Sunday, July 10, 2011

Changing terms of contract after public tender

By Yasser Latif Hamdani
1.      Commission of the European Communities v Kingdom of Denmark European Court reports 1993 Page I-03353
      (Grand Chamber of the ECJ)
On Paras 34-45
34 In its reply the Commission based its claims on a series of provisions in the final version of the contract which, in its view, constituted amendments to the tender conditions and had some effect on prices. However, as was explained above (paragraphs 14 and 15), only the amendments relating to Condition 3, Clause 3, of the general conditions may be taken into consideration by the Court.
35 The Commission's second ground of application, so defined, is essentially that the Kingdom of Denmark infringed the principle of equal treatment of tenderers by reason of the fact that Storebaelt, on the basis of a tender which did not comply with the tender conditions, conducted negotiations with ESG, which, in the final version of the contract, led to amendments to Condition 3, Clause 3, concerning price-related factors which favoured that tenderer alone.
36 In order to assess the compatibility of the negotiations so conducted by Storebaelt with the principle of equal treatment of tenderers, it must first be considered whether that principle precluded Storebaelt from taking ESG' s tender into consideration.
37 In this regard, it must be stated first of all that observance of the principle of equal treatment of tenderers requires that all the tenders comply with the tender conditions so as to ensure an objective comparison of the tenders submitted by the various tenderers.
38 This is confirmed by Article 11 of the directive, which, whilst allowing a tenderer, where there is the option of submitting variations on a project of the administration, to use a method for pricing the works which differs from that used in the country where the contract is being awarded, nevertheless requires that the tender accord with the tender conditions.
39 With regard to the Danish Government's argument that Danish legislation governing the award of public contracts allows reservations to be accepted, it should be observed that when that legislation is applied, the principle of equal treatment of tenderers, which lies at the heart of the directive and which requires that tenders accord with the tender conditions, must be fully respected.
40 That requirement would not be satisfied if tenderers were allowed to depart from the basic terms of the tender conditions by means of reservations, except where those terms expressly allow them to do so.
41 The tender submitted by ESG, concerning an alternative project for the construction of a concrete bridge, did not comply with Condition 3, Clause 3, of the general conditions in so far as it failed to satisfy the requirements stipulated therein, that is to say that the proposed price was not based on the fact that, as tenderer, it had to undertake the detailed design of a project and assume full responsibility for it, as regards both its planning and its execution, as well as accept the risk of variation in quantities in relation to those envisaged.
42 Lastly, it should be noted that Condition 3, Clause 3, of the general conditions constitutes a fundamental requirement of the tender conditions, since it specifies the conditions governing the calculation of prices, taking into account the tenderer' s responsibility for the detailed design and execution of the project and for accepting the risks.
43 In those circumstances, and since the condition in question did not give tenderers the option of incorporating reservations into their tenders, the principle of equal treatment precluded Storebaelt from taking into consideration the tender submitted by ESG.
44 Consequently, the second ground of application concerning the conduct of negotiations on the basis of a tender which did not comply with the tender conditions is well founded.
45 It follows from all the foregoing considerations that, by reason of the fact that Aktieselskabet Storebaeltsforbindelsen invited tenders on the basis of a condition requiring the use to the greatest possible extent of Danish materials, consumer goods, labour and equipment and the fact that negotiations with the selected consortium took place on the basis of a tender which did not comply with the tender conditions, the Kingdom of Denmark failed to fulfil its obligations under Community law and in particular infringed Articles 30, 48 and 59 of the Treaty as well as Council Directive 71/305/EEC.

2.      Muhammad Ayub v. CDA PLD 2011 Lahore 16  
      (Lahore High Court)
     On Paras 12 and 13
Rule 30 mandates that the bids have to be evaluated in accordance with the terms and conditions set forth in the prescribed bidding documents. In the present case, the bidding documents not only prescribed bidding security in the form of Deposit at Call or bank guarantee but also emphasized that if a bid was not accompanied by Deposit at Call or bank guarantee, the same was to be rejected. CDA's failure to reject respondent No.6's non-responsive bid and accept it for consideration was, thus, in violation of Rule 30. In fact, by allowing respondent No.3 to substitute its insurance guarantee with a Deposit at Call, CDA allowed respondent No.6 to alter or modify its bid after the opening of a tender which is prohibited by Rule 31. In this view of the matter, the argument that substitution of insurance guarantee by Deposit at Call is a case of clarification rather than alteration or modification is ex-facie misconceived and untenable. There is also no doubt that respondent No.6 was unduly favoured whereas the appellant, who had submitted a responsive bid, was ignored despite having a right to be considered for award of a contract for being the lowest bidder in view of Rule 38 read with Rule 2(h).
Once the bids had been opened, CDA, the procuring agency, could not allow any bidder to amend its bid so as to gain an unfair and undue advantage over others as any such indulgence is contrary to the norms of any bidding. Enigmatically enough, the CDA has made a volte face as in the pre-bid meeting held a few days earlier on 3-5-2010, it had categorically told the bidding contractors that an insurance guarantee would not be allowed as bid security.
3.      Tata Cellular v. Union of India AIR 1996 SC 11
(Supreme Court of India)
At Para 113 on page 32
“The Government must have freedom of contract. In other words, a fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principle of reasonableness (including its other facts pointed out above) but must be free from arbitrariness not affected by bias or actuated by mala fides.”

