European Ombudsman
This complaint was treated as confidential. This document has therefore been anonymised.
1. The complaint concerns the Commission's tender procedure [...]. The complainant's company [...] submitted a proposal under the Call for tenders. On 12 March 2008, the Commission's Directorate-General for Enlargement (DG Enlargement) informed the complainant that the tender submitted by the complainant's company was not successful because it was not the most economically advantageous. The Commission indicated that the contract had been awarded to the competing company, and provided the complainant with the average scores awarded to both the complainant's company and the competing company's proposals.
2. On 7 April 2008, the complainant wrote to DG Enlargement contesting the award of the contract to the competing company. He alleged that the company was in breach of Clause 4.1 of the Instructions for Tenderers, since the key experts of the competing company were engaged in another Commission project until June 2008, although the starting date of the new contract was 1 April 2008. Clause 4.1 states that:
"Any expert who is engaged in an EC-financed project, where the input from his/her position in that contract could be required on the same dates as his/her activities under this contract must not be proposed as a key expert for this contract under any circumstances. Consequently, the dates included by a key expert in his/her statement of exclusivity and availability in your tender must not overlap with dates on which he/she is committed to work on any other contract or tender."
3. The complaint to the Ombudsman was lodged on 7 April 2008. On 21 April 2008, DG Enlargement responded to the complainant's letter, explaining that the aim of the relevant provision is to prevent a key expert from being simultaneously engaged in another Commission project, which would jeopardise the execution of both projects. The DG explained, however, that Article 4.1 "cannot be read in absolute terms", but only "in the context it applies". In the case of the competing company, it explained that the company would be fully operational from the first day and that "the start-up phase foreseen in the tender procedure would no longer be necessary. Moreover, the contract resulting from the above-mentioned tender procedure is a continuation of the ongoing [...] contract" (which was being executed by the competing company at the time).
4. On 8 May 2008, the complainant sent a further letter to DG Enlargement requesting the annulment of the tender procedure. On 5 June 2009, the Commission answered, repeating that the above-mentioned provision cannot be read in absolute terms.
5. In his complaint to the Ombudsman, the complainant expressed his dissatisfaction with the Commission's reply.
6. On 23 October 2008, the Ombudsman opened an inquiry into the following allegation and claim:
The Commission wrongly allowed one competing bidder [...] not to respect Clause 4.1 of the Instructions to Tenderers.
The Commission should reopen the tender procedure.
7. In the opening letter to the Commission, the Ombudsman quoted the relevant provision. He noted that the first part of the provision appeared to contain the following elements:
(a) Any expert who is engaged in an EC-financed project,
(b) where the input from his/her position in that contract could be required on the same dates as his/her activities under this contract,
(c) must not be proposed as a key expert for this contract under any circumstances.
8. The Ombudsman also asked the Commission to provide, in its opinion, a reply to the following questions:
(a) Did the competing company propose experts who were engaged in an EC-financed project?
(b) If so, were those experts proposed as key experts?
(c) Could the experts' input in the project referred to in (a) above be required on the same dates as their activities under the contract subject to the tender here in dispute, and specifically during the start-up phase foreseen in the tender?
9. In addition, the Ombudsman quoted the following extract from the Commission's letter to the complainant, dated 5 June 2009:
"Let me also refer to the statement made in my previous letter, namely that the applicable provision cannot be read in absolute terms, but in the context in which it applies. This is not to allow us to freely interpret the rules we set ourselves, but to ensure that none of the bidders would be disadvantaged due to particular situations in which they might find themselves at the moment of the competition and for whom a strictly formalistic application of these rules would result in unfair treatment."
10. The Commission was asked to:
(a) explain what it meant by "particular situations";
(b) explain what it meant by "unfair treatment";
(c) explain what it meant by "strictly formalistic application" of the rule; and
(d) provide information on whether, and if so how, the Commission enabled tenderers in this case to be aware that the application of the rules would not be "strictly formalistic".
