Duties to Investigate Abnormally Low Tenders in Ireland

In a follow-up to our previous update, our Public Procurement team considers a recent High Court case, which shines further light on the duties of contracting authorities to investigate abnormally low tenders in Ireland.

Background

In this case, White Mountain Quarries challenged the award, by Mayo County Council, of a public lighting energy efficiency contract in the North West region to a consortium. The value of the contract was €23.5 million.

White Mountain argued that the Council had failed to consider that the successful tender appeared abnormally low. They also contended that the Council had failed to follow the procedures required by procurement law, specifically Regulation 69, before making a decision to award the contract. In other words, White Mountain was of the view that the Council had failed in its duty to “require economic operators to explain the price or costs proposed in a tender which appears to be abnormally low”.

When does a duty to investigate arise?

The High Court summarised previous EU case law and confirmed that, while there is no general duty to reject a tender that appears to be abnormally low, there is a duty to investigate. The Court noted that this necessarily entails at least a “prima facie assessment of whether the tender is or arouses suspicion of being abnormally low”. The Court confirmed that this would be the case “in particular, where the price proposed in a tender is considerably lower than that of the other tenders or the normal market price.”

The Court highlighted the following procedural steps:

• The authority must make a prima facie assessment of whether a tender is abnormally low, even in a case where it is only suspected to be so.
• If a tender appears to be abnormally low, the authority must request the information required by Regulation 69. While this is not required in every case, if there is so much as a suspicion, an investigation is required.
• The authority must then assess the information by consulting the tenderer.
• Finally, the authority must determine whether the evidence supplied satisfactorily accounts for the low level of price or costs proposed.

In this case, the Court noted that the difference between the tenders was, in the words of the Council itself, “massive”. The successful consortium had tendered rates below those in sectoral employment orders. While these rates were blended and could arguably be offset by other rates, the Court held that a tender which does not comply with applicable obligations, such as those relating to labour law, must be treated as an abnormally low tender. It is not sufficient for a clause in the contract which requires the contractor to comply with the applicable legislation, as was the case here.

The Court therefore found that the authority had failed to meet its obligations under Regulation 69. This was due to the fact that, it had failed to undertake a review in circumstances where it should have considered that the tender appeared to be abnormally low.

Importance of record keeping

The Court placed considerable emphasis on the fact that there were no minutes of evaluation meetings, no evidence from any evaluation panel member and that the evaluation report did not address several issues relied on in court. This again highlights the need for contracting authorities to keep clear, consistent and detailed evaluation records which justify the decisions made during the process.

Observations on timing

Proceedings in this case were issued 48 days after the standstill letter and were therefore arguably out of time. The Court rejected arguments that the applicant was time barred. While the applicant had sufficient information to assert that the tender was abnormally low, it had only later become aware that no Regulation 69 investigation had been undertaken. The Court also considered that allowing the application to proceed would not prejudice the Council. This was because the procedure had already been suspended due to another separate challenge, which was subsequently dropped.

Conclusion

This case provides further clarity around the duty to investigate abnormally low tenders in Ireland. It clarifies that, if there is so much as a suspicion that a tender is abnormally low, an obligation arises to investigate in accordance with Regulation 69. That duty will always arise where a tenderer quotes rates below those in sectoral employment orders. Other evidence could include, for example, significant differences between the prices of tenders.

The Court’s criticism of the lack of any minutes of evaluation meetings once again highlights the need for comprehensive records relating to the evaluation process.

For more information on any public procurement issue, please contact a member of our Public Procurement team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.