Key Issues in Procurement Public Procurement Conference, Irish Centre For European Law Anna-Marie Curran, Partner A&L Goodbody 28 June 2012

2 Introduction What are the difficult questions for contracting authorities in Ireland

3 Survey Over 200 contracting authorities surveyed - 70 responses Ranking easy, not difficult, difficult, very difficult Pre-Procurement Post-Tender Contract Characterisation Conduct of Tender Process Thresholds Shared Services Technical spec Pre-qual criteria Late submissions Weightings Experience eval Secondary objectives Evaluation Team Financials evaluation Evaluation Incomplete submissions Clarifications Objectivity Abnormally low bids Due diligence on bids Standstill letters Reasons Unsuccessful bidder correspondence FOI Requests Pre-contract changes Post-contract changes Self-declarations verification

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5 Survey

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8 Changes What’s the Problem? »Post-contract change will result in a new contract if it is material »Illegal direct award »Ineffectiveness remedy What is a material change? How specific does a variation clause have to be? What about totality of changes? What about unforeseeable events?

9 Changes Pressetext (C-454/06): »Changes will constitute a new contract when they are “materially different in character so as to demonstrate an intention to renegotiate the essential terms of that contract i.e. changes that:- »introduce conditions that allow for admission, or acceptance, of different tenderer(s) »extends scope of contract considerably to encompass services not initially covered »changes economic balance in favour of contractor in a manner not provided in initial contract

10 Material Changes  Change of Contractor: Substitution of a wholly owned sub is not material but substitution of a new contractual partner for initial contractor is a change to an essential term unless substitution was in initial contract – see Pressetext, Wall AG, Redwood Health Limited v NHS, draft Article 72(3)  Changes to Price: Price is a fundamental term – minor adjustments permissible - see Pressetext, Suchhi di Frutta, Commission v Spain (C-84/03), draft Article 72(4)  Change of Scope: Extension of scope is generally not permissible but may be able to justify a negotiated procedure for additional works, supplies or services - see Le Mans (C-340/02)  Change to Risk Allocation: Risk allocation is generally fundamental and cannot be changed – see Storebaelt

11 Changes – Risk Mitigation  Include a variation clause that is clear, precise and unequivocal  Consider scope carefully  Include options – e.g. contract extension, price adjustment clauses  Negotiated procedure?  VEAT Notice  Termination rights

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13 Abnormally low bids What’s the Problem? »No definition of what is an abnormally low bid »Law is unclear on how to deal with suspect abnormally low bid »Bidder may be loss-leading for various reasons What the Contracting Authority Wants »Best deal on the basis of criteria & VfM What the Contracting Authority Doesn’t Want »Sued for excluding an abnormally low bid »Sued for including an abnormally low bid »Poor performance, contractor insolvency or multitude of contract claims

14 Abnormally low bids Regulation 69 of SI 329/2006:-  If a tender appears abnormally low, contracting authority shall, by notice in writing and before rejecting the tender, request the tenderer to provide written details of constituent elements of the tender  List of non-exhaustive constituent elements in Regulations  May exclude tender if only reason for abnormally low bid is State aid and bidder hasn’t shown that aid was granted lawfully  Questions:- »What is “abnormally low”? »Is there a duty to investigate a suspect abnormally low bid? »Is there a duty to exclude an abnormally low bid?

15 the Directive does not define … that is therefore a task for the individual Member States Impresa Lombardini Genuine and viable Sound and viable SECAP (Court of Justice, 2008) Reliable and serious Renco (Court of First Instance, 2003) TQ3 (Court of First Instance, 2005) Reliable and serious Renco (Court of First Instance, 2003) TQ3 (Court of First Instance, 2005) Impresa Lombardini (Court of Justice, 2001) ‘abnormality’ is an indeterminate legal concept which must be substantiated in each case by reference to the particular circumstances of the candidates Advocate General Ruiz-Jarabo Colomer in SECAP Identifying an ALB an offer that, because of its favourable terms, raises a suspicion that the provider will not be able to perform according to the terms offered Arrowsmith, The Law of Public and Utilities Procurement (2nd ed) para

16 Duty to investigate? Renco v. Council, Case T-4/01 [2003] ECR II-171 –  Contracting authority is under a duty to identify suspect tenders; allow the undertakings concerned to demonstrate their genuineness; assess the merits of the explanations provided; and make a decision as to whether to admit or reject those tenders Varney v. Hertfordshire CC [2010] EWHC 1404 (16/06/10) “…there is nothing... to support the contention that there is a general duty owed by the authority to investigate so-called “suspect” tenders which appear abnormally low...I am quite satisfied that neither the Directive nor the Regulation imposed a duty to investigate so-called suspect tenders generally. “…the Council was not under a duty generally to investigate so-called “suspect” tenders in circumstances where the Council had no intention of rejecting those tenders.” “…[a duty] cannot arise save in the case where the relevant authority actually knows or suspects that a tender is abnormally low.”

17 Exclusion of an ALB  Contracting authority has a discretion to exclude under the Regulations  May only exercise that discretion after bid has been investigated and the bidder has been allowed to clarify or explain the characteristics of the bid  Duty/discretion to investigate or exclude may arise from tender documentation

18 Draft Directive Article 69:-  Contracting authority is obliged to seek an explanation of the price or costs where:- »bid is more than 50% lower than average bid and »bid is more than 20% lower than second lowest bid and »there are at least 5 bids  If bid appears low for other reasons, explanation may be sought  Contracting authority must verify information provided and ‘may only’ (not shall) reject the bid when the evidence does not justify the low level of the bid  Contracting authority must reject a bid that is abnormally low because it does not comply with social, labour or environmental law  Contracting authority may reject a bid that is abnormally low due to illegal State aid

19 Conclusions  Majority of contracting authorities surveyed consider procurement is difficult  Its not all about remedies…  More guidance and legal clarity needed  New Directives are unlikely to make life easier

Key Issues in Procurement Public Procurement Conference, Irish Centre For European Law Anna-Marie Curran, Partner A&L Goodbody 28 June 2012