1. EU Public Procurement Law 2011: Lesson 7 – Chapter 4, The Contract Documents – Anders Birkelund Nielsen

2. 2 Where are we? Aim and principles (chapter 1) Contracting authorities (chapter 2) Contracts subject to the Procurement Directive (chapter 3) The Contract Documents (chapter 4) The Procurement Procedures (chapter 5) Selection of Participants (chapter 6) Award of Orders (chapter 7) Enforcement (chapter 8)

3. 3 The Contract Documents The contract documents form the basis of the award of any public contract: Must describe the purchase Technical, economic and legal requirements The process (for awarding the contract) itself The contract documents will most often consist of: A contract notice Specifications Procedure specifications (specifications to tenderers) Technical specifications Draft contract Etc.

4. 4 The Contract Documents C-87/94, Commission v. Belgium Facts: Open procedure regarding contract for the purchase of busses under the former Utilities Directive The economically most advantageous tender based on fixed sub-criteria, including a fixed formula regarding maintenance costs based on: the tenderers prices and estimated time consumption per part and the contracting authoritys estimate regarding need for replacement The contracting authority evaluated the tenders and prepared a recommendation for the award decision A tenderer (EMI) forwarded additional information after the deadline for submitting tenders, including a revised fuel consumption, an estimate of the need to change spare parts and several proposal for savings the contracting authority considered the information and changed the award decision Complaint: The contracting authority 1) considered the change of tender after the deadline, 2) accepted a tender that did not comply with the contract documents, and 3) considered elements that were not included in the award criteria

5. 5 The Contract Documents C-87/94, Commission v. Belgium (Wallon busses) The Court: When, as in the present case, a contracting entity opts for an open procedure [it must] set a final date for receipt of tenders, so that all tenderers have the same period after publication of the tender notice within which to prepare their tenders, and set the date, hour and place of opening tenders, which also reinforces the transparency of the procedure, since the terms of all the tenders submitted are revealed at the same time. When a contracting entity takes into account an amendment to the initial tenders of only one tenderer, it is clear that that tenderer enjoys an advantage over his competitors, which breaches the principle of the equal treatment of tenderers and impairs the transparency of the procedure.

6. 6 The Contract Documents C-87/94, Commission v. Belgium (Wallon busses) The Court: It should be recalled that […] the special conditions did not ask tenderers to indicate the frequency of spare part replacements for their buses. On the contrary, the [authority] had fixed a figure for that element in respect of each component in the table. Moreover, in […] the special conditions the [authority] had stated that a notional penalty would be applied to all tenders "in accordance with the table …". (par. 69) … when a contracting entity had laid down prescriptive requirements in the contract documents, observance of the principle of equal treatment of tenderers required that all the tenders must comply with them so as to ensure objective comparison of the tenders. (par. 70) … the requirements [the special conditions] continued to be applicable to all the tenders and those tenders had to comply with them. It must therefore be held that EMI was not entitled to "amend" the terms of its initial tenders regarding those requirements and that [the authority] was not entitled to calculate EMI' s notional penalties by reference to its new figures, which did not correspond to the prescriptive requirements of the special conditions. (par. 71) … held […] that, by awarding the contract to EMI on the basis of figures which did not correspond to the prescriptive requirements of [the special conditions] for calculating its notional penalty for maintenance costs for engine and gear box replacement, the [authority] infringed the award criteria laid down in the special conditions and also the principle of equal treatment of tenderers. (par. 74)

7. 7 The Contract Documents C-87/94, Commission v. Belgium (Wallon busses) The Court: … the cost-saving features were not amongst the award criteria adopted by the [authority] for the award of the contract. (par. 85) … the [authority] itself defined all the technical criteria using a precise formula set out under each heading […]. Accordingly, the scope of the technical criteria, whatever the wording of the headings, was restricted by the formulas used by the [authority] to define them. (par. 87) The requirement under [the Directive] for the contracting entities to state in the contract documents or in the tender notice all the criteria they intend to apply to the award, where possible in descending order of importance is intended precisely to inform potential tenderers of the features to be taken into account in identifying the economically most advantageous offer. All the tenderers are thus aware of the award criteria to be satisfied by their tenders and the relative importance of those criteria. Moreover, that requirement ensures the observance of the principles of equal treatment of tenderers and of transparency. (par. 88).. by taking into account, in its comparison of tenders […], the cost-saving features suggested by EMI without having referred to them in the contract documents or in the tender notice, by using them to offset the financial differences between the tenders in first place and those of EMI placed second and by accepting some of EMI' s tenders as a result of taking those features into account, the Kingdom of Belgium failed to fulfil its obligations under the Directive. (par. 94)

