ICEL PROCUREMENT
CONFERENCE
Kevin Kelly McCann FitzGerald
Blackhall Place, Dublin 7
7 February 2013
Introduction
• Recurring issue in current climate
• Bidders may tender a lower than expected price
to win the contract
• Risk of non-performance
• Prospect of claims being made to make up the
difference
Procurement Regulations
• Regulation 69 of SI 329 /2006
• If a tender appears abnormally low, Contracting
Authority shall, by notice in writing and before
rejecting the tender, request the Tenderer to
provide written details of the constituent
elements of the tender which it considers
relevant
Procurement Regulations
• Details of constituent elements of tender may relate to (but
are not limited to) any of the following:-
economics of the construction method, manufacturing
process or means to be used in supplying the service
-
technical solutions chosen or any exceptionally
favourable conditions available to the bidder
-
the originality of the work to be carried out, product or
service to be supplied
-
are provisions for employment protection and working
conditions being complied with?
-
is there a possibility that the Tenderer may receive State
aid?
Procurement Regulations
• Contracting Authority shall as far as practicable verify the
constituent elements
-
by consulting the Tenderer;
-
by taking account of the evidence that the Tenderer
provides about those elements
• Regulation 69(3): a Contracting Authority can reject a
tender on being satisfied that the only reason for the
tender being abnormally low is that the Tenderer has
received State aid but only after
-
the Contracting Authority has consulted the Tenderer
about the matter and
-
the Tenderer has failed by a specified deadline to satisfy
it that the aid was granted lawfully
Procurement Regulations
• Where the Contracting Authority rejects the
tender where it is satisfied that the only reason
for the tender being abnormally low is State aid,
then it must inform the European Commission in
writing of the rejection and the reason for it
What is an Abnormally Low Tender?
• Not defined in the Directive, Regulations or cases
• Some member states prescribe mathematical
formulae for determining whether a bid is
abnormally low e.g a percentage deviation from
the average price tendered
Are automatic formulae permissible?
• Impresa Lombardini Spa, T – 285/99
• National legislation prescribing a mathematical
formula for identifying an abnormally low
tender was permissible
• But legislation could not provide for automatic
exclusion without first allowing the bidder to
justify its price
Are automatic formulae permissible?
• Secap Spa, T – 147/06
• If a contract has cross border interest, national legislation
can only allow for automatic exclusion on the basis of
mathematical formulae provided the bidder is allowed to
justify its price.
• Automatic exclusion could be permissible if “justified by
the unduly large number of tenders, a fact which might
oblige the contracting authority concerned to examine on
an inter partes basis such a high number of bids that it
would exceed the administrative capacity of those
authorities or might, due to the delay which such an
examination would entail, jeopardise the implementation
of the project”
What is an Abnormally Low Tender?
• Proposal for a Directive of the European Parliament and
Council on Public Procurement (20 December 2011)
 Recital 42
 Tenders that appear abnormally low … might be based on
technically, economically or legally unsound assumptions
or practices.
 In order to prevent possible disadvantages during contract
performance, Contracting Authorities should be obliged to
ask for an explanation of the price charged where a tender
significantly undercuts the prices demanded by other
tenderers
What is an Abnormally Low Tender?
 Recital 42 (cont’d)
 Where the tenderer cannot provide a sufficient
explanation, the Contracting Authority should be
entitled to reject the tender
 Rejection should be mandatory in cases where
the Contracting Authority has established that
the abnormally low price charged results from
non-compliance with mandatory Union
legislation in the fields of social, labour or
environmental law or international labour law
provisions
What is an Abnormally Low Tender?
• Proposal for a New Directive Article 69 (cont’d)
• Contracting Authorities must reject the tender
where the reason the bid is abnormally low is
because of non compliance with EU legislation in
the areas of social, labour, environmental law.
• Where the Contracting Authority establishes that
a tender is abnormally low because the tenderer
has obtained State aid, the tender may be
rejected on that ground alone, only after
consultation with the bidders
Duty of Contracting Authorities?
• Renco SpA v Council Case T-4/01
• Article 30(4) of Directive 93/37 required the Council
•
to identify suspect tenders
•
to allow the undertakings concerned to demonstrate
their genuineness by asking them to provide the details
which it considers appropriate
•
to assess the merits of the explanations provided
•
to make a decision as to whether to admit or reject
those tenders
UK cases – Duty to investigate?
• Morrison Facilities Services v Norwich City Council (2010)
• Injunction granted
• “[I]t does seem to me to be seriously arguable that a
contracting authority does come under a duty, when it
suspects that there has been an abnormally low tender, to
investigate that tender. Moreover, it seems to me to be
well arguable that that is the duty that is owed not merely
to the low tenderer but to the competing tenderers having
regard to the general objectives of the Directive….”
• Only an interlocutory application and not a definitive
decision (case settled out of Court)
UK cases – Duty to investigate?
Varney –v- Hertfordshire County Council (2010)
• “[T]he Council was not under a duty generally to
investigate so-called “suspect” tenders in circumstances
where the Council had no intention of rejecting those
tenders”
• Facts did not support the proposition that the Contracting
Authority had made a manifest error in
•
not deciding that the tender was abnormally low;
•
and not investigating
Recent EU decision – duty to investigate?
• SAG ELV Slovensko 29 March 2012 Case C –
599/10
• Article 55 of Directive 2004/18 must be
interpretated as requiring the inclusion in
national legislation of a provision that if a
Tenderer offers an abnormally low price, the
Contracting Authority must ask it in writing to
clarify its price proposal
• Article 55 of Directive 2004 /18 precludes a
contracting authority from taking the view that it
is not required to ask a Tenderer to clarify an
abnormally low price
GCCC Capital Works Management
Framework

Section 8.3

“If, in the Employers opinion, the tendered Contract
Sum is abnormally low… the Employer may require the
Candidate to provide details of the constituent elements
of the tendered Contract Sum or the tendered amounts
… if, having considered the information provided, the
Employer is of the view that either the Contract Sum is
abnormally low or any tendered amounts are
abnormally low … the Employer may reject the Tender
(emphasis added)”

“Note – Employers should exercise with caution the
rights reserved by this Section 8. In most cases, it is
expected that Candidates will be best judge of their own
costs. (Delete this note before issue of these
Instructions)”
Conclusion
• No legal certainty about what is an abnormally low tender
• If it does not strike the Contracting Authority as
abnormally low and the contract is awarded, is the decision
that it is not abnormally low open to challenge (manifest
error)?
• Trend of case law is that there is an obligation to
investigate even if not going to reject (contrast Varney and
SAG Slovensko)
• No certainty about whether there is an obligation to reject
• There will be an obligation to reject in certain cases if new
legislation passed as currently drafted
ICEL PROCUREMENT
CONFERENCE
Kevin Kelly McCann FitzGerald
Blackhall Place, Dublin 7
7 February 2013