C-285/99

LOMBARDINI AND MANTOVANI

OPINION OF ADVOCATE GENERAL RUIZ-JARABO C O L O M E R delivered on 5 June 2001 1

I — Introduction any measures and provisions which may have discriminatory effects are prohibited. 3

1. Five questions for preliminary ruling on the interpretation of Article 30(4) of Coun- cil Directive 93/37/EEC of 14 June 1993 concerning the coordination of procedures 3. In cases of this kind, the emphasis is for the award of public works contracts 2 placed on abnormally low tenders in (hereinafter 'the Directive' or 'Directive respect of a contract. Emphasis is placed, 93/37/EEC') have been referred to the in particular, on the procedure for exclud- Court of Justice by the Fourth Chamber ing such tenders, such a procedure being of the Consiglio di Stato (Council of State) effected in order to clear the field prior to della Repubblica Italiana, sitting as a the award of contracts by rejecting propo- judicial body, ruling on appeals lodged sals which do not display sufficient credit- respectively against two judgments of the worthiness. One further principle of Com- Tribunale Amministrativo Regionale per il munity law on public contracts must be Lazio (Regional Administrative Court, respected: the principle of efficiency. 4 Lazio).

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4. As regards abnormally low tenders, the I I — Law Consiglio di Stato raises doubts concerning the compatibility of the following with Article 30(4) of the Directive:

1. Community law

5. Directive 71/305/EEC which constituted (1) the establishment of a mechanism for a first step towards the coordination of automatically setting a threshold on the laws of the Member States in respect of basis of which a tender is considered public works contracts had as its main abnormally low which prevents under- purpose the simultaneous attainment of takings from ascertaining the threshold freedom of establishment and freedom to level before submitting their tenders. provide services in respect of public works contracts. 5 That Directive took account of the possibility that abnormally low tenders might be submitted and Article 29(5) made provision for their possible exclusion.

(2) the exclusion from the outset of tenders not accompanied by an explanation in 6. Directive 71/305 was amended substan- respect of the price for an amount tially and on a number of occasions, 6 for equal to at least 75% of the figure which reason its consolidation was appro- specified in the tender conditions and priate, this being realised in Directive the fact that only certain explanations 93/37. 7 In Article 30(4) the new text are admissible, with those referring to simply reproduced, with minor amend- minimum figures which can be inferred ments, the text of Article 29(5) of Directive from official lists being ruled out. 71/305 of the Directive as it stood follow- ing the 1989 amendment. Article 30(4) states that:

The contracting authority may take into 'In cases of awards of contracts for works consideration explanations which are justi- of ECU 5 million or above on the basis of fied on objective grounds including the the lowest-bid criterion mentioned in para- economy of the construction method, or graph 1, the authority concerned must the technical solution chosen, or the excep- assess the irregular nature of the tenders tionally favourable conditions available to referred to in Article 30 of Council Direc- the tenderer for the execution of the work, tive 93/37/EEC of 14 June 1993 in relation or the originality of the work proposed by to all tenders undercutting the indicative the tenderer. price by more than the percentage fixed by 1 January of each year by decree of the Minister of Public Works, after hearing the views of the Monitoring Authority, having regard to the tenders admitted to the procedures held in the previous year. If the documents relating to the contract provide for its award at the lowest price tendered, the contracting authority must communicate to the Commission the rejec- tion of tenders which it considers to be too low. To that end the public administration may take account only of explanations based on the economy of the construction method or 1 of the technical solutions chosen, or the exceptionally favourable conditions avail- able to the tenderer, but not of explanations relating to all those elements for which minimum values are laid down by legisla- tion, regulations or administrative provi- sions or for which minimum values can be inferred from official data. Tenders must be 2. Italian law

