Decision of the European Ombudsman on complaint 2688/2005/PB against the European Commission

Strasbourg, 11 September 2007

Dear Mr C.,

On 8 August 2005, acting on behalf of AGRER S.A., you submitted a complaint to the European Ombudsman against the European Commission concerning the rejection of AGRER's tender for the provision of technical assistance to the "Projet Régional Solaire" in Cape Verde (Project 8 ACP ROC042 - PRS II).

On 22 September 2005, I forwarded the complaint to the President of the Commission. The Commission sent its opinion on 16 January 2006 and I forwarded it to you with an invitation to make observations, if you so wished. No observations have been received from you.

I am writing now to let you know the results of the inquiries that have been made.

THE COMPLAINT

The complaint concerned a restricted invitation to tender for a service contract funded under the 8th European Development Fund, which was decentralised to the National Authorising Officer of Cape Verde (hereinafter "the NAO"). This invitation to tender, which was launched by the NAO on 26 November 2004, concerned the provision of technical assistance to the project management of the Regional Solar Programme Phase II ("RSP II") for Cape Verde. The consultancy firm AGRER S.A. (hereafter "the complainant") was one of the seven firms that were consulted and the three that submitted tenders before the closing date of 8 February 2005. After the technical assessment, the complainant's tender as well as those of two other consultancy firms were accepted. On 17 March 2005, the file concerning the assessment of tenders for this service contract was submitted by the NAO to the European Commission Office in Praia, Cape Verde ("the Commission Office") for evaluation. This file concerned both the technical and financial assessment of the tenders. The evaluation committee approved the complainant's technical proposal and considered its financial proposal to be the most advantageous of the proposals submitted. Therefore, the NAO proposed awarding the contract to the complainant.

During the evaluation carried out by the Commission Delegation in Senegal ("the Delegation"), particularly as regards the CVs of the proposed experts, it emerged that the hydrogeological expert proposed by the complainant had been on the team that had prepared the feasibility study.

In a letter dated 18 April 2005, the Commission Office informed the NAO of this and, considering that it constituted a conflict of interest, it proposed awarding the contract to the second placed firm:

"I have received the evaluation file and the proposal by (...) AGRER.

Although the proposal (...) is the most favourable, I cannot approve it. In fact, according to information at our disposal, the hydrogeological expert proposed by (...) AGRER had participated in the feasibility study by SEMIS in the framework of this project, which is contrary to the rules of the DAO [ invitation to tender] (cf. letter of invitation (...) and the (...) ethical clauses of the contract).

In this case, the tender has to be assigned to the second placed firm whose proposal has been approved and deemed acceptable from an administrative, technical and financial point of view."(1)

In light of the above, on 11 May 2005 the NAO informed the complainant that its tender had been excluded:

"I would like to thank you for your candidature (...) However, I regret having to inform you that your proposal has been excluded by the European Commission in light of the fact that technical staff having participated in the feasibility study by SEMIS for the same project feature on the list of persons presented in your technical proposal, which could give a comparative advantage to your proposal and be contrary to the ethical clauses of the contract - Article 46.1."

The complainant filed complaints with the NAO by means of letters dated 13 and 26 May 2005.

In its complaint to the Ombudsman, the complainant alleged the following:

1. the Commission had failed to reply, in violation of the European Code of Good Administrative Behaviour, to the relevant complaint that the complainant filed in May 2005; and
2. the complainant's tender had been rejected by the Commission in violation of the provisions of Articles 33.9(2) and 34.6(3) of Annex I of Decision 3/90 of the ACP-EEC Council of Ministers of 29 March 1990(4), because, once the evaluation committee has conducted a technical evaluation and considered a technical proposal eligible, this decision cannot be altered. Further, the complainant asked the Commission to ensure a strict application of the foregoing provisions concerning EuropeAid procurement procedures for service contracts financed by the 8th EDF, and, consequently, for the award of the contract in question to the complainant.

THE INQUIRY

The Commission's opinion

By way of preliminary remark, the Commission pointed out that the preparation, negotiation and conclusion of contracts concerning external activities funded by the EDF are the sole responsibility of the contracting authorities. It further explained, however, that it, as the provider of funds, is nevertheless responsible for monitoring the proper application of the rules of procedure.

(a) Allegation that the Commission has failed to reply to the complaint filed by the complainant in May 2005

The complaint was filed with the NAO on 13 May 2005 (reference 8167/98462/RC) and supplemented by a letter dated 26 May 2005 (reference 8167/143/RC). Copies of these letters were sent by fax to the Commission on 17 and 26 May 2005 respectively.

On 30 May 2005, the Commission informed the complainant that its two faxes had been sent to the unit concerned for follow-up(5).

On 11 July 2005, the complainant sent a letter to the Commission (reference 8167/143/RC) informing it that the NAO had not yet replied.

