Procurement in a Nutshell – How to treat a convicted tenderer
12th February, 2018
This week's Nutshell considers the circumstances which arise where a tenderer, or a member of a consortium of tenderers, has been convicted of a criminal offence. In particular, we examine whether it is acceptable to exclude the tenderer where they were seemingly unaware that the individual concerned had been convicted.
This update analyses the court’s decision in Impresa di Costrunzioni Ing. E. Mantovani SpA, Guerrato SpA v Provincia autonoma di Bolzano.
The Italian municipality of Bolzano published a call for tenders relating to the construction of a prison. The defendant tenderer Mantovani submitted a bid which included declarations stating that, M.B, a former board member had ceased to exercise his functions in March 2013 and that to the tenderers knowledge, he was never convicted of a criminal charge.
The Contracting Authority allowed the bid but stated that it was awaiting further clarifications regarding M.B’s status. The Contracting Authority then obtained M.B’s case file and discovered he was sent to prison for one year and 10 months. Mantovani stated that the judgment had been handed down after they made declarations in their tender and at the time they made the declarations, they had put a number of measures in place to disassociate itself from M.B.
On the advice of the Italian Authority Against Corruption (ANAC), the municipality of Bolzano excluded Mantovani from the procurement procedure on the ground that its attempts to disassociate itself from M.B. were insufficient and the judgment on M.B’s guilt had been handed down before the tender declarations were made.
Mantovani challenged this decision to the Italian Council of State, following an unsuccessful challenge at the regional tribunal. Consequently, the Council of State asked the ECJ whether Directive 2004/18 and the core EU principles of equal treatment, proportionality and transparency precluded national legislation:
- Allow a Contracting Authority to take into consideration the criminal conviction of a director of a company for an offence relating to the professional conduct of that undertaking; and
- Exclude that undertaking from the tender procedure on the ground that, by failing to declare the conviction which was not yet final, it had not dissociated itself from the activities of that director.
Article 45 Directive 2004/18
Under this Article, a Contracting Authority may exclude from a procurement process any candidate or tenderer who it is aware has been convicted of a number of specified offences, including: convictions for offences relating to his professional conduct, grave professional misconduct and serious misrepresentation.
At the ECJ
The court held that national legislation could permit Contracting Authorities to exclude a bidder for failing to declare a criminal conviction of one of its directors concerning the professional conduct of that director where the director ceased to perform his duties in the year preceding the publication of the tender notice.
In making this decision, the court drew on the following points:
- The court made reference to the fact that EU law is based on the premise that legal persons often act through their representatives and therefore conduct contrary to the professional ethics of those representatives may constitute a relevant factor in assessing the professional conduct of an undertaking. On this basis, it was possible for member states to retain the possibility to determine whether certain actions of directors of a company were contrary to professional ethics. There was also nothing to preclude member states from considering that acts of a director representing the tendering company were attributable to that company.
- The fact that the circumstances which could lead to the exclusion of the tenderer resulted from conduct of a director who had ceased to hold office on the date of submission of the application did not preclude the application of that ground for exclusion.
- A Member State was entitled to determine the requirements governing dissociation and to require, as Italian law did, that the tenderer inform the Contracting Authority of a conviction of its director, even if the conviction was not final.
In light of these the court held that Directive 2004/18/EC and the principles of equal treatment and proportionality must be interpreted as not precluding national legislation which allows the Contracting Authority:
- To take into consideration, in accordance with the conditions laid down, a criminal conviction of the director of a tendering company, even if the conviction is not yet final, for an offence concerning the professional conduct of that company where the director ceased to perform his duties in the year preceding the publication of the tender notice; or
- To exclude that company from taking part in the tendering procedure at issue, on the ground that, by failing to declare the conviction which was not final, it had not fully and effectively dissociated itself from that director’s activities.
Why is this important?
While this relates to Directive 2004/18 it appears to indicate that the discretionary grounds for exclusion of bidders may also take into account convictions of board members and the like in the Public Contracts Regulations 2015 (PCR 2015). Regulation 57 (1) of the PCR 2015 provides for the exclusion of an economic operator that has been convicted of any of the offences listed in that provision and Regulation 57 (2) allows the same for “a member of the administrative, management or supervisory body of that economic operator or has powers of representation, decision or control in the economic operator”.
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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