In a landmark ruling on January 11, 2021, Peak Consulting Group A/S v. the Ministry of Taxation, represented by the Development and Simplification Agency, the Complaints Board for Public Procurement, after consideration by a four-member complaints board, ruled that in cases of doubt, the contracting authority is obliged to investigate whether a subsidyor consortium agreement is based on an anti-competitive agreement and, if so, the contracting authority is obliged to reject the tender.
The facts of the case
The Ministry of Taxation, represented by the Development and Simplification Agency (the "Ministry of Taxation"), invited tenders for a framework agreement with four suppliers for "business and analysis services for IT, technology, and data-related projects" as a restricted tender under the Public Procurement Act.
The framework agreement had an estimated value of DKK 1,600,000,000 excluding VAT.
The Ministry of Taxation received 13 applications for prequalification, after which the Ministry of Taxation decided to prequalify nine companies. The nine prequalified companies then submitted bids, and the Ministry of Taxation decided to enter into a framework agreement with four of the nine companies. One of the four companies with which the Ministry of Taxation entered into an agreement was Maximize Consult ApS ("Maximize"). Maximize relied technically and financially on five other companies that acted as support units for Maximize.
The complainant, Peak Consulting Group A/S ("Peak"), had submitted a bid in a consortium with OptimumIT A/S, but the consortium did not win the tender.
Subsequently, Peak Consulting Group A/S lodged a complaint with the Complaints Board for Public Procurement.
The complainant's allegations
Peak claimed that the Ministry of Taxation, as the contracting authority, had acted in violation of the principles of equal treatment and transparency in Section 2 of the Public Procurement Act by not excluding Maximize from the tender, because Section 2 of the Public Procurement Act imposes an obligation on the contracting authority to reject an applicant or tenderer who has entered into an agreement with a view to distorting competition.
Peak also claimed that the Ministry of Taxation had violated Section 159(3) of the Public Procurement Act, (3) of the Public Procurement Act, which stipulates that the contracting authority is obliged to carry out an effective check of the information and documentation in the application or tender if the contracting authority is in doubt as to whether the tender meets the requirements of the contract notice and the tender documentation.
Peak Consulting Group A/S claimed that the constellation with Maximize as the main supplier and the five companies as support units constituted an anti-competitive agreement and thus contravened Section 137(4) of the Public Procurement Act, (4) of the Public Procurement Act, which – if the contracting authority has opted for this in the tender – obliges the contracting authority to reject bids if there are "plausible indications" that an anti-competitive agreement has been entered into.
According to Peak, it was anti-competitive that several companies, which Peak considered to be competitors, had submitted bids as supporting entities, because at least one of Maximize's supporting entities could, according to Peak, have bid for the contract itself.
Peak Consulting Group A/S referred in this connection to the Supreme Court ruling in the "Road Stripe Case" from November 2019, which we have previously described here.
The Ministry of Taxation had not opted for the grounds for exclusion in section 137(4) of the Public Procurement Act. Peak nevertheless argued that, even if a voluntary ground for exclusion had not been selected, a contracting authority was still obliged, pursuant to the principle of equal treatment in Section 2 of the Public Procurement Act, to reject an applicant or tenderer who had entered into an agreement with a view to distorting competition.
The Complaints Board's decision
The Complaints Board stated that, when Section 137(1)(4) of the Public Procurement Act is selected as a voluntary ground for exclusion in the tender documentation, it is incumbent on the contracting authority to investigate whether there are "sufficient plausible indications" of distortion of competition, and in this connection, the contracting authority has a certain degree of discretion in assessing whether any indications should lead to exclusion from the tender.
Regarding its jurisdiction, the Complaints Board stated that it did not have jurisdiction to rule on whether competition law had been complied with. However, if the voluntary ground for exclusion in Section 137(1)(4) of the Public Procurement Act applied, the Complaints Board could consider the issue as part of its assessment of whether a tenderer was covered by the ground for exclusion. The Complaints Board could thus assess whether the contracting authority should have conducted a more detailed investigation into the legality of the consortium agreement or a support agreement.
