain

Tel: +34 91 576 19 00 Email: [email protected] URL: www.ramonycajalabogados.com

Carlos Melón Pardo


Almagro, 16–18

28010, Madrid

Spain

Tel: +34 91 576 19 00 Email: [email protected] URL: www.ramonycajalabogados.com

Founded in 1986 and focused on the financial and business world, Ramón y Cajal has established itself as one of the top Spanish law firms on the

basis of the solid legal background of its members, the full commitment to efficiency and quality and the personal involvement of the partners in the

client dealings. Its size enables the firm to take advantage of multidisciplinary capacities and synergies and to successfully conclude matters of

significant complexity and scope. Ramón y Cajal has built a valuable clientele, comprising many of the largest listed Spanish companies in terms of

capitalisation. As some of these companies have a noteworthy international presence and regularly handle cross-border transactions, the firm is

involved in relevant capital markets and corporate transactions every year.

Pablo joined the firm in 2000 and became a partner in 2005. He

previously worked for the Council of Europe’s Directorate of Legal

Affairs (Strasbourg, France) and in the University of Zaragoza’s Public

Law Department.

He advises public and private clients on regulatory issues, government

organisations, public contracts, infringement and penalties, public

property, etc. His expertise includes cases on infrastructures and

public services, transportation, power and mining, telecommunications

and food law.

Pablo is widely experienced in court litigation (including the Spanish

Constitutional Court) and has counselled arbitration proceedings on

infrastructure cases as well as taken part in the drafting and

implementation of several PPP schemes.

He regularly contributes to multi-author publications in the area of

Administrative Law and participates as a lecturer both in Spain and

abroad.

Admitted to the Madrid Bar and recommended by Chambers Europe and Best Lawyers, Pablo holds a General Management Program

(PDG) from IESE.

Carlos joined the firm in 2007 and became a partner in 2016.

His experience is especially focused on advising public and private

clients in all types of government and public sector law matters, as well

as on the regulation of economic activities. He is particularly versed in

public sector procurement and in public-private partnerships (PPPs),

and also in the regulation of certain sectors, including insurance,

transport, energy, infrastructure (motorways, ports, airports), gambling

and pharmaceutical law.

He is involved in all types of administrative and governmental

proceedings and represents clients before the contentious

administrative courts.

Author of more than 25 publications in the area of Administrative Law,

he is admitted to the Madrid Bar.

Winner of the Iberian Lawyer 40 Under Forty Awards, 2017 (this award

recognises the most talented rising lawyers under forty in Spain and

Portugal).





Royal Decree 55/2017, of 3 February, implementing Act 2/2015, of 30 March, on the de-benchmarking of the Spanish economy, will have a significant effect on price updates in public contracts.


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Chapter 28


Mannheimer Swartling Advokatbyrå AB

Johan Carle

Sven Vaxenbäck

Sweden




The relevant legislation is the Public Procurement Act (SFS 2016:1145), the Utilities Procurement Act (SFS 2016:1146) and the Concessions Procurement Act (SFS 2016:1147). The Public Procurement Act is applicable to the public sector and the Utilities Procurement Act to the utilities sectors of water, transport, energy and postal services. The Concessions Procurement Act is applicable to works and services concessions. The acts regulate procedures for contracts above and below the thresholds mentioned in the acts, for social and other specific services and for remedies.




of the legislation?

Equal treatment, non-discrimination, transparency, proportionality and mutual recognition are basic underlying principles of utmost relevance to the interpretation of the legislation. In the preparatory works to the legislation, it is stated that the Swedish procurement laws shall be applied in conformity with EU legislation and the rulings by the Court of Justice of the European Union (CJEU).



As mentioned in the reply to question 1.1 above, there are specific procurement rules for the utilities sectors.

Furthermore, the Defence and Sensitive Security Procurement Act (SFS 2011:1029) implements Directive 2009/81/EC, but also regulates procedures for contracts below the thresholds mentioned in the act and for service contracts referred to in Annex 3 of the act.



public procurement?

The Public Access to Information and Secrecy Act (SFS 2009:400) includes a specific rule for procurement which stipulates that, up until the award decision, no information regarding suppliers and

tenders may be revealed by the contracting entity. Thereafter, the Secrecy Act secures access for all interested parties to most documents related to the procurement procedure, including parts of the tenders.



agreements?

The acts mentioned in the reply to question 1.1 above implement Directives 2014/23/EU, 2014/24/EU and 2014/25/EU, and the remedies Directives 1989/665/EC, 1992/13/EC and 2007/66/EC. The acts relate to the GPA rules as well as the Directives.


Contracts



The relevant legislation covers both public as well as private entities as purchasers. As regards to public entities, the Public Procurement Act covers contracting authorities defined as governmental and local authorities, including:

1) decision-making bodies in municipalities and county councils;

2) publicly-governed bodies, understood to cover, inter alia, undertakings, associations and foundations established to meet needs in the general interest not having an industrial or commercial character: (i) financed mainly by the government, a municipality, a county council or a contracting authority; (ii) subject to control by the government, a municipality, a county council or a contracting entity; or (iii) in which more than half of the members of the board or the managing body have been appointed by the government, a municipality, a county council or a contracting authority; and

3) associations of one or more authorities and bodies mentioned above.

The Utilities Procurement Act covers contracting entities defined as contracting authorities within the utilities sectors, public undertakings within the utilities sectors over which a contracting authority exercises a dominant influence, and private undertakings within the utilities sectors enjoying special and exclusive rights.

The Concessions Procurement Act covers contracting entities defined as entities which pursue the activities referred to in Annex 2


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of the act and that are contracting authorities, public undertakings over which a contracting authority exercises a dominant influence, and private undertakings enjoying special and exclusive rights.

It is only possible to obtain a binding ruling on which public entities are covered by the laws in connection with the remedies procedures mentioned in section 5 below. The Swedish Competition Authority or the National Agency for Public Procurement may render a non-binding, but guiding, opinion on the issue.

As regards to private entities, the Utilities Procurement Act and the Concessions Act cover private entities enjoying special or exclusive rights.

It is only possible to obtain a binding ruling on which private entities are covered by the acts in connection with the remedies procedures mentioned in section 5 below. The Swedish Competition Authority or the National Agency for Public Procurement may render a non-binding, but guiding, opinion on the issue.


All contracts, above and below the thresholds, for works, supplies and services are covered. Contracts excluded are mentioned in the replies to questions 4.1 and 4.2 below. Contracts below the thresholds and contracts for social and other specific services are covered by a special set of rules similar to the rules applying to contracts above the thresholds. Most of these contracts shall be advertised and all basic principles apply, as well as the rules for remedies.



Yes. The same thresholds apply as under the EU Directives to determine what set of rules should apply to a contract. Further, direct procurement (i.e. procurement without a requirement for tenders in a certain form) is allowed if the value of the contract does not exceed 28 per cent of the EU Directive thresholds for goods and services (if the Public Procurement Act is applicable to the contract), or does not exceed 26 per cent of the threshold for goods and services (if the Utilities Procurement Act is applicable to the contract), or less than 5 per cent of the EU Directive thresholds for works and services concessions.


Yes. These rules correspond to the rules in the EU Directives.



Yes. On 1 January 2017, a new Concessions Procurement Act entered into force. The act implements Directive 2014/23/EU and the definition of a concession contract corresponds with the definition in the Directive.



Yes. Sweden has used the option in the EU Directives to provide that contracting authorities may conclude framework agreements. These rules correspond to the rules of the EU Directives.


into lots?

Yes. Contracting authorities may decide to award a contract in the form of separate lots in accordance with the new EU Directives.



The national legislation does not specifically govern this issue. The general underlying principles of the EU Directives are applicable, as well as the GPA rules.

3 Award Procedures




For contracts above the thresholds, the open, restricted, negotiated, competitive dialogue and innovation partnership procedures apply. The rules on these procedures correspond to those of the EU Directives and thus, under the Public Procurement Act, the contracting entity may choose freely between the open and restricted procedures; and under the Utilities Procurement Act, the contracting entity may choose freely between the open, restricted and negotiated procedures.

Below the thresholds, the simplified procedure, the selective procedure, and the direct procurement procedure apply. Under the simplified procedure, all suppliers are entitled to submit tenders and the contracting entity may negotiate with one or several of these tenderers. Under the selective procedure, all suppliers are permitted to apply to submit tenders, the contracting entity invites certain suppliers to submit tenders, and the contracting entity may negotiate with one or several suppliers. The contracting entity may choose freely between these two procedures. The direct procurement procedure is a procedure without tenders in a certain form being required and may be chosen only for contracts below the threshold mentioned in the reply to question 2.4 above, or for exceptional reasons not caused by the contracting entity itself. The competitive dialogue procedure may be applied if the simplified or the selective procedures do not allow for the contract to be awarded.

Under the Concessions Procurement Act, the contracting entity may freely organise the procurement procedure provided that the underlying principles of the EU Directives are observed. The direct procurement procedure may be chosen only for contracts below the threshold mentioned in the reply to question 2.4 above, or for exceptional reasons not caused by the contracting entity itself.


