Workshop “Review procedure: complaint and evidence”

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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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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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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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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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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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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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

Documents

Workshop “Review procedure: complaint and evidence”