Procurement in a Nutshell – European Court of Justice considers requirement for evidence to be submitted during the tender stage
17th August, 2018
In July, the European Court of Justice (ECJ) handed down its judgment in VAR, Srl v Iveco Orecchia SpA in response to a question raised by the Italian Council of State regarding the requirements that certain evidence be produced at the bid submission stage in a contractual procedure. In arriving at its decision the ECJ disagreed with the opinion of the Advocate General.
Click here to read the judgment in full.
The Transport Agency of Milan published a call for tenders for a contract to supply spare and replacement parts for buses and trolley-buses in the region.
With regard to this, in its tender specification, the Transport Agency included the condition that the spare parts had to be either ‘original spare parts’, made by the manufacturer itself, or ‘equivalent spare parts’. There was a further requirement for a certificate or equivalent guarantee to be produced upon first delivery of the parts to ensure they were the same quality as the original part. The Transport Agency did not specify if this proof had to be submitted along with the tender.
VAR srl (VAR) were successful and the Transport Agency awarded them the contract. In response Iveco Orecchia spa (Iveco) the losing bidder lodged an action against the award decision. The Regional Court upheld Iveco’s challenge on the grounds that VAR had not submitted in its tender the proof that its bus parts were equivalent to the original parts.
Subsequently VAR appealed to the Council of State on the basis that the specifications required certificates of equivalence to be required only on first delivery of the parts, not during the tendering procedure.
The Council of State then referred the following questions to the ECJ:
- Must Article 34(8) of Directive 2004/17 be interpreted as meaning that it requires that proof that the products to be supplied are equivalent to the original products be presented at the submission stage of tender?
- If the answer to question 1 is negative, which steps are required to ensure respect for the principles of equal treatment and open competition and sound administration?
The ECJ’s response
Ultimately, the ECJ held that Article 34(8) of Directive 2004/17 must be interpreted as meaning that when a tender requires in its specifications a particular mark, origin or production certification – the Contracting Authority must require this proof to be submitted in its tender.
The court drew on the following points in reaching this conclusion:
- Article 34(2) of Directive 2004/17 sets out that any technical specifications which require a particular mark or certificate of guarantee, must afford equal access for tenders and must ensure there are no obstacles to the open competition of public procurement.
- In light of ensuring equal treatment and open competition – specifications may not refer to specific makes, sources, processes, trademarks, patents, types or other specifics.
- The Directive did not point to a specific time or when the nature of a product must be proved. However the Court went further and stated that where the specifications were determined by certain standards or functional requirements, the tenderer was required to prove that it satisfied this in its tender.
- It follows that a Contracting Authority must then require the tenderer to provide this proof when it submits its tender.
- In line with the principles of equal treatment and the duty of transparency, all tenderers must be in a position of equality when their tenders are submitted. If a tenderer was permitted to prove its equivalence after submission of its tender then all tenderers would not be subject to the same conditions at the time they were assessed.
In light of the above, the Court found that the Directive must be interpreted as requiring the tenderer to produce the certificate in its original tender. With the first question being answered affirmatively, there was no need for the ECJ to consider the second.
Disagreement with the Advocate General
What is interesting about this case is that the Court’s decision was inconsistent to the opinion reached by the Advocate General. Advocate General Campos Sanchez-Bordona considered that Article 34(8) of the Directive does not require proof of equivalence to be submitted at the same time as the bid, member states are free to establish when equivalence certificates need to be produced.
Why is this important?
This case illustrates to tenderers that if they are required by a contracting authority to provide proof of a particular mark, origin or production of goods, they are obligated to submit this in their tender. Contracting authorities are also reminded to ensure that they require tenderers to submit the proof. This ensures that all tenders are treated equally and it prevents obstacles to open competition in public procurements, ensuring the protection of these key EU market principles.
Although in this case the Court considered Article 34(8) of the 2004 Directive, the terms are almost identical to Regulations 42(12) and 42(13) of The Public Contract Regulations and therefore this judgment is of broad and future relevance.
How can I find out more?
If you have any queries on the issues raised or on any aspect of procurement, please contact us via our procurement hotline on 0191 204 4464.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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