ECJ hands down judgment on abnormally low tenders
A recent judgment from the European Court of Justice (ECJ) has provided insight into the obligations of contracting authorities relating to investigating abnormally low tenders in procurement procedures.
The case was brought in respect of an alleged breach of European Directive 2009/81, which regulates the procurement of contracts by authorities in the fields of defence and security. However, contracting authorities in the UK are subject to similar obligations under Regulation 69 of the Public Contracts Regulations 2015 and can therefore take useful guidance from the European judgment.
Background to the Case
The ECJ received a reference for a preliminary ruling from a Bulgarian court, concerning identification of and challenges to abnormally low tenders. An unsuccessful bidder of a contract awarded by the Ministry of the Interior of Bulgaria challenged the award of the contract on the grounds that the successful tender was abnormally low. As there were only two bidders, the Commission for Protection of Competition took the view that it was not possible to calculate the mean value for the purpose of determining whether the tender was abnormally low.
The Questions Referred to the Court
The following questions were referred to the ECJ:
- Is a contracting authority not required to verify whether an abnormally low tender exists where it is objectively impossible to apply the criterion laid down in national law for the evaluation of an abnormally low tender?
- Is the contracting authority required always to ensure that the received tenders are genuine, and state the relevant reasons?
- Does such a requirement apply to the contracting authority if only two tenders have been received during the procedure for the award of a public contract?
- Is a contracting authority’s assessment as regards a lack of suspicion that an abnormally low tender exists subject to judicial review?
- Is a contracting authority, where it has not verified whether an abnormally low tender exists, required to provide justification and reasons as to why there is no suspicion that an abnormally low tender has been submitted?
The ECJ’s Judgment
The ECJ confirmed that contracting authorities cannot avoid the obligation to identify and investigate tenders which they suspect to be abnormally low. Contracting authorities must require tenderers to provide an explanation for the proposed price for suspect tenders. Furthermore, authorities must assess information provided and may reject a tender where the evidence does not account for the low level of price proposed. The ECJ held that a contracting authority is under an obligation:
- to identify suspect tenders,
- then to allow tenderers concerned to demonstrate their genuineness by asking them to provide the details which it considers appropriate,
- then to assess the merits of the information provided by the persons concerned, and
- then, to take a decision as to whether to admit or reject those tenders.
The court further held that contracting authorities must, at the earliest opportunity, inform candidates and tenderers of decisions reached concerning the award of a contract and that information is to be given in writing upon request.
The court found that where a contracting authority has failed to initiate a procedure to verify whether a tender might be of an abnormally low nature, on the ground that it considered that none of the tenders submitted to it was of such a nature, its assessment may be subject to judicial review in the context of proceedings against the decision to award the contract at issue.
This judgment has provided some much needed clarity on some of the common questions and concerns that often cause difficulty for contracting authorities in dealing with suspected abnormally low tenders in a procurement process.
If you have any queries in relation to this judgment, or on the issue of abnormally low tenders generally, the Geldards Contracts and Procurement team can assist.