The Complaints Board further stated that, according to the principle of equal treatment in Section 2 of the Public Procurement Act, the contracting authority is also obliged to investigate whether a tender is based on an illegal anti-competitive agreement if there is reason to doubt this.
When the voluntary grounds for exclusion in section 137(1)(4) of the Public Procurement Act have not been selected by the contracting authority, the assessment must instead be made in accordance with the principle of equal treatment in section 2. The Complaints Board ruled that a more reliable basis must then be required to assume that the tender received is based on a consortium agreement or support agreement in violation of the competition rules, and the contracting authority also has a certain degree of discretion in assessing this.
The Complaints Board further stated that the fact that several companies are behind a tender cannot in itself constitute the "sufficient plausible indications" referred to in Section 137(1)(4) of the Public Procurement Act. At the same time, the Complaints Board stated that this circumstance cannot constitute the reliable basis required under Section 2 of the Public Procurement Act for assuming that a tender or application is in breach of the competition rules and must therefore be rejected. Nor can it alone lead to the contracting authority having to conduct a closer examination of the specific agreement.
The Complaints Board's conclusion
The Complaints Board noted that Peak had not requested the Competition and Consumer Authority to initiate an investigation into whether an illegal anti-competitive agreement had been entered into.
Peak acknowledged that Maximize could not meet the minimum requirements set by the Ministry of Taxation without its five supporting companies. Peak argued that one of the supporting companies appeared to be capable of bidding for the contract on its own.
The Ministry of Taxation argued that it could not have concluded with any certainty that Maximize's cooperation with the support units was an invalid anti-competitive agreement. Furthermore, the Ministry of Taxation argued that Maximize and the support units were not competitors because at most only one of Maximize and the support units could have bid for the contract independently.
On this basis, the Complaints Board found that there was no such doubt as to whether the cooperation between Maximize and the five support units constituted an agreement restricting competition that the Ministry of Taxation, as the contracting authority, should have investigated whether this was the case.
The Complaints Board also found that there was no reliable basis for assuming that the agreement was in fact contrary to competition rules and thus invalid. The Ministry of Taxation had therefore not acted contrary to Section 2 of the Public Procurement Act by not rejecting the bid.
CLEMENS Law Firm notes
The ruling helps to clarify the obligations of the contracting authority when it receives a tender or application from a group of companies.
The ruling establishes that, where the specific consortium agreement or support agreement gives rise to doubt, a contracting authority is obliged to investigate whether it constitutes an illegal anti-competitive agreement. At the same time, the Complaints Board states that Section 2 of the Public Procurement Act entails an obligation to reject applications and tenders if there are sufficient grounds to assume that the applicant or tenderer has entered into an anti-competitive agreement in violation of the competition rules.
This obligation applies regardless of whether the contracting authority has opted for the voluntary grounds for exclusion in section 137(1)(4) of the Public Procurement Act, although a more secure basis is required to activate the obligation to investigate under section 2 of the Public Procurement Act.
In future tenders, the contracting authority should therefore consider whether it is specifically advantageous for the contracting authority to opt for the voluntary grounds for exclusion in Section 137(1)(4) of the Public Procurement Act.
If this ground for exclusion is selected, the contracting authority will, based on the Complaints Board's decision in this case, have broader discretion to exclude tenderers if there is doubt as to whether the tender or application is based on an illegal anti-competitive agreement.
However, the contracting authority's obligation to exclude a tenderer under Section 137(1)(4) of the Public Procurement Act appears to apply at an earlier stage than under Section 2 of the Public Procurement Act, as the same secure basis is not required.
This may be disadvantageous to the contracting authority if it excludes a specific tenderer whom the contracting authority actually wants to remain in the competition to win the contract.
If you have any questions regarding the above ruling or how you should proceed as a contracting authority going forward, our specialists in procurement law are of course ready to advise you.
