Dear Sir,

On 9 October 2000, you lodged a complaint with the European Ombudsman against the European Commission which was registered under file number 1280/2000/JMA. Your complaint concerned the decision taken on 5 November 1998 by Mr Teun Botterweg, Team Leader of the Danube Programme Co-ordination Unit, on behalf of the European Commission, to reject the bid you had submitted for the production and distribution of several Danube Watch magazines.

On 21 October 2000, I received a complaint lodged by Mr P. which was registered under file number 1431/2000/JMA. Since it referred to the same subject-matter, I decided to deal with both complaints jointly.

On 16 November 2000, I forwarded the complaints to the President of the European Commission. I received the Commission's opinion on 6 February 2001, which I forwarded to both you and Mr P. with an invitation to make observations. On 29 November 2000, you wrote to me, detailing some of the allegations made in your complaint. On 30 March 2001, I received the observations on the Commission's opinion from both you and Mr P.. I requested further information from the Commission on 26 October 2001. On 4 and 12 December 2001, I received the Commission's second opinion, which I forwarded to you and to Mr P. on 8 January 2002. I received your observations on 28 January 2002. Mr P.'s observations were received in my Secretariat on 1 March 2002.

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

THE COMPLAINTS

Since the complaints submitted by both, Mr W. and Mr P., involved identical allegations and concerned the same subject-matter, their content has been described henceforth together. Only for those issues which had been singled out by one of the complainants, reference has been made to the relevant complaint.

Mr W. had been headhunted in 1994 to set up and work as the editor of a quarterly publication for the Danube Programme. The magazine's aim was to give some publicity to the programme among a wider public. The task was to be carried out in co-operation with, Mr P., who acted as the publisher.

The Environmental Programme for the Danube River Basin (hereafter the Danube Programme) was set up in the early 90s to co-ordinate environmental protection among 12 countries in the Danube basin. It operated under a large Task Force, comprising representatives of each country, together with the USA, The Netherlands, the World Bank, the Global Environment Facility (GEF), the European Commission and a number of other interested parties including prominent NGOs like the Worldwide Fund for Nature WWF). The programme co-ordination unit (PCU) was based in Vienna and enjoyed a substantial executive power. Its funding had been furnished by the European Commission's Phare Programme and GEF (an offshoot of the World Bank) which channelled its funds through the UN Development Programme (UNDP). Since GEF withdrew its financial backing of the programme, the burden fell entirely with the European Commission.

From 1994 to 1998, the complainants managed the programme's newsletter which was entitled Danube Watch. Until the end of 1996, their contact point in the PCU was Professor Bo Wingard, with whom they seemingly established an excellent working relation. The departure of Professor Wingard left a vacuum at the PCU for about nine months, when funding faltered. To keep the magazine going and thus maintain its professional image, the complainants had to subsidise it by more than $12.000, out of their own pockets. At the end of the contract, they were required to enter an international competitive tender.

In the complainants' view, their predicament began with the appointment of Mr Joachim Bendow as PCU representative. Soon after his arrival, the complainants stated that they began receiving "orders" couched in impolite language concerning the editorial content of the newsletter. Although the complainants sought to soothe relations and invited Mr Bendow to meet them, their initiatives were seemingly ignored. The complainants explained that the PCU's representative requested drastic changes in the presentation of the newsletter, and threatened to oust Mr P. unless his requests were met. As a result of this animosity towards them, the complainants noted that they had not been invited to the press conference held in October 1998 for the launch of the Danube Convention.

In view of this attitude, Mr W. wrote to Mr Bendow, criticising his behaviour and pointing out that all editorial decisions were not among Mr Bendow's responsibilities. The PCU representative subsequently forwarded the letter to UNDP, and as a result, UNDP reprimanded the complainant and requested that he co-operate with the PCU representative.

The complainants explained that, as a goodwill gesture to the Danube Programme, they launched in the magazine a painting competition for children. The initiative was paid for by the complainants. It proved to be a great success, and attracted a large number of entries. These entries came in at the time of the contract renewal in the autumn of 1998.

