Our Public Procurement team looks at a recent High Court judgement which provides guidance on the circumstances in which a contracting authority must investigate tenders that appear to be abnormally low. In addition, they discuss the debrief obligations on contracting authorities when excluding these tenders.
The High Court[1] considered the lawfulness of excluding a tenderer, Killaree Lighting Services Limited (Killaree), on the basis that its tender was abnormally low. The Court confirmed previous case law that a contracting authority must investigate any tender it suspects to be abnormally low, regardless of whether it wishes to reject that tenderer.
The Court also confirmed the obligation to provide a standstill letter where a tenderer is excluded in these circumstances and the available remedies.
Obligation to investigate abnormally low tenders
Mayo County Council (Council) required tenderers to submit balanced tender prices. Killaree submitted prices of €0.01 for approximately 66% of the tendered rates. The Council took the view that these prices were not balanced and were abnormally low, prompting it to investigate.
The Court considered previous case law from the European courts and confirmed that contracting authorities have a duty to request an explanation of a tender which appears to be abnormally low. This is in contrast to the approach taken by the English courts which have stated that a contracting authority must only investigate an abnormally low tender where it wants to reject the tender.
The Court also stated that there is no requirement to review all other tenders before requesting an explanation of a tender which it believes to be abnormally low. The key question is whether a tender is genuine and serious.
Obligation to send a standstill letter
Killaree claimed that, following its exclusion from the competition on the basis that its tender was abnormally low, the Council had not provided it with a standstill letter. Instead, the Council had merely written to Killaree informing it of the decision to exclude it from the competition and noting that the name of the successful tenderer would be published in the contract award notice.
The Court agreed that this was a breach of the Remedies Regulations, which require contracting authorities to send a standstill letter to all candidates concerned, including those who have been rejected during the evaluation.
The Court noted that, in failing to send any standstill letter, it was open to the Court to declare the contract ineffective. Nonetheless, the Court declined to declare the contract ineffective in this case. In doing so, it referred to the correspondence from the Council which made it clear that Killaree would be excluded and that the contract would be awarded without further notification, as well as Killaree’s failure to take steps to preserve its position.
Inability to impose alternative remedies where not pleaded
A decision not to declare a contract ineffective normally requires the imposition of alternative remedies, for example a fine of up to 10% of the contract value. The Court refused to do so in this case as such alternative remedies had not been pleaded. This highlights the need to draft pleadings carefully and to list all potential remedies which may be available to the claimant. For further tips on approaching procurement challenges, see our Practical Guide to Procurement Challenges.
Conclusion
The case confirms the duty on contracting authorities to investigate any tenders which it suspects are abnormally low. The decision also marks a clear departure from the position in England and Wales where this duty only exists when the contracting authority wishes to reject the tender.
The case is also an important reminder of the need to ensure that a standstill letter is sent to all candidates concerned and the potentially significant implications of failing to do so. The Court’s views on the availability of remedies will also be of significance to tenderers and contracting authorities when considering the drafting of submissions for procurement proceedings, given the Court’s indication that these will not be granted unless pleaded.
For more information and expert advice, please contact a member of our Public Procurement team.
People also ask
What are the requirements relating to abnormally low tenders? |
Directive 2014/24/EU on public procurement states that “a contracting authority shall require economic operations to explain the price or costs proposed in a tender which appears to be abnormally low in relation to works, supplies or services”. |
What is the remedy of ineffectiveness and when can it be imposed? |
A declaration of ineffectiveness means that the contract is set aside and all future obligations become unenforceable. It is available in a limited number of circumstances, including where the contracting authority has gone ahead and awarded the contract without issuing a standstill letter and observing the required standstill period. |
The content of this article is provided for information purposes only and does not constitute legal or other advice.
[1] Killaree Lighting Services Limited v Mayo County Council [2024] IEHC 79
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