Judgment of 2nd February 2024 of the NCAC (case 00695/23.7BEPRT), Portugal
Article(s) in Directive 2014/24/EU: Article 57(4)(g)
Topic: open procedure; exclusion grounds; bad past performance
Member State: PT
Court/rev. board: North Central Administrative Court (NCAC)
1. IMPLEMENTATION / RELEVANT NATIONAL LEGISLATION
Articles 57, 70, 146(2), 168 of the Portuguese Public Contracts Code (PCC).
2. FACTS
In an open procedure for awarding a services contract regarding private security services, one of the offers was excluded due to the exclusion ground foreseen in article 55(1)(l) of the Portuguese Public Contracts Code (PCC), which transposes the exclusion ground foreseen in article 57(4)(g) of Directive 2014/24/EU, commonly referred to as the situation of a “bad past performance” of a previous public contract.
The situation which led to the exclusion was the alleged breach, by the economic operator, of a contract entered into with another contracting authority, IEFP (not the one conducting the procurement in which the exclusion took place, which was a public hospital, referred here as “Hospital A”). The breach had led to the termination of that contract for fault. In short, IEFP, the contracting authority in the previous contract, had considered that the economic operator should assume a certain set of obligations deriving from Labour Law under the contract (i.e, the contractor should assume the position of employer of certain workers assigned to the contract), but the economic operator considered that such an obligation was not applicable in that case because the legal conditions for it were not fulfilled. The situation ultimately led to the termination of the contract by IEFP.
Hospital A, despite not being the entity with which the described situation had occurred, gained knowledge of this situation, and excluded the offer. In Portuguese law, there is usually no publicity of the termination of public contracts by breach of contract. However, it is common that contracting authorities gain knowledge of this information, usually by one of three forms: the other bidders may bring to light this information regarding their competitors during the phase of the procedure in which all bidders are heard before the final decision is taken (“previous hearing”); the contracting authority may gain knowledge by contacts with other contracting authorities; finally, in some contracts with more visibility, the information is made public through the media.
The affected economic operator challenged Hospital A’s decision to exclude the offer in court. He argued that there had been no breach of the contract with IEFP, and in any case, that the breach of contract had not resulted from “significant or persistent deficiencies” in the performance of the previous contract.
3. JUDGMENT
The main discussion which ended up taking place in the lawsuit was whether or not Hospital A could (or should) control the decision of IEFP to terminate the contract, i.e, whether or not Hospital A could consider that, despite a termination having been decided, the actual breach had not been significant or persistent – in short, it had not been a sufficiently serious breach of contract in order to allow for the application of the exclusion ground.
The Central Administrative Court decided against the first instance administrative court and took the view that Hospital A could not have analyzed, in substance, the decision of IEFP to terminate the contract and specifically, it could not have controlled if the reason for termination had been sufficiently serious. In the Court’s view, the mere existence of the decision to terminate the contract should be taken as a given by the contracting authority in the subsequent procedure – Hospital A. The Court reasoned as follows: “it should be assumed that it is not the task of contracting authorities to ascertain the correction of the termination for breach of contract decided by other contracting authorities”. An important element of legal context (mentioned by the Court) is that Portuguese Law provides that an administrative contract (such as the one here) can only be terminated in case of a serious breach of contract. One might remark, of course, that the mere fact that the law states that a contract can only be terminated by a serious breach does not necessarily mean that the actual decision to terminate complies with that standard (this was exactly the point of the excluded bidder).
This decision is yet another one that reveals the significant controversies which may arise from the application of the notorious exclusion ground of bad past performance. The reasoning of the Court is not without controversy. One might even wonder if it is not in contradiction with the view taken by the Court of Justice, in cases where the application of this and other exclusion grounds was discussed, since the Court of Justice seems to provide significant relevance to the autonomous appreciation, by the contracting authority, of the reasons that may or may not lead to a decision that a specific economic operator does not offer enough guarantees to perform the contract adequately (see, e.g., the ECJ ruling in case C‑41/18, Meca Srl).
Link to the original decision: https://www.dgsi.pt/jtcn.nsf/89d1c0288c2dd49c802575c8003279c7/76d27c6759de024a80258adf0038d31e?OpenDocument
