Exemption from tender obligation: technical competition
The size of the market for supplies, works and services put out to tender by contracting authorities in the Netherlands every year is enormous. We think primarily of the (central) government, but semi-public institutions such as educational institutions and hospitals are also involved.
Based on the fundamental principles of objectivity, transparency and non-discrimination, efforts should be made to spend public money in the fairest and best way possible.
There are some well-known excluded contracts to this obligation, such as contracts below the threshold amounts, in (quasi-) subcontracting and certain contracts in the field of defence and security; contracts related to the construction or operation of telecoms; secret contracts; renting of land and buildings; purchase of television programmes and broadcasting time; arbitration and mediation; employment contracts; certain contracts related to research and development; contracts based on a legal instrument that creates obligations under international law.
The ruling of the Gelderland District Court’s Interim Injunction Judge of 1 December 2023, published on 12 December 2023, ECLI:NL:RBGEL:2023:6573 dealt with an entirely different exception situation. That is when there is no competition for technical reasons. In other words, what you want is only available from supplier X. This exception needs discussion because in a highly technological and specialised world we now live in, this may become more common.
The case concerns the purchase of radiological equipment by RadboudUMC. There are only two major players for that equipment with the incumbent supplier drawing the short straw.
Looking to the future and the expiry of the radiological equipment’s lifespan, the project group decided that a CT scan with online adaptive radiotherapy (OART) function was called for, given the desirability of being able to work online with such a device.
After market research and discussions with both suppliers, it was decided to enter into a written agreement for consideration with the supplier that can already provide such a CT scan with OART function. The incumbent supplier, which believes it will not be able to make such a machine with OART until some time from now, enters a defence against this.
Under Section 1.4 of the Dutch Public Procurement Act (Aw), the basic principle is that a contracting authority intending to conclude a written contract for pecuniary interest for the provision of works, supplies or services must make an objective choice of procedure and participants. Section 1.10a Aw then provides that, subject to this, a contracting authority shall not design a contract to evade the application of the Aw or artificially limit competition. The latter restriction exists, according to paragraph 2 of this article, if the contract is designed to unduly favour or disadvantage certain entrepreneurs.
Chapter 2.2 of the Aw lists the various procurement procedures for contracting authorities. Part of this chapter is Section 2.32 Aw, which elaborates on the negotiated procedure without a notice. This procedure is an exception to the general public procurement obligation and offers the possibility of private award. This ground for exception should therefore be interpreted restrictively. RadboudUMC relies on the ground included in part 2 of subsection b of the first paragraph of Section 2.32 Aw.
The negotiation procedure
This ground stipulates that the negotiated procedure without a notice may be applied if the public contract can only be performed by a particular entrepreneur because competition is lacking for technical reasons. To this, the third paragraph of Section 2.32 Aw adds that this ground for exception only applies if there is no reasonable alternative or substitute and the lack of competition is not the result of an artificial restriction on the conditions of the tender.
The contracting authority invoking the technical reasons exception must prove that there are reasons within the meaning of that provision, but also that those reasons make it absolutely necessary to award the contract at issue to the company in question. Also, all the conditions imposed on the exception invoked by the contracting authority must be met.
It would be beyond the scope of this article to go into the specifics. However, RadboudUMC has meticulously substantiated why not only technically this requirement of having OART functionality was imposed. But also why the timeline drove the decision. In other words, on well-founded grounds, RadboudUMC made it plausible that it did not have to wait until the incumbent supplier had also realised such OART functionality in its CT scanners.
The ruling makes it clear that the absence of technical competition cannot be assumed easily. But in careful tendering, it can be successfully invoked.