8. 8 The Contract Documents General requirements: Transparency Potential tenderers must be able to assess whether the contract is of their of interest Demands and conditions as to the competition and completion of the contract must be published The Directive calls for the publishing of a standard contract notice (article 35(1)) Publication in the supplement to the official journal of the European Union) (http://ted.europa.eu)http://ted.europa.eu All information relevant for the assessment of the tenderers qualifications or the tenders must be published When assessing tenderers and tenders, the contracting authority may only take the published conditions into account Prohibition on negotiations

9. 9 The Contract Documents General requirements: Objectivity Equal treatment, transparency and the consequent effective competition are best ensured by using objective criteria Objective = unambiguous and verifiable (e.g. turnover or price in DKK or height, length, etc.) The objectivity requirement applies to several phases of a tender procedure Especially important when determining the award criteria in which complete objectivity is not always possible (e.g. assessment of aesthetics) Also relevant in relation to other parts of the contract documents, e.g. when preparing the technical specifications (e.g. use of standards)

10. 10 The Contract Documents General requirements: Written procedures The contract documents (rules, demands etc.) must be in writing This requirement also applies to any additional information to the tenderers (e.g. Qs and As) Clear, precise and sufficient description The contract documents must contain precise information on what is to be delivered and regarding requirements, award criteria, conditions and procedures The potential tenderer must be able to determine the technical, economic and legal elements of the contract Risk considerations tenderer/contracting authority

11. 11 The Contract Documents The Danish Complaints Board for Public Procurement, decision of 5 September 2006, Joca Trading A/S v. Renosyd I/S Facts: Open procedure regarding contract for delivery of plastic containers A number of complaint issues, including the fact that the draft contract stipulated that (i) the most extensive interpretation/wording was to apply if any discrepancy arose among the contract documents, and (ii) the defendant - in case of doubt - was to decide which wording was the correct wording the defendants statements regarding quantity was inconsistent as the contract notice stipulated that app. 6,000 containers were to be delivered whereas the contract documents stipulated that up to 71,800 containers were to be delivered

12. 12 The Contract Documents The Danish Complaints Board for Public Procurement, decision of 5 September 2006, Joca Trading A/S v. Renosyd I/S The Complaints Board: According to EUs transparency principle, an exact description of the items to be delivered must be provided … The contract notice states that the total number of containers will amount to appr. 6000 as the final number depends on what the citizens choose. The contract documents state that the estimated number of containers to be delivered to the municipality of Silkeborg was 4.415. […] The contract documents state a total number of 71,800 containers corresponding to the maximum number of households that are to receive containers according to the table […]. The total number of containers that were to be delivered and the possibility for the call of the options are not stated in the description and is difficult to asses. Therefore, the Complaints Board finds that the defendant has acted in violation of the transparency principle by stating the scope of the delivery as was the case. Thus, the Complaints Board emphasize that the scope of the delivery is of great importance to the tenderers.

13. 13 The Contract Documents Description of the object of the contract: Practical point of view: The description must take into account (i) the public object, (ii) the actual demand, and (iii) the economical scope. In principle the contracting authority has a significant right to decide what is to be bought, including the right to determine the objects characteristics (quality, scope, price, etc.) E.g.: The municipality, running a school, need for cleaning, budget The municipality may choose (i) to describe how and when to clean, or (ii) how clean it has to be – and how often/where to clean, etc. Certain essential additional elements (contract requirements) must be publicized, e.g. options, special service requirements, requirements as to the qualifications of the employees on the assignment, commitment to take over employees, equipment, etc. Requirement to refer to the relevant CPV numbers in the CPV glossary (Common Procurement Vocabulary), classification system for goods, work and services

14. 14 The Contract Documents Description of the object of the contract: Competition criteria and fixed terms: The question is whether an element should be part of the award criteria (competition criterion) or should be an absolute condition for the award of the contract (fixed term) The contracting authority has the right to choose whether an element should be included in the competition However, certain elements are obvious closed conditions, e.g.: the contracts formal requirements, an obligation to take over employees or equipment, etc. Choice between a (very) detailed technical specification/no alternative tenders, or specification of (less restricting) function requirements/possibility for alternative tenders