On 21 September 1998, the complainants were invited by Mr Botterweg, acting on behalf of the European Commission, to submit a proposal for the next stage of the contract. In response to their bid, the complainants were informed on 5 November 1998 that their proposal had not been selected "inter-alia" on grounds of price. The complainants were of the opinion that their rejection resulted from undue pressure by Mr Bendow. They also indicated that the price-based competitive nature of the tender had been concealed from them. As a result of this process, the painting competition for children which the complainants had subsidised out of their own pockets had to be cancelled.

At the time the complainants wrote to the Ombudsman, the winning firm had already put out several issues of the new newsletter, which the complainants considered to be of a very poor quality. In their view, that work had not conformed with the conditions of the tender, since for instance, the English language used in the magazine was not at the level of a native English speaker.

The complainants described their initiatives to seek redress. They referred to their contacts with Mr Peter Muccini, a British journalist, as well as with Mr Michael Howitt MEP. The inquiries that both Mr Muccini and Mr Howitt MEP carried out did not bear any fruit, in the complainants' view, due to the lack of co-operation from the Commission.

In summary, the complainants made the following allegations:

(i) the call for tenders did not respect relevant EU directives;

(ii) the rejection of their bid was unfair, arbitrary, and motivated by personal animosity towards them; and,

(iii) some of the criteria set out in the tender's terms of reference were not applied to all bidders, in particular as regards the winning bid.

THE INQUIRY

The Commission's opinion

In its opinion, the Commission first gave a general background of its role in the Danube Programme, then explained how the tender had been carried out, and concluded by addressing the allegations made by the complainants.

As regards the developments of the Danube Programme, the Commission underlined that the Danube PCU is not a Commission service. Nevertheless, it is accountable to the Commission for respecting Phare and Tacis award procedures for all contracts financed from these programmes.

The PCU started issuing a newsletter under the title Danube Watch in December 1994. The magazine was initially edited and published by the complainants under a contract with the United Nations Office for Project Services (UNOPS). Between December 1997 and October 1998, it was produced in the framework of a contract between UNOPS and Arquns Verlag. This relationship ended in a legal dispute between UNDP and the complainants.

In February 1998, the Commission concluded a Phare contract for the "Danube Project Co-ordination Unit 98/99" with the Netherlands Economic Institute (NEI). As part of the PCU activities, the contract foresaw the release of three issues of the Danube Watch newsletter during the legal duration of the contract. Taking into account the estimated cost per issue, and the available budget for this purpose, NEI decided to proceed with an informal consultation to select a consultant for the editing and publication of the newsletters. The Commission ensured that NEI's initiatives were in line with Phare rules and procedures.

The Austrian Federal Chancellery as well as the UNDP expressed their wish to finance respectively one and two additional issues of the magazine, and to take advantage of NEI's selection procedure to designate their own counterparts. For the purposes of the selection process, the project was consequently described as "Production and Distribution of maximum six quarterly Danube Watch magazines", even though the Commission only funded three of them.

On 21 September 1998, the PCU sent out four invitations to potential bidders for the submissions of offers. Two bids were received, one of them from the complainants. The assessment of the proposals was carried by an evaluation committee composed of Danube PCU staff, the UNDP-GEF project manager and an environmental expert. Their work was carried out in accordance with Phare rules, but without the direct intervention of the Commission. The evaluation committee considered that both offers were technically satisfactory, and recommended that the contract be awarded to the complainant's competitor who had proposed a considerably lower price per issue (€ 14,956) than the complainants (€ 25,900 per issue).

In its opinion, the Commission referred to the three allegations made in the complaint, namely,

(a) The call for tenders did not respect relevant EU Directives: The Commission stated that the procedure of awarding the contract through direct agreement after informal consultation was in line with the procedures applicable to awarding Phare services contracts. The September 1997 Manual on the Phare Decentralised Implementation System foresees that services of up to € 50,000 may be awarded under "Direct Agreement" procedures.

