The background to the complaint

1. The case concerns a contractual dispute between the complainant, an Italian company, and the European Commission.

2. On 18 August 2010, the complainant signed with the Commission two contracts, under which the complainant would deliver, install and put into use scientific instruments, and train people to use them. The beneficiary of the contracts was the Institute of Metrology of Bosnia and Herzegovina. In line with the General Conditions for supply contracts financed by the European Community or by the European Development Fund ('General Conditions'), the due date for delivery of the goods and services under the contracts was set for 16 November 2010, that is to say, 90 days after the notification of the award of the contracts.

3. Before the expiry of the deadline, on 1 September and 8 November 2010, respectively, the complainant requested an extension of the deadline because it was "facing delay in the manufacturing process due to subsequent delay in the supply chain of our suppliers. In some cases the manufacturing process took more than expected as the equipment supplied have been specifically designed and manufactured to meet the contracts technical requirements".

4. Considering that the justification put forward by the complainant was not in line with Article 20 of the General Conditions, the Commission rejected both requests and explained that the "complexity of the system should have been considered in [its] offer and cannot be accepted as unforeseeable obstruction".

5. The complainant delivered the goods covered by the two contracts on 24 February, 4 April and 31 May 2011. Following a meeting with the Project Manager and the Head of Finance, Contracts and Audit Section of the EU Delegation in Sarajevo, in a letter dated 7 July 2011, the complainant provided explanations for the delays in the delivery.

6. By letter of 27 July 2011, the contracting authority requested the complainant to liquidate the damages caused by the delay, that is to say, EUR 32 429.38 for the first contract, and EUR 34 040.80 for the second one[1]. The complainant accepted responsibility for part, but not all, of the delay. Not satisfied with the Commission's responses, it turned to the Ombudsman.

The subject matter of the inquiry

7. The Ombudsman opened an inquiry into the following allegations and claims:

Allegations:

1. The Commission wrongly rejected the complainant's request, dated 8 November 2010, for an extension of the deadline for the implementation of the contracts.

2. The Commission failed to take into consideration that the delay of 101 days in the implementation of the contracts was not due to the complainant's fault.

Claims:

1. The Commission should retroactively extend the deadline for the implementation of the contracts to 31 December 2010.

2. The Commission should not apply Article 21.1 of the General Conditions to the aforesaid delay of 101 days in the implementation of the contracts. The liquidated damages concerning the two contracts in question should be reduced by 50 %, that is to EUR 33 235.

The inquiry

8. On 10 July 2012, the Ombudsman sent a request for an opinion to the Commission. On 12 November 2012, the Commission sent its opinion. The Ombudsman received the complainant's observations on the opinion on 20 December 2012.

The Ombudsman's analysis and conclusions

Preliminary remarks

9. As a starting point, the Ombudsman considers it necessary to recall that, in accordance with the Ombudsman's well-established practice, in cases concerning contractual disputes, it is justified to limit her inquiries to examining whether the institution has provided her with a coherent and reasonable account of the legal basis for its actions, and why it believes that its view of the contractual position is justified. If that is the case, the Ombudsman will conclude that her inquiry has not revealed an instance of maladministration. This conclusion will not affect the right of the parties to have their contractual dispute examined and authoritatively settled by a court of competent jurisdiction[2]. In view of the foregoing, the Ombudsman's role in the present case is limited to examining whether the Commission's position was reasonable and fair in relation to (a) its decision not to extend the deadline and (b) its calculation of the damages to be paid by the complainant.

A. Allegation relating to the Commission's decision not to grant the requested extension and related claim

Arguments presented to the Ombudsman

10. The complainant submitted that the conditions provided by the General Conditions for granting an extension were met and should have justified the extension of the deadline because the delay was not due to its fault.

11. In its opinion, the Commission considered that the reasons put forward by the complainant for an extension did not meet the conditions provided by Article 20 of the General Conditions. The Commission noted, in particular, that the complainant invoked a delay in the "manufacturing process" and implied that this delay was due to the contract's technical requirements. In this respect, the Commission argued that as these technical requirements were set out in the tender documents and had not been modified since, the complainant should have taken into account in its offer any complexity that could result in delays. In the Commission's view, such delays fell within the complainant's scope of responsibility. Furthermore, it added that any extension granted on these grounds would have constituted an amendment of the initial tender conditions and would have given rise to unfair competition. The Commission further argued that the manufacturers were the complainant's subcontractors. According to Article 6.5 of the General Conditions[3], the contractor is responsible for the acts, defaults and negligence of its subcontractors.

12. In its observations, the complainant did not make any further comments in this respect.

The Ombudsman's assessment

13. Article 20 of the General Conditions provides for the possibility of requesting an extension of the period of the implementation of tasks and sets out that:

"The Contractor may request an extension to the period of implementation of the tasks if his implementation of the contract is delayed, or expected to be delayed, for any of the following reasons:

[...]

e) failure of the Contracting Authority to fulfil its obligation under the contract;

f) any suspension of the delivery and/or installation of the supplies which is not due to the contractor's default."

14. The Ombudsman points out that the Commission cannot consider granting an extension unless one of the reasons provided by Article 20 is validly invoked. In the present case, in both its letters requesting an extension, the main reason invoked by the complainant was related to the manufacturing process and the delays in the supply chain. Pointing out that such difficulties were related to the specific requirements described in the tender documents and were, therefore, foreseeable, the Commission refused to accept that reason as a valid one. The Commission further explained that any extension on this ground would constitute an amendment to the tender and would thus breach the principle of equal treatment.