As far as contracts above the thresholds mentioned in the reply to question 2.3 above are concerned, the applicable rules correspond to those in the EU Directives.

As regards contracts below the thresholds, the minimum timescale for submitting applications in the selective procedure is 10 days from the day that the invitation is published. The minimum timescales in the competitive dialogue procedure for contracts above the thresholds also apply for contracts below the thresholds. Otherwise, the rules on minimum timescales regarding contracts

Mannheimer Swartling Advokatbyrå AB Sweden


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below the thresholds simply stipulate that suppliers shall be given reasonable time to submit applications and tenders.


tenderers?

The compulsory rules of the EU Directives apply.

A tenderer may also be excluded if he is bankrupt, is being wound up, his affairs are being administered by the court or similar, is the subject of proceedings for a declaration of bankruptcy, for an order for compulsory winding up or administration by the court or for an arrangement with creditors or similar proceedings, has been convicted of an offence concerning his professional conduct by a judgment which has the force of res judicata or has been guilty of grave professional misconduct (and the contracting entity can furnish proof of this circumstance). Contracting authorities may exclude a tenderer where the contracting authority can demonstrate by any appropriate means that the tenderer is in breach of its obligations relating to the payment of taxes or social security contributions. (NB: A tenderer shall be excluded if he has not fulfilled obligations relating to the payment of social insurance fees or taxes in the country in which he is established or the country in which the procurement takes place and where this has been established by a judicial or administrative decision having final and binding effect.)

A tenderer may provide evidence to the effect that measures taken by the tenderer are sufficient to demonstrate its reliability despite the existence of a relevant ground for exclusion. The tendered cannot be excluded if sufficient evidence to this effect is presented.




These rules correspond to those of the EU Directives.


low tenders?

These rules correspond to those of the EU Directives.


As in the EU Directives, the tenderer with the most economically advantageous tender shall be awarded the contract. A written decision, which states the reasons for the award, shall be sent to all suppliers that have applied for tendering and/or have submitted a tender.


bidders?

National legislation does not provide any obligation or procedure for debriefing unsuccessful bidders. However, contracting authorities can do so if they wish.


There is, according to the Public Procurement Act and the Utilities Procurement Act, a possibility to use central purchasing bodies, which are contracting authorities that conclude framework

agreements for works, supplies or services intended for themselves and/or other contracting entities. Two or more contracting authorities can also choose to make a procurement together as a group. Usually one contracting authority will act as proxy for the group.


Alternative or variant bids are accepted only if so stated by the contracting entity in the tender documents.


Under the procurement acts, a contracting authority may exclude a tenderer if the contracting authority cannot avoid a distortion of competition or cannot ensure equal treatment of all potential tenderers due to a conflict of interest, which cannot be effectively remedied by other less intrusive measures.

The government concluded in the preparatory works that the general rules of conflicts of interest in the Administrative Procedure Act, which has a wider scope than the EU Directives, can be applicable in many cases. Also, the basic principle of equal treatment can be applied against a public authority acting in conflict of interest.




Potential bidders may be involved in the preparation of a procurement procedure. However, other potential bidders must receive relevant information exchanged during such preparations. A potential bidder that has been involved in the preparation of a procurement procedure may be excluded from the procurement procedure only if the contracting authority deems that there are no other means to ensure that the principle of equal treatment is observed.




The legislation excludes from its application the same contracts as are excluded under the EU Directives. The rules do not apply to contracts awarded by contracting entities and intended to enable them to carry out electricity generation or the sale of electricity in Sweden, according to a decision by the European Commission of 29 October 2007. Certain services in the postal sector in Sweden are also exempted, according to a decision by the European Commission of 19 December 2008.




The acts do not apply to contracts awarded within a single entity. They apply within groups consisting of different legal persons being able to conclude binding agreements with each other, and between public bodies. Under the acts, a contracting authority may directly enter into a contract with a service provider if the contracting authority controls the service provider in question as if it were that



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contracting authority’s own department, the service provider in question carries out more than 80 per cent of its activities with the contracting authority that controls that entity, and there is no direct private ownership in the service provider.

The acts do not apply to contracts awarded between contracting authorities if the contract establishes or implements a cooperation between the participating contracting authorities with the aim of ensuring that public services they have to perform are provided with a view to achieving common objectives, the implementation of that cooperation is governed solely by considerations relating to the public interest, and the participating contracting authorities perform on the open market less than 20 per cent of the activities concerned by the cooperation.

5 Remedies



A court may decide to set aside a decision or to order the contracting entity to correct an award decision or redo the procurement procedure. Interim measures may be ordered. Damages may be claimed. Following the Swedish implementation of Directive 2007/66/EC, it is possible for an administrative court to retroactively nullify a contract. In addition, the purchaser may in certain cases be subject to a procurement penalty fee after application to an administrative court by the Swedish Competition Authority.



No, they cannot.

5.3 Before which body or bodies can remedies be sought?

Damages are sought in civil courts and other remedies in administrative courts.


remedies?

A contract award decision is followed by a standstill period, where the purchaser may not enter into a contract with the chosen supplier until 10 days (if the decision has been sent by electronic means only) or 15 days (if the decision has been sent by other means) have elapsed from the communication of the decision. Administrative remedies must be sought within the timeframe of this contract standstill period. A prolonged standstill period automatically follows the application for remedies. Further, a claim to nullify the procurement contract must be made within 30 days from the public declaration of the contract in question or, if no such declaration has been made, within six months from the date of the contract. Damages may be claimed within one year from the date of the contract or from the time when a court has nullified the contract.


periods?

The limitation periods mentioned in the reply to question 5.4 above are mandatory and cannot be shortened by any of the involved parties.


Nullification of the contract and damages. The contracting entity can, however, avoid nullification of the contract by publishing a voluntary ex ante transparency notice and observing a standstill period.


remedies is made?

The likely timescale is two to six months for administrative remedies in the first instance of the administrative courts and 12–18 months for a case on damages in the first instance of the civil courts. All judgments from the administrative and civil courts may be appealed.



Remedies are fairly often obtained within all areas of public procurement. A contracting entity in breach of the rules during the evaluation phase is normally ordered by the court to correct the evaluation. A contracting entity that is in breach of the rules governing the contract notice and the contract documentation is normally ordered to set aside the award decision and initiate a new award procedure. Remedies have also been obtained in cases where the contracting entity has decided to suspend a procedure without having an objective reason for this.



According to the acts mentioned in the replies to questions 1.1 and 1.3 above, the administrative court in some cases, despite the conditions for nullification of a contract, shall decide that the contract may stand if it is justified for overriding reasons of public interest. Such exceptional circumstances forming overriding reasons of public interest could be i.a. public safety, protection of human life and health or protection of the environment.


Procedure







The general underlying principles of the EU Directives apply. Also, contracting authorities shall extend the time limits for the receipt of tenders where significant changes are made to the procurement documents during the procurement procedure.

As regards modifications of contracts during the contract term, see further question 6.3 below.



In procurements below the applicable thresholds, negotiations are



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permitted. Above the thresholds, negotiations may only take place when negotiated procurement procedures apply. The general underlying principles of the EU Directives are applicable to the negotiations. Under the Concessions Procurement Act, the contracting entity may freely organise the procurement procedure provided that the underlying principles of the EU Directives are observed.

The contracting authority may, independent of the type of procedure, allow tenderers to correct a manifest written error or erroneous calculation or some other manifest error in their final tenders. The contracting authority may also request that a final tender is clarified or supplemented, provided this can be done without risk of discrimination or restriction of competition.


signature?

First, an awarded contract may be modified as long as the overall nature of the contract is not altered and the value of the contract increases or decreases with less than the thresholds mentioned in the acts and less than 10 per cent (if it is a goods, services or a concessions contract) or 15 per cent (if it is a works contract) of the contract value.

Secondly, where the modifications, irrespective of their monetary value, have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses, which may include price revision clauses, or options, such clauses shall state the scope and nature of possible modifications or options, as well as the conditions under which they may be used. They shall not provide for modifications or options that would alter the overall nature of the contract or the framework agreement.

Thirdly, additional works, services or supplies by the original contractor that were not included in the initial procurement are allowed provided that the additional works, services or supplies are necessary and a change of contractor cannot be made for economic or technical reasons causing significant inconvenience or increase of cost, and the increase in contract value does not exceed 50 per cent of its original value.

Fourthly, modifications can be made if brought about by circumstances which the contracting entity could not foresee as long as the overall nature of the contract is not altered and the increase in price does not exceed 50 per cent of the contract value.

Fifthly, it is permitted to modify awarded contracts as long as the modifications are not substantial. An amendment is considered substantial if it, inter alia:

(i) introduces new contract conditions which, if the conditions had been part of the original contract, would have allowed admission of other candidates, that other tenders would have been included in the tender evaluation or that other companies could have participated in the tender procedure;

(ii) changes the economic balance of the contract to the benefit of the company that was awarded the contract;

(iii) extends the scope of the contract considerably; or

(iv) replaces the contractor awarded the contract.

