2015/4 Oppland municipal authority – AS Miljøbygg

Go to Norwegian case summary and full text decision

The case concerns the conditions for entering into a negotiated procedure without a preliminary contract notice as set out in art. 30.1(a) of directive 2004/18/EC. The main question was whether a tender whose price exceeded the contracting authority's budget could be regarded as unacceptable.

Oppland municipal authority conducted an open procedure for the construction of a school in Lillehammer. Out of three submitted tenders, the municipality rejected two as non-compliant. The remaining compliant tender, by AS Miljøbygg (the complainant), was rejected because it exceeded the contracting authority's budget.

The question before KOFA was whether the conditions for entering into a negotiated procedure were fulfilled in this instance (Norwegian procurement regulations § 14-4 (a) (implementing directive 2004/18/EC art. 30.1(a), second indent)), i.e.: "… in the event of irregular tenders or the submission of tenders which are unacceptable under national provisions compatible with Articles 4, 24, 25, 27 and Chapter VII".

The wording and context of the Norwegian provision is slightly different from the directive. No established national provisions define an unacceptable tender, or – in particular (as contested by the complainant in the present case) – give guidance to whether a tender exceeding the authority's budget can be considered unacceptable.

The Complaints Board considered that open procedures have some inherent weaknesses, and that the purpose of the provision is to remedy a situation in which no acceptable tenders are submitted. A new round of open tendering will not necessarily remedy the problems from the first round, and will add to the overall cost and time spent on the procurement process. The possibility of circumvention of the default ban on negotiations, however, calls for a restrictive understanding of the provision. This implies strict requirements on the procurement planning, and proper assessment of the market.

The authority's budget was not published in the tender documentation, but had been indicated in a tender conference prior to the deadline. The complainant's price exceeded the budget by approximately 25 %.

The wording of provision § 14-4 (a) (art. 30.1(a) of 2004/18/EC) is unclear as to whether such tenders can be regarded as unacceptable. In the EU Commission's guidance to the 1992 directives, it submits that the term "unacceptable" encompass such tenders (chapter II.3.3.1.1). Legal scholars have been sceptical to the Commission's stance on this issue. Article 26.4 (b) of directive 2014/24/EU (not yet implemented in Norway), however, provides that: "In particular tenders [...] whose price exceeds the contracting authority’s budget as determined and documented prior to the launching of the procurement procedure shall be considered as unacceptable." In the opinion of the Complaints Board, there was nothing to indicate that directive 2014/24/EU was intended to change the rules on unacceptable tenders in this regard. For this reason, KOFA held that the same interpretation should be applied to the Norwegian procurement regulation § 14‑4 (a), and found that tenders exceeding the budget in principle could be regarded as unacceptable. In light of the obligations on equal treatment and transparency, the deeming of a tender as unacceptable on this basis is however dependent on the budget process being diligent and the result representing a proper assessment of the market. KOFA did not find that the budget needed to be brought to the tenderer's attention before the tender deadline.

These conditions were fulfilled in this case, and KOFA emphasized that the planning process was diligent, the budget estimation supported by relevant experts, and that the estimation included a margin. The fact that the contracting authority, during the subsequent negotiations, did not obtain a price that was within the original budget, did not change KOFA's assessment of the initial budget process as satisfactory.