Procurement law: special urgency needs a reason

In its decision of September 24, 2014, the OLG Celle clarifies that a lack of an urgent reason for choosing the negotiated procedure without a competitive bidding process is not already apparent because the urgency was not substantiated in more detail by the contracting authority.

The contracting authority invited tenders for new main engines for a police coastal boat using the “accelerated negotiated procedure without competitive bidding”. It then sent the tender documents to three selected bidders, including the applicant and the respondent. The award documents indicated that the information requirement was to be waived “due to the particular urgency”. The tender documents did not contain any further explicit justification for the selected procedure.

The applicant learned via the public announcement that the bid was awarded to the respondent. Thereupon, the applicant objected to the award of the contract and criticized the choice of the negotiated procedure without a competitive bidding process as well as the waiver of prior information of the bidders. The contracting authority rejected the complaints. After unsuccessful initiation of the review procedure, the applicant filed an immediate appeal with the request to declare the award invalid and to order the respondent and contracting authority to conduct the award procedure again.

Lack of urgency was not apparent

With success! Contrary to the opinion of the Procurement Chamber, the applicant was not precluded with its complaints regarding the incorrect choice of procedure and the lack of prior information. Thus, according to the tender documents, the applicant could not have recognized that the choice of the negotiated procedure without a competitive bidding process was erroneous. Rather, the documents merely showed that the client had assumed the conditions for a special urgency after examination. The mere fact that the tender documents did not contain a concrete justification for the urgency would not lead to a recognizability of the violation of procurement law.

Moreover, the bidders in an award procedure are not obliged to question the specific reasons for the choice of procedure made with the contracting authority or to raise a suspicion.

Despite the primacy of the open procedure, it can be observed time and again in practice that public contracting authorities resort to the negotiated procedure without a closer legal examination. However, the decision of the OLG Celle shows that such a premature recourse to the negotiated procedure is associated with considerable legal risks. Public contracting authorities are therefore strongly advised to exercise the greatest possible care when selecting the type of procedure. In particular, the requirements of urgency to justify a negotiated procedure without publication are only met in very rare exceptional cases.

“Take-up threshold” is 20 percent price gap

In its decision of September 25, 2014, the Munich Higher Regional Court (OLG) stipulated that the so-called “catch threshold”, above which a contracting authority must investigate a possible discrepancy between the service offered and the bid price, must be a price difference of 20 percent between the most favorable bid and the next highest bid.

This involved a tender for a service contract for the cleaning of a building. Bidders should provide a price for cleaning services as an hourly billing rate. Based on a predefined scheme, the calculation was to be presented, whereby the bidders had to take into account compliance with the minimum collectively agreed wages – now also quite common after the introduction of the tariff compliance and award laws of the federal states.

Without further ado, the client excluded the previous contractor from the award procedure, which did not suit the latter. As a result, the previous contractor moved to the Procurement Chamber and initiated review proceedings.

The decision of the instances

Both the Procurement Chamber and the Munich Higher Regional Court ruled in favor of the previous contractor, and its bid could not be excluded.

This is because – in order to justify the exclusion – a disproportion between the service offered and the bid price would have had to be established. In order to be able to make this determination, it would be necessary to reach the so-called take-up threshold in the amount of 20 percent price difference between the most favorable and the next best offer. However, this threshold had not been reached here. In addition, the offer in dispute here was only about 9 percent below the average in terms of its price. This also speaks against a disproportion which could have led to exclusion.

Aline Heurley, KPMG Rechtsanwaltsgesellschaft mbH, Düsseldorf

T 0211 4155597-160; aheurley@kpmg-law.com

Dr. Anke Empting, KPMG Rechtsanwaltsgesellschaft mbH, Düsseldorf

T 0211 4155597-161; aempting@kpmg-law.com

Julia Paul, KPMG Rechtsanwaltsgesellschaft mbH, Düsseldorf

T 0211 4155597-163; juliapaul@kpmg-law.com