As regards transfer of contracts to new suppliers, see further question 6.4 below.



signature?

Transferring a contract to another supplier is permitted, provided

that (i) the new contractor meets the criteria for qualitative selection initially established and the grounds for mandatory exclusion do not apply to the new contractor, (ii) the new contractor fully or partially succeeds into the position of the original contractor following a corporate reorganisation (including takeover, merger, acquisition or insolvency), and (iii) no other substantial modifications are made to the contract.




them?

No, there are not.



No special rules apply.

8 The Future



impact?

In June 2018 the commission of inquiry, with the task of reviewing the appeal procedure and reviewing the national legislation applicable to procurements outside the scope of the EU Directives, completed its report. The report proposes i.a. that there should be an application fee to the administrative court, that the administrative court shall have the possibility to order that the losing party shall cover the costs of the winning party in remedies processes and that there should be a regulation for dialogue in procurement with the aim, among other things, to allow corrections and completions of tenders when this is possible according to the general underlying principles.




At the time of writing, the Government has circulated the report (mentioned above in the answer of question 8.1) for comments, and so the drafting of the Government bill has therefore not started yet. However, the commission of inquiry proposes that the proposed law amendments should enter into force on 1 July 2019.

Acknowledgment

The authors would like to acknowledge the assistance of their colleague Viveka Heimer in the preparation of this chapter.



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Johan Carle


Norrlandsgatan 21

Box 1711

SE-111 87 Stockholm

Sweden

Tel: +46 8 5950 65 76 Email: [email protected] URL: www.mannheimerswartling.se

Sven Vaxenbäck


Norrlandsgatan 21

Box 1711

SE-111 87 Stockholm

Sweden

Tel: +46 8 5950 60 33 Email: [email protected] URL: www.mannheimerswartling.se

Mannheimer Swartling is the leading commercial law firm in the Nordic region. By combining the highest legal competence with industry know-how,

we offer our clients professional legal advice with added value. We are a full-service law firm with an extensive international practice and

assignments all over the world. Mannheimer Swartling has offices in Stockholm, Gothenburg, Malmö, New York, Moscow, Brussels, Shanghai and

Hong Kong. The firm has a turnover of around SEK 1.3 billion and has approximately 550 employees.

We provide legal advice on all types of corporate matters. Our public procurement specialists are skilled across a broad spectrum of public

procurement law issues and naturally also possess general knowledge of corporate law and the Swedish public procurement market.

Johan Carle has worked with public and utilities procurement since the

establishment of Swedish legislation in the field of law in 1993.

His practice consists of advising both contracting authorities and

entities, as well as private suppliers, in all stages of a procurement,

with an emphasis on litigation regarding public and utilities

procurement.

He co-chairs the annual public procurement conference Public

Procurement Forum (which takes place in the Autumn).

He is also ranked as one of Sweden’s leading competition

practitioners and regularly appears on lists of leading and

recommended Swedish competition law lawyers.

Sven Vaxenbäck has more than 10 years’ experience of working

exclusively with all aspects of public, utilities, defence and security

procurement law.

He regularly advises contracting authorities/entities and suppliers as

well as representing them in court procedures regarding review of

award decisions, review of decisions to terminate procurement

procedures and review of the validity of public contracts. He also

regularly advises purchasers and sellers on procurement law issues in

M&A transactions.

His experience includes projects related to hospitals, pharmaceuticals,

public transport, airports, sea ports, procurement in the area of

defence and security, IT, construction and both service and works

concessions.

He is a regular lecturer at the annual Swedish public procurement

conference Public Procurement Forum (which takes place in the

Autumn).

He is also ranked in both Chambers (band 3) and The Legal 500.



229

Chapter 29


Lenz & Staehelin

Astrid Waser

Benoît Merkt

Switzerland




The principal legislative acts regulating federal public procurements in Switzerland are (i) the Federal Act of Public Procurement of December 16, 1994 as amended (FAPP), and (ii) the Federal Ordinance of Public Procurement of December 11, 1995 as amended (OPP). Whereas the FAPP sets forth the general framework, the OPP contains detailed provisions to execute the FAPP and further stipulates the procedure for public procurements not covered by the FAPP. The main legislative acts for the procurements of regional and local authorities are (i) the Intercantonal Agreement on Public Procurement of November 25, 1994/March 15, 2001 (IAPP), and (ii) the cantonal public procurement regulations.

These acts are complemented by international framework agreements such as the Government Procurement Agreement of April 15, 1994 (GPA), the Bilateral Agreement between the European Community and Switzerland on certain aspects of public procurement of June 21, 1999 (EU-CH AAGP), the Convention establishing the European Free Trade Association of January 4, 1960 as amended (EFTA Agreement), as well as certain national acts such as the Federal Act on the Internal Market of October 6, 1995 (FAIM). These framework agreements and certain national acts do not lead to a harmonisation of the public procurement laws. They do, however, contain minimal standards to be respected during the public procurement process.

The following chapter will focus principally on federal law, due to the numerous and different cantonal and even municipal regulations in the Swiss Confederation.




of the legislation?

The FAPP aims at an efficient use of public funds by increasing competition between tenderers. Contracts will be awarded to the most commercially advantageous bid. The procurement procedure follows the principles of equal treatment of domestic and foreign tenderers and transparency. Furthermore, the contracting authority will only award a contract to a tenderer who will guarantee compliance with health and safety regulations as well as employment regulations, including equal treatment of men and women.



The FAPP applies neither to the procurement of weapons, munitions or war materials, nor to the construction of fighting and command infrastructure for overall defence and the army (article 3 (1)(e) FAPP). A definition of the term “war materials” can be found in the Federal Act on War Materials of December 13, 1996, as amended. Please refer to question 4.1 for further information on excluded areas and exemptions.



public procurement?

There are diverse areas of national law that are relevant to public procurement. The FAIM regulates minimum standards for cantonal and communal procurements, and provides, in particular, that the procurement procedures have to be non-discriminating, public and subject to appeal.

With regard to government transparency rules, according to article 6 of the Federal Act on Freedom of Information in the Administration of December 17, 2004 as amended (FoIA), any person has, in principle, the right to inspect official documents and to obtain information about the content of official documents. The FoIA interacts with the Federal Act on Data Protection of June 19, 1992 as amended (FADP), which governs, inter alia, the protection and processing of personal data by federal bodies.

Further relevant national laws to public procurement are (i) the Federal Cartel Act of October 6, 1995 as amended (CartA) which prohibits, inter alia, unlawful agreements between competitors in the context of procurement contracts as well as the abuse of a dominant position, and (ii) the Federal Act Against Unfair Competition of December 19, 1986 as amended (AUC).



agreements?

Switzerland ratified the GPA, EU-CH AAGP, and the EFTA Agreement (see also question 1.1). In order to fulfil the obligations resulting from the GPA, the FAPP and the IAPP were implemented.

However, since Switzerland has a monist legal system, the domestic and the international law systems form a unity. The ratified treaties therefore enter into force in domestic Swiss law and are directly


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applicable if the terms of the relevant provisions are sufficiently clear to be self-executing. In addition, the provisions of the supra-national regimes serve as an interpretative aid for Swiss authorities and courts in order to ensure that the provisions of the national legislation are interpreted in accordance with the international agreements.


Contracts



The FAPP (article 2) enumerates the public authorities which are subject to the law. The list contains entities both with and without legal personality. Appendix 1/annex 1 of the GPA has a conclusive list of awarding authorities, although entities founded after the contract signing may also be subject to public procurement. Explicitly regulated are contracting authorities in the water, energy, transport and telecommunications sectors.

Despite the fact that there is a list of awarding authorities mentioned in the acts (FAPP, the OPP and in appendix 1/annex 1 of the GPA), it remains unclear which public entities are covered by federal law. The same holds true with respect to public entities on the cantonal level. As of 2019, the compensation fund for old age and survivors’ insurance, disability insurance and income compensation regulation is also subject to the FAPP, with the exception of asset management.

Private entities are, for certain actions and under specific circumstances, also subject to public procurement law. In particular, if private parties act in place of contracting authorities for procurements (article 2d OPP), they have to meet the same legal requirements. In addition, actions such as the provision of public services in the area of production, transport or distribution of electrical power by private parties are also subject to public procurement law.


Under Swiss public procurement law, the following types of contracts are covered:

■ works contracts, i.e. contracts for building and civil engineering work;

■ supply contracts, i.e. contracts for the supply of movable goods, in particular by purchase, lease, rent or hire; and

■ service contracts, i.e. contracts for the rendering of services.

It is important to note that the above types of contracts are only covered if the public entity appears as a purchaser or receiver of services.



The relevant threshold values (without VAT for each single assignment) in terms of article 6 of the FAPP which are valid from January 1, 2018 until December 31, 2019 are as follows:

■ for supply and services: CHF 230,000;

■ for works: CHF 8.7 million; and

■ for supplies and services procured by a contracting authority defined in article 2 (2) of the FAPP or by the Swiss Post for its activities in the public transport sector: CHF 700,000.

