Ireland: Public Procurement - Horizon Scanner: Infrastructure, Construction, Energy, March 2024

EU

Foreign Subsidies Regulation

The Commission is conducting a first in-depth investigation in a public procurement process pursuant to its powers under the Foreign Subsidies Regulation. Under the Regulation, companies must notify their tenders in the EU when the estimated value of the contract exceeds €250 million, and when the company was granted at least €4 million in foreign financial contributions from a third country in the three years before the notification.

This investigation follows notification by a subsidiary of a Chinese state-owned train manufacturer in the context of a procurement process in Bulgaria. The Commission will assess whether the subsidy means the company can submit an unduly advantageous offer, thus causing a distortion in the internal market. The Commission may then: (i) accept commitments by the company if they remedy the distortion, (ii) prohibit the award of the contract, or (iii) issue a no-objection decision. Further information is available here.

Brexit

The Trade Specialised Committee on Public Procurement met for a third time. Minutes indicate the focus was on exchanging updates on latest developments in EU and UK and addressing UK queries about alignment of cyber security certification requirements with international procurement commitments.

IRELAND

Correspondence did not constitute a Standstill Letter

Killaree Lighting Services Limited (applicant) v Mayo County Council (respondent) and Electric Skyline Limited (notice party) [2024] IEHC 79 concerned the award of a contract for works and services for public lighting for six local authorities.

In August 2020, the respondent raised concerns that the applicant's tender included abnormally low amounts. There were several exchanges of correspondence ending in a letter to the applicant in October 2020 eliminating it from the process on the basis that its tender included abnormally low amounts. It continued that, following identification of the successful tenderer and observance of the standstill period, the name of the winner would be published in a contract award notice. On the same day, the notice party was notified it was successful. The contract was signed in late October 2020, and the contract award notice was published on 3 November 2020.

There were five main grounds of challenge. The applicant partially succeeded on the first ground and the remainder were dismissed.

1. Standstill letter: The Court agreed with the applicant that the October 2020 letter did not constitute a standstill letter, thus infringing Regulation 5(1), which prevents a contract from being awarded within the standstill period. However, the Court was not required to declare the contract ineffective under Regulation 11(2)(b)(i) because, notwithstanding its other deficiencies, the letter made plain that the applicant was out of the competition. The letter had not come out of the blue, but followed correspondence repeatedly stating concerns that abnormally low pricing had not been addressed and that the applicant could be excluded from the process. The letter made it plain that the contract would be awarded without further reference to the applicant, who gave no evidence as to why it did not pursue pre-contractual remedies.

2. The respondent improperly fettered its discretion: The applicant argued that the respondent was erroneous in thinking it had a mandatory obligation, rather than a discretion, to request an explanation once it considered that there was abnormally low pricing. Based on CJEU case law it was clear, however, that the respondent was under a legal obligation to seek an explanation from the applicant. Even if the tender documentation suggested that there was some element of discretion, that was overridden by the statutory obligation to investigate abnormally low pricing in the circumstances of this case. There was: (i) a duty to investigate what the contracting authority suspects to be an abnormally low tender; (ii) a duty to afford the tenderer an opportunity to offer an explanation; and (iii) a discretion to eliminate the tender.

3. Misinterpreting tender documentation: The Court found that a proper construction of the tender documents did not support the applicant's argument that the respondent had misinterpreted them in seeking an explanation for an alleged abnormally low tender.

4. Failure to apply the appropriate test for considering the applicant's explanations: The Court rejected the argument that the respondent failed to apply the appropriate test when considering the applicant's explanations. There had been no obligation for the respondent to wait until all tenders were submitted and to carry out a comparison between them, before excluding any individual tenderer. The respondent had come to the view that one cent rates did not cover the value of the relevant works and that the contract was not capable of being performed based on the tendered rates. This was similar to describing the tender as not genuine or serious.

5. Failure to give adequate reasons: The facts of the case, as evidenced in the correspondence, created a scenario in which any tenderer in the applicant's position, acting reasonably, would have been quite aware of the reasons for the respondent's decision. The documentation enabled the applicant to understand why the respondent reached the decision it did, and to ascertain whether it had grounds to seek to review the decision.

Interestingly, because the respondent breached Regulation 5(1), the Court was required to impose an alternative penalty under Regulation 13, namely a financial penalty of up to 10% of the value of the contract and/or termination, or shortening the duration, of the contract. However, the applicant had not sought such a relief. The Judge considered that fair procedures meant that the respondent should not face a penalty the applicant had not asked the court to impose.

Court of Appeal upholds Discovery Decision

We previously considered in a briefing CHC Ireland DAC (applicant) v the Minister for Transport (respondent) and Bristow Ireland Ltd (notice party) [2023] IEHC 457, in which Mr Justice Twomey lifted the automatic suspension halting the award of a 10-year, €800 million contract for the provision of aviation services to support the Irish Coast Guard's search and rescue work.

A subsequent High Court judgment [2023] IEHC 581 dealt with costs and, in [2023] IECA 229, the Court of Appeal upheld the High Court's decision to lift the automatic suspension.

The Court of Appeal has handed down a further judgment, [2023] IECA 335, in which it upholds the High Court's decision relating to CHC's application for discovery. The issues in dispute included whether discovery should extend to the winning tenderer's tender documents and to every aspect of the evaluation of all the criteria in the request for tenders.

The Court of Appeal noted that an appellate court will not interfere with the exercise of discretion by a judge of the High Court once that exercise is shown to be within the range of judgment calls open to the court of first instance, and that the rules of discovery are the same in procurement cases as in all other forms of litigation. It considered that the trial judge had acted well within his discretion in deciding the discovery applications. The Court of Appeal also rejected a suggestion that the leading authority, Word Perfect, had been overruled by subsequent CJEU case law. It also considered that some of the material sought could have later been sought by applying for further and better discovery, had that been required.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.