Rejection of Tenderer’s bid

July 5th, 2017 by James Goudie KC

In Case T-392/15, European Dynamics v European Union Agency for Railways, the applicants alleged that the Agency had failed to fulfil its obligations to state reasons for its decision.  The applicants’ case was that the rejection decision, and the Report of the Evaluation Committee leading to that decision, were vitiated by a failure to give reasons why the applicants’ tenders were abnormally low tenders (“ALTs”). The General Court dealt with the linked issues of the scope of the duty of a contracting authority to state reasons and the scope of the rules governing ALTs.

As regards the duty to state reasons, the Court reaffirms that the duty to state reasons requires that the reasoning followed by the contracting authority “must be disclosed in a clear and unequivocal fashion so as, on the one hand, to make the persons concerned aware of the reasons for the measure and thereby enable them to defend their rights and, on the other, to enable the Court to exercise its supervisory jurisdiction”. The duty to state reasons for a contested decision is thus defined by its function which is to enable the persons concerned to assert their rights and for the Court to exercise its powers of review. It helps to ensure effective judicial protection.

It follows that compliance with the duty to state reasons must, in principle, be determined in accordance with the information available to the applicants, at the latest, when the action was brought The reasons for a decision cannot be explained for the first time ex post facto before the Court. Only exceptional circumstances may justify the Court taking into consideration evidence adduced in the course of the proceedings

Furthermore, the requirement to state reasons must be determined in accordance with the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the reasoning to go into all the relevant facts and points of law.

The contracting authority is to notify all candidates or tenderers whose applications or tenders are rejected of the grounds on which the decision was taken, and all tenderers who meet the exclusion and selection criteria, and who make a request in writing, of the characteristics and relative advantages of the successful tender and the name of the tenderer to whom the contract is awarded. With regard to unsuccessful tenderers, the contracting authority must first inform all unsuccessful tenderers that their tender has been rejected and the grounds for that rejection. Those reasons may be brief. Next, if an unsuccessful tenderer which satisfies all the criteria for exclusion and selection makes a request in writing, the contracting authority is to communicate the characteristics and relative merits of the tender accepted and the name of the tenderer. Disclosure of reasons in two stages is not inconsistent with the purpose of the duty to state reasons, which consists in making the persons concerned aware of the reasons for the measure and, thereby, enabling them to defend their rights and, on the other, enabling the Court to exercise its power of review. The duty to state reasons constitutes an essential procedural requirement, as distinct from the question whether the reasons given are correct, which goes to the substantive legality of the contested measure.

As regards the scope of the rules governing ALTs, a concept which is not defined, the abnormally low nature of a tender must be assessed by reference to the composition of the tender and the services at issue. In the case of ALTs, the Evaluation Committee must request any relevant information concerning the composition of the tender. The contracting authority’s obligation to check the seriousness of a tender arises where there are doubts beforehand as to its reliability, bearing in mind that the main purpose is to enable a tenderer not to be excluded from the procedure without having had an opportunity to explain the terms of its tender which appears abnormally low. Thus, it is only where such doubts exist that the Evaluation Committee is required to request relevant information on the composition of the tender, before, if necessary, rejecting it.  In particular, such doubts may exist if it does not appear certain whether, first, a tender complies with the legislation of the country in which the services are to be supplied, regarding the remuneration of staff, contribution to the social security scheme and compliance with occupational safety and health standards, selling at a loss and, second, that the price proposed includes all the costs generated by technical aspect of the tender.

The assessment by the contracting authority of the existence of abnormally low tenders is made in two stages. In the first stage, the contracting authority must determine whether the tenders submitted ‘appear’ to be abnormally low The contracting authority is required to carry out a prima facie assessment of the abnormally low character of the tender. Therefore, the contracting authority is not required to carry out, on its own initiative, a detailed analysis of the composition of each tender in order to establish that it is not an ALT. Thus, in the first stage, the contracting authority need only determine whether the tenders submitted contain evidence likely to arouse suspicion that they might be abnormally low. That is the case in particular, where the price proposed in a tender submitted is considerably less than that of the other tenders submitted or the normal market price. If the tender submitted does not contain such evidence and therefore, does not appear to be abnormally low, the contracting authority may continue the evaluation of that tender and the award procedure for the contract.

However, if there is evidence which arouses a suspicion that a tender may be abnormally low, the contracting authority must, in the second stage, check the composition of the tender in order to ensure that it is not abnormally low. Where it carries out that check, the contracting authority must give the tenderer which submitted that bid the opportunity to set out the reasons why it considers its tender is not abnormally low. The contracting authority must then assess the explanations provided and determine whether the tender concerned is abnormally low, in which case it must be rejected.

Therefore, the existence of that examination in two stages influences the scope of the contracting authority’s duty to state reasons.

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