15. The Ombudsman considers the Commission's approach to be reasonable and justified. In fact, when preparing its offer, the complainant should have taken into consideration the complexity of the technical requirements in order to foresee and address in advance the possibility of delays in the manufacturing process. In addition, the Ombudsman also shares the Commission's view on the complainant's responsibility as regards its subcontractors. Contrary to what the complainant suggested, the Ombudsman cannot agree with the complainant's view that the delays caused by the complainant's suppliers fell outside its own responsibility.

16. In light of all the foregoing, the Ombudsman takes the view that the Commission has provided a convincing and reasonable explanation of its actions and that, accordingly, the complainant's first allegation and the related claim cannot succeed.

B. Allegation relating to the calculation of damages to be paid by the complainant and related claim

Arguments presented to the Ombudsman

17. The complainant argued that the delays that had occurred resulted mainly from (i) the belated delivery by the Commission of the certificates related to VAT and the import duties exemption and (ii) the lack of instructions from the Beneficiary for the installation of the equipment. According to the complainant, the Commission failed to take proper account of the delays for which it was not responsible. In particular, it submitted that the Commission had calculated a total of 177 days of delay as follows:

- 30 days as regards VAT and Customs exemption procedure;

- 34 days as regards the renovation of the Institute building; and

- 113 days as regards the installation and training in the Bijelina location.

The complainant took the view that it could not be held responsible for 101 days of this delay. It pointed out, however, that it was willing to take responsibility for the remaining 76 days.

18. In its opinion, the Commission argued that the complainant appeared to have misunderstood its letter of 27 July 2011. The Commission explained that, in fact, it had accepted that the complainant was not responsible for the 177 days of delay in question and had already disregarded them when calculating the penalties that were due. The complainant's arguments concerning these 177 days were thus irrelevant. The Commission further explained that when it calculated the amount of liquidated damages, it took into account the explanations in the complainant's letter of 7 July 2011. It also explained that the liquidated damages would have amounted to EUR 74 410.91 and EUR 113 192.06 respectively. However, given that Article 21.1 of the General Conditions provides that such liquidated damages cannot exceed 15% of the value of the contract, their amount was reduced to EUR 32 429.38 and EUR 34 040.80 respectively. In the Commission's view, there was no justification for any further reduction, as claimed by the complainant.

19. In its observations, the complainant reiterated its view that the Commission was responsible for part of the delay that had occurred. In particular, it restated that the Commission had caused delays in the relation to the VAT and Customs exemption procedure: (a) when approving the complainant's draft exemption form; (b) when dispatching to the complainant the exemption documents; and (c) by failing to assist the complainant throughout the Customs exemption procedure. It maintained its claim to have the damages claimed reduced by 50%.

The Ombudsman's assessment

20. The Ombudsman notes that it is not disputed that the Commission was entitled to claim liquidated damages in accordance with Article 21.1 of the General Conditions, which provides as follows:

"If the contractor fails under his own responsibility to deliver any or all of the goods or perform the services within the time limits(s) specified in the contract, the Contracting Authority shall, without formal notice and without prejudice to its other remedies under the contract, be entitled, for every day which shall elapse between the expiry of the implementation period of the tasks and the actual date of completion, to liquidate damages equal to 5/1000 of the value of the undelivered supplies to a maximum of 15 % of the total value of the contract".

The complainant does not dispute this fact. It contests, however, the way the Commission calculated the sums to be paid and requested that the Commission and the Beneficiary assume responsibility for 101 days of delay.

21. The Ombudsman notes that, as the Commission rightly pointed out, the complainant misunderstood the content of the Commission's letter of 27 July 2011, and wrongly considered that the damages that it had to pay included the 177 days that the Commission had actually deducted from the delays which fell under the responsibility of the complainant. In fact, it is clear from the Commission's submissions and the annexed documents that, when calculating liquidated damages, the Commission did indeed take into consideration all of the complainant's arguments in relation to the delays and disregarded a total of 177 days in determining the length of the delay to be taken into account. In addition, in its observations, the complainant failed to comment on the information submitted by the Commission and merely reiterated that the Commission should take responsibility for some of the delays. However, that request appears to be deprived of any purpose, as the Commission has already taken into consideration that the complainant was not responsible for the delays mentioned above. Although, in its observations, the complainant appeared to insist on some delays that, in its view, were caused by the Commission (see above, paragraph 19), there is nothing in the file to suggest that these delays have not already been taken into consideration by the Commission in its initial calculations.

22. Furthermore, the Ombudsman notes that the Commission further reduced the amount that the complainant had to reimburse to 15% of the total value of the contacts. The complainant argued that the final amount should be further reduced by 50%, but did not, however, put forward any valid reasons for doing so. In light of the above, the Ombudsman takes the view that the Commission's position regarding the calculation of the damages appears to be reasonable and justified. Therefore, there has been no maladministration in relation to the complainant's second allegation. The related claim also fails.

C. Conclusion

On the basis of the inquiry into this complaint, the Ombudsman closes it with the following conclusion:

There has been no maladministration.

The complainant and the Commission will be informed of this decision.

 

Emily O'Reilly

Done in Strasbourg on 2 December 2013

---

[1] Article 21.1 of the General Conditions for supply contracts financed by the European Community or by the European Development Fund

[2] Decision closing the Ombudsman's inquiry into complaint 346/2009/(BEH)KM against the Commission, point 36.

[3] "The Contractor shall be responsible for the acts, defaults and negligence of his subcontractors and their agents or employees, as if they were the acts, defaults or negligence of the Contractor, his agents or employees. The approval by the Contracting Authority of the subcontracting of any part of the contract or of the subcontractor shall not relieve the Contractor of any of his obligations under the contract."