Source: https://www.howtocrackanut.com/blog/tag/technical+specifications
Timestamp: 2019-10-14 07:07:21
Document Index: 761140476

Matched Legal Cases: ['Art 34', 'Art 34', 'Art 34', 'Arts 34', 'CJEU ', 'CJEU ', 'CJEU ', 'art 23', 'art 42', 'CJEU ', 'CJEU ', 'art 24', 'CJEU ', 'Art 30', 'CJEU ', 'Art 30', 'Art 30', 'CJEU ', 'Art 30', 'Art 30', 'Art 30', 'CJEU ', 'Art 30', 'Art 30', 'CJEU ', 'Art 30', 'Art 24', 'art 30', 'Art 30', 'Art 30', 'art 30', 'Art 30', 'Art 27']

By Avius Quovis
In his Opinion of 28 February 2018 in VAR, C-14/17, EU:C:2018:135 (not available in English), AG Campos Sánchez-Bordona addressed a tricky preliminary question regarding the procurement of spare parts for buses, trolleybuses and tramways under the 2004 Utilities Procurement Directive (Dir 2004/17/EC). The legal dispute concerned the procedural stage at which contracting authorities must require tenderers to provide certificates attesting compliance with the applicable technical specifications. AG Campos suggested that such phase needs not always be prior to the award of the contract.
This case is relevant in the context of the contracting authorities’ verification duties prior to the award of the contract. In my view, while couched in promising pro-competitive terms aimed at preventing the imposition of disproportionate participation requirements, the approach followed by AG Campos can create legal uncertainty and an irreconcilable functional tension with prior cases such as EVN and Wienstrom (C-448/01, EU:C:2003:651). Therefore, the VAR Opinion merits some critical discussion.
It is important to note that the VAR case has the relevant peculiarity that the contracting authority (presumably) owning a stock of vehicles of a given brand, had specified for the spare parts to be of such named brand ‘or equivalent’ as part of the technical specifications. Therefore, the relevant certificates were not of compliance with functional technical specifications or prescribed technical standards, but rather ‘certificates of equivalence’ between the offered parts and the named branded parts. The contracting authority had indicated in the tender documentation that such certificates of equivalence had to be submitted with the first supply of equivalent parts. As a result, the chosen tenderer was awarded the contract without having provided documentary evidence of the equivalence between the (cheaper) offered parts and the (pricier) branded ones. As could be expected, after the contract was awarded to the competing supplier, the ‘original equipment manufacturer’ (OEM, or owner of the brand) challenged the decision on the grounds that Dir 2004/17 required submission of the relevant certificates pre-award and that the contracting authority could not legally award a contract without having carried out minimal technical compliance verification.
The position taken by the disappointed tenderer that equivalence certificates should have been required prior to the award of the contract represents, in my opinion, the canonical view. Indeed, this was also the position of the Italian Government and the European Commission in this case, both of which held that a systemic interpretation of the relevant rules (ie Art 34(8), in relation to Art 34(3) and 34(4) Dir 2004/17) leads to the conclusion that certificates must be required prior to the award of the contract (see AGO, para 22).
As AG Campos sums up their arguments (see paras 38-41), such systemic/functional interpretation would derive from the fact that (i) proof of technical equivalence is a necessary element for the contracting authority to reach a judgment on which is the most economically advantageous tender amongst those received; (ii) in the absence of a prior verification of the tenderers’ ability to deliver on their contractual obligations, a contracting authority faced with non-compliant supplies would only be left with the option to terminate the contract, which is undesirable; and (iii) given that Art 34(8) Dir 2004/17 solely establishes the exceptionality of the recourse to a named brand and prohibits it except if twinned with the explicit mention of the acceptability of equivalent solutions, the general requirements for verification of technical compliance under Arts 34(3) and 34(4) Dir 2004/17—both of which require pre-award submission of documentation—should be applicable to cases where the contracting authority has made use of the exceptional reference to branded products.
In my view, this reflects the correct interpretation of the rules on verification of technical compliance under Dir 2004/17—and the same logic that remains applicable under the revised rules of the 2014 Public Procurement Package.