The relevant threshold values (without VAT) for entities specified in article 2a of the OPP are as follows:

■ for supplies and services in the telecommunications sector: CHF 960,000;

■ for supplies and services in the railway sector: CHF 640,000;

■ for supplies and services in the electricity sector: CHF 766,000;

■ for works in the telecommunications or railway sectors: CHF 8 million; and

■ for works in the electricity sector: CHF 9.575 million.

In order to contract to a supplier directly and without invitation to tender, the relevant values (without VAT) have to be below the following thresholds:

■ for works and services: CHF 150,000; and

■ for supplies: CHF 50,000.

In addition, for areas and sectors not covered by international agreements (see question 1.1), the following thresholds apply (article 36 of the OPP):

■ for works and services: CHF 150,000; and

■ for supplies: CHF 50,000.


Articles 7 of the FAPP, 14 to 15a of the OPP, as well as article II of the GPA, provide detailed rules regarding the calculation of the contract value (including aggregation and anti-avoidance rules) in order to determine the applicable thresholds and procedures.



Article 2 (7) of the FAIM stipulates that the transfer of the usage of cantonal or communal monopolies to private entities is to be made through a public tender procedure. It is contested in literature whether this provision stipulates an obligation to procure according to public procurement law. According to the Federal Supreme Court, it has to be differentiated between concessions that (only) award an exclusive right and concessions that are combined with synallagmatic contracts with which the state (also) procures goods or services. In the first case, the authority does not procure but rather offers services or rights. Hence, procurement law does not apply. If, in the latter case, the goods or services are of a certain importance and usually the object of a public procurement procedure, public procurement law may apply.

Furthermore, the Federal Supreme Court has recently ruled that state-run bike rental systems are not only based on concessions but also on public assignments and that, therefore, the award of a concession does not exclude the applicability of public procurement law. If the granting of a special use concession is embedded in an overall transaction, it may result from an assessment of all the circumstances of the transaction that it is subject to public procurement law.

Apart from this explicit rule in the FAIM, there are certain laws, which specifically exclude the application of public procurement law for the award of concessions (e.g. concessions under the railway law).



In Switzerland, there are no special rules for the conclusion of

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framework agreements. Framework agreements qualify as public procurements if the single contracts to be concluded under the framework agreements qualify as public procurements. For calculation of the thresholds, the sum of the single transactions contemplated under the framework agreement is relevant.


into lots?

Under Swiss public procurement law, the division of contracts into lots is permissible, provided that the contracting authority explicitly refers to the lots in the public tender. The public procurement law provides for detailed rules for the division of contracts into lots.



In terms of equal treatment, suppliers enjoy, in principle, National Treatment and Most Favoured Nation Treatment within the scope of the relevant international agreements (see also questions 1.1 and 1.4) or in cases where the foreign state in question grants reciprocal rights.

Exceptions to the principle of National Treatment and Most Favoured Nation Treatment have to be determined on a case-by-case basis within the boundaries of the existing legal framework.

3 Award Procedures




Swiss public procurement law provides for four main award procedures: the “open”; the “selective”; the “negotiated”; and the “invitation” procedure.

In the “open procedure”, any interested bidder may submit a tender (article 14 FAPP). In the “selective procedure”, any interested bidder may apply to participate in the procedure, but only those bidders who meet the qualification criteria may submit a tender (article 15 FAPP). In the “negotiated procedure”, the contracting authority negotiates a contract directly with a supplier of its choice (article 16 FAPP). In the “invitation procedure”, the contracting authority determines which suppliers will be allowed to submit a tender. If possible, the contracting authority invites at least three suppliers (article 35 OPP).


The contracting authority has to set the deadlines in a way which allows the suppliers to examine the documentation and to submit an offer (article 19 OPP).

The minimum timescales are:

■ in an open procedure, 40 days for the submission of an offer; and

■ in a selective procedure, 25 days for the submission of a request for participation and 40 days for the submission of an offer.

The deadline for the submission of offers can (under the conditions set out in the GPA) be reduced. As a rule, the deadline should amount to at least 24 days and may not be less than 10 days.


tenderers?

The FAPP contains a non-exhaustive list of reasons for exclusion (articles 11 and 19 (3)). Reasons for exclusion include false information of tenderers to the contracting bodies, the failure to pay taxes and social security contributions, the violation of essential formal conditions and competition law infringements (e.g. cartels).

Only the “selective procedure” provides for a selection or “short-listing” of the bidders which fulfil the qualification criteria established by the contracting authority. According to article 15 (3) of the FAPP, the contracting authority can reduce the number of tenderers if the tender could not otherwise be processed in an efficient way. However, even when limiting the number of participants, the contracting authority has to guarantee an effective competition between the bidders.




The tenders have to be evaluated based on the published awarding criteria. Other than the price, the contracting authority may set up further criteria such as quality, utility, technical values, creativity, sustainability, customer service, etc. The weighting of the price in this basket of criteria lies to a certain extent at the discretion of the contracting authority and depends on the circumstances, e.g. in complex matters, less weight might be given to the price than in cases of more standardised goods. The contracting authority has to publish the order of the awarding criteria and the respective weighting. If qualification criteria apply, they have to relate to the respective supply, service or work being procured, so that the contracting authority can narrow down the tenderers to those who are capable of offering the required quality. However, criteria that are discriminatory or unrelated to the supply, service or work to be procured are not allowed.


low tenders?

According to article 25 (4) of the OPP, the contracting authority may request further information from the tenderer filing an abnormally low tender, e.g. regarding the calculation method, in order to assess whether there is a reason for exclusion (article 11; see question 3.3). If such information is not provided or presented inconclusively by the tenderer, the contracting authority may exclude such tenderer. The OPP, however, does not define “abnormally low” tenders. As a rule, tenders which range below production costs or which differ noticeably from the other tenders should be verified. Abnormally low tenders are not automatically excluded by law and should be examined on a case-by-case basis. In a cantonal public procurement case, the Federal Supreme Court also accepted the inclusion of plausibility of the price as awarding sub-criteria.


According to article 21 (1) of the FAPP, the contracts are awarded to the most economically favourable offer. The most economically favourable offer is evaluated taking into account a number of criteria, in particular, deadlines, quality, price, operating efficiency, operating costs, customer service, expedience of the performance, aesthetics, environmental sustainability, technical value and training



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of apprentices within the meaning of a basic vocational training. The last criterion, however, applies only outside the scope of international agreements. The contracting authorities have to determine a catalogue of awarding criteria and their degree of relevance, and must publish them in the tender documentation. Contracts for broadly standardised goods may also be awarded solely on the basis of the lowest price (article 21 (3) FAPP).


bidders?

The contracting authority has to communicate its decision to the bidders, and must include a reasoned summary of its decision. In addition, an unsuccessful bidder has the right to request the contracting authority to provide further information on the award procedure, such as the identity of the successful bidder, the price or the highest and lowest prices of the bids, the essential reasons why the bid was not considered and the determining characteristics and advantages of the successful bid (article 23 (2) FAPP). This information can only be refused in cases where there are justified reasons to withhold certain information. The contracting authority may provide this information in a written statement or invite the unsuccessful bidders for an oral debriefing, which in practice is often seen.


The OPP provides, in article 2c, conflict rules for joint procurements from contracting authorities subject to federal law and as such are subject to cantonal law. If a contracting authority subject to federal law bears the highest share of the financing, federal law will apply to the entire procurement procedure.

If different thresholds apply to the contracting authorities that are subject to the FAPP or the OPP, then the lower thresholds will apply.


According to the OPP, variant bids are bids with which the object of the procurement procedure can be reached in an alternative manner than envisaged by the contracting authority (article 22a). This provision has the purpose of facilitating innovative solutions. Different pricing systems are not viewed as variant bids.

Tenderers are free to hand in additional variant bids. In exceptional cases, the contracting authority can limit or exclude this possibility but has to give a reason for this restriction.


The FAPP does not provide for any rules on conflicts of interest. However, general principles of constitutional and administrative law, according to which members of the administration must recuse themselves if they have a personal interest or could be regarded as lacking impartiality, apply to public procurements.




According to article 21a OPP, the contracting authority shall exclude a previously involved tenderer if the hereby resulting competitive advantage cannot be compensated by other means and

such exclusion does not harm the competition between the tenderers. Therefore, previous involvement may be permitted, inter alia, if (i) the advantage in knowledge is marginal, (ii) the involvement was of subordinate nature, (iii) the tendered service can only be procured from a few providers, or (iv) previous involvement and advantage in knowledge have been disclosed in the procurement documents.




The FAPP contains a list of procurements for which the FAPP does not apply (article 3). Such procurements include (i) contracts to institutions for disabled persons, charities and penal institutions, (ii) contracts granted within the framework of agricultural or food aid programmes, and (iii) contracts which are awarded on the basis of an international treaty between WTO contracting states or Switzerland and third countries in respect of an objective to be achieved and jointly funded.

