Risk of anti-competitive collusion after excessive level of transparency in public procurement debriefing?

In its Judgment of 4 October 2012 in case C‑629/11 P Evropaïki Dynamiki v Commission (ESP-ISEP), the Court of Justice has issued another interesting decision on what should be considered sufficient debriefing of disappointed bidders in public procurement procedures.

The Evropaïki Dynamiki (ESP-ISEP) Judgment has been issued on the basis of Article 100(2) of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ 2002 L 248, p. 1) (‘the Financial Regulation’). However, a ‘twin’ provision can be found in Article 41 of  Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 2004 L 134, p. 114) (‘Directive 2004/18’). Consequently, the Judgment is of relevance in all areas of public procurement, and not only to that of the EU Institutions.

According to Article 100(2) of the Financial Regulation,

The contracting authority shall notify all candidates or tenderers whose applications or tenders are rejected of the grounds on which the decision was taken, and all tenderers whose tenders are admissible and who make a request in writing of the characteristics and relative advantages of the successful tender and the name of the tenderer to whom the contract is awarded.

However, certain details need not be disclosed where disclosure would hinder application of the law, would be contrary to the public interest or would harm the legitimate business interests of public or private undertakings or could distort fair competition between those undertakings.

In this case (and furthering an unsuccessful strategy to challenge adverse award decisions that, however, has made a fundamental contribution to the development of the case law in this area), Evropaïki Dynamiki challenged the debriefing received from the European Commission both on the grounds that it was 8 days late (although both the GC and the CJEU dismiss this procedural deffect easily on the basis that the delay did not however restrict the undertaking’s opportunity of asserting its rights and could not, by itself, lead to the annulment of the contested decisions) and that it was insufficient–ie that the Commission had not provided sufficient reasons to justify the award of the contract to another bidder.

Reading the Evropaïki Dynamiki (ESP-ISEP) Judgment, one cannot but wonder if EU public procurement rules do not still impose an excessive degree of transparency in the debriefing of disappointed bidders.

According to the CJEU in Evropaïki Dynamiki (ESP-ISEP)

20 […] according to the first subparagraph of Article 100(2) of the Financial Regulation, the contracting authority is required to notify all candidates or tenderers whose applications or tenders are rejected of the grounds on which the decision was taken, and to notify all tenderers whose tenders are admissible and who make a request in writing of the characteristics and relative advantages of the successful tender and the name of the tenderer to whom the contract has been awarded.

21 However, it is apparent from the case-law that the Commission cannot be required to communicate to an unsuccessful tenderer, first, in addition to the reasons for rejecting its tender, a detailed summary of how each detail of its tender was taken into account when the tender was evaluated and, second, in the context of notification of the characteristics and relative advantages of the successful tender, a detailed comparative analysis of the successful tender and of the unsuccessful tender (see, to that effect, order of 29 November 2011 in Case C‑235/11 P Evropaïki Dynamiki v Commission, paragraphs 50 and 51 and the case-law cited).

22 Similarly, the contracting authority is not under an obligation to provide an unsuccessful tenderer, upon written request from it, with a full copy of the evaluation report (see order of 20 September 2011 in Case C‑561/10 P Evropaïki Dynamiki v Commission, paragraph 25).

23 Furthermore, it must be noted that, according to settled case-law, the statement of reasons required under the second paragraph of Article 296 TFEU must be assessed in the light of the circumstances of each case, in particular the content of the measure in question and the nature of the reasons given (see, inter alia, Case C‑367/95 P Commission v Sytraval and Brink’s France [1998] ECR I‑1719, paragraph 63, and judgment of 28 February 2008 in Case C‑17/07 P Neirinck v Commission, paragraph 52).

24 In the present case, it is apparent from paragraphs 8 and 37 of the judgment under appeal that the [debriefing] letter […] contained the names of the tenderers selected as first contractor for each of the two lots of the call for tenders at issue.

25 In addition, […] the Commission enclosed as annexes to that letter extracts from the two evaluation reports […]

26 It is apparent therefrom that those extracts contained tables relating, in particular, to the technical evaluation of the tenders for both of the lots and indicating, for each award criterion, the number of points obtained by Evropaïki Dynamiki in comparison with the successful tenderer, broken down each time into sub-criteria, as well as the maximum number of points attainable per sub-criterion and the weighting of each of those sub-criteria in the overall evaluation. Summary tables showed, on the basis of the results of the technical and financial evaluation, the final ranking for each of the two lots.

