The CJEU's maximalism and minimalism in the treatment of experience as a procurement award criterion (C-601/13)

In Ambisig, C-601/13, EU:C:2015:204, the Court of Justice of the EU (CJEU) has been confronted again with the issue of the use of the experience and qualifications (ie academic and professional background) of the staff assigned to performance of the contract as an award criterion under EU public procurement rules (ie the Lianakis distinction of selection and award criteria). The Ambisig Judgment still applies the rules of Directive 2004/18, but the reasoning and principles will remain relevant for the interpretation of Directive 2014/24.

At first reading, and depending on one's view of the strictness of Lianakis, it may seem that Ambisig is fundamentally a repetition of the discussion on the assessment of staff's experience as an award criterion that was recently rehearsed in Spain v Commission (financial support for cuenca hidrográfica del Júcar), C-641/13, EU:C:2014:2264 (not available in English, see my comments here).

However, some close reading may lead to a different (or at least more nuanced) conclusion, given the tone that the CJEU has used in two such close cases. It may be worth reminding that the rhetoric used in Spain v Commission presented Lianakis as follows:

... as is apparent from paragraphs 30-32 of the judgment Lianakis and others (EU:C:2008:40) ... the Court has clearly distinguished award criteria from the selection criteria that are essentially linked to the assessment of the bidders' ability to perform the contract in question, and considered that the criteria relating to the experience, qualifications and means of ensuring proper performance of the contract in question belong to the latter category and, therefore, do not have the character of award criteria (C-641/13, para 36, own translation, emphasis added).

We could call this the maximalist reading/reporting of Lianakis. However, as we shall see below, this is not the position adopted in Ambisig, where the referring Portuguese court was concerned with two aspects that in its view seemed to make it difficult to apply such a maximalist reading of Lianakis: (1) that the contract was for intellectual services (ie training and consulting); and (2) that the 2011 proposal for a new Directive (now Dir 2014/24) "constitute[d] a new factor in relation to the case-law of the Court in this area".

In that regard, it is interesting to see how the CJEU has now adopted a minimalist approach to Lianakis that basically comes to read into the rules of Dir 2004/18 the content of the new rules under art 67(2)(b) Dir 2014/24. In the words of the CJEU in Ambisig

25 ... the case-law highlighted in the judgment in Lianakis and Others (C‑532/06, EU:C:2008:40) concerns the interpretation of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts (OJ 1992 L 209, p. 1), which was repealed by Directive 2004/18, and that that judgment does not rule out the possibility that the contracting authority may, in certain circumstances, fix and apply a criterion [enabling evaluation of the teams specifically put forward by the tenderers for the performance of the contract and which takes into consideration the composition of the team and the experience and academic and professional background of the team members] at the stage of awarding the contract.

26 That judgment concerns the staff and experience of the tenderers in general and not, as in present case, the staff and experience of the persons making up a particular team which must actually perform the contract.

27 It should be noted, in relation to the interpretation of Article 53(1)(a) of Directive 2004/18 which is the subject of the referring court’s question, that that directive introduced new elements into the Union legislation on public procurement in relation to Directive 92/50.

28 First of all, Article 53(1)(a) of Directive 2004/18 provides that ‘the tender most economically advantageous’ is to be identified ‘from the point of view of the contracting authority’, thereby giving the contracting authority greater discretion in its decision-making.

29 Secondly, the third paragraph of recital 46 in the preamble to Directive 2004/18 states that, where the contracting authorities choose to award a contract to the most economically advantageous tender, they are to assess the tenders in order to determine which one ‘offers the best value for money’, which tends to reinforce the importance of quality in the award criteria for public contracts.

30 Furthermore, Article 53(1) of Directive 2004/18 does not set out an exhaustive list of the criteria which may be used by the contracting authorities in determining the economically most advantageous tender, and therefore leaves it open to the authorities awarding contracts to select the criteria on which they propose to base their award of the contract. Their choice is nevertheless limited to criteria aimed at identifying the tender which is economically the most advantageous (see, to that effect, Lianakis and Others, C‑532/06, EU:C:2008:40, paragraphs 28 and 29 and the case-law cited). To that end, Article 53(1)(a) of Directive 2004/18 specifically requires that the award criteria be linked to the subject-matter of the contract (see judgment in Commission v Netherlands, C‑368/10, EU:C:2012:284, paragraph 86).

31 The quality of performance of a public contract may depend decisively on the ‘professional merit’ of the people entrusted with its performance, which is made up of their professional experience and background.

32 This is particularly true where the performance of the contract is intellectual in nature and, as in the main proceedings in the present case, concerns training and consultancy services.

33 Where a contract of this nature is to be performed by a team, it is the abilities and experience of its members which are decisive for the evaluation of the professional quality of the team. That quality may be an intrinsic characteristic of the tender and linked to the subject-matter of the contract for the purposes of Article 53(1)(a) of Directive 2004/18.

34 Consequently, that quality may be included as an award criterion in the contract notice or in the relevant tendering specifications (C-601/13, paras 25 to 34, emphasis added).

