Procurement in a nutshell: Court considers abnormally low tenders

The case

In August 2012, the European Commission published a call for tenders for a contract seeking to establish a network facility for the implementation of the European Innovation Partnership Agricultural Productivity and Sustainability. The contract required a combination of main tasks and additional tasks and it had a maximum annual budget of €2.5million.

Two tenderers, Agriconsulting (the applicant) and VLM were taken to the evaluation stage, where there was a large discrepancy between the prices offered by the two tenderers, with Agrioconsulting’s bid being nearly €1million less than the estimated budget in the specification. The Commission informed the applicant that the price was abnormally low and (in line with Procurement Regulations) they asked for details on the calculations of their prices. The Commission found that the calculation of prices for the additional tasks was abnormally low and there was an overlap between tasks which did not comply with the requirements of the tender specifications. Accordingly, the applicant’s score was then reduced and no longer met the threshold required.

The Commission notified Agriconsulting that they were unsuccessful and awarded the contract to VLM.

Agriconsulting lodged an action with the General Court, but the Court dismissed it in its entirety, they then appealed to the CJEU.

The CJEU’s judgement

Agriconsulting put forward four grounds of appeal which the CJEU considered in turn

Causal link between evaluation of tender and heads of loss
The appellants criticised the General Court for finding there to be no causal link between the unlawful acts allegedly committed in connection with the evaluation of its tender and the heads of loss it relied on for action. The appellants claimed the General Court distorted and misrepresented its arguments relating to causal link and further claimed that the General Court erred in law by concluding that there could be no compensation.

The CJEU found that the General Court had not distorted Agrioconsulting’s arguments concerning the causal link between unlawful acts relied upon and the alleged loss of opportunity.

Consequently, the Court held this first ground of appeal to be unfounded.

Misrepresentation
The CJEU summed up this ground as the appellant essentially claiming that the General Court misrepresented the Commission’s letter to the appellant, informing them they were unsuccessful, as well as the final evaluation report, substituting the Court’s own reasoning and secondly that it failed to fulfil its duty to state reasons.

The Court held distortion must be obvious in the documents before them and further, by alleging distortion of evidence, Agriconsulting was seeking to obtain a fresh assessment of the facts which fell outside the scope of the jurisdiction of the Court. On this basis, this ground was dismissed as inadmissible.

Distortion and misrepresentation of application
Agriconsulting argued the General Court overlooked the evidence and they committed a number of errors of law by holding there was no infringement of the principle of equal treatment.

The CJEU held, the differential treatment of the tenders in the case is intrinsically linked to the issue of identifying abnormally low tenders. VLM did not possess the same abnormality as Agriconsulting, with their bid being substantially higher, VLM was not in the same situation as Agriconsulting.  The Commission was therefore entitled, without infringing the principle of equal treatment to verify the abnormally low nature of the applicant’s tender, without applying the same treatment to VLM’s tender.

In the absence of a definition of the notion of an ‘abnormally low tender’, the Court confirmed it falls to the Contracting Authority to determine the method used to identify such tenders provided the method is objective and non-discriminatory. In the present case, the evaluation committee identified the abnormally low nature of the tender by comparing the amount of the tender to the total maximum budget set out in the specification and the applicant’s bid was lower by nearly €1million. The Court confirmed that there is nothing to prevent an abnormally low tender being identified in this way.

The Court held this ground also to be unfounded and inadmissible.

Loss of profit as a result of rejection of tender
The CJEU found that in light of the cumulative nature of the above rejections, Agrioconsulting’s appeal could be rejected without addressing this ground.

Why is this important? 

Despite this being decided under the older version of the Procurement Regulations, the reasoning will still be applicable to the current rules.

The case clarifies that in the absence of a definition of the notion of an abnormally low tender or of rules making it possible to identify such a tender, it falls to the Contracting Authority to determine the method used to identify abnormally low tenders provided that the method is objective and non-discriminatory. Further, nothing will prevent a Contracting Authority from comparing tenders with the estimated budget in the tender specification to determine if a bid is abnormally low. This has brought much welcomed clarity and certainty to this area.

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.