| SPOTLIGHT |
The European Commission has taken action against two member states in respect of changes to existing contracts which it feels have breached public procurement law. It is a reminder that the public procurement regime does not disappear once a contract has been signed, write Deborah Ramshaw and Neil Walker.
Toll collection contracts
The European Commission has issued a reasoned opinion against Slovakia in respect of alleged breaches of public procurement rules for the selection of an electronic toll collection system operator. If Slovakia does not reply satisfactorily within two months, the Commission may refer the matter to the Court of Justice.
By way of press release on 30 September 2010, the Commission details the nature of its complaint against Slovakia. In essence, the facts are that in September 2007 the National Motorway Company launched a public tender exercise for the selection of an electronic toll collection system operator. The value of the contract was worth approximately €664m. Out of the four tenders submitted, three were excluded by the contracting authority because they did not comply with the technical specifications.
The contract was eventually signed in January 2009 and several contracting conditions were substantially modified after award. The Commission argues that had these modifications been made and communicated at the beginning of the tender process, participating bidders might have submitted different tenders and more candidates might have taken part in the tender procedure.
The Commission alleges that by excluding certain bidders for “unjustified reasons” and by “substantially modifying the contract after its signature” the contracting authority has violated the principle of non-discrimination.
Urban planning contracts
In a separate press release on the same date as the Slovakian statement, the Commission has indicated it is referring Greece to the Court of Justice over the direct award of service contracts for mapping and planning services. The Commission had already sent Greece a reasoned opinion – the second stage of the infringement procedure – in November 2009. Despite assurances from Greece that the infringement would be remedied the Commission is not satisfied that any compliance measures have been taken.
The broad facts are that four Greek municipalities directly awarded six public service contracts for mapping and urban planning purposes to the same company. After some time, the scope of these contracts was re-negotiated; the Commission states that this meant that the scope of these contracts was increased. As a result, the total value of the contracts increased significantly. For example, one of the initial contracts awarded by the municipality of Vassilika in 2004 was worth approximately €1.7m, but following re-negotiation was increased to €3.7m – an increase of more than 100%. Another contract that was awarded by the municipality of Egnatia in 2002 was worth €440,000, but after re-negotiation was increased to €1.3m – an increase of more than 200%. The Commission states that value increases by up to 300% were “not uncommon”.
In the Commission’s view the contracts were so substantially modified that the authorities should have awarded new contracts following an open or restricted procedure. As this did not happen the Commission considers the Greek authorities in breach of EU rules and the conclusion of these contracts unlawful.
Conclusion
Following the decision in the leading case of pressetext (C-454/06 pressetext Nachrichtenagentur v Republik Osterreich) it is clear that the Commission is keen to follow up on alleged breaches of the procurement rules in respect of changes to existing contracts. Whilst the facts in pressetext were relatively unique the Commission will not, it appears, hesitate to take action where terms have been changed such that the tendering process itself may have been different (Slovakia action) or the changes are so fundamental that a “new” contract has come into existence which ought to be advertised in accordance with the procurement directive (Greece).
The infraction proceedings serve as a timely reminder that the public procurement regime does not disappear once a contract has been signed and that authorities must be very careful when considering any changes to existing contracts.
Deborah Ramshaw is head of procurement and Neil Walker is a director at Dickinson Dees. Deborah can be contacted on 0191 279 9836 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..