In addition, a contracting authority can refrain from applying the FAPP if it is necessary for the protection of public decency, public order, public health, or intellectual property rights.




The FAPP does not specifically regulate “in-house” arrangements. Authorities are free to choose between making and buying. The FAPP does not apply to real “in-house” arrangements whereby a contract is made between the contracting authority and a body belonging to, or being controlled by, the same public entity as the contracting authority. The FAPP, however, will apply if the “in-house” supplier also offers its goods or services for a non-insignificant part to third parties, and therefore participates as a competitor in the market, or if third parties have a shareholding interest in the supplier.

In cases of “in-state” procurement, i.e. if a public entity procures from a different public body, the application of the FAPP can be exempted; in particular, if such other public body providing goods or services is controlled by a public entity and does not participate as a competitor in the market.

In practice, the criteria developed by the European Court of Justice in Teckal have been applied.

5 Remedies



The FAPP defines several (final and interim) decisions which can be independently contested by way of appeal. The non-exhaustive list in article 29 of the FAPP includes (i) the award of contract or discontinuation of the award procedure, (ii) the invitation to tender for the contract, (iii) the decision on the selection of participants in the selective procedure, and (iv) exclusions (according to article 11 FAPP).



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Appeals against these decisions have to be brought forward immediately. Their unlawfulness cannot be pleaded at a later point in the procedure.

Appeals do not, in principle, have suspensive effect. However, the Federal Administrative Court can be requested by means of a provisional measure to grant suspensive effect.

According to the Federal Act on Administrative Procedure of December 20, 1968 (APA), as amended, an appeal against other separately notified interim orders is permitted if (i) they may cause a non-redressable prejudice, or (ii) granting the appeal would immediately bring about a final decision, and would therefore obviate significant expenditure in time or money in prolonged evidentiary proceedings.



In doctrine, it is disputed whether the remedies provided by the FAPP are conclusive or whether civil claims based on culpa in contrahendo are possible. As an informal remedy, a complaint to the supervisory authority of the contracting authority can be made (article 71 APA).


sought?

Appeals against decisions issued by a contracting authority subject to the FAPP may be submitted to the Federal Administrative Court. Decisions of the Federal Administrative Court can only be appealed to the Federal Supreme Court if the estimated value of the contract exceeds the threshold determined in the FAPP and if a legal issue of fundamental importance is in question.

Remedies against decisions of cantonal or local procurement authorities are provided for in the cantonal legislations. The cantons are, however, obliged to provide for at least one legal remedy to an independent authority. The cantonal decision can then be appealed to the Federal Supreme Court, although the court’s power to review may be very restricted, depending on whether the threshold is reached.


remedies?

An appeal to the Federal Administrative Court needs to be filed within 20 days from the notification of the ruling (article 30 FAPP). If the decision is published on the internet platform SIMAP before the tenderers are personally informed about the outcome of the procedure, the date of publication thereon will be relevant for the limitation period. An appeal to the Federal Supreme Court needs to be filed within 30 days.

On a cantonal level, an appeal has to be filed within 10 days from the date of publication (article 15 (2) IAPP). An appeal to the Federal Supreme Court needs to be filed within 30 days.


periods?

The limitation period for filing an appeal can be shortened by the unsuccessful bidder that submits an appeal before the lapse of the appeal period. An appeal in the field of public procurement has no automatic suspensive effect. Suspensive effect has to be requested

by the appellant (see question 5.1). If suspensive effect is not granted or not requested by the appellant, the contracting authority can enter into a contract with the successful bidder.


According to case law, a contracting authority is not allowed to sign a contract before it has become clear that no party filed a complaint or, if a complaint was filed, before the Federal Administrative Court decided not to grant suspensive effect to such a complaint.

After the contracting authority has signed a contract, such a contract is normally valid and cannot be terminated even in cases where the appeal is successful. The Federal Administrative Court can only determine the extent to which the contested order is in breach of federal law. The only remedy available thereafter is a claim for damages for the costs in connection with the procurement procedure and the appeal process.

With respect to continuing obligations, it is currently disputed in doctrine whether a court can order a contracting authority, which signed a contract during an appeal, to terminate the agreement and to start a new tender procedure. So far, this question has not yet been decided by the Federal Supreme Court.


remedies is made?

In cases where an appeal to the Federal Administrative Court is linked to a request for provisional measures to give suspensive effect to the appeal, the Court will rule on the provisional measures in a relatively short time. The length of the proceeding for the material decision depends on the complexity of the case and on the procedural motions by the parties.



For a successful claim and the obtainment of remedies, the Federal Administrative Court has to grant suspensive effect. Suspensive effect is, however, not granted very often. The Federal Administrative Court primarily considers the chances of success of a review petition. If the chances are given, it undertakes a balance of interests. According to its legal practice, the interest of the public to implement the decision in awarding a contract as swiftly as possible is given considerable importance. Based on this practice, the Federal Administrative Court did not grant suspensive effect to an appeal against the award of railway technology for the Gotthard base tunnel (worth approximately CHF 1.7 billion). The appellant withdrew his petition and the Federal Administrative Court did not issue a material decision. However, in some major cases relating to the Gotthard base tunnel, suspensive effect has been granted, even if it led to considerable delay and high additional costs.



The Federal Administrative Court has the possibility to suspend a proceeding with the consent of the parties in order for the parties to mediate or to settle their case. In the past, the Federal Administrative Court suspended a proceeding for settlement negotiations which, however, did not result in an agreement.



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Procedure







Swiss public procurement law is based on the assumption that the project described in the invitation to tender will remain materially the same during the entire procurement process. However, on the federal level, the FAPP allows for pre-contract award negotiations provided that reference to the negotiations is made in the invitation to tender, or none of the bids submitted appears to be the most commercially advantageous under the terms of article 21 (1) of the FAPP. Furthermore, the contracting authority can conduct a new procurement procedure if there are material changes to the project (article 30 (3) OPP).

Changes to the membership of bidding consortia are possible but only under restrictive conditions. In particular, changes in the membership of bidding consortia may not lead to a better evaluation of the tender offer.



After the contract has been awarded, the contracting authority is not bound to conclude a contract with the preferred bidder (no obligation to contract). However, if the contracting authority does so, it has to conclude the contract with the specifications as described in the invitation to tender and as offered by the tenderer. It is allowed to make more detailed specifications as long as they do not change the project. Deviations from the original project are only allowed if they are immaterial. Deviations are deemed immaterial as long as it remains certain that the same tenderer would still have been awarded the contract.


signature?

After a contract has been signed, similar rules apply to changes that have applied before signature. This also applies to a prolongation of a contract for the performance of a continuing obligation. However, the contracting authority is allowed to exercise options or possible changes that had been mentioned in the procurement process already.



signature?

As the authority is only authorised to sign with the supplier to which the contract has been awarded, the contract cannot be transferred to another entity without a new procurement procedure and a new award in favour of this entity.




them?

There are no special rules that apply to privatisations. If, in the case of an outsourcing, a private entity is contracted to provide services or supply goods, such a contract is subject to procurement law. If, on the other hand, a private entity performs a public task (that might be publicly funded), it can also be subject to procurement law (see also question 2.1). Exceptions are made for commercial and industrial activities. As an example, the Swiss Competition Commission held that an IT-service provider, whose shares are held by public institutions, is not subject to procurement law as long as the shareholders (i) act neutrally to competition, and (ii) do not apply the in-house-privilege for their procurements in this sector.



There are no special rules that apply to PPPs. PPPs, although usually long-term and often complex, are viewed as ordinary procurements of supplies, services or works. A court case confirmed the principle of one-time procurement, meaning that a PPP-partner that has been selected according to the FAPP is not again subject to procurement laws when sub-contracting. However, the contracting authority has to ensure that its PPP-partner obliges its sub-contractors to comply with requirements such as labour protection regulations.

8 The Future



impact?

The revised GPA was signed by the Swiss Federal Council on March 21, 2012. It will enter into force once it has been ratified by the Swiss parliament. It is planned that such ratification will take place after the provisions of the revised GPA have been transferred to national law.

The aim of the legislators is to align the cantonal procurement law and the federal procurement law. The consultation process for the revised FAPP was completed by July 1, 2015. On February 15, 2017, the Federal Council passed its draft law and the corresponding dispatch. The chambers of the Swiss parliament are in the process of deliberating the ratification of the revised GPA together with the revision of the FAPP. It is expected that the revised law will enter into force either in the beginning of 2020 or 2021.




Apart from the contemplated revision of the public procurement legislation, as described above, there are no other major regulatory developments which are expected to impact procurement laws.



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Acknowledgment

The authors would like to thank their colleague, Patrick Sattler, for his assistance in the preparation of this chapter.