However, taking an alternate view, AG Campos suggested that Dir 2004/17 does not necessarily require tenderers to provide—and, implicitly, does not necessarily require contracting authorities to demand that tenderers submit—the relevant certificates prior to award of the contract if (i) the contracting authority has specified products of a named brand ‘or equivalent’, and (ii) it has indicated that such documents need only be submitted with the first supply of spare parts (para 74). The reasons given for this approach—which are flanked by thought-provoking references to the competition law rules applicable to the distribution of vehicles and their parts (not to be discussed in this post)—can be summarised as follows (see paras 42 and ff):
(1) AG Campos considers that the possibility to use a direct reference to branded products ‘or equivalent’ changes the contours of the technical verification to be undertaken by the contracting authority. The rules requiring pre-award verification are justified by the uncertainty or indetermination derived from the discretion conferred to the contracting authority in the way it can set technical specifications (eg by performance requirements alone, or mixed with technical standards). In contrast, “[w]hat explains the singular mention of a trademark, a patent or similar figures (always with the addition of their ‘equivalents’) is that the space of indetermination disappears. When, for example, it is only possible to supply spare parts for vehicles corresponding to a single brand …, or their equivalents, the contracting authority has already chosen to make "a sufficiently precise and intelligible description of the object of the contract". This is the key difference with respect to paragraphs 3 and 4 of Article 34 of Directive 2004/17, which makes it possible to deal disparately with the requirements on certificates of equivalence” (AGO C-14/17, para 43, own translation from Spanish). In other words, the reference to the brand ‘or equivalent’ would have made the technical specifications so precise that no verification of technical compliance would be necessary prior to the award of the contract.
In my view, this is a functionally and logically untenable position. Given that the use of a reference to branded products is only acceptable “on an exceptional basis, where a sufficiently precise and intelligible description of the subject-matter of the contract pursuant to paragraphs 3 and 4 is not possible”, the recourse to the brand can only be considered as short-hand or a proxy for what are otherwise insufficiently precise or inintelligible technical descriptions of the goods to be supplied. This cannot be seen as excluding the need to assess technical equivalence, but simply as setting the technical benchmark against which such verification needs to be carried out—for otherwise, how could the contracting authority make sure that the supplies of anyone by the OEM meet the requirements?
(2) AG Campos also considers that there is a clash of public and private interests that excludes a requirement of unavoidable pre-award verification of technical compliance. Or, in other words, “[i]t is of course legitimate to have the concern not to frustrate the success of the procedure, which could happen if the contracting authority that had not previously required [the equivalence certificates] would find, in the end, that the successful tenderer is not in a position to prove the equivalence of the pieces … That aspiration, however, cannot supersede the essential principles of public procurement, in particular, the need to guarantee bidders have equal access and are not confronted with ‘unjustified obstacles to the opening of public contracts to competition’” (AGO C-14/17, paras 48-49, own translation from Spanish).
This clash of interests between the contracting authority’s interest in carrying out sound pre-award technical compliance verification and the tenderers’ interest in being allowed access to the tender is constructed on the assumption that, for a supplier to be able to participate in a tender requiring the supply of original or equivalent spare parts, it would need to have individualised certificates for each and every one of the spare parts to be supplied (in the case at hand, over 2,000 parts). This would indeed give an advantage to the OEM manufacturer, which is of course under no need to certify compliance with its own technical standards.
However, this seems like an extremely rigid approach to technical compliance verification through documentation, which is only explained by the conflation of qualitative selection and technical verification carried out in the next set of reasons. A contracting authority could have taken a proportionate approach eg by requiring the submission of samples with the tender, together with a certificate of equivalence of the sample parts or sufficient technical information about the sample parts as to demonstrate that equivalence of the contractual supplies would be achieved. That would allow for a non-restrictive design of the tender procedure not requiring the award of the contract without carrying out sufficient verification of technical compliance.
