Droit,

DECISION N. 9003, 21ST OCTOBER 2022, COUNCIL OF STATE, SEC. III, ITALY

Article(s) in Directive 2014/24/EU: Art. 46(2)
Topic: Effectiveness of the so-called multi-lot constraint in case of award by affiliated companies
Member State: IT
Court/rev. board: Council of State

1. IMPLEMENTATION / RELEVANT NATIONAL LEGISLATION

Art. 51 Legislative Decree no. 50 of 2016

2. FACTS

The appellant company ranked first in the ranking list for the award of the tender for the provision of armed security services contract at the facilities of the Local health authority of Foggia region, in respect of Lots 1, 7 and 8, and was awarded the relative tenders. The contracting authority cancelled the awarding of all three lots, in application of the award constraint set forth in Article 3, last part, of the Tender Rules: “Each bidder may submit a bid for one, more, or all lots. In the event that a tenderer is awarded for more than one lot, the same tenderer may be awarded up to a maximum of three lots, which shall be identified on the basis of the criterion of economic relevance, starting from the lot of greatest economic relevance among the lots for which it was ranked first in the ranking list and proceeding in descending order of economic relevance. The remaining lots in which the tenderer came first will be awarded to the next competitor in the ranking list”. In particular, it appeared that OMISSIS – a company related to the appellant – had been awarded lots 2, 3 and 5 of the same tender.

The Regional Administrative Tribunal of Apulia, in the judgment under appeal, declared inadmissible the appeal filed by the appellant against the end-of-procedure act establishing the corporate connection. It observed that:

both companies were headed by the common parent company OMISSIS (sole shareholder for OMISSIS and majority shareholder for OMISSIS), such as to show a corporate link in the sense of the Italian Civil Code (Article 2359);
that, moreover, “certain persons holding offices in representative bodies of the companies involved appear to be the same. Furthermore, the technical offers formulated by the two companies present the same drafting characteristics and furthermore are not dissimilar in terms of content. Finally, the policies issued as a provisional guarantee for participation in the tender procedure were also issued, for both companies, by the same insurance agency”;
that the provision of Article 51 of the Public Contract Code was correctly applied, since “the contracting authority, in a logic of substantial protection of competition and application of the rule in accordance with the underlying rationale, correctly applied the tendering rules, also conforming its own activity to the dictates of the most recent case law”.

According to the appellant, the rule granting the power to impose the award constraint would not attribute antitrust powers to the individual contracting station, but only the faculty to fragment the assignments in order to “ensure greater efficiency of the services”. It would therefore be extraneous to the logic underlying it to have a purpose of protecting competition such as to extend its operation, as in the present case, to affiliated undertakings.

3. JUDGMENT

The Council of State noted that the purpose of the concerned provision is to be found in Recital 79 of Directive 2014/24/EU, allowing contracting authorities to limit the number of lots that may be awarded to the same economic operator “in order to safeguard competition or to ensure reliability of supply”. It went on stating that such indication, as well as the provision of domestic law implementing it, thus reveal the twofold causal profile of public procurement contracts:

The so-called ‘accounting’ one, functional to (only) the administration’s needs to procure goods and services; and
The so-called ‘pro-competitive’ one, effectively described by the doctrine as aimed at artificially creating the conditions for competition (moreover, not only from a macroeconomic perspective, but also in order to favor the interest of the public contractor) where they would not naturally arise.

It then noted that Article 51 of the Public Contracts Code is part of a provision whose overall discipline is aimed at protecting – in terms of access to the public procurement market – “micro, small and medium enterprises”. That is how the first paragraph expresses itself, indicating the purpose of the subdivision into lots. The Council of State emphasized how the regulation of the award constraint must be interpreted also in this light.

It then recalled the choice of the Italian legislator to provide contracting authorities with a further optional tool for the subdivision of contracts into lots in order to achieve the objective of maximum participation and distribution of public contracts.

The Council of State did not eventually rule in favor of the applicant. It stated that there was no element to affirm that, between the two possible purposes of the award constraint, the pro-competitive one is secondary or only potential, with the consequence of requiring a specific motivational burden in the tender law. Differently, such burden would appear to exist in the different hypothesis in which the contracting authority merely poses the problem of avoiding a concentration of negotiating commitments at the expense of the same company organization and therefore considers rendering inoperative the constraint in relation to companies that are formally different but in a situation of connection. It added that, in the presence of a clause providing for an award constraint, it is presumed that it also responds to the rationale of preventing the hoarding of the connected by a single party, and, if anything, the other hypothesis in which there is no such purpose must be justified.

What the Council of State highlighted is that the case at hand is characterized not only by the unicity of the decision-making center, but also by the concrete translation of this subjective data into the objective of the performance bid – which is precisely one of the two events that the award constraint is intended to avoid, together with the concentration of the orders. The Council of State concluded that the examination of the specific factual dimension of the matter in question showed that the mentioned dialectic between the “accounting” and pro-competitive cause of public contracts does not necessarily arise in terms of mutual incompatibility: effective competition being an instrument of market efficiency and, therefore, a guarantee of a negotiated performance that is also efficient and effective. The appeal was thus declared as unfounded.

The main takeaways of the judgment are the following. The institution of the award constraint, as regulated by Art. 51(3) of Legislative Decree no. 50 of 2016, may have a twofold purpose, indicated by recital 79 of Directive 2014/24/EU, which allows contracting authorities to limit the number of lots that may be awarded to the same economic operator “in order to safeguard competition or to ensure reliability of supply”. Consequently, the rule conferring the power (conceived in terms of a mere faculty) to impose the award constraint does not only grant the individual contracting authority the power to fragment contracts in order to “ensure greater effectiveness of performance”, but also the power to limit the concentration of public contracts in the hands of the same entities, in the context of a provision (the aforementioned Art. 51) that has precisely the purpose of excluding concentrations.

The consolidated orientation of jurisprudence is to the effect that the discretion provided for in Art. 51(2) (participation restriction) and (3) (award restriction), if exercised (with the introduction of the quantitative participation and/or award restriction) a fortiori applies in the quomodo (as to the choice of whether or not to extend that restriction also to companies that form a single decision-making center): without there being a specific and formalistic duty to specify, in the lex specialis, such an extension, as it is derivable from the system.
When, despite the apparent subjective diversity of the bids submitted for different lots, several and unequivocal symptomatic indications reveal the objective fact of the substantial uniqueness of the performance bid, one is in the presence not of a mere corporate link, but rather of a substantial entrepreneurial and even corporate identity behind the formal screen of an apparent subjective diversity; in such cases, the application of the award constraint responds not only to protect the pro-competitive interest, but also to protect the reliance placed by the customer on the real entrepreneurial characteristics of the specific subject required to render the service.

MAIN LEGAL ISSUE: In case of division of contracts into lots, if the contracting authority limits the number of lots which may be awarded to one tenderer, the notion of “tenderer” shall include not only the single tendering company or member of the economic operators, but also any other associated or subsidiary economic operator. According to Recital 79 of Directive 2014/24/EU, the scope for limitation the number of lots which may be awarded to the same tenderer is to “to preserve competition or to ensure reliability of supply” and therefore the limitation should be extended to all companies legally linked to the awarding company.

Link to the decision.