Astrid Waser

Lenz & Staehelin

Brandschenkestrasse 24

8027 Zurich

Switzerland

Tel: +41 58 450 80 00 Email: [email protected] URL: www.lenzstaehelin.com

Benoît Merkt

Lenz & Staehelin

Route de Chêne 30

1211 Geneva 6

Switzerland

Tel: +41 58 450 70 00 Email: [email protected] URL: www.lenzstaehelin.com

With over 200 lawyers and offices located in Zurich, Geneva and Lausanne, Lenz & Staehelin is the largest law firm in Switzerland. It has a long-

standing international practice and is ranked amongst the leading firms in all areas of business law. Its clients include national and foreign individuals

and corporations, based in Switzerland or abroad.

The competition and regulated market group of Lenz & Staehelin has an outstanding track record in high-profile cases in Switzerland. It represents

governmental bodies and businesses with respect to questions of Swiss public procurement law. In addition, Lenz & Staehelin advises its Swiss and

global clients on all aspects of competition law, is involved in major, often multijurisdictional merger filings, and offers a wide range of transactional

and regulatory work; in particular, in media, telecom, health care and energy matters. The members of this group represent their clients before the

Swiss Competition Commission, the courts, and administrative bodies.

Dr. Astrid Waser is a partner in the competition and regulated market

group in Zurich. She specialises in all aspects of public procurement

law, competition (antitrust) law and media and telecoms law. Astrid

Waser also advises on regulatory issues in connection with the gas

and electricity industry. She advises in non-contentious matters and

represents clients before Swiss authorities and courts, in particular, in

public procurement procedures. Among her clients are public as well

as private entities. Astrid Waser publishes on public procurement law

as well as on Swiss and European competition law, and is a regular

speaker at conferences and seminars.

Head of the competition law practice group of Lenz & Staehelin in

Geneva, Dr. Benoît Merkt is a leading expert in this field, and is

renowned for his first-rate practice. He specialises in all areas of

Swiss and European merger control work and competition law, notably

in the banking and finance, energy, high-tech, infrastructures

(electricity), consumer goods, chemical, luxury goods, motor-car

distribution, public broadcasting and retail sectors. He has been

responsible for a large number of merger notifications to the Swiss

Competition Commission and coordinated multi-jurisdictional merger

filings. Benoît Merkt advises in contentious and non-contentious

matters and has acted in high-profile cases on alleged abuses of

dominant positions, vertical restraints, cartels and public procurement.


Chapter 30


Fried, Frank, Harris, Shriver & Jacobson LLP

James J. McCullough

Michael J. Anstett

USA




The rules governing federal procurement in the United States are set forth in various statutes, regulations, and decisions that interpret the procurement laws.

The cornerstones of federal procurement are the Competition in Contracting Act of 1984, which enhanced competition in federal procurement and established a variety of acquisition procedures, including competitive negotiation, and the Federal Acquisition Streamlining Act of 1994 and the Federal Acquisition Reform Act of 1995, which simplified the federal procurement process.

Federal procurement is governed primarily by Titles 10 and 41 of the United States Code. The Federal Acquisition Regulation (“FAR”) and agency FAR Supplements reflect the regulatory implementation of the governing statutes and provide uniform policies and procedures for most federal agency acquisitions. The FAR is found in Title 48 of the Code of Federal Regulations (“C.F.R.”).

The United States is a party to the WTO Government Procurement Agreement (“GPA”). Three submissions from the United States to the WTO (available at http://www.wto.org) provide an overview of federal procurement policies and procedures. See World Trade Organization Document No. S/WPGR/W/11/Add.6 to the WTO Working Party on GATS Rules (October 21, 1996); WTO Document No. GPA/23 (July 15, 1998); and WTO Document No. GPA/50 (June 15, 2001).




of the legislation?

The guiding principles for federal acquisition are found in FAR 1.102, which states that the “vision for the Federal Acquisition System is to deliver on a timely basis the best value product or service to the customer, while maintaining the public’s trust and fulfilling public policy objectives”. The keys to fulfilling that vision are, among other things, maximising the use of commercial products and services, using contractors that have a track record of successful past performance or that demonstrate a current superior ability to perform, promoting competition, minimising administrative costs, and conducting business with integrity, fairness, and openness.



Procurement in the United States is subject to the federal procurement statutes as implemented by the FAR and, where applicable, agency FAR Supplements and other agency guidance. For example, military procurement, which is primarily carried out by the Department of Defense, is subject to special rules found in the Department of Defense FAR Supplement (“DFARS”) and in guidance published by the Principal Director, Defense Pricing and Contracting. See http://www.acq.osd.mil/dpap.

The FAR contains provisions for the procurement of commercial items (FAR Part 12), as well as for special categories of contracting, including major system acquisitions (FAR Part 34), research and development contracting (FAR Part 35), construction contracting (FAR Part 36), service contracting (FAR Part 37), and acquisition of information technology (FAR Part 39). The National Aeronautics and Space Administration and the Department of Defense can enter into “other transaction agreements” that are not subject to the full panoply of procurement regulations applicable in most federal procurement. See 10 U.S.C. § 2371; 51 U.S.C. § 20113(e).



public procurement?

In addition to the sophisticated body of federal procurement law that has developed over the years, general contract law and certain criminal laws also apply to parties that contract with the federal government. Of particular note are the various statutes targeting fraud, waste, and abuse of federal funds. For example, under the civil False Claims Act, 31 U.S.C. §§ 3729–3733, contractors may be subject to trebled damages and statutory penalties for submitting false or fraudulent claims to the government. Similarly, contractors must comply with the post-government employment restrictions set forth in the Procurement Integrity Act, 41 U.S.C. §§ 2101–2107, and implementing FAR and Office of Government Ethics regulations. See FAR 3.104; 5 C.F.R. § 2635.

Although government records are generally available to the public under the Freedom of Information Act, 5 U.S.C. § 552, there are exemptions prohibiting the release of contractor trade secrets and confidential commercial information.

Federal tax law can also be relevant to federal procurement. For example, there is a 2% excise tax on payments to a foreign person or foreign business entity under a federal procurement contract for goods produced in a country that is not a party to an “international


USA


procurement agreement” (e.g., the WTO GPA) or for services provided in a country that is not a party to such an agreement. See 26 U.S.C. § 5000C. The Internal Revenue Service has issued regulations implementing Section 5000C, including certain exemptions (see 81 Fed. Reg. 55,133 (August 18, 2016)), along with a list of countries with tax treaties exempting nationals of those countries from the tax (see www.irs.gov/pub/irs-pdf/iw14.pdf).



agreements?

The procurement regime in the United States is consistent with the WTO GPA. The European Commission rules on government procurement are not applicable to federal procurement.


Contracts



All federal “executive agencies” are covered by the FAR. See FAR 1.101, 2.101. However, several federal agencies, such as the Federal Aviation Administration, the U.S. Postal Service, various government-sponsored enterprises (e.g., Fannie Mae, Freddie Mac), and certain federal corporations (e.g., the Federal Deposit Insurance Corporation), are not subject to the FAR and promulgate their own acquisition rules and procedures that are generally similar to those contained in the FAR.

The federal agencies covered by the WTO GPA are listed in GPA Appendix I, United States Annex 1 (as updated by WT/LET/950, submitted June 7, 2014). As noted above, some of those agencies may be exempt from certain procurement laws that are otherwise applicable to “executive agency” procurement.


The FAR and agency FAR Supplements cover all acquisitions by contract of supplies or services (including construction) by and for the use of the federal government.



FAR Subpart 25.4 concerns “Trade Agreements” and sets forth the rules for applying the WTO GPA to federal procurement, including certain exceptions. Under FAR 25.402, the value of the acquisition is the determining factor with respect to the applicability of the WTO GPA to federal procurement contracts. These values are adjusted approximately every two years. The current threshold values for federal procurements are US$180,000 for contracts for goods and services and US$6,932,000 for construction contracts. See 82 Fed. Reg. 58,248 (December 11, 2017).

There are also certain dollar thresholds that trigger specialised treatment or procedures under the FAR. FAR Part 13 includes simplified rules that allow federal agencies to buy products or services under the simplified acquisition threshold of US$150,000 more quickly, more economically, and with a focus on small businesses. Under FAR Part 19, contracts under US$150,000 are generally required to be set aside for small businesses.


FAR 25.403(b)(3) expressly provides that agencies may “not divide any acquisition with the intent of reducing the estimated value of the acquisition below the dollar threshold of the WTO GPA”. In addition, federal procurement law strongly discourages agencies from unnecessarily or unjustifiably bundling or aggregating contract requirements in order to preclude small or disadvantaged businesses from participating in procurements as prime contractors.



Concession contracts are not generally used in federal procurement. One notable exception, however, is the Department of the Interior, which regularly uses concession contracts as described in 36 C.F.R. § 51.3.



FAR Subpart 16.5 sets forth the rules governing framework agreements, which are called “indefinite-delivery/indefinite-quantity” (“IDIQ”) contracts in federal procurement. Agencies may also use framework-like “blanket purchase agreements”, which are governed by FAR Part 13, or Federal Supply Schedule contracts (“Schedule contracts”), which are governed by FAR Subpart 8.4 and managed by the U.S. General Services Administration (“GSA”), to purchase certain goods or services.


into lots?