(b) The rejection of the complainants' bid was unfair, arbitrary and motivated by personal animosity towards them: In the Commission's view, this claim was not borne out by the documentary evidence. In an open letter to all members of the Danube Task Force dated 13 November 1998, the complainants had stated that they "have always been on good terms with all its members apart from Mr Bendow". Mr Bendow was only one of five members of the evaluation committee.

(c) Some of the criteria set out in the terms of reference were not applied to all bidders: The technical quality of the two bids submitted was considered satisfactory. The Commission stressed that the evaluation committee based its recommendation only on the respective financial offers.

The complainants' observations

On 29 November 2000, Mr W. sent a letter to the Ombudsman, concerning one of the allegations he had formulated. He explained that, under the terms of reference of the tender, the newsletter had to be produced in an electronic format and placed on internet. In his view, the winning bid had never fulfilled this part of the contract.

Mr W. sent his observations on 27 March 2001, whilst Mr P. forwarded his on 26 March 2001. The complainants explained that there was no documentary evidence about Mr Bendow's personal animosity. However, they questioned the Commission's assertion that the tender had been properly decided upon by a five member evaluation committee. On the basis of some personal comments from PCU members, the complainants had been led to believe that the decision had been made by Mr Bendow, aided by an assistant, and by Mr Botterweg. The complainants, however, could not prove their assertion.

As regards the procedure followed for the adjudication of the tender, the complainants pointed out that the Phare system "foresees that services of up to € 50,000 may be awarded under Direct Agreement procedures". Since the contract was for six issues of the Danube Watch, the value of the contract could not be within the stated limit. As the winning bid had proposed a figure of € 14,956 per issue, the total amount of the contract would be € 89,736. Furthermore, they noted that no reference had been made by the Commission to the fact that Mr Botterweg's letter of 5 November 1998, indicated that their bid had been less successful than the winning one on the basis "inter-alia" of its financial offer.

The complainants insisted that some of the conditions set out in the tender had not been respected by the winning bid, namely the English skills of the editor, and the production of a website for the magazine. They felt disappointed by the lack of any reference to their exceptional good will and conscientiousness to the Danube Programme.

FURTHER INQUIRIES

In the light of the observations submitted by the complainants, the Ombudsman wrote to the Commission on 26 October 2001. In his letter, the Ombudsman requested further comments from the Commission on the complainants' observations, in particular as regards the number of participants in the evaluation committee, the possible disregard of the Phare rules in the tender procedure, and the alleged failure of the winning bid to comply with some of the criteria set out in the tender.

On 1 November 2001, Mr W. wrote to the Ombudsman expressing his concern about the limited scope of the Ombudsman's request to the Commission. In his view, the letter had not pressed the Commission to respond to all his concerns. The reply from the Ombudsman on 8 January 2002, included the Commission's opinion and pointed out that the aspects of the complaint for which further information had been requested, corresponded to the elements of the case which appeared most relevant to establish whether or not the institution had acted properly. The Ombudsman added that this first analysis of the case should not preclude a wider assessment once all necessary information on the complaint had been gathered.

The Commission’s second opinion

In its second opinion, the Commission addressed each of the allegations made by the complainants as set out by the Ombudsman. It also referred to some other aspects of the problem mentioned in the complaint.

As regards the assessment of the evaluation committee, the Commission considered that the complainants had not shown any evidence which might question the facts recorded in the evaluation report, but had simply put forward informal comments from former PCU's members. The institution explained that the two offers in the tender were deemed satisfactory from a technical point of view. Consequently, the evaluation committee recommended that the contract be awarded to the firm that had submitted the cheapest offer. The Commission underlined that the final selection had been carried out on a price basis, and thus regretted the use of the words "inter-alia" in Mr Botterweg's letter of 5 November 1998.

The Commission endorsed the use of a direct agreement procedure by the evaluation committee. It added that the decision could not have been influenced by the personal preferences of any of the members of the evaluation committee, since only the price of the offer was taken into account. The Commission explained that the direct agreement procedure makes it impossible to hold subsequent rounds of price negotiations with bidders that have met the compliance criterion.

