Workshop “Review procedure: complaint and evidence”
What private companies / procuring entities must know when dealing with review procedures - practical
examples
Johannes S. Schnitzer EBRD-Consultant, WOLF THEISS
Kiev, 19 April 2012
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Agenda
Review Procedure
Alternative dispute resolution/clarifications
Interim measures
Time limits & fees
Contestable decision / preclusion
Access to procurement file
Case Study – brand new case law from Austria
Facts of the case
Procedure
Lessons learnt
Conclusion
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Review Procedure – General considerations (1)
How to avoid a review procedure ?
Filing of complaint might “escalate” situation
Complaint is legal dispute with envisaged client (CA)
“Don’t bite the hand that feeds you”
Prior alternative dispute resolution
Thorough analysis of tender documents
Vagueness, contradictions
Potential discrimination
Unrealistic specifications (time, quantity, annual turn-over, etc)
Request for clarification ! Discrimination might be honest mistake
Often assisting CA in optimizing the tender process
If CA insists on provisions file complaint
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Review Procedure – General considerations (2)
Principal purpose of the complaint is to get the contract
Damages are secondary
Interim measures (injunctions) as condition not to lose contract
Different approaches in EU regarding interim measures
Automatically as soon as complaint is filed
Automatically as long as no conflict with public interest
No automatic suspensive effect request for interim measure (e.g. in Austria)
Imminent danger of damage to the interests of the contractor
Prima facie evidence of relevant circumstances
Exact description of (necessary and adequate) measure (injunction for whole tender procedure; only certain acts/decisions)
Weighing of contractor’s interest and public interest
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Review Procedure – General considerations (3)
Time limits 7-10 days before deadline for submission of bid/request to participate
(Austria) Other countries
10 days from receipt of tender documents Short time frame available !
Preclusive effect if decisions are not contested ! (e.g. in Austria) Complaint as means to delay tender procedure ? Fees for filing a complaint
Important for effectiveness of remedy system – fees might factually hinder pursuing of legal protection
E.g. in Austria rather low but amendment is planned (up to EUR 150.000 for works and EUR 50.000 for goods & services contracts !)
In Slovakia fees are up to 1% of the contract volume (maximum EUR 600.000 !)
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Review Procedure – What can be challenged?
Usually only certain decisions of CAs are contestable (e.g. in Austria)
Publication notice
Tender documents
Non-admittance to second stage
Other determinations during deadline for bid submission/ negotiation phase
Clarifications/ adjustments/ corrections !
Award decision (selection of party for framework agreement)
Sometimes need to wait for the next contestable decision !
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Review Procedure – What if not challenged in due time ?
Preclusive effect (contestable vs non-contestable decisions)
Rationale to structure procurement procedure into different phases
Every phase ends with a contestable decision
In the event that such decision is not (successfully) challenged it is deemed effective and becomes final and absolute – any not successfully challenged defect “heals”!
A decision may be challenged only once (for instance, tender documents)
For instance, in Austria, review bodies are not entitled to challenge illegalities ex officio
Different in, for instance, Slovakia
In practice considerable debate as to whether any deficiency precludes
Suppression of preclusion in case an evaluation of the economically most advantageous tender is not possible at all? (e.g. in case award criteria are not weighted at all or not adequately specified)
If not, breach of fundamental EC principles (effectiveness of remedies) ?
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Review Procedure – power to file a complaint
Only a contractor having or having had an interest in obtaining a particular public contract and who has been or is at risk of being harmed by the alleged infringement
Only companies that could suffer damages
Power to file a complaint is denied if a request for participation/ bid is out of the question to be selected
In this case, no damages could be suffered and therefore the complaint must be rejected
In practice considerable debate on this (very strict) approach
Almost impossible to submit „perfect“ bids being in absolute compliance with the requirements
Even minor mistakes result in a denial of legal protection (mandatory rejection of such complaint)
Especially problematic regarding mandatory revocation of tender
Austrian case law that (also) no power to file a complaint in case CA is obliged to cancel the tender procedure
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Review Procedure – Gathering information (1)
Access to the procurement file Access to the records is essential for the verification of
Compliance of submitted requests for participation/ bids of competitors with tender documents/specifications
Application by contracting authority of a non-discriminatory approach when examining the different requests for participation/ bids
Prohibition of access (to certain records) is principally justified by the protection of trade and business secrets (proportionality!)