The rules governing small business participation are found in FAR Part 19. Federal agencies are strongly encouraged to conduct procurements in order to maximise small business participation. See FAR 19.201.



Purchasers must comply with FAR requirements, regardless of the nationality of the tenderers. FAR Subpart 25 governs acquisitions of foreign supplies, services, and construction materials, and, in some cases, domestic sources may receive preference over foreign sources. Under FAR 25.403(a), eligible products from WTO GPA countries and countries with trade agreements with the United States are entitled to non-discriminatory treatment.

3 Award Procedures




There are numerous procedures under the FAR for federal procurement depending upon the nature of the procurement, the type of goods or services being procured, and the procuring agency. Agencies have substantial discretion to choose a particular procurement procedure.

Fried, Frank, Harris, Shriver & Jacobson LLP USA


USA


By far the most common type of procurement procedure is negotiated (or competitive proposal) procurement. Under this procedure (see FAR Part 15), tenderers submit their best proposals to the procuring agency in response to the agency’s solicitation. The procuring agency then evaluates these proposals and makes an award according to the solicitation’s evaluation scheme.

Procedures for sealed bidding, which is not often used in federal procurement, are in FAR Part 14. Other types of procurement procedures include: Schedule contracts (see FAR Subpart 8.4); acquisition of commercial items or services (see FAR Part 12); simplified acquisition procedures for supplies, services, and commercial items that do not exceed the simplified acquisition threshold (currently US$250,000) (see FAR Part 13); and individual task and delivery order competitions under IDIQ contracts (see FAR Subpart 16.5), under which the government places orders for specified requirements.


There are no specific minimum timescales for federal procurement. Agencies using the streamlined ordering processes available for task and delivery order contracts may be required to provide “fair notice of the intent to make a purchase” and to provide a “fair opportunity to submit an offer”. See FAR 16.505(b).


tenderers?

Tenderers may be excluded from a competition at multiple stages of the procurement process. To be eligible for the award of a federal contract, a tenderer must be “presently responsible” as of the date of award, based upon factors set forth in FAR Subpart 9.1. Also, tenderers may be suspended, debarred, or proposed for debarment (i.e., excluded from federal contracting) for a variety of civil or criminal offences or for non-compliance with contract requirements. See FAR Subpart 9.4. Excluded tenderers may not be awarded any federal contract or subcontract, absent a “compelling reason” as determined by the Agency Head.

In negotiated procurements, an agency may publish pre-solicitation notices that provide a generalised description of the scope of the acquisition and that allow the agency to advise potential tenderers regarding their potential to be viable competitors. See FAR 15.202. An agency may also limit the number of proposals eligible for award by establishing a “competitive range” composed of the most highly rated tenderers. See FAR 15.306. Establishing a “competitive range” after an initial evaluation is the most common type of “short-listing” that occurs in federal procurement.

Under FAR Subpart 6.2, a procuring agency may exclude in certain circumstances a particular source from a contract action in order to establish or maintain an alternative source of supply.




The rules on evaluating tenders vary depending on the nature of the procurement. Specific evaluation rules for negotiated procurements are found in FAR 15.305, for commercial items or services acquisitions in FAR 12.602, and for simplified acquisition procurements in FAR 13.106-2. For other types of procurements, such as sealed bidding (FAR Part 14) or Schedule contracts (FAR Subpart 8.4), the governing FAR rules should be consulted. Small

business participation in a tenderer’s subcontracting plan may be used as an evaluation factor. See FAR 15.305(a).


low tenders?

Agencies may consider performance risk in evaluating tenders. Additionally, solicitations may require an evaluation of whether a tenderer’s offer is “realistic”, meaning too low. See generally FAR 15.404-1.


In competitive procurements, a designated agency official decides which tenderer or tenderers should be awarded a contract based upon an evaluation of cost/price, technical, past performance, and any other source selection criteria set forth in the agency’s solicitation. See FAR 15.308. The decision must be documented and must include the agency’s rationale for any trade-offs made (e.g., why the additional cost of the awardee’s proposal is justified by its technical superiority).

The rules governing sealed bidding are set forth in FAR Subpart 14.4; the rules for Schedule contracts are in FAR Subpart 8.4; and the rules for simplified acquisitions are in FAR Subpart 13.1.


bidders?

The rules on debriefing unsuccessful bidders vary depending on the type of procurement. For negotiated procurements, the rules are set forth in FAR Subpart 15.5. In procurements other than negotiated procurements, unsuccessful bidders may be entitled only to a “brief explanation” of the basis for the award decision. See, e.g., FAR 8.405-2(d) (Schedule contracts); and FAR 13.106-3(d) (simplified acquisition procedures). For individual task and delivery order competitions under multiple award IDIQ contracts over US$5 million, the rules in FAR Subpart 15.5 apply. See FAR 16.505(b)(6).


The term “joint procurement” is not usually associated with federal procurement. However, through a process called “cooperative purchasing”, certain state and local government agencies may purchase information technology products, software, and other services, as well as certain alarm and signal systems and law enforcement and security equipment under Schedule contracts. The GSA Acquisition Manual governs this cooperative purchasing process. See http://www.gsa.gov/cooperativepurchasing.


If an agency intends to award a contract without first engaging tenderers in discussions regarding their proposals, the agency may elect to allow tenderers to submit proposals that deviate from the agency’s stated requirements with an explanation as to why the tenderer believes the deviation would result in an advantage to the government. See FAR 15.203(a)(2), 15.209(a)(2). The agency may either accept or reject the alternative proposal or revise the requirements in its solicitation accordingly. In procurements for commercial items, tenderers are encouraged to submit alternate proposals. See FAR 52.212-1(e).



USA



Generally speaking, organisational and personal conflicts of interest are prohibited and must be avoided or mitigated, unless the government, in rare circumstances, waives the conflict. The rules governing organisational and consultant conflicts of interest are in FAR Subpart 9.5, and the rules governing contractor employee conflicts of interest are in FAR Subpart 3.11.




Although agencies may seek input generally from the market in developing a solicitation, there are strict rules prohibiting bidders from gaining an unfair competitive advantage by advising an agency on how to prepare solicitations. See FAR 9.505.




Under federal procurement law, certain activities that are deemed “inherently governmental functions” (e.g., conducting criminal investigations, commanding military forces, or conducting foreign relations), which must be performed by government employees and cannot be performed by contractors. See FAR Subpart 7.5; OMB Circular A-76, “Performance of Commercial Activities”, 76 Fed. Reg. 56,227 (September 12, 2011).




Under FAR Part 8, federal agencies must first use what they have in their own inventories and then must satisfy their requirements for supplies and services through a number of government sources, if possible. Agencies may use Schedule contracts and commercial sources (including educational and non-profit sources) to fulfil their commercial items requirements.

If an agency acquires supplies or services through another agency, such “interagency acquisitions” may be governed by the Economy Act and FAR Subpart 17.5.

Finally, specialised government-wide acquisition contracts (“GWACs”) assist federal agencies in procuring information technology requirements through individualised task orders. GWACs are IDIQ contracts awarded to multiple tenderers under which agencies issue task order solicitations subject to competitive bidding among the awardees. See FAR 2.101.

5 Remedies



Federal procurement law provides for various enforcement procedures and remedies. Tenderers that submit proposals or that plan to submit proposals in response to a federal agency’s

solicitation may “protest” the procuring agency’s decision with respect to the procurement, and the vast majority of disappointed tenderers file such protests with the Government Accountability Office (“GAO”), which has authority under 31 U.S.C. § 3552 to resolve such protests. The regulations at 21 C.F.R. Part 4 govern the GAO’s protest procedures, and only actual or prospective tenderers whose direct economic interest would be affected by the award of a contract may file or participate in a GAO protest. The protesting party additionally must show that, but for the procuring agency’s action, the protestor would have had a substantial chance of receiving the contract. The GAO’s regulations were most recently revised effective May 1, 2018, to establish a new Electronic Protest Docketing System and a protest filing fee of US$350. See 83 Fed. Reg. 13,817 (April 2, 2018).



In addition to protests before the GAO, disappointed tenderers may file a protest with the procuring agency seeking an independent review at a level above the contracting officer. See FAR Subpart 33.103. Disappointed tenderers also may file an action seeking injunctive relief in the United States Court of Federal Claims. See 28 U.S.C. § 1491.


sought?

Parties aggrieved in the procurement process may seek relief by filing a protest with the GAO or the procuring agency or by filing an action in the Court of Federal Claims. The available fora may be restricted depending on the type of contract, the dollar value, and agency involved. See 10 U.S.C. § 2304c(e)(1); 41 U.S.C. § 4106(f)(1); and FAR 16.505(a)(10).


remedies?

For protests brought to the GAO, pre-award protests must be filed prior to the due date for the submission of proposals; post-award protests must be filed within 10 days of the date that the protester knew or should have known of the grounds for protest, or within 10 days of a requested and required debriefing. If a party protests within 10 days of award, or within five days after a requested and required debriefing, the procuring agency must automatically suspend performance of the awarded contract, pending the outcome of the protest. See FAR 33.104. Substantially similar timing rules apply to agency-level protests. See generally FAR 33.103.

