This article is an excerpt from the 2021 edition of The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its October 2015 decision in Direct Way v. European Parliament, the European Court of Justice upheld the cancellation of a tendering process and the use of a post-cancellation negotiated procedure that reduced the scope of the awarded contract. The dispute dealt with a tendering process of transportation services for members of the European Parliament, with the solicitation seeking hourly rates for the services. Only two bids were received. Both were over budget, with the complainant’s bid being the higher bid. The European Parliament notified the bidders that it would be cancelling the tendering process and initiating a negotiated process for the services. As the Court summarized, the original lower bidder continued to lower its hourly rates during the negotiated process, while the complainant (referred to as the “applicant” in the decision) continued to raise its rates:
By letter of 20 September 2012, the Parliament invited the applicants and TMS Limousine to submit a tender in connection with call for tenders INLO.AO-2012-018-LUX-UTP-05, entitled ‘Transport for Members of the European Parliament in Brussels’, in the context of an unpublished negotiated procedure. The characteristics of that call for tenders were essentially the same as those of the previous call for tenders, in particular as regards the estimated value of the contract, the scope and the award criteria, namely the price and the three qualitative criteria referred to in paragraph 3 above.
In the negotiated procedure, the two tenderers essentially maintained the tenders which they had initially submitted. However, TMS Limousine proposed a lower price, fixed at EUR 36.15 per hour, whereas the applicants proposed the same price as before, EUR 34.34 per hour.
Subsequently, two meetings were held between the Parliament and each of the tenderers, following which the applicants slightly increased the price proposed, to EUR 34.63 per hour, while TMS Limousine reduced the price proposed, to EUR 34.95 per hour.
The contract was awarded to the lower bidder. The higher bidder brought a legal challenge, seeking to annul the cancellation decision and subsequent negotiated process. However, the Court rejected the challenge, finding that the European Parliament had the right to cancel the first procedure and initiate a new negotiated procedure after the first procedure failed since this did not breach the principle of equal treatment:
It has consistently been held that the principle of equal treatment requires that comparable situations must not be treated differently, and different situations must not be treated in the same way, unless such treatment is objectively justified (judgment of 11 June 2014 in Communicaid Group v Commission, T-4/13, EU:T:2014:437, paragraph 50).
In the field of public procurement, the contracting authority is required, in particular, to ensure, at each stage of the procedure, equal treatment and, thereby, equality of opportunity for all the tenderers. Likewise, the principle of equal treatment means that tenderers must be on an equal footing both when they prepare their tenders and when those tenders are evaluated by the contracting authority (judgment in Communicaid Group v Commission, cited in paragraph 63 above, EU:T:2014:437, paragraph 51).
That means, more specifically, that the award criteria must be formulated, in the tender specifications or the contract notice, in such a way as to allow all reasonably well-informed tenderers of normal diligence to interpret them in the same way and that, when the tenders are being evaluated, those criteria are to be applied in an objective and uniform manner to all tenderers (judgment in Communicaid Group v Commission, cited in paragraph 63 above, EU:T:2014:437, paragraph 52).
The Court considers that the applicants have not established to the requisite legal standard that those principles were breached by the Parliament.
In the first place, it should be borne in mind that, according to the case-law, although the negotiated procedure may be initiated by the contracting authority only in specific situations, such as where irregular or unacceptable offers have been submitted in response to an open procedure which has been completed, provided for in Article 127(1)(a) of the Implementing Rules, the fact none the less remains that it is an autonomous procedure, distinct from any other contract award procedure and, in particular, from the open procedure (order in Bull and Others v Commission, cited in paragraph 28 above, EU:T:2009:514, paragraph 14).
The case-law has also established that, following the annulment of a tendering procedure, that procedure was at an end and the contracting authority was entirely at liberty to decide on what subsequent action to take (judgment in Sogelma v EAR, cited in paragraph 26 above, EU:T:2008:419, paragraph 136).
The applicants have put forward no argument from which it might be concluded that there was any breach of the principle of equal treatment of tenderers during the negotiated procedure. As the Parliament rightly claims, it is not possible to compare the price proposed by the applicants during the open procedure with the price proposed by the successful tenderers during the negotiated procedure, as the two procedures are distinct.
Furthermore, in the context of two distinct procedures, it would be illogical to take the view that the price proposed by the applicants during the first procedure, which led the contracting authority to conclude that the tenders were unacceptable, should be regarded as a maximum threshold that could not be exceeded during a second procedure of a different nature.
There might have been discrimination in the present case if, in the context of the same procedure, in point of fact the negotiated procedure, the contracting authority had treated similar tenders submitted by the tenderers in a different fashion. However, the applicants do not make such an assertion.
The Court also found that the negotiated changes to the scope of the contract were justified after the cancellation of the first process and rejected the legal challenge. As this case illustrates, over-budget bid situations are a recurring risk area in public procurement. While in this instance the European rules allowed for the tender call cancellation and subsequent negotiations, to avoid similar controversies, project teams should build negotiation protocols for dealing with over-budget bids directly into their initial solicitations so that they can proceed directly to negotiations without requiring the cancellation of the original process and the initiation of a new process. Had those rules been integrated into the original solicitation, the controversy that arose in this case could have been avoided.