The terms of reference of Phare contract no. 98-0019 for the "Danube Project Co-ordination Unit 98/99" concluded with the Netherlands Economic Institute (NEI) in February 1998 included the release of only 3 issues of the Danube Watch newsletter in addition to other issues that would be financed by UNDP. The Commission stressed that only 3 issues of Danube Watch were financed under the Commission's contract, and therefore, the selection procedure was correct. The decision by the Austrian government and UNDP to align the selection of a producer of Danube Watch issues financed out of their own resources with the procedure used by NEI had no bearing on this assessment.

As regards the language of the editor, the Commission indicated that the Terms of Reference expressed a preference for an editor with English as mother tongue, but explicitly allowed for the bidder to present another adequate solution. The Commission added that the editor was also required to provide the magazine in electronic format as needed for the placement on the internet. In its view, this task was different from the development of a website.

The Commission also addressed other issues raised by the complainants. It explained that the institution had no information about why Danube Watch was not invited to the launch of the Danube Convention at the end of 1998. It added, however, that there was no link between the selection of another contractor and the fact that the complainants had not been invited to the press conference. As for its failure to give information related to the PCU and the tender procedure, the Commission noted that no communication had been received from Mr Muccini. In regard to the Parliamentary Question E-1631/00 made by Mr Howitt MEP, the Commission was of the view that the issues raised by the query had been adequately addressed in its reply.

The complainants’ observations on the Commission’s second opinion

In the reply to the Commission's second opinion, the complainants repeated some of the allegations made previously. They underlined that the responses given by the Commission were inadequate and unacceptable.

Although the complainants recognised that there was no hard evidence to prove their case, they believed that if former PCU members could appear before a court, their testimony would undermine the Commission's position. They emphasised the non-compliance of the winning bid with the terms of reference of the contract, most notably as regards its deficient use of English, and its failure to set up the internet version of the magazine. Mr P. noted that the PCU had asked them to include the production of a website in their offer.

THE DECISION

1 Procedure to be followed for the evaluation of the bidders

1.1 The complainants allege that the call for tenders for the provision of several issues of the Danube Watch magazine did not respect relevant EU Directives. They point out that the Phare system "foresees that services of up to € 50,000 may be awarded under Direct Agreement procedures". Since the contract was for six issues of Danube Watch, and the winning bid had proposed a figure of € 14,956 per issue, the value of the contract could not be within the stated limit. Furthermore, they indicated that the rejection letter sent to them on 5 November 1998 by the representative of the Danube Programme Co-ordination Unit (PCU), stated that their bid had been less successful than the winning tender on the basis "inter-alia" of its financial offer.

1.2 The Commission explained that in February 1998, it concluded a Phare contract for the release of 3 issues of the Danube Watch newsletter. The Austrian government and the United Nations Development Programme (UNDP) expressed their wish to finance respectively one and two issues of the magazine.

The institution explained that the Danube PCU had invited four potential bidders to the tender. Only two offers were submitted. The selection of a sub-contractor was to be carried out through informal consultation leading to a direct agreement, as foreseen in the 1997 Phare rules for services of up to € 50,000. The Commission stressed that only 3 issues of Danube Watch were to be financed under a Commission contract. In view of the total cost, the selection procedure through direct agreement was considered adequate. Consequently, the evaluation committee recommended that the contract be awarded to one of the firm which had submitted the cheapest offer. The Commission underlined that the final selection had been carried out on the basis of price, and thus that the expression "inter-alia" which had been included in the rejection letter sent to the complainants should not have been there.

1.3 As set out in Art. 2 (2) of his Statute, the mandate of the Ombudsman is limited to the activities of Community institutions or bodies. The 1998 call for tenders for the provision of several issues of the Danube Watch newsletter was the responsibility of the Danube Programme Co-ordination Unit (PCU). The Danube PCU is an inter-governmental organisation, which integrates 12 Danube countries, for the daily management of the "Environmental Programme for the Danube River Basin". It does not belong to the institutional structure of the European Union, and is not therefore a Community institution or body.

