Public procurement – Luxembourg: Stories of ∅ (this is a zero)
In two recent rulings, the president of the administrative court accepted the possibility that even in the presence of a zero in the price list, a bid should not necessarily be disqualified.
1. Brief reminder of the existing legal framework
The rule in the Grand Ducal Regulation of 8 April 2018 implementing the Law of 8 April 2018 on public contracts, as amended (RMP) is nonetheless clear, with Article 61 providing that:
All items on the schedule of conditions must be filled in; they may not be crossed out, nor contain the word “nil”, nor the figure zero (-, o), unless the special specifications state otherwise and without prejudice to the provisions relating to variants, set out in Articles 19 and 155.
The penalty for failure to comply with this rule is set out directly in article 63 of the RMP:
Tenders that do not comply with any of the above provisions shall not be taken into consideration.
2. Appeal by a tenderer rejected for this reason
It was against this backdrop that, in the first case analysed, an appeal was lodged by a joint venture of companies active in the supply of office furniture, whose tender had been rejected for having entered “0” in three items of the schedule of conditions, namely items relating to the “order preparation file” and to supplements for a “silver finish” on certain types of furniture.
Faced with a price list that had apparently been largely copied from one of its competitors’ catalogues, and despite the fact that it did not usually charge for order preparation or supplements for this type of finish (which was one of its manufacturer’s basic colours), the association took the view that it should not indicate any prices for these items.
From the opposite point of view, the contracting authority defended the strict application of the rule set out in Article 61 of the regulations on public contracts in Luxembourg, which had moreover historically been validated by the case law of the Luxembourg courts.
Relying on the reason underlying this rule – to ensure the comparability of bids and the equal treatment of tenderers – the president of the administrative court considered that these “zero” references had no impact on the analysis of the viability of the bids and their useful comparison.
In fact, the cases that forged the jurisprudence of the lower courts concerned situations where companies were unable/unwilling to provide one or other of the services listed in the schedule.
Taking a pragmatic view of the situation, the administrative judge considered in his order of 30 September 2022 that the automatic rejection of the bid in this situation would lead to nonsense: forcing a company to put a figure on a service that it does not usually charge for, to the detriment of the proper use of public funds:
It therefore appears that the temporary association, unless it invented a non-existent price and artificially increased its prices in order to scrupulously comply with the schedule, could not validly fill in these positions, whereas if, as in the case in point, it complied with reality and did not invoice any amount for these positions, it would be exposing itself to the risk, proven in the case in point, of having its bid automatically rejected.
This dilemma illustrates the absurd nature in this case of an automatic and strict application of the provisions of Article 61 of the Grand Ducal Regulation of 8 April 2018.
This assessment is reinforced by the approach of Community law in this respect, a judgment of the Court of Justice of the European Union (CJEU, 10 September 2020, Tax-Fin-Lex d.o.o, C-367/19 §36) having held:
In the light of all of the above considerations, the answer to the questions referred is that Article 2(1)(5) of Directive 2014/24 must be interpreted as not constituting a legal basis for rejecting a tenderer’s bid in a public procurement procedure on the sole ground that the price proposed in the tender is EUR 0.00.
The European Court of Justice had ruled that the processing of a zero euro bid (in total) should lead to the implementation of the abnormally low bid procedure, implying the sending of a request for explanations to the operator concerned before proceeding with the rejection of his bid, if the answers provided were not satisfactory.
Adopting, as it were, the adage of “who can do more can do less“, the order handed down by the president of the administrative court called into question the admissibility of automatically rejecting a bid with a “zero” position, where Community case law requires an adversarial process when the total amount is zero.
Lastly, on the basis of the significant difference in price between the disqualified bid and the successful bid, the president of the administrative court of Luxembourg suspended the decision to award the public contract, considering that “the criticisms of the momentary association with regard to the two decisions referred to and with regard to the excessively strict and formalistic application of articles 61 and 63 of the grand-ducal regulation of 8 April 2018 are of a serious nature“.
3. Appeal by the competitor of a company that has not been dismissed on this ground
The second order handed down on 19 January 2024 concerned a situation in which a company B supplying and installing professional kitchens had initially had its tender rejected because of the figure “zero” entered for one of the positions relating to the supply of two refuse containers.
Challenging the validity of this decision, particularly in light of the lessons learned from the first case and the derisory value of the service in question, company B pointed out to the contracting authority that the amount indicated was simply the result of the promotional offer it had received from its supplier.
Following this complaint, the contracting authority revised its decision and decided to award the public contract to Company B despite the “zero” indicated in its tender documents.
Challenging the withdrawal of the first award decision and the award of the public contract to its competitor, Company A, which had now been reclassified as the runner-up, contested the non-application by the contracting authority of the rule set out in Articles 61 and 63 of the RMP, arguing in substance that there had been an unlawful adjustment to B’s tender and that it was up to the interim judge to apply the solutions adopted by the lower courts.
Endorsing the position developed in his previous order on public contracts, the President of the Administrative Court of Luxembourg completed his approach by pointing out that the contracting authority’s change of mind could not be assimilated to a regularisation of the bid but merely amounted to an assessment of the bid at its fair value in the light of the explanations provided:
It also appears that the indication of a “zero” price in this case did not lead to a modification of the initial offer, nor, as Company A maintains, to any “regularisation”, nor, even less, to the opening up of a possibility, through the possible subterfuge of the indication of a “zero” price, of hiding a position with a view to the late indication, all of which would violate the principle of equality of tenders and would jeopardise the comparability of tenders, since Company B had only, in its request for an injunction of 1 August 2023, informed the contracting authority of the reasons for indicating such a “zero” price, namely that the two refuse containers were offered by the supplier.
On the other hand, and with regard to the role to which he should be confined, the judge admits that he cannot encroach on the analysis of the trial judges, but that this role should not render the judge’s office impervious to “parallel developments in case law“, especially if these make it possible to confirm the obviousness of the solution to be reached:
(…) However, this position of archivist in principle should not condemn the summary jurisdiction judge to immobility or to a wait-and-see attitude in the absence of recent case law, an absence resulting from the simple fact that the trial judges have not recently had to deal with such a question, while foreign case law and the general principles laid down by the Administrative Court tend towards a less formalistic and rigorous application of the disputed provision, the absence of recent case law cannot condemn the interim relief judge to confine himself to a backward-looking attitude and ignore parallel developments in case law.
Against this background, the President of the Administrative Court dismissed the action brought by Company A, thereby validating the approach of the contracting authority in admitting the disgression of the rule in Article 61 of the RMP.
4. Important points
From the point of view of the contracting authority, and in the presence of a “zero” (or “0”, or “nil”, or a crossed-out position), it is advisable to be cautious and ask the tenderer for explanations in order to understand the reasons for this anomaly.
If there are relevant reasons, a contracting authority should in principle accept the tender and refuse to apply article 61 of the RMP automatically.
In the absence of a response, or faced with an unsatisfactory response, the public purchaser will regain the option of rejecting the tender, being able to consider in particular that the absence of a price given for one (or more) position(s) prevents an effective comparison of the tenders submitted, if not an assessment of the economic viability of a tender.
From the tenderer’s point of view, it is still recommended that all the positions in the schedule be costed.
In the event of a similar situation, an explanatory note should accompany the bid submitted to defuse the problem by indicating from the outset the reasons for indicating a zero.
Please do not hesitate to contact us if you have any questions about the grounds for rejecting a tender in a public tender in Luxembourg, or to find out about the scope of our activities in this area.