15. 15 The contract Documents Description of the object of the contract: The contracting authoritys right to describe the object of the contract is modified by the prohibition against trade barriers and discrimination The prohibition includes (i) any kind of discrimination of producers or service providers in other member states, and (ii) any restriction that might prevent – or be a disadvantage for – the business activity exercised by a service provider in another member state or makes such activity less attractive. If elements of the contract documents have as their purpose or effect the restriction of trade between member states, they are, in principle, in violation of the Treaty unless they fulfil a number of requirements: No discrimination due to nationality Due to necessary considerations for the public Appropriate measure (to realize the object) Proportionality

16. 16 The Contract Documents Description of the object of the contract: Technical specifications (art. 23) Defined in appendix VI of the Directive Can be constituted by (i) detailed, technical specifications or (ii) functional requirements or (iii) a combination of the two E.g.: Purchase of (i) x white double coated soft paper rolls, which must be 12 centimetres wide, 75 meters per roll, perforated to be torn every 14 centimetres, the paper must be wrapped round a cardboard tube with a diameter of 5 to 6 centimetres or (ii) toilet/wiping paper or (iii) toilet/wiping paper, white and double coated Objectivity requirements The tenderers must be given equal options (art. 23(2)) MR: The specifications cannot indicate a specific product, brand, origin, production process or the like (art. 23 (8)) E: The purchase cannot be described in other manners (it is required that the expression or similar is added)

17. 17 The Contract Documents Description of the object of the contract: Technical specifications (art. 23) (continued) Standards etc. a technical specification approved by a recognized body for repeated and continuous application… Standards must be used to the widest extent possible when identifying the technical specifications (art. 23(3)) Order of preference: 1.National standards transposing European standards 2.National standards (remember: or equivalent) There is a lot of standards, e.g. INSTA 800 (cleaning – way of measuring/describing the level of cleanliness required)

18. 18 The Contract Documents Description of the object of the contract: Technical specifications (art. 23) (continued) Documentation with regards to fulfillment of technical specifications (mutual recognition): Main rule: The contracting authority decides what kind of documentation that is acceptable Exception: The contracting authority must (no matter if the purchase is described using detailed technical specifications or functional requirements) assess and evaluate a tender even though the tender does not include the required documentation … …if the tenderer in the tender to the satisfaction of the contracting authority and by any appropriate means proves that the offered solution meets the performance or functional requirements of the contracting authority

19. 19 The Contract Documents Economy The contracting authority must describe the procedure, including the award criteria (which will be described further in chapter 7) A choice between lowest price or the economically most advantageous tender Economy is not necessarily only the offered price Terms of payment (period of credit, time of payment etc.), transport and consequential expenses (fuel, service, removal etc.) The contract documents should describe these conditions/ elements if you want to take be able to take onto consideration Assessment of overall economy lowest price or the economically most advantageous tender? Price does not need to be a competition parameter (economic frame)

20. 20 The Contract Documents Draft agreement: The transparency requirement entails that potential tenderers – based on the contract documents – must be able to assess whether or not the contract is interesting Prohibition on negotiations no/small possibility of individual adjustments A draft agreement in the contract documents ensures that the frame of the tenders is established (different conditions are easily/best described in the draft agreement) delivery, payment, risk, guarantees, liquidated damages, provisions on remedies for breach of contract etc. In principle, all elements that are not open to competition should appear from the tender documents (draft agreement) The contracting authoritys preparation of the draft agreement may lead to an unfair contract risk of bad/no tenders

21. 21 The Contract Documents Variants (article 24): Background: It is assumed that the contracting authority sees the broader perspective of all the technical solution possibilities on the market and their suitability in relation to the contracting authoritys specific needs The contracting authority determines technical specifications Modification: The contracting authority assesses that there could be several suitable solutions on the market The contracting authority can allow variants (tenders that differ from the specification of requirements etc.) if … the award criteria is the economically most advantageous tender the possibility of submitting variants is stated in the tender documents, and the contracting authority determines minimum requirements for the variants in the tender documents. E.g.: The contracting authority can demand the same solution in another material

22. 22 The Contract Documents The Danish Complaints Board for Public Procurement, decision of 16 December 2004, Brunata A/S v. Aalborg Boligselskab Facts: Complaint about award of contract regarding delivery of energy and water meters for departments of different general housing organisations. Obscurity in the contract documents demand for the water meters having the counter separated from the meters Possibility of submitting variants Various other claims