11. Finally, the Ombudsman asked the Commission to provide a copy of the tender and the Instructions for Tenderers.
12. The Commission submitted its opinion to the Ombudsman on 5 February 2009, attaching a copy of the full tender dossier as requested. On 19 February 2009, the complainant forwarded his observations to the Ombudsman concerning the Commission's opinion. In September 2009, the Ombudsman contacted the complainant regarding the possibility of proposing a friendly solution. On 12 October 2009, the Ombudsman made a proposal for a friendly solution to the Commission, which replied on 14 January 2010. The Commission's reply was sent to the complainant, who submitted its observations on 28 February 2010.
Arguments presented to the Ombudsman
13. The complainant considered that the Commission should not have awarded the contract to the competing company because it proposed experts who were already engaged in a Commission funded project. He took the view that doing so constituted a breach of the above-quoted Clause 4.1 of the Instructions for Tenderers. He further argued that this created an unfair advantage for the competing company, and that if the complainant's company had decided to follow the same course of conduct, it could have proposed the same experts as the competing company and thus won the contract.
14. The complainant also stated that it was unfair of the Commission to effectively foresee flexibility in the rules for the competing company, as their current contractor, but not for the other candidates.
15. In its opinion, written in response to the Ombudsman's questions, the Commission agreed that the competing company had proposed experts that were already engaged under a Commission funded contract. However, it argued that the competing company was not in breach of Clause 4.1 because the purpose of this rule was to ensure that key experts are not already engaged under another different Commission funded contract. As the competing company's experts were engaged under the setup contract of the [...] project, and the two contracts concerned the same project, this provision was not relevant to them. If the Commission had interpreted Clause 4.1 in absolute terms, this would have been unfair towards the competing company.
16. The Commission thus submitted that the context of the [...] project should be taken into account. Since the competing company was the current contractor for the [...] project, the setup phase foreseen under the new contract would no longer be necessary, since the competing company would be ready to work on the project immediately. Moreover, the end of Clause 4.1 reads as follows:
"Each key-expert must also undertake to be available, able and willing to work for all the period foreseen for his/her input during the implementation of the contract as indicated in the Terms of Reference and/or in the Organisation and Methodology."
17. The Commission considered that the competing company did not breach Clause 4.1 because the key-experts in question were available at all times to work on the [...] project. It went on to explain, in its opinion, that [...] is an ongoing project and that the tender had been organised for a technical assistance contract, which is merely "a tool to help implement an ongoing instrument." Under the Financial Regulation, the Commission is obliged to organise new tender procedures for the external service provider on a regular basis. In order to ensure the smooth continuity of the project, a start-up phase was foreseen, in the event a new contractor was to be selected. For the competing company, no start-up phase was necessary. The Commission pointed out that this enabled it to save money.
18. The Commission further explained that the fact that a start-up phase was foreseen demonstrates that the tender procedure was fair and that the Commission did not favour the competing company.
19. The Commission also stated that Clause 4.1 should be read in conjunction with the surrounding paragraphs. Paragraph 4 states that:
"Failure to respect the requirements in clauses 4.1, 4.2 and 8 will constitute a formal error and may result in the rejection of the tender." (emphasis added)
20. The Commission, therefore, argued that, even if the competing company were in violation of Clause 4.1, the Commission nevertheless had the discretion to accept the tender.
21. Finally, in response to the Ombudsman's question whether candidates to the tender were informed that the interpretation of the rules under the Instructions for Tenderers would not be "strictly formalistic", the Commission's full response was that it "fully respected the rules of the tender procedure during the whole process."
22. In his observations, the complainant pointed out that the Commission's opinion proves that the competing company did propose key experts that were already engaged under another Commission contract.
23. Furthermore, he considered that the Commission did not respond to the Ombudsman's question about whether all tenderers were informed of any flexibility in the rules.
24. The complainant also expressed his amazement at the fact that the Commission admitted that it saved money by selecting the competing company, because no start-up phase was necessary. He stated that this illustrates that the Commission had a natural tendency to prefer the competing company as its current contractor. He argued that, if the Commission had selected the complainant's company, it would have saved almost two million Euro, despite the necessity of a start-up phase.
