Over the summer, Thomas Larsen of Bird & Bird very kindly wrote a follow up post for this blog concerning the decision in Case C-23/20, Simonsen & Weel. Thomas had of course written about this reference when it was made in 2020 and here he follows up on the decision now taken by the ECJ. I apologise to him and to you all for the delay in getting this post up....and I hope that more of my own comments on other matters will follow soon-ish. But in the meantime, here are Thomas' remarks.
In my guest post from 8th of September 2020, I tried to account for the Danish Perspective on framework agreements based on the ruling in Case C-216/17, Autorità [..], where the ECJ indicated that the quantities of all public bodies eligible to make purchases pursuant to a framework agreement must be determined when tendering the framework agreement itself and 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.
My post was motivated by the decision of the Danish Complaints Board to submit a request for a preliminary ruling (C-23/20) to the ECJ with some very concrete questions as to how the ECJ ruling in C-216/17 should be interpreted, mainly:
- 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
The answers from the ECJ have been published on the 17th of June 2021 but unfortunately the decision is not (yet) available in English. (and still is not in November 2021)
In short, however, the ECJ came to the following 3 conclusions:
1) Article 49 of Directive 2014/24 and Annex V, Part C, sections 7 and 8 and 10 (a) to this Directive in conjunction with Article 33 and the principles of equal treatment and transparency laid down in Article 18 (2) shall be interpreted as meaning that the estimated tender quantity and / or value, as well as a maximum quantity and / or value of the goods to be delivered in accordance with a framework agreement must be stated in the contract notice and that when this limit is reached, the said framework agreement will have exhausted its effects.
For this part of the decision, the ECJ did remark that the wording of certain provisions of the Public Procurement Directive, including inter alia Annex V, Part C, sections 8 and 10, as well as the standard formular for use in tenders (the tender notice), imply a certain margin of discretion in relation to a possible obligation to state a maximum value.
However, a literal interpretation of said provisions is not in itself decisive and the ECJ therefore found, with reference to the principles of equal treatment and transparency, that a contracting entity must state both the estimated quantity and / or the estimated value and the maximum quantity and / or a maximum value of the goods to be delivered under the framework agreement.
2) The same reference to article 49 etc as in answer 1 also means that the estimated quantity and / or the estimated value, as well as a maximum quantity and / or a maximum value of the goods to be delivered in accordance with a framework agreement must be stated in total in the contract notice, and that in this executive order, additional requirements may be laid down, which the contracting authority decides on and adds to the executive order.
Referring to Answer 1, the Court held that the principle of transparency and equal treatment precludes a contracting authority from confining itself to providing only partial information on the subject matter and scope of a framework agreement at quantitative and / or financial level.
Undoubtedly the question from the Danish Complaints Board had as a main objective to clarify if there is an obligation to split the total maximum amount / quantity in to smaller amounts/quantities if the framework covered more contracts and/or more entities but from the answer of the ECJ this does not seem to be an absolute requirement; however, a contracting entity may, apart from stating the total value/quantity, choose to specify separately in the contract notice the estimated quantity and / or the estimated value, as well as a maximum quantity and / or a maximum value of the goods to be delivered under a framework agreement for each of the contracting authorities.
3) Article 2d, para. Article 1 (1) (a) of Council Directive 89/665 / EEC of 21 December 1989 on the coordination of laws, regulations and administrative provisions relating to the application of appeal procedures in the award of public works contracts, as amended by the European Parliament and Council Directive 2014/23 / EU of 26 February 2014 must be interpreted as meaning that this provision does not apply in the case where a contract notice is published in the Official Journal of the European Union, but where, firstly, the estimated quantity and / or the estimated value of the goods to be delivered under the tender framework agreement does not appear in this contract notice, but in the tender specifications, and, secondly, neither a maximum quantity is mentioned in the said contract notice nor in these tender conditions and / or a maximum value of the goods to be delivered in accordance with the said framework agreement.
This part of the decision deals with the practical implications of a public authority having failed to state its estimated or maximum amount/quantity or indeed both of these, the conclusion being that this violation of the procurement rules is not nearly as serious as an unlawful direct award of contract without prior publication of a notice. Thus, a contract tendered without this information must not be treated as an unlawful direct award of contract and must for this reason also not be subject to the rules on ineffectiveness in the member states:
"When tendering a framework agreement, a contracting authority should, based on the preliminary ruling, make sure to describe both the estimated value / quantity and the maximum value / quantity."
