This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its December 2003 decision in EVN AG, Wienstrom GmbH v. Republik Österreich, the European Court of Justice struck down the government’s environmental criteria as overly restrictive and ordered the re-tendering of the challenged bidding process after determining that the government could not proceed with the remaining criteria since that would have amounted to an improper post-bid rule change. The dispute dealt with an Austrian tender call for the supply of electricity in Carinthia. The complainant challenged the environmental evaluation criterion, which was weighted at 45 percent of the total evaluation and required that the electricity was to be provided from renewable energy sources.
The Court determined that the purchasing institution could take ecologic criteria into account in framing the evaluation criteria and also determined that the allocation of 45 percent of the weightings to those ecological factors was not incompatible with European procurement rules:
Having regard, therefore, to the importance of the objective pursued by the criterion at issue in the main proceedings, its weighting of 4 5% does not appear to present an obstacle to an overall evaluation of the criteria applied in order to identify the most economically advantageous tender. In those circumstances, and since there is no evidence to support a finding that the requirements of Community law have been infringed, it must be held that the application of a weighting of 4 5% to the award criterion at issue in the main proceedings is not incompatible with the Community legislation on public procurement.
However, since the purchasing institution lacked the technical ability to verify whether the supply of electricity was actually coming from renewable energy sources, the Court determined that the criterion breached the fair evaluation standards and was therefore contrary to European procurement rules:
…the contracting authority itself has admitted that it does not have the technical ability to verify whether electricity supplied to it has actually been generated from renewable energy sources and it did not require the tenderers to supply proof of their actual supply obligations or existing electricity supply contracts. The referring body is therefore essentially asking whether the Community law provisions governing the award of public contracts preclude a contracting authority from applying an award criterion which is not accompanied by requirements which permit the accuracy of the information contained in the tenders to be effectively verified.
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It should be recalled that the principle of equal treatment of tenderers which, as the Court has repeatedly held, underlies the directives on procedures for the award of public contracts (see, in particular, Case C-470/99 Universale-Bau and Others [2002] ECR I-11617, paragraph 91, and Case C-315/01 GAT [2003] ECR I-6351, paragraph 73) implies, first of all, that tenderers must be in a position of equality both when they formulate their tenders and when those tenders are being assessed by the contracting authority (SIAC Construction, paragraph 34). I – 14579. More specifically, that means that when tenders are being assessed, the award criteria must be applied objectively and uniformly to all tenderers (SIAC Construction, cited above, paragraph 44).
Second, the principle of equal treatment implies an obligation of transparency in order to enable verification that it has been complied with, which consists in ensuring, inter alia, review of the impartiality of procurement procedures (see, to that effect, Universale-Bau and Others, paragraphs 91 and 92). Objective and transparent evaluation of the various tenders depends on the contracting authority, relying on the information and proof provided by the tenderers, being able to verify effectively whether the tenders submitted by those tenderers meet the award criteria.
It is thus apparent that where a contracting authority lays down an award criterion indicating that it neither intends, nor is able, to verify the accuracy of the information supplied by the tenderers, it infringes the principle of equal treatment, because such a criterion does not ensure the transparency and objectivity of the tender procedure. Therefore, an award criterion which is not accompanied by requirements which permit the information provided by the tenderers to be effectively verified is contrary to the principles of Community law in the field of public procurement.
Furthermore, the Court ruled that the ecologic criteria were not sufficiently linked to the procurement requirements since they assessed a bidder’s overall ability to provide electricity from renewable sources to the entire marketplace and therefore went beyond the scope of the requirements for the tendered contract:
The ecological criteria used by a contracting authority as award criteria for determining the most economically advantageous tender must, inter alia, be linked to the subject-matter of the contract. In the case at issue in the main proceedings, the award criterion applied does not relate to the service which is the subject-matter of the contract, namely the supply of an amount of electricity to the contracting authority corresponding to its expected annual consumption as laid down in the invitation to tender, but to the amount of electricity that the tenderers have supplied, or will supply, to other customers.
An award criterion that relates solely to the amount of electricity produced from renewable energy sources in excess of the expected annual consumption, as laid down in the invitation to tender, cannot be regarded as linked to the subject-matter of the contract.
The Court ruled that giving additional points to bidders for being able to provide the largest overall levels of renewable-source electricity beyond the scope of the contract gave an unfair advantage to larger suppliers and undermined the objective of opening the market to competition:
Moreover, the fact that, in accordance with the award criterion applied, it is the amount of electricity in excess of the expected annual consumption as laid down in the invitation to tender which is decisive is liable to confer an advantage on tenderers who, owing to their larger production or supply capacities, are able to supply greater volumes of electricity than other tenderers. That criterion is thus liable to result in unjustified discrimination against tenderers whose tender is fully able to meet the requirements linked to the subject-matter of the contract. Such a limitation on the circle of economic operators in a position to submit a tender would have the effect of thwarting the objective of opening up the market to competition pursued by the directives coordinating procedures for the award of public supply contracts.
Finally, even assuming that that criterion was a response to the need to ensure reliability of supplies — an assumption which it is for the national court to verify — it should be noted that while the reliability of supplies can, in principle, number amongst the award criteria used to determine the most economically advantageous tender, the capacity of tenderers to provide the largest amount of electricity possible in excess of the amount laid down in the invitation to tender cannot legitimately be given the status of an award criterion.
The criteria that awarded points for being able to supply electricity beyond the requirements of the contract was ruled to be contrary to European law and struck down as invalid. The Court therefore concluded that the challenged bidding process needed to be cancelled and re-tendered since, after striking the invalid criteria, the evaluation requirements were changed so significantly so as to amount to a post-bid change to the rules:
As far as the award criteria themselves are concerned, it is a fortiori clear that they must not be amended in any way during the tender procedure. It follows that where the review body annuls a decision relating to an award criterion, the contracting authority cannot validly continue the tender procedure leaving aside that criterion, since that would be tantamount to amending the criteria applicable to the procedure in question.
Therefore, the answer to the fourth question must be that the Community legislation on public procurement requires the contracting authority to cancel an invitation to tender if it transpires in review proceedings under Article 1 of Directive 89/665 that a decision relating to one of the award criteria laid down by that authority is unlawful and it is therefore annulled by the review body.
As this case illustrates, while purchasing authorities may have some latitude to take non-commercial elements, such as environmental factors, into consideration in the development of their evaluation criteria, those criteria must be capable of verification to support open and transparent competition. Furthermore, those non-commercial elements should be proportionate to the scope of the tendered contract and should not provide larger suppliers with an unnecessary unfair competitive advantage based on their larger overall capacity where that additional capacity is surplus to the needs of the tendered contract.