The Ombudsman's preliminary assessment leading to a friendly solution proposal
25. In his letter to the Commission of 12 October 2009, the Ombudsman made the following proposal for a friendly solution:
Taking into account the Ombudsman's findings, the Commission could agree to organise a new and open tender at the end of the initial contract duration foreseen in Article 5.2 of the Terms of Reference[1], and hence allow other tenderers, including the complainant, to submit a tender for the second 36-month period mentioned in the said provision.
26. The Ombudsman's relevant findings were the following.
27. The Ombudsman noted that, from a purely factual point of view, it appeared to be undisputed that the competing company proposed key experts who were already engaged under another Commission funded project, and who "could be required" to work simultaneously on both contracts. It appeared equally undisputed that this was not consistent with the express wording of Clause 4.1 of the Instructions for Tenderers. However, in essence, the Commission argued that its decision to drop the start-up phase in this case in order to allow the competing company to win the tender was both fair and within its discretionary power.
28. The wording of Clause 4.1 suggested that the Commission had no discretion in the matter. According to the paragraph in question, an expert who was already engaged under another Commission funded project could not be proposed as a key-expert "under any circumstances". Clause 4.1 in itself did not provide for any exceptions to this rule, or for the specific circumstances of the tenderer to be taken into account.
29. With regard to the alleged discretion to act as it did in this case, the Clause quoted by the Commission, ("Failure to respect the requirements in clauses 4.1, 4.2 and 8 will constitute a formal error and may result in the rejection of the tender"), could not reasonably be interpreted as suggested. The purpose of this sentence was clearly not to inform tenderers that a breach of the disputed rule could have consequences depending on the Commission's free will. Rather, the aim of the wording was precisely to warn tenderers that a breach of the rule may entail the most serious of consequences, namely, a rejection of the tender. If the Commission could decide on a less serious measure to address a breach, that measure would still have to be adopted and implemented whilst respecting the basic principles of fairness, equal treatment and transparency applicable to all EU tender procedures.
30. In the present case, neither the preparation nor the conduct of the tender suggests that the above principles were respected. In particular, the Commission had not demonstrated that all tenderers were informed of the possibility to disregard the start-up phase as a way of avoiding the application of the rule in Clause 4.1[2]. Nor had it demonstrated or referred to other measures that were taken to make up for this during the tender procedure.
31. Additionally, the Commission's apparent presumption that the start-up phase could, in any case, only apply in respect to a tender from the competing company could not be of relevance when concluding that the Commission conducted an objective and impartial tender procedure. Such a presumption was factually flawed, given the entirely conceivable possibility that other tenderers could have recruited precisely those experts whose knowledge and experience would make the start-up phase unnecessary.
32. In light of the above, the Ombudsman made the preliminary finding that the tender procedure here concerned was tainted by maladministration. The Commission wrongly allowed the winning bidder (the competing company) not to respect Clause 4.1 of the Instructions to Tenderers and, by implication, thus deprived other tenderers, including the complainant, from tendering on the same terms as the competing company. The Ombudsman, furthermore, noted that the facts and events that led to this error were entirely foreseeable.
33. In light of the above, the Ombudsman concluded that, due to an error on the Commission's part, the complainant was deprived of a genuine and important opportunity to tender on equal terms.
34. In light of the above findings, the Ombudsman made the proposal for a friendly solution quoted above.
The arguments presented to the Ombudsman after his friendly solution proposal
35. The Commission rejected the Ombudsman's proposal for a friendly solution. It found that the tender procedure was carried out correctly in all respects.
