Public Procurement - Horizon Scanner: Infrastructure, Construction, Energy, May 2024

EU

The EU initiated a first investigation under the Regulation (EU) 2022/1031 on the access of third-country economic operators, goods and services to the Union's public procurement and concessions markets. The investigation is concerned with measures and practices in the Chinese procurement market for medical devices which the EU indicates discriminate unfairly against European companies and products. Next steps in the investigation are described here.

The Parliament adopted the proposed Regulation on a framework for strengthening Europe's net-zero technology products manufacturing ecosystem, and the Council is expected to adopt it without further amendments on 27 May 2024, following which it will be published in the OJEU and come into force days later.

The Regulation will impose certain requirements in relation to procurement processes for strategic net-zero technologies (including, for example, solar, wind, energy storage, grid and other technologies), requiring contracting authorities to apply minimum requirements for environmental sustainability. They will also have to apply resilience contribution requirements (in certain circumstances) if there is a non-EU country dependence of more than 50% for a specific technology or its components. Further information is available here.

The Parliament adopted the proposal for a new Regulation laying down harmonised conditions for the marketing of construction products. The Regulation will establish harmonised rules for the placing and making available on the market of construction products.

The Regulation will include measures relating to public procurement, including a requirement that the Commission adopts delegated acts specifying mandatory minimum environmental sustainability requirements for construction products. For procurement procedures falling within the scope of public procurement Directives, where contracts require minimum environmental sustainability performance for construction products as regards their essential characteristics covered by harmonised technical specifications, contracting authorities and contracting entities shall apply the mandatory minimum environmental sustainability requirements laid down in the delegated acts.

An Advocate General's Opinion has answered a preliminary reference (C-28/23) in respect of whether a contract is a public works contract. The background is that, in 2013, the Slovak Government signed a grant agreement with a private undertaking for the construction of the national football stadium. In 2016, the parties signed a new agreement which included a clause granting the undertaking the unilateral option to sell the stadium, under certain conditions, to the State. Slovakia notified the Commission of these publicly funded aid measures and, in a State aid decision, the Commission declared the measures to be compatible with the internal market. In 2020, the Slovak authorities refused to comply with the agreements, on the ground that they had from the outset been in breach of the EU public procurement rules. The dispute has led to litigation between the two parties.

The answer provided to the domestic court is that Article 2(1)(6) of Directive 2014/24/EU (which defines 'public works contract') must be interpreted as meaning that a grant agreement and an agreement to enter into a future sales agreement which are concluded between a State body and a private undertaking, and in which the private undertaking is granted public funds for the purpose of the construction of a sports infrastructure and is given the unilateral option of selling it to the State, respectively, cannot be classified as a public works contract if they do not give rise to a legally enforceable obligation on the part of the State to purchase the infrastructure, and if the State does not derive a direct economic benefit or has not had a decisive influence on the design of the work. It is for the referring court to determine whether those circumstances are present in this case.

IRELAND

Further proceedings struck out in CHC v Minister for Transport

Last month we referenced the Court of Appeal's judgment in CHC Ireland DAC v the Minister for Transport and Bristow Ireland Ltd [2023] IECA 335 which upheld the High Court's decision on CHC's application for discovery. We previously considered the substantive judgment ( [2023] IEHC 457) in which Mr Justice Twomey lifted the automatic suspension halting the award of a 10-year, €800 million contract for the provision of aviation services to support the Irish Coast Guard's search and rescue work. Subsequent judgments ([2023] IEHC 581) dealt with costs and the unsuccessful appeal of the substantive decision [2023] IECA 229.

A further judgment has been handed down ( [2024] IEHC 218) which concerns a challenge by CHC to the decision of the Minister to modify impermissibly the new contract. The Judge decided to strike out these proceedings on the basis that they were bound to fail. The Judge stated that "no credible evidence has been provided which suggests that the alleged decision to modify has been made and/or that the respondent has entered into modified contract, whether expressly, impliedly, tacitly or otherwise. The respondent, it emerges in the evidence, has not even received a proposal in respect of the supposed intended modifications. The claims of CHC arise from speculation and assertion all built on a foundation of mere belief".

Costs following finding of deficiencies in Standstill Letter

In March 2024 we looked at the judgment in Killaree Lighting Services Limited (applicant) v Mayo County Council (respondent) and Electric Skyline Limited (notice party) [2024] IEHC 79 in which the applicant partially succeeded on one out of five grounds of challenge: the Court agreed with the applicant that an October 2020 letter did not constitute a standstill letter, thus infringing Regulation 5(1), which prevents a contract from being awarded within the standstill period. However, the Court was not required to declare the contract ineffective under Regulation 11(2)(b)(i) because, notwithstanding its other deficiencies, the letter made plain that the applicant was out of the competition, and that the contract would be awarded without further reference to the applicant.

A further judgment has now been handed down ( [2024] IEHC 229) deciding two issues. First, the Court decided not to make a declaration to the effect that the standstill letter was not compliant with the requirements of law. No such declaration was sought in the original proceedings. The provision of an effective remedy to the applicant did not require the Court's finding in favour of the applicant to be supplemented by the making of a declaration. The issue was immaterial to the costs' decision.

Second, the Court awarded the applicant 15% of its costs in bringing the proceedings. The defendant would be entitled to recover 75% of its costs. Applying a set off, the Court awarded the defendant 60% of its costs. The Judge decided that the costs order in favour of the defendant should be adjusted to give effect to the legislative requirement that it could not walk away unscathed from its failure to serve a proper standstill notice.

Office of Government Procurement

The OGP amended Reserved Specialist documents to align the NN subcontract price variation clause with the Public Works Contract PW-CF1 to PW-CF5. Further information is available here.

The OGP is making changes to its website to include sections dedicated to BIM; Sustainability and Green Procurement; and Central Statistics Office (CSO) indices.

EU

Procurement Act 2023

The UK Government published a second tranche of guidance on the new Act, which is expected to come in to force on 28 October 2024. It includes guidance on the National Procurement Policy Statement (in respect of which there is a statutory duty to have regard); pipeline notice; and planned procurement notice. Further guidance is anticipated.

Guidance has also been published on transitional and savings arrangements. It states: "The fundamental principle is that procurements that commence after the entry into force of the Act must be conducted by reference to the Act only, whilst those that were commenced under the previous legislation (the Public Contracts Regulations 2015 (PCR), the Utilities Contracts Regulations 2016 (UCR), the Concession Regulations 2016 (CCR) and the Defence and Security Public Contracts Regulations 2011 (DSPCR)) ... must continue to be procured and managed under that legislation."

Appropriate approach taken to the Exclusion of a Non-Compliant Bid

In Working on Wellbeing Ltd v Secretary of State for Work and Pensions [2024] EWHC 766 (TCC), the Technology and Construction Court in England & Wales found that a UK Government department had not acted unlawfully by excluding a bid in a call-off competition under a framework agreement. The bidder scored the highest but failed to comply with a requirement not to bid in excess of maximum unit sums under the framework agreement. The contract was awarded to a compliant tenderer.

The Court found that the tender documents had made clear that it was important to comply with the tender rules and that there was a possibility of disqualification. Once the bidder had breached the relevant requirement, and before deciding to disqualify it, the department had appropriately exercised its discretion by considering alterative options, such as allowing bids to be resubmitted. However, it had been entitled to consider that the alternative options considered would have been contrary to the principles of transparency and equality of treatment.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.