Abnormally low bids in public contracts #CETA
I.
What is an abnormally low tender ?
The public purchaser is obliged to reject an abnormally low bid because it "undermines equality between candidates for the award of a public contract" (Conseil d'Etat, 30 March 2017, req. n°406224).
However, the rejection of a bid as abnormally low must be preceded by a prior adversarial procedure.
Thus, when the public purchaser identifies a bid likely to be classified as abnormally low, it is obliged to ask the tenderer for explanations.
"The purchaser shall use all available means to detect abnormally low tenders.
Where a tender appears to be abnormally low, the purchaser shall require the economic operator to provide details and justification of the amount of its tender.
If, after verification of the explanations provided by the economic operator, the purchaser establishes that the tender is abnormally low, it shall reject it in accordance with the conditions laid down by decree in the Council of State".
If, after verification of the explanations provided by the economic operator, the purchaser establishes that the tender is abnormally low, it shall reject it in accordance with the conditions laid down by decree in the Conseil d'Etat".
As part of the prior adversarial procedure, "
the purchaser shall require the tenderer to justify the price or costs proposed in its tender if the latter appears to be abnormally low in relation to the works, supplies or services, including for the part of the contract that it intends to subcontract".
(Article R. 2152-3 of the French Public Procurement Code).
Responding to the public purchaser's request for explanations is therefore essential, as the administrative judge considers that a lack of precision on the part of the tenderer justifies the disqualification of its bid (CE, 30 March 2017, n°. 406224).
The classification of a bid as abnormally low may also concern the amount of subcontracting
included in the bid.
The Conseil d'Etat recently ruled that it follows from the aforementioned provisions of the Public Procurement Code "that, regardless of the procurement procedure used, it is the responsibility of the contracting authority that notes that a bid appears to be abnormally low to ask the bidder for all details and justifications likely to explain the price proposed, without being obliged to ask the bidder specific questions. If the details and justifications provided are not sufficient to ensure that the price proposed is not considered to be manifestly undervalued and of such a nature as to compromise the proper performance of the contract, it is up to the contracting authority to reject the tender. Whether or not a bid is abnormally low cannot be determined simply by noting a significant price difference between that bid and other bids that the explanations provided by the candidate are not such as to justify, and it is in particular up to the judge hearing the pre-contractual application for interim relief, to investigate whether the price in question is in itself manifestly undervalued and thus likely to compromise the proper performance of the contract". (Conseil d'État, 7th Chamber, 14/03/2023, 465456)
II.
How can candidates justify the amount of their bids ?
Article R. 2152-3 of the French Public Procurement Code gives non-exhaustive examples of justifications:
"Justifications relating in particular to the following aspects may be taken into consideration:
1° The method of manufacture of the products, the way in which the services are provided and the construction process ;
2° The technical solutions adopted or the exceptionally favourable conditions available to the tenderer for supplying the products or services or for carrying out the work;
3° The originality of the bid;
4° The applicable environmental, social and labour regulations in force at the place where the services are to be provided;
5° Whether the bidder has received any state aid."
The administrative judge considers that companies cannot simply rely on their long experience and their status as the previous holder of the contract to justify bids, which were "significantly lower" than the estimates of the public purchaser "as well as the average of the bids of the other candidates and that some of the unit prices that made them up were lower than the cost price" (CE, 15 October 2014, Communauté urbaine de Lille, n°378434).
The Administrative Court of Bastia also recently ruled that the bidding company, "whose bid appeared particularly low in comparison with the contracting authority's estimate and the prices resulting from competing bids, did not at the time communicate the sub-detail of prices but
confined itself to responding with general explanations on 42 of its prices, relating in particular to the location of its resources, its experience and the fact that it possessed "almost each time part of the data () requested", without however accompanying its responses with figures. In fact, CAPA was given no justification for some of the prices, such as the lack of added value in the case of night work.
Accordingly, the information provided by SELARL Agex in its response was not sufficient to ensure that the overall price it proposed would not be considered, firstly, in view of all the costs required to carry out the services in question, as clearly undervalued and, secondly, in the circumstances of the case, as likely to compromise the proper performance of the contract. Accordingly, SELARL Agex has no grounds for claiming that, by rejecting its bid as abnormally low, the contracting authority vitiated its decision with a manifest error of assessment". (TA Bastia, 09-05-2023, req. n°. 2300430)
Article R.2152-4 of the French Public Procurement Code provides that the public purchaser "shall reject the tender as abnormally low in the following cases :
1° Where the information provided by the tenderer does not satisfactorily justify the low price or costs proposed ;
2° Where the public purchaser establishes that the tender is abnormally low because it contravenes the obligations imposed by French law, including the applicable collective agreement(s), by European Union law or by the stipulations of the international agreements or treaties mentioned in a notice annexed to this code, in terms of environmental, social and labour law".
