What are the conditions which trigger the contracting authority’s duty to state reasons in case of abnormally low nature of the successful tender and what is the scope of such an obligation? This and other questions were answered by the Court of Justice in appeal proceedings lodged by the EU Commission in Commission v Sopra Steria Benelux and Unisys Belgium, C-101/22.

Background

With its appeal the Commission sought to overturn the judgment by which the General Court annulled its decision to reject a joint tender submitted by a consortium in the context of a tendering procedure launched for the procurement of IT services with the best quality-price ratio of 70:30. Specifically, the consortium was informed by the Commission that its tender had been rejected because it was not the most economically advantageous one and that the contract had been awarded to another tenderer. Upon written request the Commission informed the consortium of the name of the successful tenderer and the total score received by the latter, bringing out a difference of 8 points due to the price offered. The consortium contested the results of the procedure by expressing doubts that a price much lower than the price it proposed and considered ‘reasonable and in line with market conditions’ could be viable without risk of ‘social dumping’ and associated risks for the continuity of services. Furthermore, the consortium invited the contracting authority to confirm that it had carried out appropriate investigations.

The Commission replied by merely claiming that a detailed financial analysis of the selected bid had found it to be in line with the market conditions in the countries from which the contractors and their subcontractors would have performed the requested services. The consortium thereupon brought an action for annulment of the rejection decision by alleging, inter alia, failure to state reasons with regard to the abnormally low nature of the successful tender.

Legal context

Article 170(2) of the so called Financial Regulation’ 2018/1046 stipulates that: ‘The contracting authority shall notify all candidates or tenderers, whose requests to participate or tenders are rejected, of the grounds on which the decision was taken, as well as the duration of the stand still periods referred to in Articles 175(2) and 178(1)’. It further provides that, on written request, the contracting authority shall inform each tenderer of the name of the successful tenderer, the characteristics and relative advantages of its tender, the price paid or contract value (see paragraph 3). The rationale behind these provisions is to protect all unsuccessful tenderers from arbitrariness of the contracting authority and ensure healthy competition (see also Lombardini and Mantovani, C‑285/99 and C‑286/99, paras. 44 and 57).

Article 170(3) must be read in conjunction with paragraph 23 of Annex I to that regulation (entitled ‘Abnormally low tenders’) which states that, if the price or costs proposed in the tender appear to be abnormally low, the contracting authority is to request in writing details of the constituent elements of the price or costs which it considers relevant and give the tenderer the opportunity to submit its observations with reference to the elements specified in that paragraph (including the economics of the manufacturing process, the technical solutions chosen, the exceptionally favourable conditions available to the tenderer; compliance with environmental, social and labour law obligations; the possibility of obtaining State aid).

Paragraph 23 also states that contracting authority shall reject the tender only where the evidence supplied does not satisfactorily account for the low price or costs proposed or where it has established that it does not comply with the above-mentioned obligations.

Therefore, the assessment of the existence of abnormally low tenders is articulated in two possible stages:

1. firstly, the contracting authority determines prima facie whether the price or costs proposed in the tender ‘appear’ to be abnormally low. That summary review is for internal use only. In the absence of appropriate evidence to raise suspicions, the contracting authority continues its evaluation and award the contract. This means that it implicitly deemed that that there was no evidence;
2. if instead such evidence exists, then it must analytically check the constituent elements of the tender, by giving the tenderer the opportunity to submit its observations. Consequently, it must assess the explanations provided and determine whether the tender concerned is abnormally low, in which case it must be rejected.

In this respect, the General Court noted that, according to Article 170(3) of the Regulation, an explicit and detailed reasoning must be disclosed if the unsuccessful tenderer makes an express request (providing important information regarding the characteristics and relative advantages of the successful tender) even where the successful tender does not appear to be abnormally low (see para. 13).

The judgment under appeal and the findings of the Court of Justice

By upholding the plea on the lack of motivation, the General Court held that it is not sufficient for the contracting authority to apodictically state that the selected tender is not abnormally low. The Commission should at the very least have provided information relating to the share of the contract that would be performed under a subcontracting arrangement and the countries from which the services in question would be performed. It is only in this way that the consortium would have been better able to understand the reasons for the price difference with its tender and, therefore, challenge the merits of the assessment. Morevover, the reasoning cannot, in principle, be explained for the first time and a posteriori before the court.

