The EU Procurement Directives make provision for certain very limited situations where a contracting authority may award contracts without advertised competition. These are set out at Article 32 (2)-(5) of Directive 2014/24/EU (Public Sector), and Article 50 (a)-(j) of the Utilities Directive and Article 31 (4) and (5) of the Concessions Directive. Those situations may be summarised briefly as follows:
The works, supplies or services can be provided by only one economic operator because:
(a) no suitable responses received to a previously-advertised tender competition;
(b) where for uniqueness (e.g. artworks) or technical or intellectual property reasons a product or service may be provided by only one economic operator (NB – subject to very significant additional detailed qualifications);
(c) because of extreme urgency brought about by unforeseen events that are not attributable to the contracting authority.
For supply (goods) contracts where:
(a) the products are purely for research purposes;
(b) additional deliveries by an original supplier (and subject to detailed qualification);
(c) for supplies quoted and purchased on a commodity market;
(d) for purchases on exceptionally advantageous terms due to liquidation of the suppler etc.
For new works or services where:
(a) a contract is to be awarded on foot of a previously advertised design contest;
(b) the new works or services consist of the repetition of similar works or services awarded to the original contractor under an advertised competition, provided that such works or services are in conformity with a basic project for which the original contract was awarded, and, when the basic project was advertised, the extent of possible additional works or services and the conditions under which they will be awarded was made clear (and subject to additional qualifications).
The Recitals to the three Directives (which should always be read carefully if contemplating a direct award) emphasise the very limited scope of these exceptions: “In view of the detrimental effects on competition, negotiated procedures without prior publication of a contract notice should be used only in very exceptional circumstances.”
In other words, the EU legislators were conscious that permitting direct unadvertised awards could facilitate anti-competitive behaviour and so these exceptions are very tightly drawn.
Because they are exceptional grounds, they will be construed narrowly by the courts and the onus will always be on the contracting authority to justify their use.
In short, any contracting authority contemplating the use of these procedures should take considerable care, including seeking legal advice, in order to ensure that they are not caught offside in making illegal direct awards.
Logic would suggest that a prudent contracting authority, if faced with any doubt on the matter, should err on the side of caution and conduct an orthodox advertised tender process.
As explained in my previous post on the Eurotunnel case in the UK, there can be serious consequences in the event that a contracting authority is found to have made an illegal direct award, including the risk of having the contract set aside as ineffective, and/or the award of damages and/or fines.
Voluntary Ex-Ante Transparency Notices
In order to mitigate the risk of ineffectiveness in bona fide cases the EU Remedies Directives make provision for the publication of a Voluntary Ex Ante Transparency Notice which allows for a minimal degree of transparency in direct award situations.
In completing the VEAT notice it is critical that the contracting authority gives sufficient information as to the nature and full extent of the contract and its justification for direct award without OJEU advertising, and observe a minimum 14 day standstill period before the contract is awarded.
This allows economic operators the opportunity to challenge the decision of the contracting authority and either force the holding of an orthodox competition or, should the contracting authority persist with the award, enable an aggrieved party to seek to have the award set aside in court. The advantage to the contracting authority of the VEAT procedure is that the penalty of mandatory ineffectiveness does not apply in the event of a challenge to a contract awarded after the 14-day standstill period has elapsed.
Irish contracting authorities may use the etenders portal to publish VEAT notices in appropriate cases.
According to Tenders Electronic Daily, there were 7,061 VEAT Notices published across the EU 27 in 2018, of which 28 were published by contracting authorities in Ireland. (NB – this is by no means the full extent of direct awards: it appears from the data on the TED website that there were 10,762 contracts awarded across the EU by “negotiated procedure without a call for competition” and a further 5,006 by “direct award without prior publication” during 2018. It seems likely too that a significant but unknowable number of over-threshold contract awards are made throughout the EU without any form of notice being published.)
The significant volume of VEAT notices published annually has given rise to concerns of possible abuse whereby these notices are being “sneaked out” in the hope that interested market operators will not pick up on them or be able to mount a challenge within the very tight limitation period of 14 days (or 10 days in some Member-States).
The European Commission in its most recent Report on the Effectiveness of the Remedies Directives does not appear to share that concern, and the use of VEAT notices is barely mentioned in it.
Another ground for concern is where a contracting authority fails to set out clearly the true nature and extent of the contract in the VEAT Notice, a factor which recently led the English Court of Appeal to set aside as ineffective a land development contract awarded by an English local authority in the Faraday Developments case because the Court found on the facts that the VEAT notice being relied on to resist Faraday’s claim of ineffectiveness failed to give a properly detailed description of the contract and therefore was not a valid notice that could be relied on to prevent the court making a declaration of ineffectiveness.
The European Court of Justice ruling in the Fastweb case C-19/13 (cited in the Faraday case) is also significant in the context of ensuring that direct award decisions are made for bona fide reasons in the limited exceptional circumstances provided for in the Directives.
While it is useful for procurement officials to be aware of the existence of the VEAT Notice procedure which may be a legitimate option in appropriate cases, they should also be aware of the risks involved and the need for extreme care in making use of it.
Senior Procurement Consultant
This post is an exploratory discussion of procurement issues of general interest and does not purport to constitute legal advice.