(3) As AG Campos explains in his Opinion (see paras 57 and ff), in the case at hand, the contracting authority was able to award the contract without the need to receive documentation attesting technical equivalence because it had carried out an unduly restrictive qualitative selection by requiring that tenderers demonstrated experience in supplying a high value of spare parts of the named brand or equivalent in the previous three years. Indeed, he considers that “[p]rocurement documentation drawn up in those terms is restrictive, since it circumscribes the circle of recipients to those who have already manufactured spare parts of the [named] brand, whether original or equivalent, which excludes the participation of other manufacturers … the procuring entity, which had already imposed this rigorous conditions, could reasonably rely on them as criteria to assess the technical standing of the tenderers, without having to require them, in addition, to initially provide the certificates of equivalence of the 2,195 pieces referred to in the supply contract” (AGO C-14/17, para 60, own translation from Spanish).
In my view, this determines the existence not of one, but two, breaches of EU public procurement law. First, because the qualitative selection criteria are indeed too narrow and exclude the possibility for other OEMs or other ‘generic spare parts’ manufacturers to tender for the supply of pieces equivalent to the specific named brand on the basis of technical capability and previous experience in delivering original or equivalent pieces of other named brands (or OEMs). Second and on an alternative understanding of the facts, because in VAR the contracting authority would not have actually waived its obligation to carry out pre-award technical compliance certification by accepting certificates with the first supplies, but it would rather have carried out the verification at qualitative selection stage—which does not seem in line with the distinction between qualitative selection and award criteria according to Lianakis (C-532/06, EU:C:2008:40). Indeed, from a functional perspective, it seemed clear that in VAR the contracting authority screened potential suppliers on the basis of their ability to meet the particular technical specifications of the supplies it required, rather than on the basis of general technical capabilities to produce original or equivalent spare parts for buses, trolleybuses and tramways.
By taking the (inadvertent?) position that ‘two wrongs make a right’, AG Campos may have missed an additional important point. In practice, his position would allow contracting authorities to include requirements in the tender documentation that they have no intention of verifying prior to the award of the contract. This runs functionally contrary to the precedent of EVN and Wienstrom. There, the CJEU clearly established that “where a contracting authority lays down an award criterion indicating that it neither intends, nor is able, to verify the accuracy of the information supplied by the tenderers, it infringes the principle of equal treatment, because such a criterion does not ensure the transparency and objectivity of the tender procedure” (C-448/01, para 51). The difficulty here is not that the information cannot be verified at all, but that the information cannot be verified during the tender procedure—which in my view is a logical implication of the EVN and Wienstrom Judgment. Even if I would not support such an approach, this possibility for deferred verification during contractual execution could maybe only change now that contract modification is explicitly regulated in the 2014 Public Procurement Package; but any such logic would not apply to procurement covered by the 2004 Utilities Directive.
Moreover, the deferral of verification of technical compliance to contract execution and award of the contract without documentary or sample-based checks would create two undesirable effects: (i) opening up the possibility of self-certification of technical compliance by the tenderers and (ii) conflating verification of compliance with technical specifications for award purposes and quality control for contract performance purposes, which are not necessarily identical functions and certainly serve two distinct legal aims; respectively, ensuring the objectivity and probity of the award decision and ensuring compliance with contractual obligations.
On the whole, in my view, the VAR Opinion is flawed by a misconstruction of the tests and verification carried out by the contracting authority, as well as by a misunderstanding of the technical simplification expected to derive from the exceptional recourse to branded ‘or equivalent’ supplies. As a matter of principle, contracting authorities should not be allowed to award contracts without carrying out sound checks on technical compliance. They should also not be allowed to defer them to contract execution without more. Contracting authorities should also not be allowed to use technical specifications as qualitative selection criteria due to the artificial narrowing of competition that involves (as clearly stressed, but not thoroughly analysed, by AG Campos in his Opinion).
Therefore, I would argue for the CJEU not to follow AG Campos on this occasion and rather clarify that (i) technical compliance cannot be deferred beyond the award of the contract, regardless of the use of references to branded ‘or equivalent’ products, and (ii) it is for the national court to determine whether the rules on technical specifications and qualitative selection were infringed in the design of the procedure in the case at hand. Otherwise, if the CJEU decided to follow the VAR Opinion, its case law would continue to add internal inconsistencies and unnecessary complexity in this already difficult area of procurement regulation.
