This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its October 2003 decision in Kauppatalo Hansel Oy v. Imatran kaupunki, the European Court of Justice upheld the decision of a Finnish municipality to cancel its tendering process due to evaluation errors. The case dealt with a bidding process initiated by Imatran kaupunki (the City of Imatra) for an electricity supply contract. After discovering errors in its evaluation structure, which would have precluded it from awarding to the most economically advantageous tender, the municipality cancelled the tendering process and the low bidder sued. However, the European Court of Justice concluded that the municipality was within its rights under the European Public Procurement Directive to cancel the bidding process due to the error:
Therefore, the answer to the questions referred by the national court must be that Directive 93/36 is to be interpreted as meaning that a contracting authority which has commenced a procedure for the award of a contract on the basis of the lowest price may discontinue the procedure, without awarding a contract, when it discovers after examining and comparing the tenders that, because of errors committed by itself in its preliminary assessment, the content of the invitation to tender makes it impossible for it to accept the most economically advantageous tender, provided that, when it adopts such a decision, it complies with the fundamental rules of Community law on public procurement such as the principle of equal treatment.
As this case illustrates, since government cancellation decisions remain subject to legal challenge, government institutions bear the onus of establishing that their tender cancellations are made for valid reasons. While in this situation the municipality was able to justify its cancellation based on an evaluation error, that error and resulting cancellation triggered the subsequent legal challenge. Project teams wanting to avoid similar challenges should therefore take the necessary precautions to avoid mistakes in their evaluations since cancelling, re-tendering, and defending legal claims is never preferable to ensuring work is properly completed in the first place.
