Public Procurement Case Law Update - Simonsen & Weel A/S V ...

In its judgment of 17 June 2021, the Court of Justice of the European Union (the “CJEU”) found that contracting authorities are obliged to indicate at the outset the maximum estimated quantity and value of the goods and services to be supplied under a framework.

Background

This case concerned a challenge to the award of a single party framework on the basis that the contract notice had not included the estimated quantity or value of the products to be supplied under the framework. Reliance was placed on the CJEU’s 2018 judgment in case C-216/17 which found that there was an obligation under the previous procurement directive to indicate the maximum volume of supplies or services that may form the subject of subsequent contracts under a framework.

The contracting authorities maintained that the obligation to indicate a specific value in the contract notice or tender documents did not apply to framework agreements. It submitted that pursuant to Article 33(1) of Directive 2014/24/EU (the “2014 Directive”), the estimated quantities may be indicated “where appropriate” and on this basis argued that the requirement was optional. The authorities further argued that the judgment in case C-216/17 was limited to situations in which a contracting authority is acting on behalf of other contracting authorities which are not directly parties to the framework agreement, which was not the case here.

The Danish Public Contracts Appeals Board decided to stay proceedings and referred a number of preliminary questions to the CJEU. These included whether a contracting authority is obliged under the provisions of the 2014 Directive to indicate in the contract notice the maximum quantity or value of the supplies or services that may become the subject of subsequent contracts, and whether the framework agreement in question will no longer have any effect once this limit has been reached.

Decision of the CJEU

The CJEU found that in light of the provisions of the 2014 Directive and the principles of equal treatment and transparency, it cannot be accepted that a contracting authority can refrain from indicating in the invitation to tender, quantities and values of the products to be supplied under the framework agreement. In arriving at this finding, the CJEU relied upon its earlier judgment in Case C-216/17 which found that a framework agreement must, at the outset, determine the maximum volume of supplies or services that may form the subject of subsequent contracts and that once the maximum quantity is reached, the agreement will no longer have any effect.

The CJEU stressed that the indication of the estimated quantity and value to be supplied under a framework agreement is of considerable importance for a tenderer, since it is on the basis of this estimate that he will be in a position to assess his capacity to perform the obligations arising under the framework agreement.

The CJEU also addressed the question of whether the estimated and maximum values must be stated as a whole or per participating authority. The CJEU found that the indication could appear globally but commented that nothing prevents a contracting authority from setting additional requirements and subdividing the quantity or overall value estimate of the products to be supplied under the framework agreement in order to characterise the needs of the original contracting authority which intends to conclude a framework agreement and those of the original contracting authority (s) which issued the wish to participate in the framework agreement on an optional basis.

The final question addressed by the CJEU was whether a contract notice that failed to include an estimated maximum value and/or volume would result in a framework agreement being treated as awarded without prior publication of a notice and thereby open to the sanction of ineffectiveness. The CJEU found that it would be disproportionate to extend the sanction of ineffectiveness to circumstances such as the present case. The CJEU held the infringement of Article 49 of the 2014 Directive read in conjunction with the principles of equal treatment and transparency “does not reach the degree of seriousness required to apply the sanction.”

Why is this case important?

The practical effect of this case is of major significance to all contracting authorities that use or avail of frameworks. Determining the maximum quantity or value of the goods and services that will fall within the scope of a framework over its lifetime is not always an easy task, particularly in the context of a framework agreement that is open to other contracting authorities to draw-down from. Not only will a good degree of consideration need to be given to establishing a realistic and proportionate maximum value and quantity for the goods and services required, but also time will need to be spent monitoring the level of spend that occurs during the term of the framework to ensure that the maximum value indicated is not exceeded. The clear risk here is that contracting authorities will simply indicate a higher-than-expected maximum quantity or value to provide a buffer for themselves. However, such an approach could have a knock-on effect on issues such as turnover levels, and insurance requirements and could make it harder for tenderers to accurately assess the true value of the framework they are applying for.

The extent to which this decision will impact upon existing frameworks is not clear. However, it is likely to be the case that a number of frameworks currently in operation have either not specified a maximum value or have exceeded the maximum value stated thereby calling into question the validity of such frameworks. While the CJEU did refer to the possibility of modifying framework agreements, provided the modification was not substantial, this would really only present a short-term solution and a contracting authority that finds itself in this type of situation will need to establish a new framework.

Written with the assistance of Michelle Mehigan.