Procurement law case update: Veridos - what to do when presented with tenders that appear abnormally low

Published 5 octubre 2022

A new judgment of the Court of Justice of the European Union (“CJEU”), Case C‑669/20 – Veridos, provides further guidance on the steps that should be taken by Contracting Authorities and Utilities when presented with tenders that appear to be abnormally low.  The case highlights the importance of investigating all such tenders and recording any decisions taken in light of those investigations.  It also confirms that disappointed tenderers may bring a challenge if they believe that a tender had the appearance of being abnormally low but was not investigated.  This case is interesting because it appears to suggest that the duty to investigate tenders that appear to be abnormally low is broader than had previously been suggested by the English Courts.

English Courts are not bound by CJEU decisions made after 30 December 2020 but may still have regard to such decisions, which are often persuasive. As such, whilst this case will not be binding in the UK, it does indicate the potential direction of travel in the event of future claims.  We have suggested within the comments section below the actions that Contracting Authorities and Utilities may wish to take in response to this judgment.

Background

In August 2018, Bulgaria’s Deputy Minister for the Interior launched a procurement procedure for services relating to the supply of identity documents. The contract was awarded in April 2020 and the unsuccessful tenderer challenged the outcome.  One of the arguments put forward by the challenger was that the successful tender appeared to be abnormally low but this was not investigated as part of the procurement process.  It was alleged that if the tender had been investigated, it would have been found to be abnormally low and should therefore have been rejected.

The Bulgarian Supreme Administrative Court referred certain issues to the CJEU. In essence, the Bulgarian Court wished to establish whether contracting authorities are under an obligation to verify whether an abnormally low tender exists in order to ensure an objective comparison of tenders (i.e. to enable it to determine which tender is the most economically advantageous, without that tender being abnormally low such as to distort competition).

The CJEU’s findings

The EU rules considered by the CJEU are materially the same as Regulations 56 and 69 of the Public Contracts Regulations 2015 and Regulations 76 and 84 of the Utilities Contracts Regulations 2016.

The Court confirmed that the relevant EU legislation did not impose an obligation on contracting authorities to set out in writing each time it concluded that tenders submitted in response to a procurement exercise did not have the appearance of being abnormally low (i.e. where there is no suspicion that a tender is abnormally low, there is no obligation to investigate or explain why a tender is not considered to be abnormally low).  However, where there is a suspicion that tenders are abnormally low, the relevant rules require contracting authorities to:

• identify the suspect tenders;
• allow the tenderers concerned to demonstrate their “genuineness” by asking them to provide appropriate details;
• assess the merits of the information provided, taking into account all of the relevant components of the invitation to tender and contract documents;
• take a decision as to whether to admit or reject those tenders; and
• set out their decision in writing together with the reasons for taking that decision.

The Court also confirmed that if a contracting authority does not carry out relevant investigations because it considers that none of the tenders appear to be abnormally low, its conclusion as to whether or not a tender appears to be abnormally low can be challenged in Court in the context of proceedings against the decision to award the relevant contract to the successful tenderer.

Comment

This case is interesting in that it adopts a different approach to that taken by the English courts in SRCL Ltd v NHS England [2018] EWHC 1985 (TCC) and Bechtel Ltd v High Speed Two (HS2) Ltd [2021] EWHC 458 (TCC).

In those cases, the Court held that Contracting Authorities and Utilities where only obliged to investigate tenders that had the appearance of being abnormally low if they were considering excluding them for that reason.  If, for example, a Contracting Authority considered that a tender had the appearance of being abnormally low but considered the risk of non-performance to be low, it would not be under a duty to investigate. 

Although not binding in the UK, this new CJEU ruling may well be persuasive in future claims alleging that authorities have failed to investigate and exclude abnormally low tenders.  As such, it would now be sensible for Contracting Authorities and Utilities to investigate all tenders that have the appearance of being abnormally low (irrespective of whether or not they are considering rejecting the tender), and then to make a clear record of the reasons for rejecting or accepting the relevant tender taking into account the outcome of that investigation.

This may add to the administrative burden on Contracting Authorities and Utilities by requiring them to investigate all tenders that have the appearance of being abnormally low (as opposed to just those that appear to be abnormally low and that they are considering rejecting for that reason).  However, the thorough investigation of all tenders that appear to be abnormally low may well result in long term benefits, for example by helping to ensure that contracts are sustainable, and that Contracting Authorities have given full consideration to all relevant issues before deciding to accept a tender that has the appearance of being abnormally low. Carrying out such investigations would, of course, also help authorities to defend challenges relating to the potential presence and/or impact of abnormally low tenders.

The judgment may encourage more challenges by disappointed tenderers suggesting that Contracting Authorities have failed to investigate tenders that have the appearance of being abnormally low (i.e. asserting that authorities were wrong to conclude that certain bids did not appear to be abnormally low).  Although this is a real risk, authorities should take heart from the fact that, at present, Courts will only interfere with an authority’s assessment as to whether a tender had the appearance of being abnormally low (and should therefore have been investigated) if the authority’s conclusion was manifestly wrong.  This is a high-hurdle that is broadly equivalent to irrationality.  In essence, a Court would only interfere with a conclusion that a tender did not appear to be abnormally low if no other rational authority would have reached the same conclusion in the same circumstances.