Unfortunately, this is not the news that clients include so-called discriminatory conditions into their tender documentation. It was used to "secure the victory" in a tender for a participant "friendly" to the client during the validity term of already ineffective Law of Ukraine "On Public Procurement".
The scheme worked as follows: conditions of tender documentation "were tailored for a specific company" so that these could be fulfilled only by the participants being "friendly" to the client. In most cases, such "specific" conditions were not able to affect the quality of the goods procured or the quality of the works performed/services provided. For example, tender documents on procurement of legal services in respect of representation of company interests in litigation could have had a condition requiring that an applicant company had at least 3‑ employees with "Ph.D. in Law" degree. Such simple manipulations allowed to "get rid of" unwanted participants and to secure victory in the tender for the "right" company.
Many specialists hoped for drastic changes in the public procurement system as a result of entry into force of the Law of Ukraine "On Public Procurement" in 2016. In particular, the new law was intended to ensure transparency and fair competition of tender participants. Assessment of changes that took place after the law entered into force demonstrates that the above expectations were partially met. Also, we can see positive trends that relate to ensuring of equal conditions to tender participants. Compared to previous periods, the number of those willing to "circumvent" the rules has decreased, but many clients still has been trying to "influence" tender results by including discriminatory conditions, "tailored" for a particular participant, into the tender documentation.
At the same time, considering recent experience, such violations can and must be challenged. Effective legislation envisages several possible options to respond to certain actions of the client. To begin with, one can appeal to the client and request to eliminate violations committed in terms of procurement procedure. If such a request fails, one can apply to the Antimonopoly Committee of Ukraine and thereafter to the court in order to protect one's rights.
A participant willing to "complain" against the discriminatory conditions of the tender documentation shall be prepared for the financial expenditures that arise from the appeal. While the appeal to the client is free of charge, consideration of a claim by the Antimonopoly Committee of Ukraine and the court is the subject to certain fees. In particular, the fee for consideration of a claim by the AMCU amounts to UAH 5K in case of procurement of goods or services and UAH 15K – in case of the procurement of works. Thus, before filing a claim to AMCU or to a court to challenge "discriminatory nature" of a respective tender condition, one should assess the chances of a claim success.
In the first place, it is necessary to understand the nature of the principle of non-discrimination and what conditions can be considered discriminatory. The European Court of Human Rights defines discrimination as a difference in treatment of persons being in a similar or same situation. Respective findings of the Court can be found in the decision in case No. 42184/05 "Carson and Others v. the United Kingdom" dated 16/03/2010 and the decision in case No. 13378/05 "Burden v. the United Kingdom" dated 29/04/2008.
The principle of non-discrimination of participants is enshrined in Art. 3 of the Law of Ukraine "On Public Procurement" (hereinafter – the Law). Art. 5 of the Law expressly states that the clients shall ensure free access to the information on procurement to all participants as required by this Law and may not establish discriminatory requirements. Art. 22 of the Law prohibits tender requirements that limit competition and lead to discrimination of participants.
Given that the Law of Ukraine "On Public Procurement" does not provide for a list of conditions that may be viewed as discriminatory, one should be guided by the established practice of the Antimonopoly Committee of Ukraine and the judicial practice in order to assess the chances of a claim success.
Having analyzed decisions of the Permanent Administrative Board of the Antimonopoly Committee of Ukraine in respect of consideration of claims related to violations of public procurement law, we may state that "specific" requirements related to a procurement item, which can be fulfilled only by one participant/limited circle of participants, and provided they do not affect the quality of goods/works/services (their insufficient justification or even inexpediency), shall be deemed as discriminatory.
Following decisions of AMCU Board can be referred to as an example:
- Decision No. 10119 dated 02/10/2018 which upheld the claim filed by a participant to the procurement of wire products (welding electrodes); in this case here AMCU concluded that the client set unjustified specific technical parameters related to the procurement item. AMCU substantiated its decision by the fact that the client set very specific requirements in respect of the procurement item (operating temperature, special features of the product structure) in the tender documentation, which could not be met by an average manufacturer cumulatively. At the same time, ESAB AB (Sweden) was the only manufacturer globally which could meet these conditions. Therefore, AMCU concluded that the specified conditions violated the principle of non-discrimination in the meaning of public procurement law. AMCU made similar conclusions regarding unjustified specific requirements in its decision No. 4377‑r/pk‑pz dated 04/07/2017.
- The decision dated 17/09/2018 supported a claim filed by a participant to the procurement of lubricants; here the AMCU concluded that the client established unjustified condition related to obtaining of mandatory approval for quality confirmation documents specifically from the state enterprise – Kharkiv Engine Building Design Bureau. AMCU stated that the foregoing requirement was discriminatory, since the client did not prove the necessity of obtaining the approval from the specified company.
- The decision No. 1758‑r/pk‑pz dated 04/04/2017, whereby the authority upheld a claim brought by a participant to the procurement of asphalt concrete mix; here the AMCU concluded that the client included an unjustified requirement, according to which location of a plant/loading station of a participant should have been located in Kyiv City or in the suburban area up to 10 km from Kyiv City boundaries". AMCU found such requirement to be discriminatory, since the client did not prove the necessity to locate the plant/station of a participant within the specified area.
- The decision No. 9891‑r/pk‑pz dated 25/09/2018 which upheld claim submitted by a participant to the procurement of solid fuel based on the fact that the client set the unjustified requirement which obliged a participant to have available in stock at least 50% of the coal rank, which was the subject to the procurement. AMCU found respective requirement to be discriminatory in relation to the tender participants, including the claimant.
Judicial practice in this category of cases shows that courts apply the approach similar to the one used by AMCU, when resolving the cases related to discriminatory nature of conditions in the tender documentation. It should be noted separately that in terms of the court proceeding participants provide their arguments to support their appeal against AMCU decision made under participant's claim against the tender results.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.