The Court of Federal Claims follows rules similar to those of the GAO with respect to the limitation period applicable to pre-award protests; but for post-award protests, the court applies the equitable doctrine of laches and considers the timeliness of such protests in connection with the decision of whether to order injunctive relief. Parties may seek de novo review in the Court of Federal Claims of agency procurement decisions following the disposition of a timely GAO protest.


periods?

The limitation periods set out above are generally not subject to being shortened.



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The GAO, the Court of Federal Claims, and procuring agencies have wide latitude in structuring remedies in response to protests of awarded contracts. For instance, if the GAO determines that an award did not comply with applicable statutes or regulations or solicitation terms, it may recommend that the procuring agency terminate the contract, re-compete the contract, amend the solicitation, or award the contract to the protester. See 4 C.F.R. § 21.8. The procuring agency may follow the GAO’s recommendation, may implement more robust corrective action, or may cancel the procurement altogether. Rarely do procuring agencies decline to follow the GAO’s recommendations.


remedies is made?

The GAO is required by statute to decide all protests within 100 days of filing. Under FAR 31.103(g), procuring agencies must use their best efforts to resolve agency-level protests within 35 days of filing. Protest actions at the Court of Federal Claims are not subject to any statutory or regulatory timetable and usually take many months to resolve.



The GAO resolves hundreds of protests each year by written decision. Thus, it is difficult to identify current leading examples of GAO bid protest decisions; nevertheless, GAO decisions have precedential value and are often relied on in resolving future bid protests. A discussion of the most common reasons for the GAO sustaining a protest may be found at http://www.gao.gov/ assets/690/688362.pdf.



If the procuring agency has been required to suspend performance of an awarded contract because a protest has been filed, the agency may “override” the stay of performance upon a finding of either the best interests of the United States or urgent and compelling circumstances which significantly affect the interests of the United States. See FAR 33.104(c)(2).

Procuring agencies are authorised to take voluntary corrective action in response to a protest to address issues identified in the protest. The nature, scope, and timing of any voluntary corrective action are within the broad discretion of the procuring agency.


Procedure







Procuring agencies may change their requirements or the terms and conditions of the procurement prior to award, either before or after

receipt of proposals. In negotiated procurements, agencies must amend the solicitation to make such changes. See FAR 15.206. Regardless of the type of procurement, however, procuring agencies must provide tenderers with fair notice of their requirements and the criteria that will be used to evaluate tenders.

Pre-award changes to the bidding entity (i.e., through sale or corporate restructuring) may be allowed under certain circumstances. See Consortium HSG Technischer Service GmbH et al., B-292699.6, June 4, 2004, 2004 CPD ¶ 134. Generally, the assignment of proposals “when such transfer is effected by operation of law, or merger, or corporate reorganisation, or sale of an entire business, or sale of an entire portion of a business embraced by a proposal” is permissible. Numax Elecs., Inc., B-181670, January 16, 1975, 75-1 CPD ¶ 21. A mere change in the corporate name should have no effect on a proposal’s acceptability. See Baker Support Servs., Inc. et al., B-256192.3, B-256192.4, September 2, 1994, 95–1 CPD ¶ 75. Where changes may affect the resources available for contract performance, tenderers should disclose that information to the agency before contract award. See, e.g., Lockheed Martin Integrated Sys., Inc.--Recon., B-410189.7, August 10, 2017, 2017 CPD ¶ 258; Dual, Inc., B-280719, November 12, 1998, 98–2 CPD ¶ 133.



In negotiated procurements, the submission of revised proposals is governed by FAR 15.307. Because agencies may not favour one tenderer over another (see FAR 15.306(e)(1)), all tenderers must be allowed an opportunity to submit revised proposals by a common cut-off date.


signature?

Post-contract changes are governed by FAR Part 43 and are made via contract modifications. Depending on the type of change, the modification may be made unilaterally by the contracting officer or may be negotiated by the parties. See FAR 43.103.

Disputes concerning contract changes after award are primarily governed by the Contract Disputes Act of 1978, which provides both an administrative and a judicial process for the resolution of all claims (by both contractor and government) relating to an existing contract. See also FAR Subpart 33.2. Most contract administration disputes are settled at the procuring agency level by negotiating a request for equitable adjustment of the contract price and schedule. FAR 33.214 also encourages the use of Alternative Dispute Resolution (“ADR”). However, if a dispute is not settled informally at the agency level, the contractor may file an action at the Court of Federal Claims or at a board of contract appeals.



signature?

The Assignment of Contracts Act, 41 U.S.C. § 6305, prohibits the transfer of a government contract to another entity unless the government consents to the transfer or the transfer occurs “by operation of law” (e.g., through a merger). See Tuftco Corp. v. U.S., 614 F.2d 740, 745 (Ct. Cl. 1980). Formal consent for a transfer of a contract is obtained through the novation process, which is governed by FAR Subpart 42.12. Agencies may not award a



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contract with the intent to transfer the contract to another entity. See, e.g., Acepex Mgmt. Corp., B-283080 et al., October 4, 1999, 99–2 CPD ¶ 77.




them?

FAR Subpart 7.5 and OMB Circular A-76 set forth policies and procedures to ensure that government contracts are not issued to private parties for the performance of “inherently governmental” functions.



In recent years, PPPs have become more common in the United States, particularly as a mechanism to develop and fund infrastructure projects such as highway and transit systems. PPPs often involve the participation of federal, state, and local government entities. Although there are no federal rules specifically governing PPPs, several states have passed legislation authorising and regulating these types of partnerships.

8 The Future



impact?

Federal procurement laws and regulations change constantly. In 2019, the final report of the “Section 809 Panel” is expected to be issued. The report will make multiple recommendations concerning proposed reforms of the defence procurement system. The Trump Administration’s international trade policies will remain dynamic in 2019 and may result in strengthened “Buy American” laws and potential U.S. withdrawal from, or renegotiation of, international trade agreements.




The Department of Defense is becoming increasingly active in its use of “other transaction authority” to enter into agreements with industry and academia for certain research and development or prototyping work. These agreements are exempt from most of the regulatory requirements applicable to federal government contracts.



USA


James J. McCullough


801 17th Street, NW

Washington, D.C. 20006

USA

Tel: +1 202 639 7130 Email: [email protected] URL: www.friedfrank.com

Michael J. Anstett


801 17th Street, NW

Washington, D.C. 20006

USA

Tel: +1 202 639 7390 Email: [email protected] URL: www.friedfrank.com

From offices strategically located in principal financial centres around the globe, Fried Frank serves as counsel to many of the world’s largest

companies, financial institutions, and investment firms. We are recognised for our ability to deploy well-configured, cross-border teams that provide

the depth of knowledge, breadth of experience, and responsive service that clients require to meet their critical business objectives.

Fried Frank’s government contracts practice is actively engaged in all phases of the government contracting process, including bid protests. Our

attorneys are highly experienced and have handled a diverse array of high-profile matters for some of the leading aircraft, satellite, electronics,

information technology, and health care companies, both domestically and internationally. Our attorneys counsel clients on the intricacies of

government contract law and regulatory compliance, and our practice is highly interactive, involving close collaboration with the Firm’s corporate,

intellectual property, international arbitration, False Claims Act, RICO, and white-collar crime practices.

Mr. McCullough heads Fried Frank’s government contracts practice.

He concentrates on pre-award and post-award counselling and

litigation, representation of government contractors in civil

proceedings, including Procurement Integrity and Freedom of

Information Act disputes, and enforcement matters involving

suspension and debarment. He has been lead counsel in numerous

bid protests before the Government Accountability Office and the

United States Court of Federal Claims and has extensive experience

involving claims and terminations at various Boards of Contract

Appeals and the Court of Federal Claims. Mr. McCullough also has

significant transactional experience advising domestic and

international clients on the acquisition and disposition of aerospace

defence companies, including proceedings involving the Committee

on Foreign Investment in the United States and the Defense Security

Service.

Mr. McCullough has been consistently recognised by Chambers USA: America’s Leading Lawyers for Business as a leading lawyer in

Government Contracts (National) with special expertise in bid

protests.

Mr. Anstett is special counsel resident in Fried Frank’s Washington,

D.C. office. His practice focuses on the representation of government

contractors, including major defence and aerospace clients, in a wide

range of matters involving bid protests, regulatory compliance, and

suspension and debarment proceedings.

Mr. Anstett represents government contractors in fraud investigations

and False Claims Act qui tam litigation. Mr. Anstett also counsels

clients on contract formation and post-award matters, government

audits, export control compliance, government contracts due

diligence, Procurement Integrity Act and Freedom of Information Act

disputes, and voluntary disclosures.

In addition to his government contracts practice, Mr. Anstett advises

domestic and international clients on the acquisition and disposition of

aerospace defence companies and works on a variety of commercial

litigation and white-collar criminal investigations.



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