Nevertheless, the Danube PCU is accountable to the European Commission for respecting Phare and Tacis award procedures in all contracts financed with Community funds(1). The Ombudsman's inquiry therefore has been directed at establishing whether or not the European Commission acted properly when monitoring the Danube PCU's initiatives involving Community funds.

1.4 In relation to the procedure to be followed to award a contract following an invitation to tender, Community courts have held that the Commission has a broad discretion with regard to the factors to be taken into account(2). Review of the actions pertaining to a tender procedure is therefore limited to checking that the rules governing the procedure and the statement of reasons are complied with, the facts are correct and there is no manifest error of assessment or misuse of powers(3).

1.5 The procedure to be followed to award a contract following an invitation to tender in cases in which Community assistance does not exceed € 50.000, is not laid down either in the Phare Regulations(4), or in the programme's implementing rules(5).

The only description of the procedure to be followed in this type of cases is to be found in the Commission's guidelines on the implementation of the Phare programme (Manual on the Phare Decentralised Implementation System of September 1997). As laid down in its paragraph F2.4, if the supply of services is under € 50.000, the selection can be made through a direct agreement, following informal consultations. The relevant procedure is described in paragraph F2.4.1 of the Manual which states,

"Offers from at least three selected eligible suppliers are invited and the economically most advantageous offer that responds to the technical and commercial requirements is selected".

1.6 As stated in the Terms of Reference (ToR) of the tender annexed to the invitation for the production and distribution of a maximum 6 quarterly Danube Watch Magazines, Community support would only extend to 3 of these issues. Since the most inexpensive proposal was € 14,956 per issue, the entire Community contribution for this project would amount to € 44,868, and thus below the ceiling foreseen for a direct agreement (€ 50,000).

Under these circumstances, it appears therefore that the Commission acted properly when it did not object to the use a direct agreement procedure in this tender.

The Ombudsman has therefore concluded that there appears to be no maladministration as regards this aspect of the case.

1.7 The Ombudsman notes that the Commission in its opinions has apologised for the use of certain terms in the rejection letter of 5 November 1998 from Mr Botterweg, on behalf of the Danube PCU, to the complainants, in particular as regards the expression "inter-alia". In view of the fact that the institution has apologised for it, and since the letter had been sent on behalf of the Danube PCU, and therefore his author did not represent the Commission in doing so, the Ombudsman does not consider it necessary to pursue this matter further.

2. Rejection of the complainant's bid

2.1 The complainants allege that the rejection of their bid was unfair, arbitrary, and motivated by personal animosity towards them. They believe that the refusal of their bid resulted from undue pressure from Mr Bendow, who had acted as their PCU contact person since 1997. On the basis of some personal comments from PCU members, the complainants were of the opinion that the decision had been taken by Mr Bendow and his assistant. To illustrate this animosity towards them, the complainants noted that the PCU had not invited them to the press conference for the launch of the Danube Convention in October 1998.

2.2 The Commission has argued that decisions on the tender had been made by a five-member evaluation committee composed of Danube PCU staff, the UNDP-GEF project manager and an environmental expert. Mr Bendow had only been one of the members of the committee. Having considered both offers, the evaluation committee proposed to award the contract to the complainant's competitor on the grounds that it had proposed a price per issue (€ 14,956) considerably lower than the one submitted by the complainants (€ 25,900 per issue). The Commission has stated that there was no link between the selection of another contractor and the fact that the complainants had not been invited to the press conference for the launch of the Danube Convention.

2.3 As Community courts have held, review of the actions taken by the Commission in connection to tender procedures is limited to checking that the rules governing the procedure and the statement of reasons are complied with, the facts are correct and there is no manifest error of assessment or misuse of powers.

2.4 The complainants seem convinced that their bid was rejected by spurious reasons which concealed the bias of the PCU against them. No sufficient evidence has been made available in the course of the Ombudsman's inquiry, however, which might lead to conclude that the evaluation committee's decision was biased against the complainants, and thus vitiated by a manifest error or by a misuse of its powers.