In a letter dated 27 July 2005, the Delegation acknowledged receipt of copies of the aforementioned letters. In a letter dated 8 August 2005, the Commission informed the complainant that, in order to enable it to reach a decision on the complainant 's complaint to the NAO, it had asked the Delegation for the file. The Commission replied to the complainant by letter dated 11 October 2005, that is, following the submission of the present complaint to the Ombudsman. In its letter, the Commission essentially made the following points:

1. The complainant had argued that the ethical clauses in the General Conditions do not apply until and unless the contract has been signed.
2. However, the Commission considered that the Special Conditions containing the draft contract, and which repeat Article 46 of the ethical clauses, as well as its annexes form part of the call for tender file and cannot be ignored. The Commission also considered that, in addition and quite apart from the application of Article 46, the principle of equal participation is also applicable to the present case. The Commission explained that if the principle of equal participation were not applied, the complainant would enjoy an unfair competitive advantage.
3. It was during its examination of the file that the Commission had to conclude that the evaluation committee for the tenders had not adopted its evaluation in full knowledge of the facts relating to the expert concerned.

The Commission acknowledged that there had been a delay in its reply to the complainant's complaint filed in May 2005, and sincerely apologised to it for this. However, as the complaint concerned a decentralised project, the Commission pointed out that the delay had been caused by the need to consult various bodies, such as the NAO, the Delegation and the Commission Office . The Commission stated that it was regrettable that these consultations had taken longer than expected.

(b) Allegation that the complainant's tender was rejected by the Commission in violation of Articles 33.9 and 34.6 of Annex I of Decision 3/90 of the ACP-EEC Council of Ministers and the request for a stricter application of the contractual procedures (including the award of the contract to the complainant)

The Commission drew the Ombudsman's attention to the fact that, as the invitation to tender in question was for services, the purpose of the public opening of tenders was solely to ascertain general eligibility (two-envelope system). The expressions used by the complainant - "technical eligibility - public opening of the financial proposals - award of the contract to the lowest bidder" - relate to invitations to tender for works and supply contracts, but not to a service contract (see Article 36.1(b) of the general regulations of Decision 3/90, Annex I).

Article 36.1(c) of Annex I of Decision 3/90, which applies to service contracts, states that the most advantageous tender must take into account "inter alia, the price, the technical value of the tender, the organisation and the methodology proposed for the provision of the services, as well as the competence, independence and availability of the personnel proposed". The Commission went on to state that, "[t]herefore, it was not simply a question of automatically awarding the contract to the lowest bidder following confirmation of "technical eligibility", as is the case for works and supply contracts" (emphasis in original).

The complainant alleges that the applicable regulations, namely, Article 33.9 of Annex I of Decision 3/90, state that the delegate shall be present at the opening of tenders and shall receive a copy of each tender. It also alleges that, in accordance with Article 34.6 of Annex I of Decision 3/90, following the completion of the technical evaluation, only eligible tenders shall be evaluated financially. It further maintains that, once taken, a decision on the technical eligibility of a tender may not be reconsidered.

Under normal circumstances, the complainant's above position would certainly be correct. However, in this particular case, the Commission became aware, at a later stage, of the existence of a real, well-founded risk of a conflict of interest. This wholly justified the need to reconsider the initial decision.

What happened was that, during the examination of the documents contained in the award proposal submitted by the NAO, particularly the CVs of the proposed experts, the Commission became aware that one of the proposed experts had taken part in the feasibility study and the drafting of the terms of reference of the contract in question. The risk that this expert was aware of the terms of reference and that this fact had given the complainant an unfair advantage over the other tenderers was too high.

The applicable regulations are clear on this matter. On the one hand, the letter of invitation to tender states that:

"[a]ny firm contracting/subcontracting for the services indicated above shall, in principle, be excluded if it has contracted/subcontracted for the performance of other contracts (for works, supply, or other services) for the same project and vice-versa".

On the other hand, Article 46.3 of the Ethical Clauses states that:

"[i]n submitting their application or tender, applicants or tenderers must declare that there is no potential conflict of interests and that they have no specific link with other tenderers or other parties to the project. Should such a situation arise during performance of the contract, the contractor must immediately inform the contracting authority." (Commission's emphasis.)

The Commission noted that, notwithstanding the above provisions, the complainant "failed to mention that one of its experts had taken part in the feasibility study and the drafting of the terms of reference" (emphasis in original).

The complainant asserts that the ethics clauses reflect the General Conditions and that these only apply once a contract has been signed. Contrary to the complainant's assertion, the Commission considers that the Special Conditions containing the draft contract and its annexes are part of the invitation to tender and that tenderers must comply with them fully.

