Regulation 41 – Prior involvement of candidates or tenderers

Commentary

As mentioned in relation to Regulation 40 PCR2015, the treatment of the candidates or tenderers involved with the contracting authority prior to a specific procurement is covered by Regulation 41 PCR2015, which transposes the rules of Article 41 of Directive 2014/24 with some minor drafting changes that do not alter its content.

In simple terms, this regulation is concerned with the counterintuitive question whether a prospective tenderer can be involved in drafting the tender documents before a procedure is launched. The main rule of Regulation 41 allows for such participation, but digging deeper into the Regulation allows us to find some limitations to this possibility related with the principle of competition. This topic raises two main sets of issues. First, the burden imposed on contracting authorities and how to make sure that it is proportionate to the need to guarantee the integrity and probity of the procurement process. Second, the competition distortions that could derive from shortcomings in the assessment of bids submitted by undertakings involved in previous phases of the procurement process.

Liability lies with the contracting authority

Regulation 41(1) leaves to the contracting authority the obligation of taking appropriate measures ensuring competition is not distorted by the participation of the entity which was involved in drafting the tender documents, based on the rules of Regulation 40 or otherwise. Two problems are immediately apparent. The first one is that Regulation 41 accepts that in some circumstances, economic operators may be involved in helping contracting authorities outside the remit of Regulation 40. We would like to know how that could be done.

The second problem is more practical: being involved in drafting the technical specifications and participating in the subsequent tender will always distort competition as the supplier will be in a position it would not have been otherwise (this is further discussed below, and see also the strict approach recently followed by the General Court in Intrasoft International v Commission, T-403/12, EU:T:2015:774). The previously involved tenderer will know the terms of the deal before everyone else, it may know more about the deal than everyone else, perhaps even information that will not be made public such as the budget available to the contracting authority. The only way we can see the prior involvement not raising competition issues is if the contracting authority only asks a very direct, specific question and provides no other details on the project (what is really being acquired, when and for what price). All other scenarios where the supplier helps the contracting authority define what it wants to buy, which we suspect are the true reason behind Regulation 40, will distort competition. As Regulation 41(1) has no qualifier on the level of distortion acceptable, the correct interpretation has to be that any distortion leads to the automatic exclusion of the putative tenderer. Yes, Regulation 41(1) states that the contracting authority shall take appropriate measures to ensure competition is not distorted, but as the distortion occurs when the information that something is being procured in the future is passed to the helper and subsequently when the same economic operator helps the contracting authority design the tender documents, the distortion has already occurred.

The irony of Regulation 41(1) is that the burden of correcting the distortion is left in the hands of the contracting authority. This may appear impossible for the reasons above but perhaps leaves the helping economic operator with the possibility of suing the contracting authority in case it does not fulfil this (impossible?) obligation.

Papering over the cracks

Paragraph 2 of Regulation 41 offers some potential solutions for the competition distortion issue. Helpfully, other candidates should be informed of the relevant information exchanged between the helping economic operator and the contracting authority. But how does this solve the distortion of competition arising from the asymmetry of information and the fact one of the suppliers influenced the rules of the procedure? In fact, informing the market that someone was involved in drafting the tender documents AND will be participating may have the opposite effect on competition: effectively reducing the attractiveness of the project for everyone else and thus reducing competition.

The same paragraph puts forward that perhaps a solution is to set an adequate time limit to receive the tenders. The problem is not the time per se as all economic operators would have to comply with the minimum time limits (although it would have been preferable to just block the use of accelerated or time-reduced procedures) but the fact one of the economic operators had access to information before everyone else and influenced the design of the tender documents.

If everything else fails, lower the standards

Paragraph 3 admits that to ensure compliance with Regulation 18(1) (that is, the principle of equal treatment and non-discrimination, but not competition) perhaps the economic operator will have to be excluded, but only as a last resort. Why as a last resort? Would it not be preferable instead to block it from the start and ensure the economic operator is compensated for the help? Would it not be simpler and clearer for everyone involved? Even if it was a last resort, at least the burden of proof that no distortion of competition occurred (which paragraph 3 should have referred to) should be left with the economic operator who helped the contracting authority.

As it stands, Regulation 41 is prone to create difficulties and complications for contracting authorities. To be honest, this is a mess originating from Article 41 of the Directive (and, ultimately, the Fabricom case C-34/03, EU:C:2005:127)  but still, it is up for the Member States to provide further rules if they so see fit. This solution will probably have to be nuanced in the future due to the Directive, but we would not be surprised if that country takes once more a harder line on this matter.

For the broader discussion on the competition implications of prior involvement, see Albert’s assessment of Arts 40 and 41 of Dir 2014/24 in Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 373-78.

Proposed citation: Albert Sanchez-Graells & Pedro Telles, (2016) Commentary to the Public Contracts Regulations 2015, available at: www.pcr2015.uk.

Last modified: September 5, 2016 by Pedro Telles

 

41.—(1) Where a candidate or tenderer, or an undertaking related to a candidate or tenderer—

(a) has advised the contracting authority, whether in the context of regulation 40 or not, or

(b) has otherwise been involved in the preparation of the procurement procedure,

the contracting authority shall take appropriate measures to ensure that competition is not distorted by the participation of that candidate or tenderer.

(2) Such measures shall include—

(a)the communication to the other candidates and tenderers of relevant information exchanged in the context of or resulting from the involvement of the candidate or tenderer in the preparation of the procurement procedure; and

(b) the fixing of adequate time limits for the receipt of tenders.

(3) The candidate or tenderer concerned shall only be excluded from the procedure where there are no other means to ensure compliance with the duty to treat economic operators equally in accordance with regulation 18(1).

(4) Prior to any such exclusion, candidates or tenderers shall be given the opportunity to prove that their involvement in preparing the procurement procedure is not capable of distorting competition.

(5) The measures taken under this regulation shall be documented in the report referred to in regulation 84(1).