The EU Public Procurement Remedies Directive requires “real, rapid and effective legal protection” in public procurement procedures. But how does that protection exist when EUR 140 billion is spent in the Netherlands every year via public procurement procedures and only a handful of objections from businesses are honoured? And is it acceptable that a court has to rule on disputes in preliminary relief proceedings within a short period of time and on the basis of an incomplete file? Objections are obviously more likely to be rejected in that case!
On 16 February 2018 already, the Dutch newspaper “Het Financieele Dagblad” published an article with the headline: “Municipalities and the business community: public procurement must improve”. The frustration of enterprises (SMEs in particular) with tenders has given rise to an Action Agenda for Better Public Procurement. This Action Agenda presents a wide range of recommendations of contracting authorities and tenderers to improve the procurement practice for businesses. A much more important consequence of all this attention and lobbying, in my opinion, was the investigation of and the proposed measures for the protection of tenderers in relation to contracting authorities in court. Because yes, things do occasionally go wrong in procurement procedures, resulting in the wrongful award of contracts. In this context, I am not talking about wrong buses or speedboats in the call for tenders, but rather wrongful awards and incorrect procedures. Legal protection for tenderers leaves much to be desired.
The problem outlined in a practical example
A municipality, for instance, issues a call for tenders for the design and construction of a new town hall. One of the requirements is that the builder must have experience with certain modular systems and must use them during the construction. You, as an expert in the modular issue in question, know that there are only three market players that are able to do this. And yet a fourth party is awarded the contract: a party of which you know that it (i) lacks that experience and (ii) claims it will work in a modular manner without being able to do so. What do you do?
In practice, parties spend time and effort pointing this out to the municipality and convincing it to more thoroughly investigate whether tenderers can do what they promise. But the municipality takes the successful tenderer’s word for it or sends it an e-mail saying: "I assume you meet the requirements, as stated in your tender?". Yes, of course!
By that time, the twenty-day period for objecting to the outcome of the tender procedure is almost over. Objecting involves contacting a lawyer who – if he or she is confident in the outcome – must then draw up a writ of summons stating all the objections, and request a hearing date for preliminary relief proceedings. At the hearing, which usually takes several hours, the claimant must convince the judge that the winning tenderer’s claims are incorrect and that the municipality has failed to properly assess the tender. You are already down 3 to 0: you have no access to the alleged winner’s tender and you have no information on the municipality’s assessment and documents in question. In addition, during the hearing you will often hear the municipality’s defence, have to respond to it within a short period of time, and convince the judge that the municipality has acted negligently. So it will come as no surprise that many companies do not even apply to the court.
But suppose you do take this step, the judge agrees with you, and you are able to turn a 3-0 deficit into a 3-4 lead. Then what? In such a case a contracting authority may submit the dispute to the court of appeal again, under the guise of “new round, new opportunities””. Literally a second chance for the municipality.
Suppose you have gone to court, but were unsuccessful. The municipality is then free to enter into the contract and implement it with the builder. That is indeed what happens in practice. And can you then appeal to a higher court in order to put a stop to this and to present the dispute to the court again? In theory, yes, but you will have achieved a Pyrrhic victory at best, because the court of appeal may not annul the contract in such a case. At best, you may institute new proceedings (on the merits) to claim damages. In those proceedings you will have to demonstrate that (1) the municipality has acted wrongfully, (2) the court wrongly ruled otherwise in the preliminary relief proceedings, and (3) you have incurred loss as a result. This is a time-consuming and expensive procedure for (at most) a relatively small reimbursement of your loss and the costs incurred. In other words, only the major cases lend themselves to this, not the average procurement procedure in which a builder submits a tender.
Solution proposed by State Secretary Mona Keijzer
The unequal legal protection of rejected tenderers on the one hand and contracting authorities on the other hand has existed since 1 April 2013, when the Public Procurement Act entered into force. Article 4.15 of the Public Procurement Act exhaustively lists the cases in which annulment is possible, for instance if the contract was wrongly not announced on TenderNed or if the contract was entered into immediately after a provisional award. The Dutch Supreme Court has confirmed the exhaustive list of grounds for annulment and noted that, outside public procurement law, annulment is possible only in the event of vitiated consent if the contract is contrary to public order or morality.
We are now in 2021, the year in which the State Secretary (finally) hears the objections. In her letter of 12 February 2021, she sets out the measures aimed at improving the legal protection for businesses.
An important proposal is the following: “I intend to do so by adding a fourth ground for annulment to Article 4.15 of the 2012 Public Procurement Act, which offers the possibility to annul a contract already entered into also in the event of gross breaches of the rules of the Public Procurement Act. That gives judges more possibilities to annul contracts on appeal, should that be necessary in an extreme case. Referring to gross breaches ensures that contracting authorities and successful tenderers do not constantly have to fear that contracts already entered into will be annulled.”
In the case of “gross” breaches of public procurement law, in “extreme” cases in which it is “necessary”, the court of appeal may annul the contract awarded. Even if there are then actually grounds for annulment, the court of appeal may nevertheless decide otherwise for reasons of public interest or, alternatively, may decide to limit the term of the contract. In other words: this sounds like a good improvement proposal on paper, but it will be of little help to businesses in practice.
So what will help businesses? As in the case of many solutions: people who take a critical view and are open to solutions. Critical tenderers that aim for dialogue, via market consultations and summaries of additional information and changes. Critical contracting authorities that, when responding to questions and objections, ask themselves what will happen if their answer begins with “yes” or “agreed”. Critical judges who do not simply accept the limited and one-sided information provided by the municipality, but who continue to ask questions about the tender, demand the submission of important documents, or dare to question assessors. Opportunities that current practice and regulations already offer, but that need to be put to use. Let’s all play our part.
This blog was also published at aanbestedingscafé.nl.
