RECONSTRUCTION OF PUBLIC LIGHTING IN THE URBAN AND SUBURBAN AREA OF LOZNICA (2018)
The public procurement procedure analyzed in this case study is an example of violation of the basic public procurement principles through contracting authority’s abuse of the framework agreement.
Namely, the tender documentation did not specify the exact quantities of lamps that were to be installed during the duration of the framework agreement, nor were determined the exact locations where the reconstruction was to be carried out. As a criterion for the selection of the most favorable bid, the lowest total unit price was envisaged, which was the sum of unit prices offered for 7 items (works). For the performance of all the works individual contracts were to be concluded in the following 2 years, and the value of all the works to be performed could not exceed the total estimated value of the public procurement.
One of the potential bidders pointed out to the fact that the bidders cannot compile an acceptable bid since the contracting authority hasn’t even determined an approximate number of lamps to be installed during the reconstruction. He then submitted a request for clarification of the tender documentation, and then a request for protection of rights. However, the Republic Commission rejected his request for protection of rights, accepting the illogical explanation of the contracting authority that the nature of the framework agreement does not require determining the amount of work to be performed during its duration, and that the exact locations and quantities of materials will be defined later by the plan of the public company competent for the control and execution of this type of works.
The Law on Public Procurement stipulates that a framework agreement is an agreement between one or more contracting authorities and one or more suppliers, the purpose of which is to determine the terms of the contract to be awarded during a certain period, relating to prices and, where appropriate, quantities. At first glance, from the legal definition – and especially from the determinant “where appropriate” – it could be concluded that the indication of the quantity of goods, services or works to be delivered or provided during the framework agreement is optional. However, if we accept this position, the following questions arise: how exactly would the bidders form a price if the quantities haven’t been determined, and whether the offer with the lowest total unit price after the realization of individual contracts would really be the most favorable? Namely, in such a situation, the bidder could “estimate” that the need for certain goods, services or works will be lower during the validity of the framework agreement, so he would offer a significantly lower unit price for those goods, services or works in relation to other bidders; at the same time, for some other goods, services or works for which he “estimates” that in the same period there will be greater need he would offer a unit price higher than those of the other bidders. Although his total offered unit price would be the lowest at the time of bid opening, in the end, after the realization of individually concluded contracts, his bid would not actually be the most favorable. In addition, in that case the offers would be incomparable.
It follows from the above that not determining even the approximate quantities for which the framework agreement is concluded and prescribing the total unit price as a criterion for the selection of the most favorable bid is contrary to the principles of efficiency and economy, transparency and equality of bidders; besides, it opens space for numerous abuses by the participants in the public procurement procedures.
This is also confirmed by the case in question, in which the contracting authority misused the non-determination of the quantities of works in the framework agreement in order to award the contract to a precisely determined bidder. Namely, only four days after the conclusion of the framework agreement, the contracting authority “learned” the amount of works that will be performed and their exact locations, so it concluded a contract with the selected bidder in the amount of 12,471,741.00 dinars, which exhausted almost all funds intended for the execution of the subject works in the next two years (12,500,000.00 dinars).
It is especially worrying that this abuse was made possible by the Republic Commission’s decision to reject the request for protection of rights which pointed out the problem of non-determination of quantities in the framework agreement, as well as by the fact that the Commission accepted the arguments of the contracting authority which had no foundation in law, much less in logic.
Finally, it is important to point out that the European Court of Justice in its decision of December 19, 2018 (number C-216/17 Autorità Garante Della Concorrenza e Del Mercato – Antitrust e Coopservice) ruled that the failure to determine the quantity of goods, services and works that may be required by contracts concluded on the basis of a framework agreement is contrary to Directive 2004/18/EC and the principles of transparency and equal treatment of economic operators interested in concluding a framework agreement.