A common question in regulated procurement is whether a public body can exclude multiple tenders from connected tenderers.
This often arises in construction contracts, where the same sub-contractors can appear as part of a consortium. It can also come about where bidders share a parent company or ultimate ownership.
The chief concern for the public body (and competitor tenderers) is one of anti-competitive behaviour, as the market can be artificially narrowed by a bidder effectively having more than one chance to win the procurement.
The CJEU's recent preliminary ruling in Case 531/16 - Ecoservice projektai’ UAB, formerly ‘Specializuotas transportas’ UAB, provides guidance on the application of the principles of equal treatment and transparency in the context of procurements where two or more of the participants belong to the same group of companies.
The Court decided that:
- Related tenderers which submit separate offers in the same procurement are not obliged to voluntarily disclose the links between them to the contracting authority.
- The contracting authority can require this of bidders by adding a "specific condition in the call for tenders or in the tender specifications".
- If a contracting authority "has evidence that calls into question the autonomous and independent character of the tenders submitted by certain tenderers", it is obliged to verify and to ask for "additional information from those tenderers [as to] whether their offers are in fact autonomous and independent".
- If the offers prove not to be "autonomous and independent", the procurement regulations do not permit the award of the contract to the tenderers having submitted those tenders. To do so breaches the equal treatment principle in the procurement directives, as it can give the related tenderers "unjustified advantages in relation to the other tenderers".
The Court also confirmed that mere shared ownership of tenderers is not sufficient for the contracting authority to exclude those tenders automatically.
In July 2015, the centre for waste management for the region of Šiauliai in Lithuania announced a procurement for the provision of services relating to the collection of communal waste.
Four tenderers submitted bids, including ‘Specializuotas transportas’ UAB (‘tenderer B’), ‘Ekonovus’ UAB, and ‘Specialus autotransportas ’UAB (‘tenderer A’), both of which were subsidiaries of ‘Ecoservice’ UAB. The two tenderers were connected to the extent that they would be classed as "associated" for the purposes of UK law (see section 1159 of the Companies Act 2006).
Lithuanian legislation does not provide that a tenderer is obliged to disclose its links with other operators participating in the same tendering procedure, and the tender documentation did not include this as a condition. Nonetheless, tenderer B submitted a declaration of honour to the effect that it was taking part in the tendering procedure autonomously and independently.
The contract was ultimately awarded to tenderer B and "VSA Vilnius" challenged, arguing that the principles of equal treatment and transparency had been breached as a result of tenderers A and B operating as a collusive "association of undertakings".
The courts in Lithuania agreed and voided the decision, both at first instance and on appeal, maintaining that the contracting authority was in breach for not taking steps to determine the influence of the link and that the tenderers were in breach for their failure to adequately disclose the same.
For more information or advice please contact David Hansom in Clyde & Co's procurement law team.