Exploring bias in procurement and timing of procurement challenges

08 April 2015

The case of eVigilo v PAGD in March 2015 saw the Court of Justice of the European Union (CJEU) explore three public procurement questions raised by the Lithuanian Supreme Court. The questions related to the effect of conflicts of interest/bias on evaluations, the potential for bringing a challenge at a late stage, and whether consistency with tender documentation can be a valid award criterion.

Factual background

Case C-538/13 eVigilo Ltd v Priešgaisrinės apsaugos ir gelbėjimo departamentas prie Vidaus reikalų ministerijos (PAGD) was heard by the CJEU on 12 March 2015. The preliminary ruling provides guidance on three key issues:

  1. how the effect of potential conflict of interest/bias on the award of a procurement contract will be determined by the Court;
  2. whether there is a right to bring a challenge against the contract award at a late stage; and
  3. the extent to which consistency with tender documentation requirements can be used as an award criterion.

The case concerned a contract tendered by the Lithuanian General Department of Fire and Rescue. The contract was for the provision of a system to warn and inform the public 'using the infrastructure of the networks of providers of services relating to public mobile telephone connections'.

Two consortia submitted bids for the opportunity, which was valued at around €4.3m. On 4 November 2010, the tenderers were informed of the results of the evaluation. However, two days beforehand, eVigilo had brought an action against PAGD on the grounds that the provisions of the invitation to tender lacked clarity.

This original claim was subsequently further particularised by eVigilo on several occasions. One such instance included a claim relating to new facts connected with the alleged bias of three of the six experts, from the Technical University of Kaunas, who had devised the tender documents and evaluated the submissions. eVigilo claimed that the three experts were colleagues of specialists engaged by the preferred bidder and thus a professional link existed between these parties.

On 8 March 2011 PAGD, 'NT Service' UAB and 'HNIT-Baltic' UAB concluded the contract, even though the proceedings between eVigilo and the contracting authority were still pending.

The applications brought by eVigilo were rejected by the Lithuanian courts of first instance and appeal. These decisions were then appealed to the Supreme Court of Lithuania, which stayed proceedings and referred several questions to the CJEU.

The CJEU's decision

The CJEU was requested to provide a ruling on three broad issues:

(a) The question of bias

  • Whether the existence of an objective set of facts (i.e. a possibly significant link between a tenderer and an evaluator) is sufficient to establish the unlawfulness of an evaluation process, or instead whether (a) other evidence is required to demonstrate this; or (b) the unsuccessful tenderer needs to provide evidence that the experts in question were biased;
  • Whether it was relevant that, despite the existence of bias on behalf of the experts, this bias had no effect on the ultimate outcome i.e. the award of the contract.

(b) The limitation issue

  • Whether the right to challenge the lawfulness of the tender procedure must remain open after the expiry of relevant limitation period where the tenderer requires further information relating to the reasons for the award decision in order to understand the award criteria;

(c) The award criterion issue

  • Whether contracting authorities can use the degree to which submissions were consistent with tender document requirements as an award criterion.

The question of bias

The CJEU held that the EU procurement rules did not preclude a finding that the evaluation of the tenders is unlawful solely on the ground that the tenderer had a significant connection with experts appointed by the contracting authority who evaluated the tenders.

The CJEU's decision appears to have been made with close regard to the principle of equal treatment, with a robust stance being taken on the existence of any opportunity for favouritism or arbitrariness on the part of PAGD.

It highlighted that a conflict of interests of this nature entails a risk that PAGD could have been guided by considerations unrelated to the contract in question and, consequently, that a particular tenderer may receive undue preference. Such a conflict is liable to constitute a breach of the requirement to treat tenderers equally and non-discriminatorily and to act in a transparent manner.

On the question of evidence, the CJEU held that an unsuccessful tenderer is not required to provide tangible proof of an expert's bias. The applicant need only show objective evidence calling into question the impartiality of a contracting authority's experts. The CJEU affirmed that contracting authorities are under a duty to determine whether any conflicts of interest exist, and to take appropriate measures to ensure they are prevented, detected and remedied. Failure to demonstrate this provides a strong indication that the evaluation was unlawful.

In light of this analysis, the court ruled that it would be incompatible with this role for the applicant to bear the burden of proving that the experts were biased.