Tags public procurement, branded products, or equivalent, technical specifications, compliance verification, technical checks, contract execution, equal treatment, original equipment manufacturer, AG Campos, VAR, C-14/17, EU:C:2018:135, directive 2004/17
I have just read L Bornico & I Walden, 'Ensuring Competition in the Clouds: The Role of Competition Law?' (2011) 12(2) ERA Forum 265-85 (part of the largest QMUL Cloud Legal Project) and have been, once more, surprised at the complete oversight of the public procurement rules that would have been relevant to the competition law analysis.
There are three important points to stress here. Firstly, this is nothing new, but State aid litigation based on public procurement decisions is very limited, generally unsuccessful, and likely to be 'phagocytised' by 'pure' procurement litigation [for an extended discussion, see A Sanchez Graells, 'Enforcement of State Aid Rules for Services of General Economic Interest before Public Procurement Review Bodies and Courts' (2014) 10(1) Competition Law Review 3-34].
Secondly, aggrieved competitors would have a much better shot under the applicable rules on the design of technical specifications. Indeed, it has long been the position of the ECJ, now consolidated in the applicable Directives 2004/18 (and/or 2014/24, where transposed), that '[u]nless justified by the subject-matter of the contract, technical specifications shall not refer to a specific make or source, or a particular process, or to trade marks, patents, types or a specific origin or production with the effect of favouring or eliminating certain undertakings or certain products. Such reference shall be permitted on an exceptional basis, where a sufficiently precise and intelligible description of the subject-matter of the contract ... is not possible; such reference shall be accompanied by the words "or equivalent".' (emphasis added) [art 23(8) dir 2004/18, and now art 42(4) dir 2014/24; for discussion, see S Arrowsmith, The Law of Public and Utilities Procurement. Regulation in the EU and UK, 3rd edn, vol. 1 (London, Sweet & Maxwell, 2014) 254-55 and 1068 ; and A Sanchez Graells, Public procurement and the EU competition rules (Oxford, Hart Publishing, 2011) 271-72]. Consequently, specific technological choices that excluded equivalent solutions would immediately be in breach of EU public procurement rules.
In its Judgment of 5 December 2013 in case C-561/12 Nordecon and Ramboll Eesti, the CJEU has ruled on the interpretation of Article 30(2) of Directive 2004/18 as regards the negotiation of technical elements between a contracting authority and the tenderers participating in a negotiated procedure.
The case is complicated by the fact that a more general issue concerning the (potential) obligation to exclude technically non-compliant tenders in a negotiated procedure is entangled with the limits of the negotiation authorisation provided for in Article 30(2) Directive 2004/18. In my view, by not clearly distinguishing both issues, the CJEU may have provided unnecessarily limiting guidance on the proper interpretation of Article 30(2) Directive 2004/18.
In the case at hand, the contracting authority launched a negotiated procedure for the construction of a new road. The road had to have certain technical characteristics (including, amongst others, specific width in different parts of the road) and the technical specifications did not allow for the submission of variants, which (implicitly) means that all technical requirements were mandatory (art 24 dir 2004/18) and, consequently, tenders that failed to meet the technical specifications (in full) should had to be rejected by the contracting authority.
However, the contracting authority engaged in negotiations with all tenderers, including one that had submitted a tender that did not meet the technical description of the road (it was narrower in some points). Even if, eventually, that tenderer was not awarded the contract, there were several challenges against the award decision and the case ended up before the CJEU on grounds of a potential infringement of Art 30(2) Directive 2004/18. The Court addressed it as follows:
33 [...] the referring court asks whether Article 30(2) of Directive 2004/18 allows the contracting authority to negotiate with tenderers tenders that do not comply with the mandatory requirements laid down in the technical specifications of the contract.
34 In that regard, it must be recalled that, in certain cases, Article 30(2) of Directive 2004/18 allows the negotiated procedure to be used in order to adapt the tenders submitted by the tenderers to the requirements set in the contract notice, the specifications and additional documents, if any, and to seek out the best tender.
