Errors in Public Procurement Procedures – Is It Worth Appealing?
One of the reasons why a bid may fail in a public tender process could be that the procurement procedure didn't fully follow the rules. This kind of procedural error on the part of the contracting authority can be appealed by the bidder to the Market Court.
Prior to filing an appeal, it is worth taking a hard look at whether the appeal has a realistic chance of success. Particular attention needs to be paid to what effect the error had on the bidder's position in the tender process and on the result of the process.
This is essential, because the appeal will likely fail in the Market Court if the contracting authority's error had no material effect on the result of the procurement procedure or on the appellant’s position.
In this post, we review two recent Market Court cases that illustrate this issue.
Excluded Bidder Placed Fourth
In case MAO 502/20, the contracting authority had excluded the appellant from the tender process, because the appellant had previously been an alliance partner of the contracting authority during the planning stage for city infrastructure. The contracting authority was of the opinion that, as an alliance partner, the appellant had received information on the subject of the procurement that gave it a competitive edge in the tender process.
According to the appellant, the contracting authority could not set demands for the procurement directly through the general plans that were drafted for the area during the alliance partnership. The area that was the subject of the tender process was only part of the subject of the alliance partnership, and there were several upcoming competitive procedures for the area. The risk was that if the contracting authority's decision was to stand, the appellant could be excluded from future tender processes on similar grounds.
In its decision, the Market Court stated that the appellant's bid was the most expensive of the four submitted bids. Thus, the appellant's bid could not be selected even if the appeal were upheld. The Market Court ruled that the appellant had no legal interest in the matter to obtain the Market Court's opinion on whether the contracting authority's actions were erroneous. The appeal was dismissed, and the Market Court refrained from ruling on the main issue.
Erroneous Turnover Requirement Did Not Prevent Participation in Tender Process
In case MAO 12/21, a minimum turnover requirement had been set in a competitive tender process for a real estate software development project. According to the requirement, the bidders’ turnover for the previous three financial years had to be at least one million euros per year, with at least 90% of that turnover being from customers in the Finnish real estate industry. The appellant argued that the requirement discriminated bidders and was in violation of the principle of transparency and proportionality.
In its decision, the Market Court found that the turnover requirement was discriminatory. It violated procurement regulations by favouring companies that were focused solely on the Finnish real estate industry. The requirement did not secure the opportunities of potential bidders to participate in the tender process.
However, the Market Court found that the appellant and the winning bidder had both met the minimum turnover requirement. As such, the contracting authority's error had no effect on the appellant's opportunity to participate in or on its position in the procurement procedure.
The error also did not lead to information on the public procurement not being freely available in public procurement notice channels. No claim had been made that the error would have affected the result of the procurement procedure, and the Market Court dismissed the appeal.
Who Can Appeal a Tender Process?
As a rule, only a party that participated in a public procurement procedure can appeal that procedure. In a direct award of contracts, it is enough for the appellant to show that they are a bidder operating in the relevant field of business.
Case law has also confirmed that a company operating in the relevant field of business can appeal a call for tenders for being discriminatory even if it did not participate in the tender process. However, in this case the appeal should be filed before the end of the tender period.
In decision KHO 2018:27, the Supreme Administrative Court ruled on a situation in which the appellant appealed discriminatory requirements in a call for tenders during the tender process and filed a second appeal after the procurement decision. The later appeal was based, among other things, on the technical specifications and requirements of the call for tenders having been restrictive of competition and in violation of the principle of proportionality.
The Supreme Administrative Court considered the appeal filed during the tender process, but not the one filed after the procurement decision. The Supreme Administrative Court found that the appellant was not a concerned party with respect to the latter appeal, because the appellant had not participated in the tender process and had not proven that it had attempted to participate.
If you are a bidder and notice an error in a procurement procedure, the first step is to determine what the effect of the error is on your own position in the in the tender process or on the result of the process. The procurement team here at C&S will be happy to help you decide whether appealing a tender process is justified and what chances an appeal would have of succeeding.