Private Tenders 2: Creating Freedom by Establishing Rules
Introduction
During the past years, various judgments have been rendered in
which the court held that under certain circumstances private
parties too are bound by the procurement law principles of
transparency and equality. Two of these rulings have already been
discussed in the newsletter of April 2009
(in Dutch but available in English).
On 6 May 2009 the Court of Amsterdam (LJN: BI4270) expressed a
different opinion on the applicability of the principles of
procurement law. This judgment gives private parties an
understanding of the way in which they can keep their freedom of
contract when various tendering parties are requested to submit
offers.
The Facts
Since 1999 Commercial Cleaning BV ("CCC")
has been doing cleaning work for KLM in two periodical check-ups of
certain types of aircraft. In 2005 KLM issued an RFQ (Request for
Quotation) for these works. The RFQ was opened to four suppliers of
cleaning services, and contained the following information, inter
alia:
"You are hereby advised that KLM is not committed to any
course of action as a result of its issuance of this Request For
Quotation and/or its receipt of a proposal from you or other firms
in response to it. In particular, you should note that KLM
might:
- reject any proposal that does not conform to instructions
and specifications that are issued herein;
- not accept proposals after the stated submission
deadline;
- reject all proposals, if it so decides;
- negotiate with one or more firms;
- award bid to one or more firms;
- award only a portion of the bid;
- make no award.
(...).
The supplier also acknowledges that during the RFQ process KLM
may, at any time:
- Enter into and conclude negotiations with any other
supplier for the supply of all or part of KLM's
requirements.
- Terminate the RFQ process with respect to any or all of
KLM's requirements.
- Terminate the RFQ process with and/or further participation
by, the supplier.
- Reject at its sole discretion all or part of any RFQ
response submitted by the supplier.
- Depart from or modify the proposed framework and/or any
other procedures in relation to the RFQ."
After the closing date KLM twice had the bidders carry out a
test cleaning, after which the bidders were given the opportunity
to adjust their proposals. After the re-submission of the
proposals, the bid of CCC was lower than that of one of the other
bidders, Asito. Following an additional request of KLM to Asito,
Asito lowered the rates in its proposal. However, CCC was not given
the opportunity to adjust its proposal. KLM then decided to award
the works for the first periodical check-up to Asito, and informed
the parties involved of this decision.
In reaction to this decision, CCC stated that in its opinion
irregularities had occurred during the public procurement
procedure, as a result of which the first contract had wrongly been
awarded to Asito. KLM, however, saw no reason to reconsider its
decision. After CCC had threatened to go to court, KLM informed CCC
that KLM did not intend to have CCC carry out the works for the
second periodical control if it would bring a legal action against
KLM. Since CCC refused to sign a settlement agreement depriving CCC
of the possibility to bring legal proceedings, KLM informed CCC
that it had contracted with another party to do the works in the
second periodical control. CCC then brought proceedings on the
merits of the case against the award and claimed that KLM had
violated the principles of procurement law.
The Course of the Proceedings
Although CCC also (and with success) put up a
defense against the giving away of the second part of the works,
the discussion about the first part is particularly important with
a view to the application of procurement law. The Court rightly
considered that the procedure used by KLM does qualify as
procurement, but that the laws and regulations in that field do not
apply, because KLM is not a contracting authority. However, the
Court is of the view that following the procurement procedure does
result in the establishment of a special, precontractual legal
relationship between the parties that is governed by the
requirements of reasonableness and fairness. The Court considered
in this respect that this legal relationship may entail that the
contracting party has to treat the various bidders equally, and
also has to give the bidders the information they need in order to
control compliance with the principle of equality and to make a
sound bid. Moreover, KLM also has to comply with its own procedural
rules in the RFQ.
However, KLM's failure to treat the bidders equally is at
the heart of the discussion in these proceedings, since KLM has
only given Asito the opportunity to adjust its proposal once again
at a later stage. The Court, on the other hand, held that KLM is
only subject to the obligation to keep the proposals secret, and
that the RFQ further stipulates that KLM is not bound by any policy
rule with regard to the procurement. By including the reservations
quoted above in the RFQ, KLM has made it clear - in the opinion of
the Court - that it is not bound by the principles of procurement
law, which should have been clear to the bidders - according to the
Court - as professional parties. Furthermore, KLM has not created
the expectation at any time during the procedure that it would
adhere to the principle of equality or that it would not deviate
from the RFQ (anymore), and KLM has actually used the freedom in
practice which it had reserved in the RFQ. The Court concluded that
as a result of the above, KLM is not bound by the principle of
equality or the principle of transparency, and it has not acted
contrary to the rules of the RFQ either.
Lessons for Practice
Various judgments have already confirmed that private contracting
authorities too may be bound by the principles of procurement. This
consideration has been confirmed in the judgment of the Court of
Amsterdam. However, this judgment also makes clear that private
parties may keep their precontractual freedom by setting it out in
specific rules regarding the procurement procedure. If the private
contracting authority explicitly reserves all freedom in these
rules, it follows from the application of the judgment discussed
above that the principles of equality and transparency do not
apply.
The Public Procurement Team of Kennedy Van der Laan has broad
experience in drafting customized procurement rules for this
category of contracting authorities. Especially in the current
economic climate, where disappointed bidders will be more inclined
to go to court in an attempt to win a procurement procedure after
all, it is recommended - also for private contracting authorities -
to set out procurement rules when contracts are put out to
tender.