The court referred the actual determination of bias back to the Lithuanian Supreme Court, stating it is in principle a matter of national law to determine whether, and to what extent, the competent authorities must take account of the fact that possible bias on the part of experts has had an effect on the decision to award the contract.

The limitation issue

The CJEU interpreted the procurement rules as allowing economic operators to bring an action relating to the lawfulness of the tender procedure - even after the expiry of the period prescribed by national law - in circumstances where reasonably well-informed and normally diligent tenderers (after the so-called "RWIND" test) could only understand the tender conditions at award decision stage, when informed of the reasons for that decision. Such a right may be exercised until the expiry of the period for bringing proceedings against the decision to award the contract.

eVigilo claimed that it was only able to understand the award criteria applied after the contracting authority had sent it exhaustive reasons for its decision not to award eVigilo the contract. It was, therefore, only after that communication had been made that the period for bringing an action ought to have started to run.

In so deciding, the CJEU was keen to reiterate the importance of not undermining the ordinary limitation periods, highlighting the risk of allowing tenderers to invoke challenges at any stage of the award procedure. The Court also reaffirmed the principle of the limitation period commencing upon the date upon which the claimant knew, or ought to have known, of the alleged infringement.

While the court did not advise on the merits of eVigilo's claim, its guidance suggests that incomplete knowledge of the deficiencies of the award criteria (based on the vague tender documentation) did not constitute sufficient knowledge to commence the limitation period. This level of knowledge might only arise upon provision of information at award debrief - meaning that the necessary limitation period would only then begin to run.

The CJEU was clear that it was up to the referring court to determine whether eVigilo was justifiably unable to understand the award criteria, or whether it should have understood them by applying the standard of a reasonably well-informed tenderer exercising ordinary care.

As part of this analysis the CJEU suggested, helpfully, that factors such as the fact that several tenderers submitted bids and no clarifications were raised were to be taken into account. If, after applying this test, the tender conditions were still incomprehensible to that particular tenderer, then a legal challenge is permissible on the basis outlined above.

The award criterion issue

Here, the CJEU's stance was that in principle, contracting authorities could use the degree to which tender submissions are consistent with the requirements of the tender documentation as an award criterion.

The tender submissions were assessed on the basis of "the most economically advantageous tender from the point of view of the contracting authority". This assessment is made based on various criteria which are linked to the subject-matter of the contract. Article 53(1)(a) of the (previous) Public Contracts Directive (2004/18) sets out a list of suitable award criteria which assist in making this assessment.

The court reaffirmed the principle that this list was not exhaustive and the contracting authority has the power to establish other award criteria (provided that they are connected with the subject-matter of the contract and compliant with the principles set out in Article 2 of the Public Contracts Directive - equal treatment, transparency, non-discrimination, proportionality).

In the circumstances of this case, the CJEU suggested that there was nothing to suggest that the award criteria in question were inconsistent with the principles set out in Article 2.

Comment

This judgment will be of interest to contracting authorities and suppliers. For authorities, it presents significant challenges.

The CJEU's stance on the question of bias ostensibly places the burden of disproving it upon the authority. In a manner resonating with the 2014 Public Contracts Directive, the court referred to the authority's duty to prevent, detect and remedy conflicts of interest. This constitutes a high threshold for authorities, and suggests that a disgruntled supplier contending bias need only present objective evidence undermining an evaluator's impartiality in order to demonstrate a prima facie case that a tender evaluation was unlawful.

Additionally, the court's conclusions regarding the limitation period might also provide hope to suppliers who have found claims time-barred despite not possessing sufficient information to justify the risk of mounting a challenge. This decision opens up the possibility that suppliers may be able to bring challenges which might, in the past, have been considered to fall outside the limitation period, if it can be demonstrated that:

  • the level of clarity in the tender documentation would fail the RWIND test; and
  • the deficiencies challenged only become fully apparent (to the tenderer in question) after tenderers have been furnished with full information as part of the communication of the award decision.

Finally, the award criterion issue should at least provide authorities with a greater degree of certainty in how they frame award criteria, although in most instances the extent to which a tender complies (or not) with the requirements of the ITT tends to be treated as an issue of compliance or non-compliance - this will, we expect, continue.

The judgment itself can be viewed here.


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