The Commission acknowledges that an error was made during the contract award procedure. The financial proposals of the tenderers chosen following the technical assessment were publicly opened in Praia on 7 March 2005. This opening should not have taken place, as there was no provision for it in the general regulations of Decision 3/90 (Article 33.7 of Annex I). However, this error does not cast doubt on the clear existence of a conflict of interest.

The complainant has requested a stricter application of the contractual procedures governing service contracts funded under the 8th European Development Fund and the award of the contract to the complainant . However, the fact that there was a conflict of interest which the complainant failed to mention justified the measures taken by the Commission and the NAO. Such an omission of information meant that neither the evaluation committee nor the NAO was able to reach a decision in full knowledge of the facts. Once this conflict of interest was discovered, the Commission recommended that the contract be awarded to the second placed firm, on the basis of respect for the principles of transparency, equality between participants, and fair competition, as well as the need to respect for other applicants.

IV. Conclusion

The Commission would like to apologise again to the complainant for the delay in responding to its complaint filed with it by letters of 13 and 26 May 2005. However, it believes that, in recommending that the complainant be excluded, it abided by the rules and the principles of equality between participants and fair competition, by which it is bound.

The complainant's observations

The Ombudsman received no observations from the complainant on the Commission's opinion.

THE DECISION

1 Preliminary remark

1.1 In its opinion, the European Commission has pointed out that the preparation, negotiation and conclusion of contracts concerning external activities funded by the European Development Fund are the sole responsibility of the contracting authorities. The Commission has also explained that, as the provider of funds, it is nevertheless responsible for monitoring the proper application of the rules of procedure. The Commission, thus, did not contest that the complaint concerned alleged instances of maladministration in its activity relating to the award of the contract, which were severable from the actions of the contracting authority in the context of the tender procedure and from the conclusion of the contract in question(6). Relatedly, the European Ombudsman also notes that the above statement made by the Commission seems to reflect the provisions of Decision 3/90 of the ACP-EEC Council of Ministers of 29 March 1990(7) ("Decision 3/90") concerning its approval of proposals for the award of tenders.

2 Alleged failure to reply to complaint

2.1 The consultancy firm AGRER S.A. alleged that the Commission had, in violation of the European Code of Good Administrative Behaviour, failed to reply to the relevant complaint that the complainant filed in May 2005.

2.2 In its opinion, the Commission enclosed a copy of the relevant response of 11 October 2005 to the complainant's above-mentioned complaint, which it sent following the Ombudsman's opening of the present inquiry. The Commission acknowledged that there had been a delay in sending this reply, and sincerely apologised to the complainant for this. The Ombudsman has not received any observations from the complainant.

2.4 In light of the above, the Ombudsman considers that the Commission took action in response to the above allegation and that no further inquiries into this part of the case are necessary.

3 Alleged violation of the relevant tender rules

3.1 The Commission rejected the complainant's tender on the grounds that a member of its technical staff who had participated in the feasibility study for the same project also featured on the list of persons presented in its proposal. In this regard, the complainant alleged that this rejection violated the provisions of Articles 33.9 and 34.6 of Annex I of Decision 3/90. The complainant argued that, once the technical evaluation has determined that a technical proposal is eligible, one cannot reconsider this decision. Further, the complainant asked for a strict application of EuropeAid procurement procedures for service contracts financed by the 8th European Development Fund, and, consequently, for the award of the contract in question to it.

Articles 33.9 of Annex I of Decision 3/90 provides as follows:

"The delegate shall be present at the opening of tenders, and shall receive a copy of each tender."

Article 34.6 provides that:

"Following the completion of the technical evaluation, tenders which, on the basis of Article 34(5), are technically responsive shall be evaluated financially. Tenders shall be compared in the national currency."

The complainant stated specifically, in its complaint, that:

"[t]hese rules are quite clear: once the technical evaluation has considered a technical proposal eligible, which is the case because we were officially invited to the opening of the financial tenders, one cannot reconsider this decision and the contract must be awarded to the lowest bidder".

3.2 In its opinion, the Commission rejected the complainant's above allegation. It explained that it became aware of the conflict of interest on the basis of which it did not accept the complainant's tender only at the stage of its examination of the documents contained in the award proposal submitted to it by the NAO. Moreover, it referred to provisions in the letter of invitation to tender and in the relevant ethical clauses concerning (i) the declaration of potential conflicts of interest and (ii) the exclusion of a firm contracting or subcontracting for the services in question which has contracted or subcontracted for the performance of other contracts for the same project. The Commission also made reference to the principles of transparency, equal treatment of tenderers, and fair competition. The complainant did not submit to the Ombudsman observations on the Commission's opinion.