This is an interesting exercise of judicial rhetoric, which shows the CJEU's willingness to ensure certain cross-temporal validity of its case law in the area of public procurement, where change is a constant. This is not a bad thing in itself. However, it may be puzzling for observers (it definitely is for me) because I am not sure that many would have expected the CJEU to engage in such an explicit change of hats in the space of about 5 months in the way it reports its own previous case law, particularly in such a controversial and debated area [for very insightful discussion on this type of implications of Lianakis, see S Treumer, "The Distinction between Selection and Award Criteria in EC Public Procurement Law—A Rule without Exception" (2009) 18(3) Public Procurement Law Review 103-111]. 

In the end, it is worth reminding that one of the justifications for the revision/repeal of Dir 2004/18 by Dir 2014/24 was to address the "Lianakis issue" [see S Arrowsmith, "Modernising the European Union's public procurement regime: a blueprint for real simplicity and flexibility" (2012) 21(3) Public Procurement Law Review 71, 80; and rec (94) dir 2014/24]. To some extent, then, the Ambisig Judgment renders a significant (if relatively hidden) justification for the 2014 generation of EU public procurement rules useless.

This may have implications for the future, where the lack of clarity of the CJEU's case law in certain new/revamped areas of public procurement (let's just mention life-cycle costing or asymmetrical negotiations, for now) may trigger calles for further legislative reform--which should, in my view, be avoided to the extent that they rest on maximalistic interpretations of the CJEU's usually sparse and confusing passages, as we now know that it only (?) takes some adequate prompting for the CJEU to provide minimalistic twists that exclude the need for reforms.

CJEU keeps Lianakis interpretation relevant under Directive 2014/24 (C-641/13)

In its Judgment in Spain v Commission (financial support for cuenca hidrográfica del Júcar), C-641/13, EU:C:2014:2264 (not available in English), the Court of Justice of the EU has reiterated in very clear terms the currency of its Lianakis case law [C-532/06, EU:C:2008:40]. Indeed, in Spain v Commission (paras 33-41), the CJEU has clearly stressed that Lianakis (paras 30-32) and Commission v Greece [C-199/07, EU:C:2009:693, paras 55-56] prevent the past experience of the tenderer being used as an award criterion. Given the brevity and clarity of the reasoning of the CJEU, few doubts can remain as to the rather absolute character of the prohibition.

 

This should come as no suprise, as this was the majoritarian interpretation of the Lianakis Judgment [for a possibilistic interpretation seeking flexibility, though, see S Treumer, ‘The Distinction between Selection and Award Criteria in EC Public Procurement Law—A Rule without Exception’ (2009) 18 Public Procurement Law Review 103, and A Sanchez Graells, Public procurement and the EU competition rules (Oxford, Hart Publishing, 2011) 310-12]. Moreover, this was precisely one of the points in which the 2011 proposals for new EU public procurement Directives aimed to deviate (or fine-tune) the case law of the CJEU [for discussion, see M Orthmann, 'The experience of the Bidder as Award Criterion in EU Public Procurement Law' (2014) 1 Humboldt Forum Recht 1 ff].

 

With this in mind, it is worth stressing that Directive 2014/24 now (well, as soon as the Member States transpose it, which they must do by 18 April 2016) deviates from the standard reading of the Lianakis case law. Directive 2014/24 decouples the treatment of the general experience of the tenderer as a qualitative selection criterion [art 58(4), where Lianakis applies full-force] from the assessment of more limited and specific aspects of experience evaluation clearly linked to the subject-matter of the contract, which allow for the specific experience of staff assigned to performing the contract to be taken into consideration at award stage, 'where the quality of the staff assigned can have a significant impact on the level of performance of the contract' [art 67(2)(b), which restricts, specifies of modifies Lianakis].

 

The justification given by Directive 2014/24 for this change is that

Wherever the quality of the staff employed is relevant to the level of performance of the contract, contracting authorities should also be allowed to use as an award criterion the organisation, qualification and experience of the staff assigned to performing the contract in question, as this can affect the quality of contract performance and, as a result, the economic value of the tender. This might be the case, for example, in contracts for intellectual services such as consultancy or architectural services. Contracting authorities which make use of this possibility should ensure, by appropriate contractual means, that the staff assigned to contract performance effectively fulfil the specified quality standards and that such staff can only be replaced with the consent of the contracting authority which verifies that the replacement staff affords an equivalent level of quality [rec (94), emphasis added].

In my view, all of this indicates that the use of staff (specific) experience at award stage will need to be assessed under strict proportionality terms (particularly as the 'significance' of its impact on the level of performance of the contract is concerned), given that exceptions[art 67(2)(b)] to the general rules [art 58(4)] of Directive 2014/24 and the applicable interpretative case law need to be constructed strictly. Moreover, recourse to this sort of award criterion will still need to comply with general requirements and, in my view, avoid distortions of competition such as first comer advantages for incumbent contractors.

