Procurement in a Nutshell – Is it obligatory for bidders to remain as the same legal entity between pre-selection and submission of tenders?

The facts

Three companies: (1) Telecom Italian SpA (Telecom), (2) Metroweb Sviluppo SpA (Metroweb), and (3) Enel Open Fiber (Enel) were selected to take part in a tender process for the construction and management of a public broadband network in Italy.

However, in the period between pre-qualification and submission of tenders Metroweb and Enel in effect merged meaning that they were no longer separate legal entities. Consequently, Metroweb withdrew its application and did not participate in the second round of bidding.

Following the release of the tender results, which placed Enel first for all five lots and Telecom as runner-up for all but one lot, Telecom sought to contest the outcome by bringing the matter before the Italian Courts. After hearing this, the Italian Council of State referred the following question for a preliminary ruling:

Must the words, as set out by Article 28 of the Directive (and Regulation 28 of the Public Contracts Regulations 2015) i.e. “Only those economic operators invited to do so by the Contract Authority following its assessment of the information provided may submit a tender” be interpreted as precluding the conclusion of an agreement which:

• Has as its purpose and effect the completion of a merger by the absorption of one of those pre-qualified undertakings; where
• The effects of the merger were fully realised after the submission of a tender by the absorbing undertaking; and
• The absorbed undertaking subsequently states that it is no longer taking part in the procurement process?

The judgment

In holding that the submission of a bid by a pre-selected tenderer which is in the process of merging with another tender is permitted by procurement law, the CJEU noted that the principle of equality requires that all tenderers must be afforded equality of opportunity when formulating their tenders.

Furthermore, the CJEU also emphasised the importance of meaningful competition between tenderers explaining that it was not contrary to the interests of the Contracting Authority for a tenderer to strengthen their offering following the pre-selection stage.

Why is this important?

Despite the facts of this case being somewhat uncommon, Contracting Authorities and tenderers alike should be sure to bear in mind the CJEU’s clear ruling that the submission of an offer by a pre-selected tenderer who is in the process of merging with another pre-selected tenderer is compatible with procurement law.

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 0330 137 3451.