The European Union quite early on, as early as 1989, made its
first rudimentary attempts to harmonise rules on public procurement
across the internal market for two principal reasons: the breakdown
of trade barriers within the EU bloc and the elimination of
distortion of competition through government purchasing.
Many years later, and with the most recent overhaul in 2014, the
EU legislative framework for public procurement has become
increasingly more complex and wider in scope. Malta as an EU Member
State has obviously followed suit and transposed this framework
into Maltese law, principally, the Public Procurement
Regulations.
However, and as I would like to see it, public procurement is
relatively simple. It is driven by core general principles: equal
treatment of bidders, transparency of the procurement procedure, no
discrimination between economic operators and products/services,
proportionality and promotion of genuine competition. The detail of
the legal framework is generally understandable if one has a good
grasp of how these general principles are interpreted and applied
in practice. The majority of the rules are founded in one or more
of these general principles.
A corollary aspect of equal treatment and transparency is,
naturally, the remedies aspect of procurement. In fact, as part of
the EU legislative framework, there is a specific Remedies
Directive (1989/665/EC, as amended) which has been around since at
least 1989. The principal objective of this Directive is that
“effective and rapid remedies” must be available to
economic operators in case of breaches of public procurement so
that transparency and non-discrimination are guaranteed. This is
very true. The effective and rapid nature of judicial remedies in
public procurement generally available before the Public Contracts
Review Board (PCRB) must contribute to the market’s trust
in Government’s purchasing policies and procedures. This is
evident from year on year increase in cases being heard before the
PCRB and relative speed by which disputes are resolved: 2 – 4
months before the PCRB and 4 – 5 months before the Court of Appeal
(if a dispute is appealed).
Malta has had its own unique remedy in public procurement the
so-called pre-contractual remedy, or formally called, “remedy
prior to the closing date of competition”. This remedy can be
exercised by filing an application before the PCRB at any time
before the closing date of competition to address any perceived
defect or illegality in a procurement document or procedure in
advance and before economic operators submit their bids.
This remedy is attractive and has been used frequently for three
principal reasons.
- First, this remedy is intrinsically pro-active and attempts to
solve any defects or illegalities in the procurement documents or
the procedure adopted before bidders submit their bids. This
guarantees legal certainty and also sets aside tender
specifications which bar legitimate bidders with quality
cost-effective solutions from participating in tenders. - Second, no deposit was payable by the bidder filing the
pre-contractual remedy-which contrasts starkly with the deposit
payable in case of an appeal from an award or rejection decision
which can be as low as ?400 and as high as ?50,000. - Third, the PCRB has showed, time and time again, its
willingness to hear these applications in one whole sitting (in
some more complex cases spanning hours) and delivering its decision
in just a few weeks. In my experience, bidders were won over by
these two principal factors.
The utility of this pre-contractual remedy did not go unnoticed
by the Court of Appeal either. In a number of judgments delivered
in 2019, the Court of Appeal has held that if a bidder fails to
exercise this pre-contractual remedy, that bidder cannot
subsequently, and after being unsuccessful in the competition,
challenge any aspect of the procurement document which it could
have done before closing date of the competition. For better or for
worse, that is the Court of Appeal’s position and one which
sought to strengthen the pre-contractual remedy and to direct
economic operators to use it in a timely fashion.
Despite all of the good things one could say about this remedy,
it is true that a few market players have misused this remedy for a
myriad of improper reasons: unnecessarily stalling competitive
tender procedures, blocking new entrants to a market, but also,
winning some more time to formulate a bid! This misuse has
been, in my view, sporadic at best, but nonetheless, there was good
reason to address it. The abuse of judicial remedies is certainly
not a new phenomenon. Although such abuse might, in theory, expose
the preparator to damages, our courts have been less inclined in
practice to award damages in such instances generally and this by
applying a relatively high legal standard.
Government has sought to address this misuse by passing two
far-reaching amendments to the pre-contractual remedy.
The first amendment which was passed on 15 November 2019
introduced the requirement for a deposit to be paid to the PCRB on
the filing of the pre-contractual remedy. The exercise of this
remedy is no longer free, but now a fee representing 0.05% of the
estimated financial value of the potential public contract is to be
paid which is capped at ?50,000. If a multi-million Euro tender was
split into lots, then the cost to lodge this remedy could be even
double or triple that since the deposit is requested by the PCRB
for each lot.
The second amendment which was passed even more recently on 15
May 2020 requires that the application is filed not just before the
closing date of the tender (which sometimes meant filing it just a
few hours before a tender was due to close), but “within the
first two-thirds of the time period allocated in the call for
competition for the submission of offers”.
In my view, these amendments have made the pre-contractual
remedy absolutely redundant and ineffective. I will explain why I
think this is the case below.
The pre-contractual remedy is usually useful in complex
procurement and for example in the procurement of novel or
innovative medicine-both of which are inherently of high financial
value. Economic operators are also incentivised to take action to
correct these tenders to earn the right to participate effectively.
However, and in my view, economic operators are unlikely to blindly
invest ?50,000 (in most cases at least) in an uncertain venture, in
particular, when they are not even present on the market in
question. It is true that the deposit is paid back by the PCRB if
the bidder is successful, but, with the exercise of any remedy,
this is never guaranteed.
As to the new time-limit imposed for the exercise of this
remedy, there is an inherent difficulty to calculate this
“time period” since the submission period is regularly
extended for some reason or another. Therefore, one has to ask
whether the right to file this remedy is extinguished where the
first two-thirds would have lapsed, but then the closing date is
subsequently extended after a couple of days before it was meant to
close.
The time period is also incompatible with the Court of
Appeal’s judgments which are meant to strengthen this remedy
and with the requirement in the Remedies Directives that
transparency is guaranteed by remedies. This ties with another
important point: the minimum time periods for the submissions of
bids are regulated by the EU legislative framework to ensure
transparency, but also, adequate opportunity for interested parties
to learn of procurement procedures and to prepare their bid
accordingly. The totality of that time period is important for
reasons related to transparency and genuine competition, and
therefore, it does not make sense that the time period allowed to
exercise the pre-contractual remedy is significantly shorter. This
shorter time period for the exercise of this remedy undermines the
very objectives of public procurement.
More importantly, and I say this quite respectfully, there is no
good and proper reason for this unworkable and unreasonably short
time period to have been imposed. It can have no purpose other than
to render this pre-contractual remedy ineffective and
meaningless.
While it may be too early to tell, and there might have been
other contributory factors, there might be a sharp drop in the
exercise of pre-contractual remedies.
These amendments should be reversed and the effectiveness of the
pre-contractual remedy is reinstated. If this is not the case,
economic operators’ trust in Malta’s public procurement
framework is at risk.
This article was first published in the Times of
Malta, 20 July 2020.
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guide to the subject matter. Specialist advice should be sought
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