The estimated value / quantity must be stated in the tender notice, whereas it is not quite clear if the maximum value / quantity may appear elsewhere in the tender material. The ECJ clearly suggests this possibility in paragraph 71 of the judgment, but in the formal ruling the ECJ states that both the estimated and the maximum value / quantity must be noted in the tender notice.
Depending on whether the procurement is divided into several subcontracts and / or several contracting entities, it cannot be determined from this judgment whether there is an obligation to split quantities / values at this level as well.
If a contracting authority offers 5 very different sub-agreements on a framework agreement, it seems logical to follow the same principle and for the sake of the transparency regarding each sub-agreement, to distinguish between the expected purchase volume and the maximum framework.
Therefore, my suggestion for the future use of such frameworks is to describe both the estimated and maximum values / quantities divided into sub-agreements, and if the agreement covers several purchasing bodies, some with only a remote chance to utilise the agreement, it will be quite logical that some wording presents the underlying assumptions for the calculated estimated and maximum values /quantities thereby providing the generally needed transparency.
For a practitioner, the regime of supplying this information may conflict with the fact that relevant parts of the standard tender notice, sections II.1.5 and II.2.6 do not allow stating any information other than a monetary amount. Also, these sections are in regard to frameworks reserved for “estimated total maximum value for the entire duration of the framework agreement” (section II.1.5) and “estimated total maximum value for the entire duration of this lot” (section II.2.6).
In Denmark, section II.1.5 of the notice for framework agreements is worded as being for “estimated total value” rather than the “estimated total maximum value” which has probably not made this topic less confusing among practitioners since the main discussion in the preliminary ruling has been whether a public authority needs to state the estimated value, the maximum value or both.
If a public entity needs to estimate quantities rather than values, estimate values for the individual sub-agreements, as well as values for any optional purchasing bodies such information must therefore be stated somewhere else than in section II.1.5 and II.2.6.
Depending on how briefly this can be explained, whether it relates to options or the purchases of mere potential contracting entities, one or more of the following sections in the tender notice seem best suited for this purpose:
II.1.4 "Short description" - max 1000 characters,
II.2.4 "Description of the tender" (contract / individual subcontract) - max 4000 characters,
II.2.14 "Additional information" (contract / individual sub-agreement) - max 400 characters,
II.2.11 “Information on options” (contract / individual sub-agreement) - max 4000 characters, or
VI.3 “Additional Information” (Framework Agreement Complex) - 4000 characters.
There are as described practical ways to fulfil the requirements laid down by the ECJ and from the perspective of a public entity the most important thing is to make sure that both the estimated and maximum value /quantity is accounted for. This will create transparency in regard to expected volume as well as the outer limits of the supplier’s possible obligation but more importantly this will ensure that the contracting authorities will not have to retender just because the actual purchases on the framework agreement exceed the original expectations.
…ooo000ooo…
Finally, it may be worth to consider what this preliminary ruling means for public bodies that have already tendered such framework agreements where some or all of the required information on estimated value and maximum value is missing?
As far as the ECJ’s assessment of the sanction "ineffectiveness" is concerned, it is stated quite briefly that a failure to have stated this information in a published tender notice is not in its severity to be compared to an unjustified award of contract without prior publication of a notice. The framework agreement is therefore still valid and shall on its own not be deemed ineffective, as this sanction is reserved for the worst procurement offences.
What the court does not relate to, however, is what the consequence is if the public entity utilises such a framework agreement and the result may very well vary in different jurisdictions.
As stated above, the framework agreement will no longer have any effect once a stated maximum amount is reached meaning that purchases beyond the maximum could be perceived an award of contract without prior publication and thus on their own be sanctioned with ineffectiveness. It would be inconsistent if purchasing on a framework agreement without a stated maximum would not suffer a similar fate.
Although the framework agreement as such is not deemed ineffective it would – at least from a Danish perspective - be hard to see any contracting entity legally going beyond the maximum stated in the tender notice or indeed make purchases if no estimated total or maximum amounts or quantities have been described in the tender material.