Public Contracts Regulations 2015 - Regulation 41

Regulation 41 - Prior involvement of candidates or tenderers

Can a prospective tenderer be involved in drafting the tender documents before a procedure is launched? According to Regulation 41, yes it can. The main rule of Regulation 41 allows for such participation, but digging deeper into the Regulation allows us to find some limitations to this possibility related with the principle of competition. Albert has already published a barn storming entry on the issue this morning.

Leaving the buck in the back of the contracting authority

Regulation 41(1) leaves to the contracting authority the obligation to take appropriate measures ensuring competition is not distorted by the participation of the entity which was involved in drafting the tender documents, based on the rules of Regulation 40 or otherwise. Two problems are immediately apparent. The first one is that Regulation 41 accepts that in some circumstances, economic operators may be involved in helping contracting authorities outside the remit of Regulation 40. I would like to know how that could be done.

The second problem is more practical: being involved in drafting the technical specifications and participating in the subsequent tender will always distort competition as the supplier will be in a position it would not have been otherwise. It will know the terms of deal before everyone else, it may know more about the deal than everyone else, perhaps even information that will not be made public such as the budget the authority has. The only way I can see the prior involvement not raising competition issues is if the contracting authority only asks a very direct, specific question and provides no other details on the project (what is really being acquired, when and for what price). All other scenarios where the supplier helps the contracting authority define what it wants to buy - which I suspect are the true reason behind Regulation 40 - will distort competition. As Regulation 41(1) has no qualifier on the level of distortion acceptable, the correct interpretation has to be that any distortion leads to the automatic exclusion of the putative tenderer. Yes, Regulation 41(1) states that the contracting authority shall take appropriate measures to ensure competition is not distorted, but as the distortion occurs when the information that something is being procured in the future is passed to the helper and subsequently when the same economic operator helps the contracting authority design the tender documents, the distortion has already occurred!

The irony of Regulation 41(1) is that the burden of correcting the distortion is left in the hands of the contracting authority. This appears to me to be impossible for the reasons above but perhaps leaves the helping economic operator with the possibility of suing the contracting authority in case it does not fulfil this (impossible?) obligation.

Papering over the cracks

Paragraph 2 of Regulation 41 offers some potential solutions for the competition distortion. Helpfully, other candidates should be informed of the relevant information exchanged between the helping economic operator and the contracting authority. How does this solve the distortion of competition arising from the asymmetry of information and the fact one of the suppliers influenced the rules of the procedure? In fact, informing the market that someone was involved in drafting the tender documents AND will be participating may have the opposite effect on competition: effectively reducing the attractiveness of the project for everyone else and thus reducing competition.

The same paragraph doubles down on irrelevant suggestions by putting forward that perhaps a solution is to fix the an adequate time limit to receive the tenders. The problem is not the time per se as all economic operators would have to comply with the minimum time limits (although it would have been preferable to just block the use of accelerated or time-reduced procedures) but the fact one of the economic operators had access to information before everyone else and influenced the design of the tender documents.

If everything else fails, lower the standards

Paragraph 3 admits that to ensure compliance with Regulation 18(1) (that is, the principle of equal treatment and non-discrimination, but not competition) perhaps the economic operator will have to be excluded, but only as a last resort. Why as a last resort? Would it not be preferable instead to block it from the start and ensure the economic operator is compensated for the help? Would it not be simpler and cleaner for everyone involved? Even if it was a last resort, at least the burden of proof that no distortion of competition occurred (which paragraph 3 should have referred to!) should be left with the economic operator who helped the contracting authority, which as we have seen above, does not happen in any moment.

As it stands, Regulation 41 is a mess and prone to create difficulties and complications for contracting authorities. To be honest, this is a mess originating from Article 41 of the Directive (and as pointed out by Albert, the C-34/03 Fabricom case)  but still, it is up for the Member States to provide further rules if they so see fit. For example, under the 2008 Portuguese Public Contracts Code, no economic operator involved in the development of a procedure can take part in it. This solution will probably have to be nuanced in the future due to the Directive, but I would not be surprised if the country takes once more a harder line on this matter.