36. In particular, the Commission considered that the complainant's argument regarding whether the disputed Clause 4.1 should be understood in absolute or relative terms was irrelevant. The Commission stated that it had always been aware that an overlap could not take place "under any circumstances". The Commission maintained that it had acted in compliance with the basic principles of fairness, equal treatment and transparency of the tender procedure when it decided that, if the competing company were to execute the contract, the start-up phase could be dropped, and the commencement date of the new contract could be postponed until 21 May 2008. The Commission stated that it had not decided to relinquish the start-up phase in order to allow the competing company to win the tender, or to avoid the application of the rule in Clause 4.1. Rather, its decision had been a logical consequence of the outcome of the tender procedure. It further stated that "the description of eventual consequences which would follow from a selection of a particular tenderer would go well beyond the information to be provided in the Terms of Reference".
37. The Commission also considered it crucial to recall that the very purpose of including of a start-up phase in the tender was to (a) ensure fair competition by giving companies not previously engaged in the management of the [...] scheme the time needed to build up operations and thus be able to compete on fair terms, and (b) to organise the management handover in the [...] operation from the old to a new contractor in such a way that operations would not be interrupted. The Commission stated that the purpose of introducing a start-up period commencing seven weeks prior to the end of the ongoing old contract was obviously not intended deliberately to deprive experts engaged in the management of [...] under the old contract of the opportunity to offer their services under the new contract. Such a provision would have deprived the competing company of the opportunity effectively to compete in the tender, and would obviously not have been compatible with the principles of fairness and equal treatment.
38. The Commission considered that all tenderers would have clearly understood the purpose of a start-up phase, including the complainant, who knew the [...] operation well. First, all tenderers were aware of the shortlist of potential contractors, and the list was published. Second, questions and clarifications regarding the start-up phase were dealt with during the tendering process. At no time, however, did the complainant raise any questions regarding the start-up phase. All tenderers would, therefore, have been aware that if the competing company's tender were selected, a start-up phase would not be considered necessary. It was also obvious that, if the competing company were to become the winning bidder, the Commission would take measures at the time of contracting to avoid any possible overlapping of contracts, while fully respecting the principle of equal treatment of tenderers.
39. This issue was also addressed in the competing company's tender, which contained the following statement:
"The timetable presented further above is based on the tender documents that foresee 1 April as commencement date of the contract. However, since the current contract of [the competing company] ends on 20 May 2008, the actual commencement date in case the [competing company] Consortium will be awarded the contract, would be 21 May 2008."
40. Therefore, when the competing company prepared its tender, it was aware that the purpose of the start-up phase was to allow other companies to compete on fair terms, and that experts engaged under the old contract should not be excluded from being considered in new tenders.
41. The Commission took the view that the above explanation should also have been obvious to the other tenderers, as it was to the competing company, and that it was therefore unnecessary for the Commission to provide a prior explanation to the tenderers. In the Commission's view transparency was therefore ensured.
42. The Commission also did not share the Ombudsman's view that it should have addressed the issue that there was an "entirely conceivable possibility" that other tenderers might hire experts working for the competing company.
43. On the contrary, the Commission was of the opinion that the possibility of the experts leaving the competing company to work for another tenderer was rather remote. All three key experts had been working for the competing company for a number of years, one of them for 25 years. It was, therefore, highly unlikely that these experts would have agreed to leave their current employer.
44. Moreover, the second-placed tenderer actually proposed an expert team which received a higher score in the evaluation than the team proposed by the competing company. The competing company did not, therefore, win the tender because of the superior quality of its team of experts.
45. The Ombudsman stated that it was entirely conceivable that other tenderers could have recruited precisely those experts whose knowledge and experience would make the start-up phase unnecessary. However, it needs to be noted that whether or not a start-up phase was required, did not depend on the involvement of the three key experts. As already mentioned above, the purpose of the start-up phase was, among other things, to build up operations, recruit approximately 20 members of staff, provide training for the IT applications, set up facilities and hand over the management of the scheme from the old to a new contractor at all levels, and not only at the level of the key-experts.
46. For the reasons explained above, the Commission took the view that no maladministration occurred during tender procedure [...], and that the basic principles applicable to all EU tender procedures were respected.
47. The Commission concluded that there were no risks at any time that Clause 4.1 of the Instruction for Tenderers would be breached, and that no breach of this provision actually occurred.
