Decision of the Supreme Administrative Court (1st Section), 09.06.2022 (CASE 01040/20.9BEBRG)
Article(s) in Directive 2014/24/EU: Art.18(2), Art.69
Topic: Exclusion grounds (regarding the offer); abnormally low tenders; breach of Labour Law / Social Security Law provisions by a bid.
Member State: Portugal
Court/rev. board: Supreme Administrative Court
1. IMPLEMENTATION / RELEVANT NATIONAL LEGISLATION
Art. 18(2) of the Directive can be said to have a national equivalent (even with a slightly different wording) in Art. 1-A(2) of the Portuguese Public Contracts Code (PCC, adopted by Decree Law 18/2008, of 29 January, with amendments, the current version resulting from Decree Law 78/2022, of 7 November).
Art. 70(2)(f) of the PCC then provides that if the acceptance of any bid would imply the breach of mandatory provisions in laws or by-laws (which is considered to include Art. 1-A(2) of the Code), the bid must be excluded.
As for Art. 69 of Directive 2014/24/EU (regime on abnormally low tenders), it is transposed into Portuguese Law by Arts. 71 and 70(2)(e) of the PCC.
During an open procedure for the award of a services contract for the provision of surveillance services in a public hospital, a doubt arose as to the admission of one bid, that was supposedly in breach of Labour Law / Social Security provisions.
In Portuguese Law, employers pay, for each worker, a specific contribution (a percentage of the salary) regarding Social Security. The claim was that the bidder in question intended not to pay the full amount of that contribution. As the bidder in question explained, this was true, and the explanation was that he meant to benefit of a special regime for employment of two categories of workers (first-time workers and long-duration unemployed workers), which offers a significant reduction in the contribution for Social Security (this is, of course, a policy measure from the State to reduce unemployment).
However, at the time of presentation of the bid, the bidder had not applied to benefit from the reduction yet. Taking the view that the bid led to breaching mandatory law (because the indicated price was not enough to cover the full percentage of Social Security contribution), the contracting authority excluded the offer. First and second instance administrative courts overturned this decision, and then an appeal was made for the Supreme Administrative Court.
The controversy addressed by the Court relates, in general, to the standard that should be applied when assessing the justifications provided by the bidder in the context of claims that he is not complying with mandatory provisions regarding the payment of costs to perform the contract, and whether or not evidence of the non-compliance with such provisions has been produced (or can be produced) in the tender phase. It should be borne in mind that this kind of discussion, which under EU law is made under the heading of abnormally low tenders, in Portuguese law is broader, since, as mentioned above, in addition to the provision on abnormally low tenders [Art. 70(2)(e) PCC], there is an autonomous reason for the exclusion of tenders [Art. 70(2)(f) PCC] which relates to any case in which the acceptance of an offer would lead to breach of mandatory law. The result is that, for these kind of situations, in which Labour Law / Social Security Law questions are the issue, usually both grounds for exclusion are discussed (and it was also the case here).
The Court, agreeing with decisions from lower courts, considered that it was not possible to ascertain, in the current case, the existence of reasons to exclude the bid, sustaining that it is sufficient the proof, from the bidder, that the access to these “tax benefits” is viable (i.e., legally possible in that case), and that it is not necessary that he proves he has previously obtained them. As the Court mentions, the contractor will only present the request to benefit from the reduction in the Social Security contribution to the competent authority when the employment contracts have been established with the workers; it cannot be demanded from economic operators to hire the workers before the contract is awarded, since this would mean to assume contracts and costs which are only justified in case the contract is awarded to them.
Although Art. 71(4)(e) of the Public Contracts Code, which aims to transpose the corresponding Art. 69(2)(f) of the 2014/24 Directive, was not explicitly mentioned, the decision is implicitly relevant for its interpretation. Art. 71(4)(e) of the PCC allows that bidders explaining their low price refer to “the possibility to obtain State aid, provided it is lawfully granted” (this last segment is not present in the Directive’s text). Previous case law (Supreme Administrative Court 28.01.2016 ruling, case 01255/15; Central Administrative Court of the South, 19.10.2017 ruling, case 2473/14.5BESNT) had already decided that the provision does not mean that the bidder must have obtained the State aid prior to the bid. The current decision seems, therefore, coherent with that previous case law. However, this question seems to be somewhat uncertain in case law, since this decision was followed by another decision (of 22.09.2022, also commented here) which seems to go in the opposite direction.
Link to the original judgement (PT) here.