Judgment of 6th July 2023 of the SAC (case 02727/21.4BEPRT), Portugal
Article(s) in Directive 2014/24/EU: Article 57(4)(g)
Topic: exclusion grounds; significant deficiencies in the performance of a public contract; legal term counting
Member State: PT
Court/rev. board: Portuguese Supreme Administrative Court
1. IMPLEMENTATION / RELEVANT NATIONAL LEGISLATION
Paragraph l) of article 55(1) and paragraphs 2 and 3 of article 329 of the Portuguese Public Contracts Code (PCC)
2. FACTS
In a public tender for the acquisition of digital color aerial photography coverages of the entire territory of mainland Portugal, divided into eight lots, the contracting authority indicated the intention to exclude one of the bidders, a consortium of companies. The public authority argued that the companies should be excluded from the procedure since they had been the counterpart of a previous contract with the exact same object, and in that previous contract, the companies in question had not complied with their obligations (namely, the deadline for delivering the photographs), and for that reason, had been the object of pecuniary penalties provided for by that previous contract. The contracting authority therefore considered it should apply the provision that treats as an exclusion ground the existence of “significant or persistent deficiencies in the execution of at least one previous public contract in the last three years, which has led to the termination of that contract due to non-compliance, the payment of compensation resulting from non-compliance, the application of sanctions that have reached the values maximum applicable pursuant to paragraphs 2 and 3 of article 329, or other equivalent sanctions” [article 55(1) paragraph l) of the PCC].
Both the first and second instance courts, regarding the interpretation of the abovementioned norm, were unanimous in the understanding that this impediment of three years counts from the “constitutive fact” – which, in the present case, had occurred in 10.12.2018 (meaning that it had already been outdated when the case reached the courts), and not the date in which the applicability of the sanction to the company took place.
3. JUDGMENT
Paragraph l) of article 55(1) of the PCC (the provision that transposes the European bad past performance exclusion ground to Portuguese law) determines that entities who have demonstrated significant or persistent deficiencies in the execution of at least one previous public contract in the last three years cannot be tenders or members of any group, which has led to the termination of that contract by non-compliance, the payment of compensation resulting from non-compliance, the application of sanctions that have reached the maximum values applicable under the terms of paragraphs 2 and 3 of article 329 (of the PCC), or other equivalent sanctions, are prevented from presenting offers in public procurement procedures.
The issue arose as to whether that time limit is counted from the moment the deficiencies were found in the performance of the previous contract, or from the moment the contracting authority decided to apply the contractual penalties, or from the moment of res judicata of the decision that applied the corresponding contractual fines (since that decision was challenged by the company). Mentioning article 57(7) of Directive 2014/24/EU (according to which “where the period of exclusion has not been set by final judgment, that period shall not exceed five years from the date of the conviction by final judgment in the cases referred to in paragraph 1 and three years from the date of the relevant event in the cases referred to in paragraph 4”), the Court decided that the three-year period contained in the Portuguese norm must be counted from the moment in which deficiencies occurred in the performance of the previous contract. The main argument was that the “relevant event” must necessarily be understood as the fact that led to the situation of contractual non-compliance that gives rise to exclusion.
Commentary: We believe the Court decided well when admitting that the time limit should be counted from the completion of the work covered by the supply contract – the delay of which led to the application of financial sanctions (contractual penalties). This understanding is fully supported in paragraph l) of paragraph 1 of article 55 of the PCC and in paragraph 7 of article 57 of Directive 2014/24/EU. Following this conclusion, the notification of the administrative act that determined the application of contractual sanctions could never constitute the relevant moment for the purposes of counting the duration of the impediment. Having in mind that the bad past performance exclusion ground is intrinsically linked to the behavior of the tender, it must be its conduct – and the moment in which it took place – to determine the start of the three-year period counting referred to in paragraph l) of article 55(1) of the PPCC. In the present case, the relevant fact is the delivery of the last block and completion of the contracted work, which incidentally occurred after the term of the contract (because the performance problem related exactly to the delay of the contractor in delivering the outputs). This means one should not consider relevant the moment of the administrative consequences determined (e.g., a sanctioning resolution) by the bad past performance (which does not mean that they cannot coincide), nor the date on which a court decision related to the sanctions was handed down. Although it is true that Article 57(4)(g) of Directive 2014/24/EU does not provide for a deadline, from its teleology results implicitly that Member States’ legislators must consider the moment of verification of non-compliance as the relevant moment to consider when verifying if the provision of the norm is fulfilled. We can discuss if this three-year period that the Portuguese legislator decided to determine is adequate, regarding the protection of the principle of competition. From our point of view, this timeline protects this important principle of public procurement, while respecting the principle of proportionality (both mentioned in Recital 1 of Directive 2014/24/EU) – considering the importance of safeguarding the contracting authority when facing a tender that had had a bad past performance.
