In May 2018 the Court of Justice of the European Union (“CJEU”) considered a Lithuanian case where linked tenderers submitted separate offers in the same public tender process for waste management services. The ruling provides tenderers and contracting authorities with a clear steer about when and to what extent potential conflicts of interest should be investigated.

 

The facts

There were four tenderers in total, with Tenderers A and B being subsidiaries of the same parent company and sharing the same shareholder and management board directors. The contracting authority, although aware of the link between A and B, took no steps to determine the impact of that link on whether the competition between those tenderers was genuine. Upon the contracting authority informing tenderers that B was the successful tenderer, Tenderer C raised a complaint that the interrelation between A and B breached the principles of transparency, non-discrimination and fair competition.

It is relevant that the national legislation did not expressly require a tenderer to disclose its links with other operators participating in the same tendering procedure, or provide that the contracting authority was obliged to verify, assess or take account of those links for the purpose of its decisions. Nor were those obligations provided for in the tender specifications.

 The CJEU considered the following issues:

  1. the duty on tenderers to disclose to the contracting authority their links with other tenderers; and

  2. the duty on contracting authorities, where they have evidence that calls into question the autonomous nature of the tenders, to investigate whether the offers are autonomous.

 

CJEU ruling

As there is nothing specific in Directive 2004/18 about a duty on tenderers to disclose their links with other tenderers, or a duty on contracting authorities to investigate links between tenderers, and as the national legislation and tender documents were similarly silent on this issue, the ECJ considered the question in the light of EU principles of equal treatment, non-discrimination and transparency, ruling that:

  • Tenderers are not obliged to take the initiative and disclose the links between them; the CJEU noted that such a duty would of itself be contrary to the principles of transparency and equal treatment, which require the conditions for participation in a contract to be clearly defined and publicised in advance, so that tenderers understand the requirements and can be sure that the same requirements apply to all candidates. 

  • Where a contracting authority has evidence of a potential conflict due to tenderers being related, it has a duty to proactively investigate whether the offers made are autonomous and independent, requesting additional information from those tenderers as appropriate; if the offers prove not to be autonomous and independent, competition is no longer fair and genuine and the principles of equal treatment and transparency are breached, whereupon the contracting authority cannot award the contract to either of the related tenderers.

The CJEU confirmed previous case law in noting, as a starting point, that EU law does not prohibit related tenderers from submitting offers in a public procurement procedure and it would run counter to EU law to systematically exclude related tenderers from participating in the same tender process. Further, related tenderers can have different forms and objectives, which allow them to enjoy a certain autonomy in the conduct of their commercial activities, including in respect of competing for public contracts. Moreover, relationships between tenderers in the same group of companies may be governed by contractual provisions, which guarantee both independence and confidentiality in the drawing-up of tenders to be submitted in the same tendering procedure.

This is why, where there are indications or evidence that tenderers are related, the contracting authority must investigate further as a mere finding of a relationship of control between tenderers, by reason of ownership or voting rights exercisable at an ordinary shareholders meeting, is not sufficient for the contracting authority to automatically exclude those tenders from the tender process. However, in the circumstances of this particular case, the finding that the links between tenderers had a bearing on the content of their tenders was sufficient for those tenders not to be considered by the contracting authority.

 

Mitigating risk

It is important to note that since the procurement in Specializuotas transportas, Directive 2014/24/EU has replaced Directive 2004/18 and this requires contracting authorities to “take appropriate measures to prevent, identify and mitigate conflicts of interest”.  

To comply with this obligation and to mitigate risk, it is important therefore that contracting authorities follow best practice and have a clear conflict of interest policy in place which requires a carefully drafted declaration of no conflict of interest and a non-collusion certificate from all tenderers. This should assist contracting authorities in being able to identify when a duty to further investigate links between tenderers arises, in order to verify whether tenders submitted by related tenderers are autonomous and independent. In fact, it may be prudent for contracting authorities to investigate as a matter of course all circumstances where there are indications that tenderers are related or the contracting authority has knowledge to this effect, in order that it can be satisfied that competition remains genuine and the tenderers have been treated equally.