The Court of Justice recently made a ruling regarding an award decision by the European Commission (Sopra Steria Benelux Case C-101/22 P). After the tender process, subject to the rules of the Financial Regulation, the Commission granted a service contract to a consortium that submitted the most economically advantageous tender.
However, a competitor successfully contested this decision in the General Court, arguing that the Commission did not provide a rationale for the potentially abnormally low nature of the winning tender in its decision, despite a clear request based on article 170(3) of the Financial Regulation. The Commission did not agree with the reasoning and appealed the General Court’s judgment.
Understanding Transparency Obligations under Financial Regulation versus the Remedies Directive
Under Article 170(2) of the Financial Regulation, contracting authorities are obliged to inform unsuccessful candidates or tenderers about the reasons for their rejection. Extra details, such as the identity of the winning tenderer, are provided only upon a specific written request by the unsuccessful party.
This regulation starkly contrasts with the procedures governed by the EU Public Procurement Directives (Directives EU 2014/24 and EU 2014/25). Under the Remedies Directive (Directive 89/665/EEC), the contracting authority must inform any tenderer who has made an admissible tender about the winning tenderer as well as its tender's characteristics and relative advantages. In essence, the transparency requirements are stricter for authorities under the EU Procurement Directives compared to those under the Financial Regulation.
Assessing Price Normality
The General Court had stated that the obligation for authorities governed by the Financial Regulation to provide reasons for not considering a tender to have abnormal prices is limited. If an unsuccessful tenderer requests additional information, the authority is not automatically required to justify the normality of the prices in the winning tender. The Court acknowledges that simply accepting a tender implies, implicitly but definitively, that there were no signs of abnormally low prices in the tender.
However, if a request for additional information explicitly questions the normality of prices, the authority must then provide explicit reasons for deeming the tender prices normal. Given that the Commission did not meet this obligation, the General Court declared the award decision illegal and annulled it.
In its ruling of 11 May 2023, the Court of Justice upheld this decision. The court reminded that there is a two-stage process for checking for abnormal prices in tenders. The first stage involves a preliminary assessment by the contracting authority. If this assessment raises doubts about the normality of the offered prices, the authority enters the second stage, where it consults the tenderer to gain more insight into its price composition and costs. The authority then evaluates the provided explanations and decides if the tender is indeed abnormally low.
The Court of Justice clarified that the first stage is solely for internal use. Therefore, an unsuccessful tenderer that presents justified doubts about the abnormally low nature of the successful tender triggers the second stage of the assessment. According to the Court, any other interpretation would undermine the unsuccessful tenderer's right to an effective remedy.
Analyzing the Judgment
The judgment raises questions about how and when an investigation into abnormal prices should be conducted. It seems that the motives that support the award decision should be confirmed at the time of the award. In other words, the prices included in the winning tender should be established as normal at that time. Therefore, the idea that the second phase of the price assessment should be conducted only after competitors have raised questions is somewhat surprising. In such cases, it seems that the contracting authority may have made a mistake in the first stage by not identifying the dubious factors invoked by the competitor, thus not initiating a deeper investigation of the prices.
It appears to us that authorities under the Financial Regulation should be prepared to justify why prices are not deemed abnormal as early as the first stage. In certain cases, such justification might be straightforward, for example, when the prices of all tenderers align with each other. However, in other cases, a more in-depth investigation will be necessary from the outset. If this investigation is not conducted and questions arise later, there is a risk that abnormal prices will only be identified after the award, rendering the award illegal.
Given the less rigorous transparency obligation for European institutions compared to national contracting authorities, the proactive role of unsuccessful tenderers is crucial. It is their responsibility to pose pertinent questions and comments after the award (but before the contract is closed) to potentially reveal an illegality in the award decision.
Remember, being forewarned equips one to be forearmed.