23. 23 The Contract Documents The Danish Complaints Board for Public Procurement, decision of 16 December 2004, Brunata A/S v. Aalborg Boligselskab The Danish Complaints Board for Public Procurement: The mentioned requirements in the contract documents could be interpreted in different ways and the most natural way is as mentioned contrary to the contract documents requirement for the water meters being EU approved. These conditions are caused by the defendant not having formulated the demand precisely enough. As a result of the equal treatment principle, the defendants were obliged to seek technical clarification…

24. 24 The Contract Documents The Danish Complaints Board for Public Procurement, decision of 16 December 2004, Brunata A/S against Aalborg Boligselskab The Danish Complaints Board for Public Procurement: The contract documents statement of the possibility of submitting variants was misleading as the documents apparently did not aim at what is normally considered as variants, that is to say tenders referring to another service than the one specified in the contract documents. This appears from the building case description using the expression Alternative tenders covering the tender documents demands. Furthermore, it appears from the fact that it was not stated in the contract documents which minimum requirements variants should comply with. Against this background, The Danish Complaints Board assesses that the technical descriptions statement of the possibility of submitting variants being should be understood as a possibility for the tenderers to offer various energy meters and various water meters.

25. 25 The Contract Documents The Danish Complaints Board for Public Procurement, decision of 4 August 2009, Mölnlycke Health Care ApS mod Region Hovedstaden Facts: Public tender of 43 framework agreements regarding delivery of wound treatment products Complaint: The evaluation was based on a point model not included in the contract documents The contract documents did not state precisely enough what elements the contract authority would attach weight to in relation to the subcriteria functionality and quality A revision sheet expanded the tender to include another (44 th ) framework agreement not mentioned in the contract notice

26. 26 The Contract Documents The Danish Complaints Board for Public Procurement, decision of 4 August 2009, Mölnlycke Health Care ApS v. Region Hovedstaden The Danish Complaints Board for Public Procurement: Article 53 includes no direction about the contract authority – if it in the assessment of the tenders wants to apply an assessment model – describing this assessment model in the contract documents. From the equal treatment principle or the transparency principle, see article 2 of the public procurement directive, or from the EU Public Procurement it cannot be concluded that a contract authority […] has to work out and apply an assessment model, and it can neither […] be concluded that a contract authority who wants to apply an assessment model must work out this assessment model at a time early enough for the assessment model to be included in the contract documents […]. […] From the principles in article 2, there is no basis of concluding that the contract authority – besides the demands determined in article 53 – is responsible for including the assessment model in the contract documents if it has been completed […].

27. 27 The Contract Documents The Danish Complaints Board for Public Procurement, decision of 4 August 2009, Mölnlycke Health Care ApS v. Region Hovedstaden The Danish Complaints Board for Public Procurement: In the contract documents, the defendant has next to each of the 44 positions determined a number of subcriteria describing the characteristics which the defendant will attach importance to in the assessment of the offered products regarding the relevant position. However, the defendant has not stated in the contract documents which of the two subcriteria B. Functionality or C. Quality the relevant subcriteria are related to, and in this way the tenderers have not been able to conclude from the contract documents which subcriteria that were determined as subcriteria B. Functionality, and which subcriteria that were determined as subcriteria C. Quality. By this, the defendant has acted contrary to the transparency principle of the public procurement directive.

28. 28 The Contract Documents The Danish Complaints Board for Public Procurement, decision of 4 August 2009, Mölnlycke Health Care ApS v. Region Hovedstaden The Danish Complaints Board for Public Procurement: In the contract notice, the defendant has next to each of the 43 positions given a short description of the product which each of the 43 parallel tenders are related to, and this detailed description […] gives the readers of the contract notice a basis for supposing that it is a complete statement of the offered product line. Companies that sell this product which the defendant afterwards included in the parallel tenders [….] has in this way on the basis of the contract notice been able to conclude that the parallel tenders do not include this product not included in any of the other 43 positions. The defendant has in this way by including position 44 and entering into a contract hereof acted contrary to the public procurement directive.

29. 29 The Contract Documents Control questions: 1.Why do (all) tender documents have to be in writing? 2.Why are there so many requirements for the detail level in the tender documents? 3.Why is it important to include a draft agreement in the tender documents? 4.Which advantages and disadvantages are connected to the use of alternative tenders? 5.Is the contract authority allowed to apply voluntary options and/or options not included in the assessment?