3.3 The Ombudsman, first, notes that the complainant alleges, in essence, that, in light of Articles 33.9 and 34.6 of Annex I of Decision 3/90, the Commission was precluded ratione temporis from examining the issue of conflict of interest and from rejecting the complainant's tender, since its technical proposal had already been considered eligible. However, such a proposition does not appear to be well founded. These provisions do not state or imply that the Commission lacks the power to reject a tender that has been considered as technically admissible by the contracting authority. Relatedly, it must be noted that, under Articles 33 to 36 of Annex I of Decision 3/90, the evaluation of the tenders is conducted by the contracting authority and its assessment is submitted to the Commission's delegate for review and approval only after the completion of this evaluation. Furthermore, this evaluation includes the examination of whether the tenders conform to all the terms of the tender dossier and whether the principle of fair competition has been respected(8). Moreover, in the context of its decisions concerning the award of tenders, the Commission is bound by the principle of equal treatment of tenderers, which is a general principle of Community law(9). This principle is relevant to the issue of conflict of interest invoked by the Commission in support of its challenged decision not to accept the NAO's proposal and to reject the complainant's tender.

3.4 In light of the above, the Ombudsman considers that the complainant's allegation has not been substantiated. Therefore, he finds no corresponding instance of maladministration on the part of the Commission. Further, he does not accept the complainant's relevant claim for the award of the contract in question to it.

4 Conclusion

In respect to the complainant's allegation that, in violation of the European Code of Good Administrative Behaviour, the Commission failed to reply to the relevant complaint that the complainant filed in May 2005, the Ombudsman considers that no further inquiries into this part of the case are necessary. Moreover, the complainant's allegation that its tender had been rejected by the Commission in violation of the provisions of Articles 33.9 and 34.6 of Annex I of Decision 3/90, has not been substantiated. Therefore, the Ombudsman finds no corresponding instance of maladministration by the Commission.

The President of the Commission will also be informed of this decision.

Yours sincerely,

 

P. Nikiforos DIAMANDOUROS

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(1) Translation from French by the Ombudsman's services.

(2) "The delegate shall be present at the opening of tenders, and shall receive a copy of each tender."

(3) "Following the completion of the technical evaluation, tenders which, on the basis of Article 34(5), are technically responsive shall be evaluated financially. Tenders shall be compared in the national currency."

(4) Decision No 3/90 of the ACP-EEC Council of Ministers of 29 March 1990 adopting the general regulations, general conditions and procedural rules on conciliation and arbitration for works, supply and service contracts financed by the European Development Fund (EDF) and concerning their application, Official Journal 1990 L 382, p. 1.

(5) "(...) j'accuse réception de vos fax du 17 mai et du 26 mai, avec en annexe la lettre envoyée à Monsieur l'Ordonnateur National du FED à Praia, dans le cadre de l'appel d'offres mentionnée en objet. Je vous informe que j'ai transmis le dossier à M. Carlo Eich, chef de l'unité AIDCO/C5 "Finance, Contracts and Audit for the ACP countries", pour suivi".

(6) Cf. Case C-395/95 P Geotronics v Commission [1997] ECR I-2271, paragraph 14:

"It is clear from paragraph 8 of the contested judgment that by its letter of 10 March 1994 the Commission informed Geotronics that it rejected its tender on the ground that the equipment on offer did not originate in a Member State of the Community or a beneficiary country under the PHARE Programme. Accordingly, the contested decision, which was formally addressed to Geotronics, was taken by the Commission after it had ascertained whether or not that company's tender satisfied the conditions for obtaining Community funding set out in the invitation to tender. Even though that decision formed part of a contractual procedure which was to lead to the conclusion of a national contract, it could be severed from that context inasmuch as, first, it was adopted by the Commission in the exercise of its own powers and, secondly, it was specifically directed at an individual undertaking, which lost any chance of actually being awarded the contract simply because that act was adopted."

(7) Decision No 3/90 of the ACP-EEC Council of Ministers of 29 March 1990 adopting the general regulations, general conditions and procedural rules on conciliation and arbitration for works, supply and service contracts financed by the European Development Fund (EDF) and concerning their application, OJ 1990 L 382, p. 1.

(8) Annex I, Articles 34.2 - 34.4, of Decision 3/90.

"34.2

Prior to the detailed evaluation of tenders, the contracting authority shall determine whether each tender is substantially responsive to the requirements of the tender dossier.

34.3.

For the purpose of Article 34, a responsive tender is one which conforms to all the terms, conditions and specifications of the tender dossier without material deviation or reservation. A material deviation or reservation is one which affects the scope, quality or performance of the contract, or which, in any substantial way, is inconsistent with the tender dossier or limits the contracting authority's rights or the tenderer's obligations under the contract, and affects unfairly the competitive position of tenderers presenting responsive tenders.

34.4.

If a tender is not responsive to the tender dossier, it shall be rejected by the contracting authority, and may not subsequently be made responsive by correction or withdrawal of the deviation or reservation."

(9) See Case C-57/01 Makedoniko Metro and Michaniki [2003] ECR I-1091, paragraph 69.