27 It is also apparent therefrom that, according to the information communicated in the [debriefing] letter […], Evropaïki Dynamiki’s tender was ranked higher than the successful tender solely under the fourth award criterion regarding the quality of the service and the methodological proposal in the domain of Lot No 2. It was also only with regard to the fourth criterion relating to the quality of the technical offer in the domain of Lot No 1 that its tender obtained the same number of points as the successful tender. On the other hand, for all other criteria, Evropaïki Dynamiki’s tender was less well ranked than that of the successful tenderer.

28 Furthermore, the comments of the evaluation committee which were also disclosed indicated, for each award criterion, the sub-criteria on the basis of which the Commission found the successful tenderer’s offer or that of Evropaïki Dynamiki to be the best.

29 Finally, the method applied by the Commission for the technical evaluation of the tenders was clearly set out in the tendering specifications relating to the call for tenders at issue. As is apparent in particular from paragraph 3 of the judgment under appeal, they specified, for each lot, the various award criteria, their respective weighting in the evaluation, that is to say in the calculation of the total score, and the minimum and maximum number of points for each criterion.

30 Accordingly, […] in view of all the information supplied to Evropaïki Dynamiki, as well as the specifications contained in the call for tenders, including the weighting relating to the award criteria for each of the lots, Evropaïki Dynamiki had sufficient information to enable it, for each lot, to identify the characteristics and relative advantages of the best ranked tenderer’s offer.

31 It follows that, in the light of all of the elements of the present case […]  Evropaïki Dynamiki’s argument alleging that the statement of reasons for the contested decisions was inadequate had to be rejected.

From the Judgment, it is not only clear that the Commission debriefed Evropaïki Dynamiki in full, but also that the current rules require the disclosure of certain information (of most relevance, the name of the winning bidder) that may be excessive. In that regard, the second paragraph of Article 100(2) of the Financial Regulation [or the equivalent Article 41(3) Directive 2004/18] deserve more attention, as regards the caveat that some information may (rectius, should) not be disclosed if such disclosure might prejudice fair competition between economic operators.

As pointed out elsewhere, contracting authorities and review courts should be particularly careful in not imposing excessive disclosure when there are actual risks of strategic use of challenge procedures or the market structure is such that the increased degree of transparency could (inadvertently) facilitate or reinforce collusion  [Sanchez Graells, A. Public Procurement and the EU Competition Rules (Oxford, Hart Publishing, 2011) 358-9].

It should be taken into consideration that there is a risk for a strategic use of bid protest mechanisms seems at least twofold. On the one hand, tenderers could try to gain access to confidential information which could be used later to compete unfairly with the affected tenderers. On the other hand, excessive disclosure of information can increase market transparency and be used as a means to collude or to reinforce collusion by tenderers. Therefore, rules on disclosure of information should take into account their potentially restrictive or distortive effects on competition. Interestingly, Directive 2004/18 contains a specific rule addressing this issue. Article 41(3) of Directive 2004/18 allows contracting authorities to withhold certain information regarding the contract award, the conclusion of framework agreements or admittance to a dynamic purchasing system where the release of such information would impede law enforcement, would otherwise be contrary to the public interest, would prejudice the legitimate commercial interests of economic operators, whether public or private, or might prejudice fair competition between them [see also art 29(3), art 32(4)(c), and art 35(4) dir 2004/18, emphasis added].

Therefore, in the exercise of such discretionality and as a mandate of the principle of competition, contracting authorities are bound to restrict the disclosure of information given to tenderers to prevent instances of subsequent unfair competition or collusion—and, in order to do that properly, must identify and properly justify the negative effects which the withholding of the information seeks to avoid.

Along the same lines, and although there is no equivalent provision in Directive 89/665 and Directive 92/13 (both as amended by dir 2007/66), it is submitted that the same restrictions to the disclosure of information apply in bid protests and review procedures, so that contracting authorities (in the case of mandatory reviews prior to challenges, or otherwise) and independent review bodies are bound to prevent disclosures of information that could result in restrictions or distortions of competition. In such cases, limiting the access of information to the minimum extent required to ensure the effective protection of the rights of the applicants in review procedures will require a balancing of interests by the competent authority—which, in our view, should take into due consideration the potential impact on competition of the disclosure of certain information. Such an obligation can be stressed or reinforced by general rules on the treatment of business secrets and other commercially sensitive information of general application according to Member State domestic legislation.

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