48. Furthermore, the Commission concluded that it was not reasonable to expect that the Commission should have informed all the tenderers that the start-up phase could be waived, and that the commencement date of the contract could be postponed if a winning bidder did not require a start-up phase.
49. However, the Commission stated that, when inviting future tenders for projects which are the continuation of previous identical projects where a start-up phase was necessary, it would take care to word the Instructions for Tenderers and the Terms of Reference in such a way that there could be no doubt as to their meaning.
50. The Commission stated that it intends to maintain its flexible approach when making decisions on extensions based on operational considerations. In particular, the Commission did not rule out the possibility that the overall duration of the contract here concerned, following an extension, would be considerably shorter than six years.
51. The complainant submitted his observations on the Commission's reply. His comments are summarised below.
52. As regards the disputed Clause 4.1, the complainant believes that the Commission interprets this clause to be saying that its purpose is to ensure that all the key experts proposed will be available for the overall period of implementation, and that the risk of possible double invoicing under two different contracts will be avoided. For the complainant, however, the meaning of this clause is very clear and not subject to interpretation, since it states that no exception can be made "under any circumstances". Therefore, the complainant reads the clause as meaning that, in line with the principles of fairness, equal treatment and transparency, a company which has an existing contract cannot propose experts engaged under that contract to be engaged in positions as key experts under a new contract. Experts could, however, be proposed as non-key experts, so as to allow fair competition among experts. For this reason, the complainant did not, therefore, propose experts engaged under previous contracts. The complainant considered that the competing company had made a mistake in proposing experts engaged under its past project, and that the Commission had accepted this mistake.
53. The complainant considers that his company was unfairly treated, and he felt that this should be corrected.
54. Before submitting his suggestions as to how the unfair treatment could be corrected, the complainant commented on some of the specific points made by the Commission.
55. The Commission wrote that "[t]he purpose of introducing a start-up period commencing seven weeks prior to the expiration of the ongoing old contract was obviously not to deprive experts engaged in the management of [...] under the 'old contract' of the opportunity to offer their services under the ' new contract'. The latter would have deprived [the competing company] of the opportunity to effectively compete in the tender, and would evidently not have been compatible with principles of fairness and equal treatment." The Commission recognises that it did not want to deprive experts engaged under the old contract of the opportunity to be engaged under the new one. Indirectly, it also indicated that it considered engaging experts from the old contract to work under the new one as a positive step. This understanding of its statement is confirmed by the word 'effectively' in the last sentence, which indicates that, by proposing in the new tender, experts engaged under the ongoing contract, the competing company would be able to compete more successfully against competing tenderers.
56. It should be noted that, as the complainant pointed out, the competing company would not have been prevented from competing in the tender, but it would simply have been on the same footing as all other competitors in terms of the experts it would be able to propose.
57. With regard to the competing company's manner of proceeding, quoted by the Commission in paragraph 39 above, it is odd that the competing company should declare that if it were to be awarded the contract, the actual commencement date would be 21 May 2008. The commencement date was clearly stipulated in the Terms of Reference, and could not be altered, and certainly not unilaterally by the tenderer. As no "variants" were allowed, this could also have been an additional reason for excluding the competing company from the tendering procedure. The postponed starting date would have enabled the competing company to adjust its calculations and budget accordingly. The competing company's offer was much more expensive than the complainant's, but the competing company knew that if it won the contract, it would be able to make significant savings (for instance, by not having to buy new material/equipment), and that by starting at a slightly later date, it would also be able to reduce its budget.
58. Paragraph 41 above outlines the position taken by the Commission, namely, that when it considers that something is obvious, it assumes that it should also be obvious to others, and that when things are obvious, they are transparent. This is not a credible way of reasoning.
59. As regards the Commission's statements in paragraphs 42 and 43, it should be pointed out that there were approximately fifty experts engaged under the old contract. There was, therefore, a high probability that other tenderers might wish to propose someone from the competing company's team, even if they were engaged under the old contract with the competing company.