Cheaters beware: GC enforces strict #suspension rules in EU #publicprocurement (T-87/11)

In its Judgment of 10 April 2013 in case T-87/11 GRP Security v Court of Auditors, the General Court of the EU (GC) has analysed some interesting features of the sanctions that EU institutions can apply to non-performing public contractors in order to prevent their participation in new public tenders for a given period of time (ie temporary exclusion, or suspension).

In the case at hand, GRP Security had been awarded a contract for the security of the premises of the Court of Auditors on the basis of falsified professional documentation--more specifically, the CV and professional qualifications of the security team leader called to oversee the proper working of the security activities. Upon discovery of such falsity, the Court of Auditors unilaterally decided to terminate the services contract and informed GRP Secutirty that it planned to claim damages and to enforce the available financial and administrative penalties. The company retorted that they were not aware of the illegal behaviour of their employee, whom they fired and sued for damages. 

The Court of Auditors' decision was unchanged, and the contract was terminated, together with a claim for €16,000 for moral and economic damages (which were deduced from the payments corresponding to the outstanding invoices for the services rendered before termination). Moreover, on the basis of article 96.2.a)  of the Financial Regulation applicable to the general budget of the European Communities, GRP Security was thus provisionally excluded from contracts and grants financed by the budget of the Union for a period of three months--which should be revised and could lead to an extension of the exclusion if the applicant did not provide evidence that it had taken appropriate internal corrective action to prevent similar events from happening again. It is worth stressing that the maximum period of exclusion is 10 years, and that the payment of financial penalties by the contractor can reach the full value of the contract in question [art 96.2.b)]--so it is clear that the sanctions imposed by the Court of Auditors were well below the maximum thresholds set in the Financial Regulation.

Within the set period of three months, GRP Security submitted a remedial plan to the satisfaction of the Court of Auditors and, consequently, no extension of the initial suspension was imposed. Afterwards, GRP Security initiated legal proceedings to challenge the unilateral termination of the contract by the Court of Auditors and announcing that it reserved the right to seek financial compensation (not least, for its temporary exclusion from EU procurement tendering).

One of the interesting points of law in the dispute is whether the EU Financial Regulation actually allows for a sanction of reviewable temporary exclusion or not. Article 96.2.a) of the Financial Regulation, coupled with article 134 ter of its Implementing Regulation, determine that

Without prejudice to the application of penalties laid down in the contract, candidates or tenderers and contractors who have made false declarations, have made substantial errors or committed irregularities or fraud, or have been found in serious breach of their contractual obligations may be excluded from all contracts and grants financed by the Community budget for a maximum of five years from the date on which the infringement is established as confirmed following an adversarial procedure with the contractor.

That period may be extended to 10 years in the event of a repeated offence within five years of the date referred to in the first subparagraph (emphasis added).

According to GRP Security, the system only foresees one-off exclusion decisions, but it does not allow for a set of rolling decisions dependent upon the adoption of remedial action on the part of the suspended contractor. The GC avoided answering this important point of law by relying on the specific circumstance that the Court of Auditors did not extend GRP Security's exclusion at the end of the initial 3-month period (paras. 67-71 of the T-87/11 Judgment). Therefore, legal uncertainty seems to remain concerning this possible reviewable or on-going application of the suspension regime.

In my view, however, such temporary suspension coupled with a compliance check fits within the system of  the Financial Regulation and its Implementing Regulation, and would be to the advantage of contractors--since, in the absence of such possibility to review, contracting authorities could clearly be tempted to impose longer exclusion periods from the beginning. Moreover, companies should be the first interested in implementing remedial action and, consequently, gaining some immediate benefits from that investment. Also, this would be in line with the current trend of recognition of the value of 'self-cleaning' efforts, such as in article 55 of the December 2011 proposal for a reviewed EU Directive.

GRP Systems also appealed the 3-month temporary suspension decision on the basis of an alleged lack of proportionality, which the GC easily dismissed, considering that

the applicant has seriously failed to meet its contractual obligations. In addition, it should be recalled that the Court of Auditors, which is one of the institutions of the Union, is dedicated to examining the legality and regularity of revenue and expenditure of the Union and any organ or body created by the EU and to ensure their sound financial management (Article 287, second subparagraph, TFEU). Particularly in view of these missions and the severity of the deficiencies attributable to the applicant, it should be considered that the latter, by his conduct undermined the image of the Court of Auditors and the European Union (T-87/11, para 81, own translation from French).

This part of the Judgment may be criticised on the basis that it seems to allow for an analysis of the gravity of the offence and the ensuing sanction on the basis of factors that are external to the offender (would the same actions be less reproachable had they been committed against an institution not entrusted with a financial audit or oversight mission?). However, it seems clear that the GC is prepared to uphold the highest standards of professional conduct in the field of EU public procurement and this more general message must be most welcome.

In general, this case highlights the need for some additional clarity and development of the system of suspension and debarment of non-performing contractors in EU public procurement which, in my view, should not only be created for EU's institutional procurement, but extended to the general rules applicable in the Member States.