With its appeal against the first decision the Commission put forward three grounds of appeal:

• error in law in classifying the consortium’s request as an ‘express request’ (seeking to obtain the statement of reasons for which the successful tender does not appear to be abnormally low);
• misrepresentation of the content of its reply;
• error in law as regards the scope of the contracting authority’s obligation under Article 296 TFEU and Article 170(3) of the Financial Regulation.

To corroborate the first ground of appeal, the Commission invoked the General Court’s judgment in case European Dynamics Luxembourg and Others v European Union Agency for Railways (T‑392/15), where the GC required an ‘express request’ by the unsuccessful tenderer (i.e., a request which expressly claims that the selected tender is abnormally low). According to the EU Commission, that condition was not satisfied, because the consortium simply indicated the potential consequences of an abnormally low tender. The European executive further recalled that, according to the GC, the contracting authority shall stick to follow a literal interpretation of the request, without engaging in a teleological interpretation thereof (see judgment in European Dynamics Luxembourg and Evropaïki Dynamiki v Commission, T‑752/15, paras. 78 to 81).

In endorsing the ruling of the GC, the Court of Justice stated that an unsuccessful tenderer may make use of the option available under Article 170(3) to invite the contracting authority to expressly justify its decision not to consider the successful tender abnormally low. To this end, it does not appear indispensable an express reference to that concept (see paras. 49 and 52). Nevertheless, the unsuccessful tenderer’s request must be formulated in such a way that it leaves no doubt (see para. 53).

The Court of Justice then confirmed that the consortium’s request was expressed. In examining the third ground of appeal, the Court of Justice observed that the wording of paragraph 23.1 of Annex I does not rule out the possibility that doubts as to the abnormally low nature of the successful tender may have been raised in a substantiated manner by an unsuccessful tenderer, thus causing the contracting authority to enter the second stage of the assessment above-mentioned and inform it of the outcome (see paras. 81 and 82). In the Court of Justice’s view, a different interpretation would deprive the unsuccessful tenderer of its right to an effective remedy guaranteed by Article 47 of the Charter, making it impossible to assess the merits of the decision (see para. 83). Particularly, this is the case when the price of the successful tender was the only advantage characterising it.

Then the Court of Justice added that, save in exceptional circumstances – which were not present in this case –, the inadequacy of the initial statement of reasons cannot be remedied in the course of the proceedings (see Michel v Parliament, 195/80, para. 22; Dansk Rørindustri and Others v Commission, in Joined Cases C‑189/02 P, C‑202/02 P, C‑205/02 P to C‑208/02 P and C‑213/02 P, para. 463 and Commission v Di Bernardo, C‑114/19 P, para. 51). This would equally affect the right enshrined in Article 47 of the Charter.

Conclusively, as for the second ground of appeal, the Court of Justice confirmed that the consortium request represented an ‘express request’ as to the abnormally low nature of the successful tender with the subsequent Commission’s duty to provide specific reasons. In light of the above, the Court of Justice decided to dismiss the appeal and ordered the EU Commission to pay the legal costs of the proceedings, as requested by the defendant.

 

Silvio Battista is a self-employed Italian lawyer specialising in administrative law and EU funding. He provides advice and assistance to public entities in the preparation of procurement procedures and economic operators which intend to participate in tenders both at national and EU level. He graduated with honours at the University of Bologna School of Law where he obtained also an LLM in tax law.

 

SUGGESTED CITATION: Battista, S.; “The contracting authority’s duty to state reasons in case of abnormally low tenders in the context of EU institutions’ procurement procedures”, EU Law Live, 31/01/2024, https://eulawlive.com/analysis-the-contracting-authoritys-duty-to-state-reasons-in-case-of-abnormally-low-tenders-in-the-context-of-eu-institutions-procurement-procedures-by-silvio-battista/