This article is an excerpt from the 2020 edition of The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its December 2018 decision in Autorità Garante della Concorrenza e del Mercato —Antitrust v. Azienda Socio-Sanitaria Territoriale della Vallecamonica — Sebino (ASST), the European Court of Justice ruled that applicable European and Italian procurement rules did not permit open-ended piggybacking by non-party institutions onto the standing agreements of other public institutions. As the Court summarized, the dispute involved an onboarding clause in a nine-year Italian framework agreement for sanitation services that purportedly permitted other public institutions to contract directly with the contractor and avoid tendering for the required services:
That decree allocated to ATI Markas certain environmental sanitation, collection and waste services for a period of 108 months, which is 9 years, from 16 February 2012 to 15 February 2021. Paragraph 5 of the tender specifications relating to that public contract included a clause headed ‘Extension of the contract’ (‘the extension clause’), which allowed one or more of the bodies referred to in that clause to request that the successful bidder extend the contract to cover them ‘subject to conditions identical to those of the relevant procurement contract’. That clause, which referred, inter alia, to the ASST of Valcamonica, specified that the successful bidder was not obliged to accept the request for extension. Further, on the basis of that clause, an ‘independent contractual relationship’ arose, which covered the remaining part of the contract period set out in the initial contract.
Another contractor challenged that onboarding arrangement, arguing that it breached applicable open competition rules that require framework agreements to include the clear identification of participating institutions and contract values for specific assignments to meet transparency standards:
Its standpoint, as reflected in a number of its judgments, is that, on a subjective level, that clause should identify the contracting authorities that can have recourse to it, while, on an objective level, it should set out the economic value of any extension, including a maximum amount. Any interpretation to the contrary would render it lawful for an unlimited series of contracts to be awarded directly, which would infringe the basic principles of EU law, under which public contracts are to be awarded through public tendering procedures, and would therefore undermine competition.
The European Court of Justice upheld the complaint, finding that the open procurement rules under the European Procurement Directive required transparent contract award procedures, including the transparent identification of contract scoping of call-up assignments when framework agreements are created:
Not only the principles of equal treatment and non-discrimination, but also the principle of transparency that stems from them (see, to that effect, judgment of 17 December 2015, UNIS and Beaudout Père et Fils,C-25/14 and C-26/14, EU:C:2015:821, paragraph 38) imply that all the conditions and detailed rules of the award procedure must be drawn up in a clear, precise and unequivocal manner in the contract notice or tender specifications so that, first, all reasonably informed tenderers exercising ordinary care can understand their exact significance and interpret them in the same way and, second, the contracting authority is able to ascertain whether the tenders submitted satisfy the criteria applying to the contract in question.
The principles of transparency and equal treatment of economic operators with an interest in the conclusion of a framework agreement, as established, inter alia, by Article 2 of Directive 2004/18, would be affected if the contracting authority that is an original party to the framework agreement did not set out the total quantity which such an agreement covers.
The obligation of transparency is particularly important in the context of a subsequent contract, given that, in accordance with the second subparagraph of Article 35(4) of Directive 2004/18, contracting authorities are not bound to send a notice of the results of the award procedure for each contract based on the framework agreement.
Further, if the contracting authority that was an original party to the framework agreement were not obliged to indicate at the outset the quantity and maximum amount of services that will be covered by that agreement, the conclusion of the agreement could be used to divide a contract up artificially so that it remains below the thresholds laid down by Directive 2004/18, which is prohibited by Article 9(3) of that directive.
The Court also ruled that contracting authorities that establish framework agreements for the use of other institutions must specially indicate the names of those other institutions when establishing the frameworks. Furthermore, those other institutions cannot leave the quantity of services required open-ended and undefined, but must instead specifically identify the value of any call-up assignments when those frameworks are first established:
Therefore, the reply to the questions referred is that Article 1(5) and the fourth subparagraph of Article 32(2) of Directive 2014/18 must be interpreted as meaning that:
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a contracting authority may act on its own behalf and on behalf of other contracting authorities that are specifically indicated but are not direct parties to a framework agreement, provided that the requirements as to advertising and legal certainty and, consequently, those relating to transparency are complied with; and
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it cannot be accepted that contracting authorities that are not signatories to the framework agreement refrain from determining the quantity of services that may be required when they conclude contracts pursuant to the framework agreement or determine that quantity by reference to their usual requirements, because, if they do so, the principles of transparency and equal treatment of economic operators with an interest in the conclusion of that framework contract will be infringed.
As this case study illustrates, public institutions cannot legitimately use vaguely defined framework agreements as a vehicle to enable other public institutions to engage in non-transparent contracting practices. Those institutions that enable or engage in those practices are acting in contravention of globally recognized open procurement rules.