4.      Bell Mobility Complaint PR-2008-008 PR-2008-009

(Canadian International Trade Tribunal)

At Paras 42-44

The Tribunal does not share Rogers’ view that heavy user aircard rates are merely “service enhancements”, the offering of which is permitted under clause B11(j) of the RFP. That provision reads as follows:
Technological Improvements: The Contractor agrees to advise the PWGSC Technical Authority of all technological improvements that affect the services in each Stream under this Contract. The Contractor agrees to offer all improvements it is offering to its customers at large as part of its standard service offering at no additional charge to Canada. Any other service enhancements must only be provided following approval in writing by the Contracting Authority. The price of these other service enhancements will be negotiated on a case-by-case basis.
It is settled law that “words and combination of words” in a contract “take meaning from their context”. A careful reading of the above provision, including its title, “Technological Improvements”, and the phrase “all technological improvements that affect the services in each Stream under this Contract”, which imparts meaning to the subsequent references to “improvements” and “service enhancements”, reveals that the clause deals with technological improvements and the basis on which they are made available to PWGSC. In particular, those technological improvements offered to customers at large, as part of the standard service, are to be offered to the Government of Canada at no additional charge while all other technological service enhancements require PWGSC’s prior approval and the negotiation of price. In the Tribunal’s view, clause B11(j) is rendered inapplicable by the fact that the impugned changes to the aircard service were not technological in nature.
In summary, the Tribunal finds that, by proceeding in the manner in which it did, PWGSC effectively conducted a new procurement without competition. Accordingly, the Tribunal finds that PWGSC breached the AIT by not following the procedures for procurement contained in Article 506.
In light of the foregoing, the Tribunal determines that the complaints are valid.

5.      Commission of the European Communities v. CAS Succhi di Frutta SpA Case C-496/99 P  2004] ECR I-3801  
(Sixth Chamber of ECJ)
       At Paras 116-124
Although, therefore, any tender which does not comply with the specified conditions must, obviously, be rejected, the contracting authority nevertheless may not alter the general scheme of the invitation to tender by subsequently proceeding unilaterally to amend one of the essential conditions for the award, in particular if it is a condition which, had it been included in the notice of invitation to tender, would have made it possible for tenderers to submit a substantially different tender.


Consequently, in a situation such as that arising here, the contracting authority could not, once the contract had been awarded and, moreover, by a decision which derogates in its substance from the provisions of the earlier regulations, amend a significant condition of the invitation to tender such as the condition relating to the arrangements governing payment for the products to be supplied.


Should the contracting authority wish, for specific reasons, to be able to amend some conditions of the invitation to tender, after the successful tenderer has been selected, it is required expressly to provide for that possibility, as well as for the relevant detailed rules, in the notice of invitation to tender which has been drawn up by the authority itself and defines the framework within which the procedure must be carried out, so that all the undertakings interested in taking part in the procurement procedure are aware of that possibility from the outset and are therefore on an equal footing when formulating their respective tenders.


Furthermore, if such a possibility is not expressly provided for, but the contracting authority intends, after the contract has been awarded, to derogate from one of the essential conditions specified, it cannot legitimately continue with the procedure by applying conditions other than those originally specified.


If, when the contract was being performed, the contracting authority was authorised to amend at will the very conditions of the invitation to tender, where there was no express authorisation to that effect in the relevant provisions, the terms governing the award of the contract, as originally laid down, would be distorted.


Furthermore, a practice of that kind would inevitably lead to infringement of the principles of transparency and equal treatment as between tenderers since the uniform application of the conditions of the invitation to tender and the objectivity of the procedure would no longer be guaranteed.


In this case, it is established that, once the contract had been awarded, the Commission replaced the fruit specified in the notice of invitation to tender with other fruit as the means of payment for the fruit to be supplied by the successful tenderer, although no such substitution was provided for either in that notice or in the relevant legislation on which that notice was based.


The Court of First Instance was therefore right in holding, at paragraph 82 of the judgment under appeal, that the amendment in question, decided upon by the Commission when it had no authorisation to that effect, should lead to the annulment of the Decision of 6 September 1996 for infringement of the notice of invitation to tender annexed to Regulation No 228/96 and of the principles of transparency and equal treatment as between tenderers.


Inasmuch as the Commission complains in the same plea that the contested judgment is based on contradictory grounds in that, while prohibiting any amendment of the conditions of the invitation to tender, as they are laid down in the notice of invitation to tender, at the stage when the procedure involving the successful tenderer is being implemented, at the same time it states that a new procedure should have been initiated, which would inevitably have involved changing the conditions of the invitation to tender, it need only be stated that the Commission’s complaint is based on a manifestly erroneous understanding of the contested judgment.

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