Decision of 23rd March 2023 (case 01235/21.8BEPRT), Portugal
Article(s) in Directive 2014/24/EU: Art. 57(4)(g) and (6); Art. 59
Topic: exclusion grounds; self-cleaning measures; consequences of the lack of prior hearing before an exclusion
Member State: PT
Court/rev. board: Supreme Administrative Court (SAC)
1. IMPLEMENTATION / RELEVANT NATIONAL LEGISLATION
Articles 55(1)(l), 55-A and 57(6) of the Portuguese Public Contracts Code (PCC)
2. FACTS
In 2020, a contracting authority started an open procedure for a contract regarding the “acquisition of digital aerophotogrammetric coverage of mainland Portugal in 2021”. The procedure was divided into different lots. During the procedure, one of the bidders argued that another bidder (a group of two economic operators), which had presented an offer for lots 1 and 2 of the tender, could not have done so, because it had allegedly incurred in the exclusion ground of the bad past performance of a previous contract, foreseen in article 55(1)(l) of the Portuguese Public Contracts Code (PCC), in transposition of article 57(4)(g) of Directive 2014/24/EU. The first question of the case was, therefore, the application (or not), in this case, of the exclusion ground of bad past performance.
The previous contract in question, in which the supposed noncompliance had occurred, coincidentally had the same object and involved the same contracting authority (although regarding the year of 2019) as the one being awarded. In that previous contract, the contracting authority had applied contractual penalties amounting to 25% of the price of the contract, claiming that the contractor had not performed the contract in due time. The bidder in question did not include in the European Single Procurement Document (ESPD) any reference to this previous situation. When confronted with these allegations, the bidder claimed he had challenged in court the decision to apply penalties in the previous contract.
The second question (or group of questions) discussed in the case regards the substance and procedure of self-cleaning, following article 57(6) of Directive 2014/24/EU, which is transposed into Portuguese Law by article 55-A of the PCC. In a first moment, when discussing the existence of the bad past performance, the contracting authority noticed that the bidder failed to indicate in the ESPD any self-cleaning measures and did not attempt to obtain further information. In reply to this position, the affected bidder claimed that he had, indeed, implemented self-cleaning measures and presented them. Considering this, the contracting authority analyzed the self-cleaning measures and eventually decided (without any further hearing of the bidder) that they were insufficient, thus excluding the bidder. This led the bidder to open another cause for complaint in the lawsuit, related to lack of a proper prior hearing: the bidder claimed that he had not been given prior hearing regarding the contracting authority’s appreciation of the self-cleaning measures.
3. JUDGMENT
Regarding the first question, the Supreme Administrative Court considered that the exclusion ground of bad past performance was applicable in this specific case. The way in which Portuguese law regulates the situations giving rise to the application of this exclusion ground is slightly different from the Directive, since it actually specifies some situations – like applying contractual penalties of a certain value – that should be considered as a sufficiently relevant breach of contract for this purpose. The wording or article 55(1)(l) PCC has raised some doubt as to whether this relevant value is 20% or 30% of the price of the contract, but recent case law of the Supreme Administrative Court has clarified that 20% is enough.
The Court also ultimately considered that the contracting authority’s assessment of the self-cleaning measures – which concluded that the measures of self-cleaning presented by the bidder were insufficient – should be upheld.
Commentary: The final outcome of the case regarding the first question (application of the “bad past performance” exclusion ground in this situation) is not surprising, given the quite high value of the contractual penalties (over 25% of the contract price), and even in light of the case law of the European Court of Justice (specifically, the ECJ decided in Meca, C-41/18, that challenging in court the decision to determine breach of contract does not automatically mean that the bidder is admitted). Since the bidder challenged the decision but did not manage to obtain interim relief to suspend the decision to apply the penalties, the exclusion ground applies, so the only possible way for the bidder to have his offer admitted was by self-cleaning.
Regarding self-cleaning, the ruling is obviously a more relevant one, since it helps define the standard of application of the rules on self-cleaning, in this case, by agreeing with the contracting authority and not lifting the exclusion ground. It is positive that even though it acknowledged the wide margin of discretion in the appreciation of self-cleaning measures, the Court did not limit itself to a formal appreciation and substantially analyzed the reasons given by the contracting authority. The main reason for the contracting authority to deny relevance to the self-cleaning measures was the fact that the bidder, which had two aircraft in the previous contract, only applied with one aircraft in the second tender. The bidder claimed that as a self-cleaning countermeasure, it had secured the commitment, by an international company, to send an aircraft in case of need. In the contracting authority’s view, the risk of malfunction of the aircraft which had caused the delays in the first contract was even more present and was not set aside by the arrangement with the international company (because it would only supplement the single aircraft). The contracting authority (followed by the Courts, both the second instance and the Supreme Court) considered that this self-cleaning measure was insufficient. The bidder also noted that, even though he had challenged the penalties, he had, in the end, paid those penalties and complied fully with its obligations (albeit in delay) in the previous contract. The contracting authority and the Courts, however, clearly dismissed this as irrelevant – a controversial position, to say the least, since both the Directive and the Portuguese provision both refer explicitly to this kind of action (paying compensation) as relevant. The Court could probably have noted more precisely that paying compensation is relevant as self-cleaning measure, but not enough if the bidder wants to prove the capability of performing adequately in the next contract.
The decision is also relevant regarding what can be called the procedural aspects of self-cleaning. The Directive only requires that the bidder be given the opportunity to present the self-cleaning measures and have them analyzed by the contracting authority, which did in fact happen in this case. However, Portuguese law has a stricter standard, and requires that any bidder can only be excluded if he has been confronted with a fully reasoned project of decision before the decision is taken [this derives from the combination of articles 146 to 148 of the PCC and 122(2) of the Administrative Procedure Act]. This apparently did not happen in this case, because the bidder only became aware of the contracting authority’s appreciation of the self-cleaning measures when he was notified of the final decision. Consequently, the Court found that there had been a breach of the duty to give prior hearing to the bidder (regarding specifically the appreciation of the self-cleaning measures), but considered that this procedural flaw should be disregarded, in this case, applying a provision of the Administrative Procedure Act [article 163(5)] which is inspired by similar solutions present in the Administrative Law of other countries, whether by statute law [such as § 46 of the German 1965 Administrative Procedure Act – Verwaltungsverfahrensgesetz] or case law. The Court considered that in this case, since the outcome would be the same even if the right to prior hearing would have been fully complied with, it would be excessive to invalidate the decision.
