Procurement in a Nutshell – Court holds that tenderer can be excluded when a member of its bidding consortium loses accreditation
11th October 2017
This week's update considers the Court of Justice of the European Union (CJEU) decision of Casertana, where it ruled that Directive 2004/18/EC does not preclude national rules for automatic exclusion of a tenderer in circumstances in which a member of a bidding consortium loses accreditation.
In particular, the update clarifies the CJEU’s logic in reaching its conclusion and explains the conditions that would need to be satisfied in order for a similar course of action to be taken again.
The case concerned a tendering procedure for the award of a contract for the design, planning and execution of works for sewage and purification infrastructures. As part of the process, tenderers were required to demonstrate their technical and professional capabilities by presenting a recognised professional certificate.
One bidding consortium satisfied this requirement by relying on a third party’s certificate. However, following that third party’s certificate becoming invalid during the course of the tender process an issue arose as to whether the consortium ought to have been excluded.
After hearing the matter, the Italian Council of State referred the following question to the CJEU for a preliminary ruling:
“[Does European law] preclude national rules which exclude, or may be construed as excluding, any possibility for an economic operator, that is to say a tenderer, of appointing another undertaking to replace the undertaking originally selected… where the latter no longer has the capacity to participate or that capacity is diminished, thus resulting in the economic operator being excluded from the tendering procedure”.
In essence, the CJEU had to consider whether a tenderer could be excluded in circumstances where a member of its bidding consortium lost the required accreditation.
Firstly, the court confirmed that Directive 2004/18/EC confers on every economic operator the right to rely on the capacities of other entities when preparing to tender for a contract. The court then made the following points before reaching its decision:
Core EU principles: Central to the court’s judgment were the core EU principles of equal treatment and non-discrimination along with the obligation of transparency. These principles guarantee that during a procurement procedure, no negotiations between the Contracting Authority and a tenderer will take place and a tender cannot be amended after it has been submitted.
Substantial change: The court also drew on the Advocate General’s Opinion, who stated that if replacing a third party would amount to a substantial change of the tender or the very identity of the consortium then there are grounds for exclusion.
It was held that allowing the consortium to replace its third party would amount to a substantial change which would be contrary to the core EU principles. Equal treatment requires that all tenders are to be given equality of opportunity when formulating their bids.
If a change of the third party was allowed, it would grant a competitive advantage to the consortium, allowing it to optimise its tender to better deal with its competitors’ in the procedure, this could open the gateway to distortion of healthy and effective competition.
Full responsibility of the tenderer: The court also added that although the Directive enabled a tenderer to rely on a third party to fulfil the specified criteria, this reliance means that the tenderer as the head of the consortium takes full responsibility in ensuring that undertaking fulfils its obligations and conditions for participation in the call for tenders.
On the basis of these points, the CJEU held that there was a reasonable basis to exclude the consortium here. Further, the court held that the articles of Directive 2004/18/EC must be interpreted as not precluding national legislation which excludes the possibility for an economic operator taking part in a tendering procedure to replace an auxiliary undertaking that has lost required qualifications after the submission of its tender and which results in the automatic exclusion of that operator.
Why is this important?
The articles from Directive 2004/18/EC relevant to this case have now been repealed by Directive 2014/24/EC, which is much wider in scope and introduces substantial amendments regarding the right of an economic operator to rely on the capacities of other entities for public contracts. However despite this, the judgment does provide some clarity into the possible position of future cases with similar circumstances if they arise under the new Directive; the CJEU are likely to place heavy emphasis on preserving these core EU principles and preserving healthy and effective competition in the market.
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.