Since the ECJ handed down its judgment in Case C-216/17, Autorità Garante della Concorrenza e del Mercato - Antitrust and Coopservice Soc. coop. arl v Azienda Socio-Sanitaria Territoriale della Vallecamonica - Sebino (ASST) and Others the decision has given public purchasers operating framework agreements a few headaches. There has been no authoritative view of its interpretation in the UK, but there has been quite a bit of comment. For commentary on the issues see the podcast at https://aanbestedingspodcast.nl/en/2020/07/02/4-framework-agreements-following-coopservice-doing-a-phd-in-public-procurement/
Given all these concerns it is good to see that in at least one jurisdiction, Denmark, some real progress is being made to work through the issues. So it is great to have another guest contribution on these developments from Thomas Larsen who is a Danish specialist in public procurement law and partner in Bird & Bird working for both public entities and bidders in public procurement procedures regarding complex infrastructure projects. Before turning over to Thomas, I should emphasise that, as is apparent from the narrative, there are various available interpretations of this case, and given the uncertainty it is particularly helpful that this development of the saga may bring a little more clarity to the operation of framework arrangements.
With many thanks to Thomas for this contribution, the rest of this blog is over to him.
Back in December 2018 the ECJ handed down a preliminary ruling regarding the use of framework agreements established by other contracting authorities (C-216/17, Autorità). The case concerned a framework agreement with a duration of 9 years under Directive 2004/18/EC with an option for additional, specifically named public bodies to request that the successful bidder should extend the contract to cover them subject to conditions identical to those of the procurement contract.
The ECJ first established that a contracting authority may act on behalf of other contracting authorities that are specifically indicated but which are not direct parties to the original framework agreement.
However, the ECJ further established that contracting authorities cannot refrain from determining the quantity of services that may be required when they conclude contracts pursuant to a framework agreement and may not determine this quantity merely by reference to their usual use / consumption. The wording in this part of the ruling must be read in the light of the ECJ’s prior remarks which indicate that the quantities of all public bodies eligible to make purchases pursuant to the framework agreement must be determined when tendering the framework agreement itself.
Finally, the ECJ emphasises that once the originally stated value and quantity of a framework agreement has been reached, the agreement can no longer be used to fulfil a contracting authority’s obligation to tender.
The preliminary ruling has in Denmark caused significant debate among public procurement practitioners, the major issue being how to estimate the value or volume in frameworks particularly when they are being established with the potential that many participants might ultimately choose to use them, e.g. frameworks procured by a central purchasing body.
As a result of the debate the Danish Competition and Consumer Authority (DCCA) published a memorandum in November 2019 with the aim of providing some clarity regarding the nature and extent of the consequences the case would have for Danish public procurement law.
Based on the ECJ ruling, the DCCA concluded
- that a contracting authority must determine the total maximum amount of services or goods covered by a framework agreement,
- that the contracting authority may do this by stating a total maximum value of the Framework Agreement,
- that the maximum quantity or value must not be stated per entity participating in the framework but can be stated for the whole framework agreement, and
- that when the maximum quantity or value of the framework agreement has been reached, the framework agreement can no longer be utilized unless this can somehow be justified based on other provisions within the directive.
As to the means to fulfil these requirements, the DCCA pointed out that it would be contrary to the principles of proportionality and transparency if the contracting authorities would increase the estimated contractual value to a higher amount than the actual expected amount to circumvent this rule and thereby making room for eventualities.
The conclusions of the DCCA have been met with mixed emotions among the Danish practitioners.
The majority seem to find the conclusion too strict arguing that the ECJ ruling may have been influenced by the special nature of the Italian framework (9 years and optional for both entity and supplier if the framework should be extended to other entities), but also a few argue that the DCCA interpretation is actually too lenient and that the maximum quantity/value must be stated for each entity part of the framework.
From a Danish perspective, the ECJ ruling and the DCCA interpretation does present public bodies with a real problem since it is rarely possible to estimate the combined needs of all the entities on a framework with many potential contracting authority members and even more difficult to establish the individual need of each of these entities if this indeed was also necessary.
The concern from the bidder side is that public entities will now - even though this may not be in line with the ruling and the DCCA recommendation – simply include an estimate for the value of frameworks which is considerably higher than it might actually need to be, increasing flexibility and maximising potential for use, but making it harder for bidders to accurately assess the true value of the opportunity and therefore make the right bid.
The other major concern is how the ruling will impact already tendered frameworks where the estimated value stated in the tender notice has already been reached.
A concrete example is the largest Danish central purchasing body (SKI), which is now prematurely re-tendering one of the most popular it-consultant framework agreements with 14 separate underlying areas of expertise because the estimated contractual value has been reached long before the expiry of the framework.
One practical approach to address these issues could be to utilize the tender notice section II.2.4 or IV.3 to explain how the estimated value in II.1.5 has been calculated and maybe even stating the potential value (maximum) of a framework. The ECJ ruling does not however, in its wording seem to make room for such a pragmatic approach.
Since there does not seem to be an easy way around this problem, it is very positive that the Danish Complaints Board for Public Procurement is not oblivious to the current discussions.
The Complaints Board has in a new case submitted a request for a preliminary ruling to the ECJ with some very concrete questions as to how the ECJ ruling in C-216/17 may influence a normal framework agreement.
In short, the board has in Case C-23/20 asked the following questions:
- to what extent must the contract notice contain information on the total estimated quantity and/or the estimated value of the supplies under the framework contract to which the tender relates,
- must the information be presented overall or for each participant (even optional participants),
- if the contract notice or the tender specifications must set a maximum quantity and/or a maximum value of the supplies such that the framework contract in question will no longer have any effect when that limit is reached,
- and if failure to follow these instructions will result in the tendered contracts being treated as awarded without prior publication of a notice in the Official Journal of the European Union.
It is hoped that the upcoming preliminary ruling will take into consideration the practical challenges facing entities trying to comply with the principles of transparency laid down in C-216/17 while also fulfilling the commercial need to enable multiple public entities to utilize a framework on a voluntary basis.
In a perfect world, the ECJ would come up with an obiter dictum containing a pragmatic approach as to how the transparency principle and these practical commercial needs may be fulfilled at the same time.
As this seems unlikely, it is still the hope that the ECJ may, indeed, see some more nuances in the matter and potentially narrow down the field of application for the quite strict principles laid down in C-216/17 or at least elaborate on these with specific consideration to the practical implications.