35 According to Article 2 of Directive 2004/18, contracting authorities are to treat economic operators equally and in a non-discriminatory manner and are to act in a transparent way.
36 The Court has stated that the obligation of transparency is essentially intended to preclude any risk of favouritism or arbitrariness on the part of the contracting authority (Case C‑599/10 SAG ELV Slovensko and Others [2012] ECR I‑0000, paragraph 25).
37 Accordingly, even though the contracting authority has the power to negotiate in the context of a negotiated procedure, it is still bound to see to it that those requirements of the contract that it has made mandatory are complied with. Were that not the case, the principle that contracting authorities are to act transparently would be breached and the aim mentioned in paragraph 36 above could not be attained.
38 Moreover, allowing a tender that does not comply with the mandatory requirements to be admissible with a view to negotiations would entail the fixing of mandatory conditions in the call for tenders being deprived of useful effect and would not allow the contracting authority to negotiate with the tenderers on a basis, made up of those conditions, common to those tenderers and would not, therefore, allow it to treat them equally.
39 In the light of the foregoing considerations, the answer to the first question is that Article 30(2) of Directive 2004/18 does not allow the contracting authority to negotiate with tenderers tenders that do not comply with the mandatory requirements laid down in the technical specifications of the contract (C-561/12 at paras 33-39, emphasis added).
In my view, this is a problematic interpretation, as Article 30(2) Directive 2004/18 covers a range of cases and, at least in some of them, the interpretation provided by the CJEU nullifies Art 30(1) Directive. To be more specific, under Art 30(1)(a) Directive 2004/18, contracting authorities are allowed to resort to negotiated procedures "in the event of irregular tenders or the submission of tenders which are unacceptable [...] in response to an open or restricted procedure or a competitive dialogue insofar as the original terms of the contract are not substantially altered".
The interpretation provided by the CJEU would imply that the lack of compliance or the reason that made the tenders unacceptable could not have been of a technical nature (or, at least, could not affect a mandatory technical specification) because, in that case, even if the procedure would be formally available under Art 30(1)(a), the contracting authority could not engage in any meaningful negotiation oriented towards adapting the tenders to the requirements set in the (technical) specifications--which is precisely the purpose of Art 30(2) dir 2004/18, or one of them at least. Moreover, risks of excessive deviation from the original conditions are controllable by the last caveat in Art 30(1)(a), where it is expressly required that the original (technical?) terms of the contract are not substantially altered.
The interpretation provided by the CJEU could work when Article 30(2) is triggered by other grounds for resorting to the negotiated procedure under Art 30(1), but not for Art 30(1)(a). In my view, this derives from an excessive reliance on the principle of non-discrimination and a too rigid understanding of the need and purpose for a negotiated procedure triggered by a fundamental flaw of the initial competitive procedure (be it due to a fundamental technical flaw, excessive requirements, or any other reasons).
In my view, the CJEU could have found two alternative routes to sort out the case. Well, possibly three.
The first one, by accepting the criticisms raised as to the inadequacy of Art 30(2) Dir 2004/18 to solve this specific case--which should have led it to declare the question inadmissible and leave it at that.
The second one, to consider that the case was actually concerned with an illicit acceptance of technical variants and, consequently, a breach of Art 24 Directive 2004/18--hence sending out the clear message that, in negotiated procedures, contracting authorities still need to indicate that variants are acceptable if they want to engage in technical dialogue [except in the case of art 30(1)(a) where the tenders are inadmissible or unacceptable on technical grounds].
There would be a potential third option, ie to set out a differential interpretation of Art 30(2) depending on the ground in Art 30(1) which triggers the availability of the negotiated procedure--something that we can only do speculatively now by stressing the factual conditions that surrounded the cases [although it is not explained why the contracting authority resorted to a negotiated procedure and why it was acceptable under art 30(1) dir 2004/18, which seems duboius in the circumstances].
As a conclusion, I think that the Nordecon Judgment would actually create a very significant problem if technical negotiations were completely excluded in all cases and under all circumstances in negotiated procedures--and, particularly, where negotiations are triggered by the technical unsuitability of all the tenders received. However, this is something that may be avoided under the new Directives if an uncritical reading of Art 30(2) as interpreted in Nordecon is not carried forward to future Art 27 of the new Directive on the (rebranded) competitive procedure with negotiation.
