It is not surprising that the composition of a tenderer, participating in a tender procedure as a combination, can change in the course of the procedure, or at least that a need to change could arise for a tenderer. This certainly applies to complex, lengthy tender procedures in which there could even be a couple of years between the selection decision and the final award of the contract. A lot could happen in that time: members of the combination could file for bankruptcy or could be taken over by a third company, a dispute could arise, the composition of the combination could be optimised given the specific contract, etc.
In two recent judgments, one from the Court of Justice, one from the Council of State, more clarity has been created in relation to the possibility of replacing a member of a tendering combination. In both decisions, the need for effective and healthy competition has prevailed.
Court of Justice
In the facts preceding the Court's Højgaard judgment of 24 May 2015 (C-396/14), a candidate – "Per Aarsleff/Pihl og Søn" was tendering as a combination for a contract for the Danish railway infrastructure operator. One of the two companies constituting that combination, Pihl og Søn, was declared bankrupt after the submission of the first offer, but before the award of the contract. The remaining company, Per Aarsleff, continued the tender alone and was eventually awarded the contract.
The Danish referring court sought to ascertain whether the principle of equal treatment of economic operators stated in Article 10 of Directive 2004/17, read together with Article 51 of that directive, must be interpreted as precluding a contracting entity from allowing an economic operator – which was a member of a group of two undertakings which was pre-selected and which submitted the first tender in a negotiated procedure for the award of a public contract – to continue to take part in that procedure in its own name, after the dissolution of that group.
The Court ruled that Directive 2004/17 does not enact any rules relating to alterations made to the composition of a pre-selected combination. This leaves the issue to the Member States. Neither the Danish legislation nor the contract notice contained any specific rules on this subject, so the question had to be examined with regard to the general principles of EU law, in particular the principle of equal treatment and the duty of transparency that follows from it, and the objectives of EU law in relation to public procurement.
According to the Court, in principle only economic operators who have been pre-selected can in that capacity submit tenders and be awarded contracts. The Court based this approach on Article 51(3) of Directive 2004/17, which states that the contracting entities are to "verify that the tenders submitted by the selected tenderers comply with the rules and requirements applicable to tenders". This presupposes that the pre-selected economic operators and those who submit tenders are legally and substantively the same.
However, according to the Court, this principle could be "qualified" in order "to ensure, in a negotiated procedure, adequate competition", as required by Article 54(3) of Directive 2004/17. The Court concluded that an economic operator could continue to participate in the tender procedure – provided, first, that the continuation does not mean that the other tenderers are placed at a competitive disadvantage and, secondly, that that economic operator by itself meets the requirements laid down by the contracting entity. The second condition is fairly straightforward.
The first condition, however, is rather vague and could lead to discussion. According to Advocate General Mengozzi, who gave his opinion on 25 November 2015, there could be a competitive advantage for the "new tenderer" when he was allowed to participate in the tender at a later stage than the competing tenderers, giving him more information than the competing tenderers at the moment they decided to participate in the tender procedure. In the case at hand, the Advocate General referred to the fact that the remaining economic operator continuing the tender knew that his offer (or at least the offer of the combination of which he was part) was ranked first and how many tenderers were participating. However, the Court left it to the referring court to decide whether the alteration led to a competitive advantage. It will be interesting to see how this condition will be applied in practice.
Council of State
In the facts that led to the Council of State's decision of 15 September 2015 (no. 235.776), a tender was required to be composed of a real estate developer on the one hand, and a casino operator on the other hand. After having already submitted two offers, and only shortly before the final submission deadline for its BAFO, the developer notified the contracting entity that it would not be submitting a BAFO. Confronted with this refusal, the casino operator that was part of the pre-selected tenderer had to rely on a company affiliated with one of its subcontractors for the tender to act as developer.
Before the Council of State, the question arose whether the consent of the contracting authority to the replacement of the withdrawing developer by the new developer was valid. The Council referred explicitly to the aforementioned Højgaard decision of the Court of Justice in the light of the contracting entity's wish to have effective competition in the context of a negotiated procedure with only two bidders and its wish to avoid competitive restrictions by refusing to accept the alteration. Further, the Council established that the tender specifications allowed such an alteration under strict conditions and that those conditions had been strictly verified by the contracting authority; that the substance of the pre-selected candidate remained unchanged; and that pre-selection references of the replaced developer were not crucial. In those circumstances, the Council found that the possibility to alter a pre-selected tender was not unlimited.
Both decisions confirm that alterations in the composition of a pre-selected tenderer during the tender procedure are not prohibited in se. Advocate General Mengozzi stressed the importance of the specific circumstances in the Højgaard case to justify a derogation from the principle that a pre-selected tenderer cannot be altered. The Council of State similarly emphasised the importance of the factual circumstances for confirming the validity of such an alteration in a combination. Caution is still necessary!