New procurement ruling: Is a bidder required to deposit an amount to document its reliability?
In a new decision of 20 January 2025, the Danish Complaints Board for Public Procurement has ruled on when a bidder has been ordered to pay damages, cf. section 138(3)(1) of the Danish Public Procurement Act. The Complaints Board also ruled on whether an evaluation model was suitable for identifying the most economically advantageous tender.
The case on Jammerbugt Municipality’s tender, conducted by MOWE
The case concerns Jammerbugt Municipality’s tender for two lots covering the cleaning of the municipality’s properties. The municipality had awarded both lots to KN Rengøring. KN Rengøring was subject to a discretionary ground for exclusion (section 137(1)(4) of the Danish Public Procurement Act), as Herlev Municipality had terminated a contract with KN Rengøring in 2021. Under section 138(1) of the Act, a contracting authority cannot exclude a bidder if the bidder has provided sufficient evidence that it is reliable.
Jammerbugt Municipality had obtained a guidance opinion from the Danish Competition and Consumer Authority on the reliability of RN Rengøring, in accordance with section 138(1), second sentence, of the Public Procurement Act as then in force. Jammerbugt Municipality decided to follow the Authority’s opinion and therefore did not exclude KN Rengøring from the tender.
Under section 138(3)(1) of the Act, if a bidder has been ordered to pay damages, the bidder must provide evidence that the damages have been paid. This also applies if the bidder has undertaken to pay damages. If the bidder does not provide evidence of payment of the damages, it cannot document its reliability and is therefore excluded from participating in the tender.
During the complaint proceedings, the complainant argued that KN Rengøring had already been ordered to pay damages to Herlev Municipality when Herlev Municipality made its claim for damages against KN Rengøring. In that connection, it was not decisive whether a final judgment or decision had been made on the claim. The complainant also pointed out that Jammerbugt Municipality could, for example, have required the bidder to deposit an amount corresponding to the damages claimed, which could then be released in accordance with the final decision.
Jammerbugt Municipality, on the other hand, argued that arbitration proceedings had been brought over the claim and that KN Rengøring had raised objections to Herlev Municipality’s claim. It was therefore uncertain whether Herlev Municipality had a claim against KN Rengøring and, if so, how large the claim was. On that basis, the municipality took the view that KN Rengøring had not been ordered to pay damages.
The complainant also complained that the evaluation model was not suitable for identifying the most economically advantageous tender. For the sub-criterion “Service calculation”, Jammerbugt Municipality had used a “mathematical formula”. The municipality wanted the bidders to offer the number of hours covering the “expected average daily service” – or at least close to the desired number of hours. Jammerbugt Municipality had described the model in the tender documents and (directly) stated the service level that would give the best score for the sub-criterion.
The complainant argued that the evaluation model was contrary to sections 160 and 161 of the Public Procurement Act, as it was not able to reflect the real difference between the tenders with regard to the service calculation. This was particularly problematic when only two tenders had been received, where the tender with the lowest yPoint was awarded 10 points and the tender with the highest yPoint 0 points.
Jammerbugt Municipality, on the other hand, argued that the evaluation model had been laid down and described in the tender conditions, cf. section 160 of the Act. The municipality had evaluated the tenders in accordance with the model described, which had also been suitable for identifying the most economically advantageous tender.
Decision of the Danish Complaints Board for Public Procurement
The Complaints Board found that Jammerbugt Municipality had carried out the process and the assessment of RN Rengøring’s reliability in accordance with the rules of the Public Procurement Act. The complaint was therefore dismissed.
The decision is based on the fact that, in the absence of a judgment or other decision, KN Rengøring had not been ordered to pay damages, cf. section 138(3)(1) of the Act. The fact that Herlev Municipality had made a claim for damages therefore does not mean that KN Rengøring had been ordered to pay damages. The Complaints Board also stated that it is obvious that KN Rengøring had not “undertaken” to pay damages to Herlev Municipality either. The complainant was therefore unsuccessful in arguing that KN Rengøring had not documented its reliability.
As regards the evaluation model, the Complaints Board concluded that an evaluation model that is described in the tender documents and complies with section 160(1) of the Act cannot be set aside if it is transparent and complies with the principle of equal treatment, cf. section 160(2) of the Act. The Complaints Board also found that the model had in fact been suitable for identifying the most economically advantageous tender.
MOWE’s comments on the decision
From 1 January 2025, public contracting authorities no longer have to obtain a guidance opinion from the Danish Competition and Consumer Authority on the reliability of excluded companies. Instead, the contracting authority must assess reliability itself. The decision contributes significantly to understanding how a contracting authority should act when the contract that is the subject of the bidder’s exclusion is still pending, e.g. before the Danish courts.
Attorney Kathrine Ahrenholt also points out that the decision is important when choosing an evaluation model. The Complaints Board has previously dealt with a similar issue in its decision of 15 March 2013 (Cowi A/S v National Procurement Ltd. – Denmark (SKI)). In that case, the Complaints Board concluded that a model in which the tender with the lowest price received the maximum points and the tender with the highest price received 0 was not unsuitable in the specific case. The Complaints Board thus once again endorses an evaluation model in which two tenders are awarded 0 points and the maximum points, respectively.
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