60. The complainant finally proposed ways in which the Commission could make amends for its unfair treatment of tenderers other than the competing company. First, it maintained that the Ombudsman's proposal for a friendly solution remained appropriate. Second, it suggested that an agreement might be found directly between the complainant and the competing company for past and possible future contract periods.
The Ombudsman's assessment after his friendly solution proposal
61. The Commission's reply is well-structured and detailed, and contains a number of interesting points and arguments. The Ombudsman does not, however, consider that the Commission has provided any convincing additional information or arguments to rebut the Ombudsman's findings in the proposal for a friendly solution.
62. The Ombudsman notes in particular that the Commission quoted the disputed Clause 4.1 where it states that it was "all the time clear to the Commission that overlap could not take place 'under any circumstances'." The "under any circumstances" in Clause 4.1 is not, however, formulated on those terms, but concerns the tenderer's act of proposing key experts whose input would be required on the same date. The relevance of the Commission's point is therefore not clear.
63. In that same paragraph, the Commission stated "[t]he description of eventual consequences which would follow from a selection of a particular tenderer would well go beyond the information to be provided in the Terms of Reference." This 'eventual consequence' was, namely, that, in view of the fact that the competing company had an existing contract, if the competing company won the contract, the start-up phase would be dropped. This was one of the most foreseeable likely developments in this tendering procedure. Once again, the relevance of the Commission's comment is, therefore, not clear.
64. The Commission also made the point that the competing company did not actually win the tender because of the superior quality of its expert team. Again, the relevance of this point is not obvious. The present case essentially concerns the fact that other tenderers, including the complainant's company, were not informed that the start-up phase could be dropped. If they had known this, they, like the competing company, would have been able to consider proposing experts engaged under existing contracts. This would have enabled them to compete on equal terms with the competing company. If they had been able to do so, the evaluations carried out in this tender, and their corresponding results, might have been quite different.
65. With regard to the Commission's failure to provide the above-mentioned information, the Commission stated that "it was not reasonable to require that the Commission should have informed the other tenderers about the possibility of waiving the start-up phase and of delaying the commencement date of the contract in case the company being awarded the contract would not require a start-up phase". This is an interesting point of view. It is, regrettably, left unexplained in the Commission's reply.
66. It follows from the above remarks that the Ombudsman considers that the complainant's observations are not without merit.
67. With regard to the complainant's suggestions as to how to resolve this dispute, the Ombudsman notes that the complainant maintains the appropriateness of the Ombudsman's proposal for a friendly solution. This, however, has been categorically rejected by the Commission. Second, the complainant suggests that an agreement might be found directly between his company and the competing company for past and possible future contract periods. This last proposal cannot, however, be pursued with the assistance of the European Ombudsman, since his competence is strictly limited to inquiring into possible instances of maladministration on the part of the EU Administration.
68. In light of the above, and, in particular, the Commission's categorical refusal to accept that it did anything wrong, combined with several not very intelligible arguments put forward in its last reply, the Ombudsman does not consider there to be any purpose in continuing his inquiry. He therefore closes the inquiry, making a critical remark at the end of this decision.
On the basis of his inquiry into this complaint, the Ombudsman closes it with the following critical remark:
The Commission wrongly allowed the winning bidder to disregard Clause 4.1 of the Instructions to Tenderers. In so doing, other tenderers, including the complainant's company, were deprived of the right to submit a tender on the same terms as the winning bidder. That was an instance of maladministration.
The complainant and the Commission will be informed of this decision.
P. Nikiforos DIAMANDOUROS
Done in Strasbourg on 16 July 2010
[1] This Article provided that the intended commencement date of the contract was 1 April 2008, and that the period of execution for the contract would be 36 months from that date. It also provided for a possible contract extension of a further 36 months.
[2] The complainant's statement, formulated in his observations on the Commission's first opinion, that the Commission did not respond to the Ombudsman's question about whether all tenderers were informed of any flexibility in the rules was accurate.
