June 4, 2019

Mind the Gap - Public procurement proceedings in the energy infrastructure sector

Many of our clients are service providers and construction companies in the offshore energy business and they often participate in public tender proceedings, because many such tendered projects are owned and financed either directly by public authorities, state-owned entities or by private companies bound by public procurement law. Often, the EU Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors (“Sector Directive”) applies, which provides that private companies providing essential services to the national production of energy and power, such as constructing and maintaining the grid connections for offshore wind farms, are bound by public procurement law.

As companies bound by the Sector Directive are usually privately or partially privately owned companies, many bidders are unaware of the strict public regulation of tender proceedings conducted by these companies. Whilst their tenders might appear to be usual private tenders for a contract for works or services, their tender proceedings are in fact subject to a large number of public procurement law provisions detailing the prerequisites for tender documents, the formalities of tender proceedings, the selection of the successful bid and the legal remedies bidders may have if these provisions are not adhered to.

Tender documents – Identifying the mistakes

When initiating tender proceedings that are subject to the Sector Directive, the customer needs to provide a full and complete set of tender documents to all potential bidders. These documents must contain details of how the tender will be conducted, what type of tender proceeding is being used, what the criteria for selection of the successful bidder are and what contract conditions the tendering company is proposing. Since the documents to be provided are quite elaborate, it is easy for tendering companies to make mistakes, rendering them in breach of the public procurement law right from the start of the tendering process.

To give you an example, the tender documents must not only specify the criteria according to which the successful bidder is chosen, they must also specify how these criteria are weighed in relation to each other and the standards by which it will be determined whether and to what extent a criterion is fulfilled. Some customer requests on the qualification of the bidders may be inadmissible and including them would thus amount to a mistake in the tender documents. The same applies to a request to use a certain supplier of technical parts, if only certain bidders are able to fulfill such request for licensing reasons and there is no reasonable ground for the customer to ask for that exact supplier. Such request would then be considered discriminating, and thus also inadmissible.

The tender proceedings – Beware of the formalities

Bidders should always bear in mind that they only have 10 calendar days, starting from the publication of the tender documents, to notify and object to any mistakes, omissions or inaccuracies in the documents, after which their right to object lapses. In our experience, it happens frequently that a bidder realizes a mistake in the tender documents, or that he has been unlawfully excluded from the tendering process or been discriminated against in favor of another bidder after the deadline for an objection has already passed. Since these deadlines are so short and there is a myriad of mistakes to be made or opportunities to be missed, we would always advise to consult with lawyers experienced in the field of public procurement from the start when taking part in a tender, whether in Germany or elsewhere in the EU.

Aside from that crucial beginning of the tendering phase, the customer must also strictly adhere to the provisions for the type of proceeding it chose to employ during any step of the procurement process. The whole proceeding must be completely transparent in the way that it is conducted and all bidders must be given equal opportunity to take part and be given equal access to information. At the same time, the bids are of course strictly confidential and the customer must never allow any bidder to receive details of any of the other bids by his competitors.

In our experience, some tendering companies use the complicated requirements and specific provisions of public tender proceedings to their advantage when dealing with bidders who are unfamiliar with the details of German and EU public procurement law and some are equally unfamiliar with the whole process themselves. In both cases, mistakes are frequent and can have a significant economic impact on the bidders, if a mistake results in the loss of an otherwise promising bid, as well as on the customer, if proceedings have to be stopped or repeated for formal reasons or because the customer incorrectly awarded the contract. Consequently, bidders should always keep in mind the very short deadlines for legal remedies, which easily lapse without the necessary legal support.