In the absence of any such evidence, the Ombudsman has concluded that the Commission acted within the limits of its legal authority when monitoring the proper application of Phare rules to the tender procedure. The Ombudsman therefore finds that there is no evidence of maladministration in relation to this aspect of the case.

3. Failure of the winning bid to abide by the terms of reference

3.1 The complainants allege that the winning bid has not complied with some of the criteria set out in the terms of reference of the tender. They have underlined that their competitor neither mastered the language skills of "a native English speaker" nor set up a website for the magazine.

3.2 The Commission has explained that the evaluation committee considered that the offers submitted complied with the tender's conditions. The terms of reference expressed a preference for an editor with English as mother tongue but explicitly allowed for the bidder to present another adequate solution. They also required that the editor provide the magazine in electronic format as needed for the placement on the internet. In the Commission's view, this task was different from the development of a website.

3.3 The technical requirements applicable to the tender were included in a document entitled "Terms of Reference"(ToR) which was annexed to the invitation to offer sent by the Danube PCU to potential bidders.

As regards the language of the publication, section 8 of the ToR states that "[T]he English used in the Danube Watch shall be at the level of a native English speaker".

This provision, however, does not imply that the magazine's editor had to be a native English-speaker, since section 10 of the ToR, regarding the qualifications an experience of the bidder points out that, "[G]iven that the language requirement (see Section 8 of this ToR) calls for an editor with English as mother tongue; however, the bidder is free to present another adequate solution".

Section 3 of the ToR described the task to be performed by the editor and the publisher of the magazine. Point 7 of the editor tasks reads as follows,"[T]o provide the Danube Watch in electronic format as needed for the placement on Internet (HTML or another appropriate format as agreed)".

3.4 The Ombudsman notes that in assessing the technical quality of the two bidders, the evaluation committee concluded that both of them met the criteria laid down in the tender's terms of reference (ToR). Despite the allegations made by the complainants, no sufficient evidence has been presented in order to prove that the winning bid produced a magazine with a deficient use of the English language, or that it did not fulfil one of the tasks foreseen in the contract, namely to render the publication into an electronic format. In the absence of any such evidence, it cannot be inferred that the evaluation committee made a manifest error in regard to the qualifications of the winning bid.

In the absence of any such evidence, the Ombudsman has concluded that the Commission acted within the limits of its legal authority when monitoring the proper application of Phare rules to the tender procedure. The Ombudsman therefore finds that there is no evidence of maladministration in relation to this aspect of the case.

4. Conclusion

On the basis of the European Ombudsman’s inquires into this complaint, there appears to have been no maladministration by the European Commission.

The Ombudsman therefore closes the case.

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

Yours sincerely,

 

Jacob SÖDERMAN

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(1) As set out in Art. 44 of the European Commission's General Conditions for Service Contracts financed from Phare/Tacis Funds, "[A]ll texts of the Contract [funded through Phare/Tacis] shall be construed according to the provisions and principles of the law of the European Community".

(2) Case 56/77 Agence Européenne d'Interims v Commission [1978] ECR 2215, par. 20; Case T-19/95 Adia Interim v Commission [1996] ECR II-321, par. 49.

(3) Case T-145/98 ADT Projekt v Commission [2000] ECR II-387, par. 147.

(4) The main legal instrument governing the PHARE programme (Council Regulation (EEC) No 3906/89 of 18 December 1989 on economic aid to certain countries of central and eastern Europe [OJ 1989 L 375, p. 11], in the version thereof resulting, in particular, from Council Regulation (EEC) No 2698/90 of 17 September 1990 [OJ 1990 L 257, p.1]) only describes in Art. 7 (1) the procedure applicable to tenders in which Community funding goes beyond € 50.000:

"In the case of assistance exceeding ECU 50.000 for which the Community is the sole source of external aid, participation in invitations to tender and contracts shall be open on equal terms to all natural and legal persons of the Member States, and of the countries referred to in Article 1 [Central and Eastern Europe]"

(5) General conditions for Service Contracts Financed from Phare/Tacis Funds.