EPPPL 2024: Εξελίξεις στις Δημόσιες Συμβάσεις - Η Ματιά του Δικαστή

EPPPL 2024:

Report from Greece

Recent public procurement developments

-from the viewpoint of national judge

Dr. Stelios Tsevas

Lawyer at Court, PhD Public Law (University of Athens),

PgD Public Procurement (King’s College London)

Marilia Platsa

Trainee Lawyer

1. In Greece there are two kind of Courts producing public procurement case-law; The Court of Audit on the one side. The Council of State and administrative courts on the other. Earlier this year, the national Court of Audit released its Report[1] with its main findings on the precontractual control of public contracts. These findings are presented in the first chapter of this report, while at the second chapter we present an interesting concession-related case still pending before Greek administrative and judicial authorities.

A. Court of Audit Report 2022-2023

2. According to Article 98 of the Greek Constitution, the Hellenic Court of Audit is entrusted with the task of reviewing the legality of the entire awarding procedure and the corresponding draft of public contracts of high value (higher than EUR 1.700.000[2] when financing originates purely from national funds or higher than EUR 5.000.000 for contracts co-financed by European Union or awarded within the framework of the Recovery and Resilience Facility[3]). The primary objective of the audit is to safeguard fundamental principles of public procurement legislation, including transparency, non-discrimination and competition[4]. Therefore, the audit’s main scope is to detect the presence of substantive defects [in Greek: ουσιώδεις πλημμέλειες] that impede the conclusion of a controlled contract. In line with the prevailing case law of the Court of Audit,[5] a defect is considered “substantive” when its ramifications compromised the principles of transparency, competition, and the equal treatment of the tenderers. The five substantive defects identified by the Court of Audit from January 1, 2022, to June 30, 2023 are as follows:

I. Justification of exceptional procedures

3. The primary substantive defect identified by the audit was the recourse to exceptional procurement procedures without proper justification. In light of the above, the following findings have been recorded:

i. When a contracting authority invokes an urgent need, the relevant contract must be awarded without delay, as urgency cannot be used as a pretext for resorting to exceptional procurement procedures;

ii. The existence of an urgent need due to unforeseen events does not give the contracting authority the discretionary power to choose a non-competitive procedure unless it demonstrates that, under such circumstances, it could not follow competitive procedures, even with shortened deadlines;

iii. The assessment of the contracting authority's ability to conduct an open procedure is not based on an abstract estimation of what is considered a reasonable time frame, nor is it compared to previous publication procedures carried out by the same contracting authority, but rather by comparing the chronological sequence of each specific negotiation procedure without publication with the existing deadlines of publication procedures;

iv. The burden of proof that the specified conditions are met lies with the contracting authority, which is obliged to adequately and specifically justify its choice at all times and demonstrate due diligence in assessing whether each particular unforeseen circumstance warrants the application of the envisaged exception.[6]

4. A particular instance of direct award concerns a negotiated tender for the award of the contract for the study of flood protection and extreme weather events. This procedure was selected with the rationale that the geographical area covered by the study had been affected by natural disasters approximately two years before the start of the tender. The audit was negative, establishing its denial on the following reasons:

i. The subject of the award did not primarily involve works to restore problems caused by previous events, but rather the preparation of a study for the execution of infrastructure works and general planning, for the protection of the area from similar phenomena in the future;

ii. To the extent that the study favored permanent solutions, requiring a significant period of time for their implementation, the needs served by the specific contract could not inherently be considered urgent, but rather fixed and of a permanent nature;

iii. The long (over two-year) period that had elapsed between the occurrence of the extreme weather event and the award of the controversial study was, by common agreement, sufficient for the completion of any regular tender procedures that might have been followed.

II. Justification of selection criteria

5. Secondly, the selection criteria for economic and technical capability in certain procurement procedures were deemed either unsuitable for serving the intended purposes of the contracts or excessively stringent, thus acting as deterrents to the participation of a wider pool of economic operators in the respective procedures. Contracting authorities have discretionary power to require tenderers to meet specific qualitative selection criteria in order to ensure the proper execution of their contracts. It is widely known that the criteria establishing this discretion include:[7] Suitability for the exercise of a professional activity; Economic and financial standing; Technical and professional ability. All limitations to equal participation have to be put in public procurement procedures in light of the principle of proportionality. The same principle applies to selection criteria, meaning that the contracting authority has to demonstrate that the purpose of each contract   can not be achieved equally effectively with less restrictive selection criteria.[8]

6. Indicatively speaking, the Court of Audit faced a tender for the purchase of cleaning services for university buildings, where a term required the execution exclusively by the bidder -thus not allowing candidates to demonstrate that they meet the minimum requirements of financial and/or technical professional capability by invoking the capabilities of other economic operators. This term was deemed unlawful.[9] According to the Court of Audit, the tasks to be assigned did not present specificities that made it necessary for them to be provided exclusively by the contracting party, excluding the possibility of accumulating the capabilities of the bidding economic operator and a third party.