Any third party whose interests may be adversely affected by the conclusion or clauses of a contract may apply to the administrative court to challenge the validity of the contract.
Third parties must demonstrate that their interests are likely to be harmed in a sufficiently direct and certain manner.
The third party may only invoke defects in the contract that are directly related to the prejudiced interest that it is claiming, or those that are so serious that the court should raise them of its own motion.
The administrative court will only annul the contract if such annulment would not
excessively harm the general interest.
In other words, only the most serious defects may allow the contract to be annulled.
In addition, an action for annulment must be brought within two months of publication of the public contract.
An unsuccessful candidate may bring an action for damages before the administrative court, in order to obtain compensation for the loss incurred as a result of his elimination (Conseil d'Etat, opinion 11 May 2011, Sté Rebillon Schmitt Prevot, req. no. 347002).
The Marseille Administrative Court of Appeal has reiterated that
this procedure may be used by a candidate whose bid has been deemed abnormally low (CAA Marseille, 27 January 2020, no. 18MA02886).
This claim for compensation may be made
- either in ancillary submissions to an action for annulment ;
- Or in an independent claim for compensation.
In the latter case, the unsuccessful candidate must demonstrate that his loss arose from the unlawful conclusion of the contract of which he was unsuccessful.
An action for damages may make it possible to obtain (Paris Administrative Court of Appeal, 31 March 2021, no. 18PA02799) :
- Compensation for loss of earnings if the candidate had a serious chance of winning the contract ;
- Reimbursement of the costs of submitting its bid if it did not have a serious chance of winning the contract.
IV.
What means can be used to challenge the rejection of a bid ?
There are three common ways of challenging a decision to reject a bid on the grounds that it is abnormally low.
If the public purchaser fails to ask the unsuccessful bidder to explain why its bid is abnormally low,
the administrative court will take action.
In its decision Société Nouvelle SAEE no. 0800408 of 25 January 2011, the Lille Administrative Court held that the provisions of article L. 2152-6 of the French Public Procurement Code "are intended, in particular, to enable the unsuccessful company to challenge the rejection of its bid; it follows that failure to comply with the contracting authority's obligation to provide information
constitutes an infringement of the advertising and competitive tendering obligations likely to harm that company by preventing it from effectively challenging the rejection of its bid".
Where no reasons are given, the administrative judge considers that the rejection of the unsuccessful candidate constitutes a "breach of the obligations of transparency and competitive tendering" (Conseil d'Etat, 29 October 2013, Département du Gard, no. 371233).
However, any failure to state reasons can be rectified. This can be rectified during the course of the procedure by the public purchaser communicating the reasons for the decision to reject the tender.
However, this communication
must take place before the court gives its ruling,
in sufficient time to allow the unsuccessful bidder to "usefully contest its elimination" (Conseil d'Etat, 29 October 2013, Département du Gard, no. 371233).
- Manifest error in the qualification of an "abnormally low" bid
"A low price alone cannot be considered as proof of the technical or financial inadequacy of the bid submitted by a company".
(Conseil d'Etat, 7/10 SSR, 15 April 1996, 133171)
The administrative judge has also ruled on several occasions that
an abnormally low bid should be assessed in terms of the overall price (CE, 13 March 2019, Société Sepur, n°. 425191; CAA Marseille, 27 January 2020, no. 18MA02886).
Recent case law states that "whether or not a bid is abnormally low
cannot be determined simply by noting a significant price difference between that bid and other bids that the explanations provided by the candidate are not such as to justify, and it is up to the pre-contractual interim relief judge, hearing a case in this regard, to investigate whether the price in question is itself manifestly undervalued and thus likely to compromise the proper performance of the contract". (see Conseil d'État, 7th Chamber, 14/03/2023, 465456)
The Court of Justice of the European Communities (now the CJEU) has already ruled that low prices "may result from the competitiveness of undertakings, their productivity, technical competence and financial health, their cost structure or their use of innovation. In such cases, the price offered, although lower than that of other economic operators, does not affect the normal play of competition" (ECJ, 15 May 2008, SECAP v Commune di Torino and Santorso Soc. coop arl, Case. C-147/06 and C-148/06, pt. 26)