Tags Nordecon, Slovensko, discrimiantion, negotiated procedure, non-compliant tender, public procurement, technical specifications
In times of crisis, the opportunity to achieve (short-term) savings by procuring reused or repared goods (such as refilled ink and tonner cartridges for printers and photocopiers, for instance) may have a particular appeal to public buyers facing significant budgetary constraints.
At first look, such a procurement strategy may also seem to support environmental goals (as there could be some environmental savings implied in 'reusing'), but such a claim may require further scrutiny from a life cycle costing perspective (since refilling could be conducted in more polluting conditions than the manufacturing of new products, or 'refillers' may not recycle the used cartridges once they have been used up, whereas 'original producers' may have implemented an environmental quality control system that guaranteed full collection and recycling of used cartridges). The impact of the reused products on the maintenance cost or durability of equipment (if any) should also be taken into consideration.
Also, from the perspective of drafting the technical specifications, public buyers should be careful to respect the mandate of 'technical neutrality' in the current EU rules, which would prevent them to restrict the supply to either only new or only reused supplies (cartridges, in our example) on the exclusive basis of product performance (as long as there is no clearly identifiable performance-related difference between the two types of products).
Therefore, desigining a strategy to buy reused or repared goods deserves some careful consideration on the part of the responsible procurer. The same care should be exercised if, for some reason (hopefully not only lobby efforts by 'original producers'), the public buyer decides to resort to the supply of 'original' or 'new' products only.
In that regard, I find interesting (and worrying) the Spanish Central Administrative Tribunal of Contractual Appeals (Tribunal Administrativo Central de Recursos Contractuales, ‘SCATCA’) Resolution No. 83/2012 of 30 March 2012 in case Caro Informática, S.A. v FREMAP (Supply of IT consumables). In that case, the contracting authority had excluded in the tender specifications the possibility to be supplied reused or repared IT consumables (more specifically, refilled tonner cartridges). Caro Informática (a 'refiller') challenged the tender documents on the basis that they violated the mandate of technical neutrality and ran contrary to the requirements of competition laws (for which it found support in the Spanish National Competition Commission's 'Guide on Competition and Procurement'), and that they were at odds with stated public austerity goals.
Following a very formalistic reasoning (and expressly disregarding the recommendations of the NCC's Guide as 'irrelevant to decide on the merits of the case'), SCATCA found that the contracting entity had not abused its administrative discretion in determining that only 'original' or 'new' supplies (or equivalent, sic) could be offered. It did not scrutinise the reasons behind the decision, or whether technical, life cycle or environmental considerations supported it--but rather adopted an economic reasoning that sounds protectionist of 'original manufacturers' and, actually, restrictive of competition.
In this regard, it is worth emphasising the counterintuitive logic followed by SCATCA (which seems to put itself in the position of a court faced with unfair competition rather than public procurement claims):
[... accepting the supply of reused or repared goods where the tender documents do not expressly allow for them] "would be a contradiction to the basic principles of public procurement under free competition and non-discrimination, and would place some bidders at a disadvantage, since the use of used parts for the production of goods clearly influences the cost structure thereof, which allows [reusers] to submit lower offers. Accordingly, the acceptance of tenders for goods incorporating used parts must be expressly stated in the contract documents. (SCATCA Res. No. 83/2012 at para. 6).
In my opinion, this is a bad decision in an hot area where contracting authorities must adopt difficult decisions that may have a significant impact in the market and in the environment. Therefore, it would be desirable to depart from this type of formalistic (and protectionist) analysis and to encourage public buyers to make more in-depth impact assessments of the opportunity to acquire reused or repared supplies, since that would in many cases be appropriate, and could make an important contribution to reducing the impact of the economic crisis on the actual levels of public services and administrative activity--as well as contributing to the implementation of effective green procurement goals.
Tags IT supplies, SCATCA, budgetary constraints, competition, green procurement, new products, or equivalent, public procurement, refilled ink cartridges, repared goods, reused goods, technical specifications