III. Justification of not splitting into lots

7. In procurement procedures characterized by reduced competition, the denial of the opportunity to participate in discrete lots may prevent from tendering small and medium-sized enterprises. The contracting authority retains the discretion not to divide the contract into lots; however, it is mandatory that this choice is justified properly in the documents accompanying the Call for Tenders. The legality of this justification is also subject to pre-contractual control by the Court of Audit. An example was a contract encompassing the collection, transportation and handling of urban solid waste and recyclable materials, where the tender did not provide for separate lots, without any reference to the reasons for the decision not to split the contract into multiple lots. According to the Court of Audit, the subject matter of the contract was conducive to such division.[10]

IV. Suitability of selection criteria

8. In public procurement procedures where the criterion for awarding the contract is the most economically advantageous offer based on price-quality ratio, selection criteria have to be suitable for highlighting the qualitative characteristics of bids. In such cases, pre-contractual control aims to check whether the selected criteria indeed contribute to identifying the characteristics and qualities of the offer, rather than the general capabilities of the tenderer. In other words, it assesses whether they allow for a comparative evaluation of the technical and other qualitative elements, as well as the level of performance of the submitted offers, and by extension, whether they are determinative of the economic value of the offer.[11] An example concerns the purchase of routine cleaning services of university buildings,[12] wherein it was deemed unlawful that the prior experience of the company's personnel and their expertise in similar tasks was not considered as an evaluation criterion for the bids. According to the assessment, the contracting authority failed to justify why factors such as the training and experience of the employed personnel ensured to such a significant extent the quality of the contract's execution, so as to be elevated to a scoring criterion for the award, given that the subject matter consisted of routine cleaning tasks and did not require strict adherence to predefined protocols and procedures -as would be required, for example, for the sterilization of an operating room.

V. Modification of concession contracts

9. Concession contracts are governed by Law 4413/2016 (A' 148), which transposes the Directive 2014/23/EU into Greek law and provides principally for their award through open and transparent competitive procedures. Exemptions to these rules apply of course, following the requirements of the said Directive. Such an exemption is the modification of concession contracts without the obligation to initiate a new procedure, under the requirements set by the Directive.[13] Issues of violation of the law regarding concession contract modification arose during the audit of a sub-concession contract of the exclusive right to use, maintain, operate, and exploit a part of a commercial port for forty (40) years.[14] The audit formulated a positive assessment[15] of the draft submitted for review under specific conditions, including the removal from the draft contract of contractual provisions that make it possible to unconditionaly modify the contract without initiating a new procurement procedure.

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B. Developments in concession contracts

10. The 1019/2024 judgement of the Greek Council of State ruled on the application of concession contracts’s law on an international closed procedure for the privatization of the majority stake of share capital of a limited liability company (hereinafter “Port S.A.”) to which the Greek State has granted the exclusive right to exploit a major greek port for a period of forty (40) years. The procedure started with a decision of an Interministerial Committee transferring the 100% of the share capital of the Port S.A. to the Hellenic Republic Asset Development Fund (hereinafter “TAIPED”).[16] Subsequently, by decision of the Board of Directors of the TAIPED, the sale and transfer of shares representing a majority stake of sixty-seven percent (67%) of the share capital of Port S.A. was approved, through an international competitive bidding process structured in two stages, with the highest price as the award criterion. After following this procedure, another –already privatized- neighbouring Port S.A. company was declared the Preferred Investor, offering a price at least double than that of the rest of the bidders. The case was brought to the Council of State by the company offering the second best price. The legal issues highlighted by the applicant revolved around (a.) a conflict of interest situation due to the participation of TAIPED in the Board of Directors of the prefered –already privatized Port S.A.- investor and (b.) the nature of the prefered offer as financially unusual, exceeding the offer of the second competitor by 100%. These shortcomings were initialy brought before the Hellenic Single Public Procurement Authority (hereinafter “HSPPA”), which rejected the appeal on the grounds of incompetency, adopting the opinion that this procedure is a privatization -not a concession. The case was finally brought before the highest administrative court of Greece, the Council of State, which decided that this awarding procedure was of a concession contract character, thus applying the public procurement procedural rules. In judging so, the Court reversed the judgement of HSPPA and sent the case back to HSPPA for their judgement on the merits.

9^th August 2024

Disclaimer: Stelios Tsevas as a lawyer was included in the legal team  handling the case that led to the 1019/2024 judgement of the Greek Council of State.