ECJ case C-450/06 Varec Applicant in a review procedure is entitled to inspect and comment on
the evidence and observations submitted to the reviewing body Restriction of the applicant's access only insofar as necessary to
protect the business secrets of the applicant's competitors General denial of access violates the principle of fair competition
Justification only in “narrow” cases
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Review Procedure – Gathering information (2)
Access to the tender records ECJ case C-450/06 Varec
The review body responsible must be able to decide whether the information in the file should not be communicated to the parties or their lawyers
Only if it is required by community law in order to ensure the protection of fair competition or the legitimate interests of economic operators
“Cautions approach” in Austria Immanent risk of disclosure of business secrets Blacking out or covering of certain parts of documents to be protected
(proportionality) Global denial of access to a file should not be accepted Insisting on being provided with comprehensive reasons as to why
particular parts of the file are confidential
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Case study – review procedure in Austria
Facts of the case Tender procedure
CA: Austrian social security body
Tender procedure for the selection of a party to a framework agreement (FWA)
Subject: supply of tick vaccination (including distribution)
Review procedure Applicant: pharmaceutical company X which submitted bid
Bid X comes in 2nd place (lowest bid by company Z is 40% cheaper); one additional bidder
X challenges decision to select Z as party for the FWA
Abnormally low bid + CA did not seek explanation
Anti-competitive agreement and illegal multiple participation (Z and its supplier submitted bids)
Mandatory exclusion of Z
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Case study – review procedure in Austria
Facts of the case (2) X also files for interim measures
CA: argues public interest due to threat to life and limb for CA’s beneficiaries because of imminent danger hinders injunction
Complex procedure for injunction; several written pleadings
Finally interim measure is granted CA is prohibited to conclude contract until review body decides
Proceedings before review authority CA failed to seek explanation on low bid
Decision to select Z as party to FWA is annulled !
CA re-evaluates bids Selects Z again !
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Case study – review procedure in Austria
Facts of the case (3) Should X challenge the CA’s decision again on (remaining)
grounds ?? Abnormally low price
Anti-competitive agreement and illegal multiple participation
In the meanwhile… CA buys vaccine from Z without commencing tender procedure
X challenges purchase for illegal (1) direct award and (2) negotiated procedure w/ 1 contractor without notice (+injunction)
X alternatively request for declaration of illegality by review authority
CA, suddenly, argues that its purchase is covered by old 2011 FWA
“Like a rabbit out of a hat"
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Case study – review procedure in Austria
Review authority
Does not grant interim measures
Not competent because FWA has already been concluded – declaration of nullity is not possible any more
Only request for declaration of illegality is admissible
Oral hearing – decision of 11 April 2012
Declaration of illegality
Annulment of contracts ex nunc (impossible to undo vaccination, otherwise ex tunc annulment)
Old FWA did not cover purchase (value) and distribution
Illegal direct award
Review authority imposes highest fine ever in Austria on CA (EUR 90.000)
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Case study – review procedure in Austria
Lessons learnt X did not win tender/ was not awarded the contract
always successful party before review authority ! Client does not profit from imposed fine High legal expanses because of 2 complex review
procedures including procedures for interim measures No reimbursement of costs
Damages for first review procedure ? FWA does not oblige CA to purchase at all
Frustrating for client Likely that fine will prevent (other) CAs from similar actions
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Conclusion
In principal, the Austrian remedy system is evolved but there still are some unresolved issues
Power to file a complaint
Company might lose for purely formalistic reasons
There is no perfect bid !
Appealing the decision of the review authority is not practicable
Win the bid protest or leave it !
De-facto very unlikely to get damages
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Contact
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Johannes S. Schnitzer, Dr. iur, LL.M.Tel: + 43 / 1 / 51510 – 2350
Fax: +43 / 1 / 51510 – 665355
E-Mail: [email protected]
WOLF THEISS Attorneys-at-LawSchubertring 61010 ViennaAustria