8. By the Ministerial Decrees of 28 April 1997 1 1and 18 December 1997 12 issued under the first subparagraph of Arti- cle 21(la) of Law No 109/1994 for 1997 and 1998 respectively the Minister of 1. Case C-285/99 10 — The provision was amended by Article 7 of Law No 4 1 5 of 18 November 1998 (GURI N o 284 of 4 December 1998, ordinary supplement, p. 5). Following that amend- ment, which is not applicable to this case ratione temporis, the text of Article 21(1a) of Law 109/1994 reads: 'In awarding contracts for works of ECU 5 million or m o r e according to the criterion of the lowest bid within the meaning of Article 1, the authority concerned shall assess 9. The Italian National Highways Author- irregularities inherent in tenders in accordance w i t h Article 30 of Council Directive 93/37/EEC of 14 J u n e ity (hereinafter 'the ANAS') published a 1993 for all tenders undercutting by an amount equal or greater than the arithmetical average of the percentage notice calling for tenders, under a restricted discounts of all the bids accepted, excluding ten per cent, procedure, for works described as 'RM rounded up to the next unit, for bids undercutting by a large amount and those undercutting by a small amount, 87/97 — GRA Motorway — stretch increased by the arithmetical average differential of the percentage discounts which exceed that average (the italics 19 — widening to three lanes in both indicate the differences with respect to the previous wording). To that end the public administration may take directions from km 43,280 to km 46,500'. account only of explanations based on the economy of the construction method, or the technical solutions chosen, or the exceptionally favourable conditions available to the tenderer in question, but not, however, of explanations relating to those elements for which minimum values have been set by laws, regulations or administrative measures, or for which minimum values can be inferred from official data. At the time of submission, tenders must be accom- panied by explanations concerning the most significant price components, indicated in the tender notice or in t h e etter of invitation, which in total amount to no less than 7 5 % of the figure specified in the tender notice... .' 10. The temporary association of under- 11 — GURI N o 105 of 8 May 1997, p. 28. takings constituted by Lombardini SpA — 12 — GURI No 1 of 2 January 1998, p. 26. Impresa Generali di Costruzioni (herein-

13. ANAS published a contract notice for the award, under restricted procedure, of a

C. A warning that failure to respect any of 13 — The irregularity threshold was set at 28.004% while the the above requirements would mean exclu- discount submitted by Lombardini was 29.88%. 14 — Third paragraph of the Chapter 'Facts' in the order for sion of the bids. reference.

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corresponding contract to complete the cerning the contract notice, the letter of second stage of construction work of the invitation, the decision to exclude it from Bergamo/Zanica stretch of provincial road the awards procedure and the award itself. No 115. The Tribunale Amministrativo Regionale per il Lazio dismissed the action in Judg- ment No 1498 of 26 June 1998.

16. Contesting the inadmissibility of its '(1) Does recourse to a clause in calls for bid, Mantovani lodged a complaint con- tenders for public works contracts which prevents the participation of

1 5 — T h e threshold was set at 40.865% and Mantovani submitted a discount of 41.460%. 16 — Chapter II of the order for reference.

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undertakings which have not submitted economy of the construction method or with their tenders explanations in the technical solutions adopted or the respect of the price indicated, being exceptionally favourable conditions equal to at least 75% of the figure available to the tenderer represent an specified in the tender conditions, obstacle to the application of Arti- represent an obstacle to the application cle 30(4) of Directive 93/37? of Article 30(4) of Directive 93/37?

(5) Does the exclusion of explanations (2) Does the establishment of a mechanism relating to items for which minimum for automatically identifying tenders figures can be inferred from official which overstep a threshold indicative lists represent an obstacle to the appli- of irregularities and whose validity cation of Article 30(4) of Directive should therefore be checked, based on 93/37?' a case-by-case criterion and an arith- metical mean, which is such that under- takings are unable to ascertain that threshold in advance, represent an obstacle to the application of Arti- cle 30(4) of Directive 93/37?

21. At the hearing on 3 May 2001 all the parties, with the exception of the Austrian Government, appeared to put their submis- sions orally.

23. My arguments will follow the above outline; however, there should initially be some consideration, even if only super- ficial, of the principles in Community law which underlie the system of awarding public contracts, in order better to under- stand the rules in Article 30(4) of the VI — Consideration of questions for pre- Directive. liminary ruling

22. The five questions referred by the Consiglio di Stato can be grouped, as indicated in paragraph 4 of this Opinion, into three categories:

1. Principles underlying selection of a contractor

(1) Automatic setting of the threshold indicative of irregularity. This refers to the second question. 24. The Directives on public contracts, each one concerned with a specific field, aim to promote the development of effec- tive competition in the sector of public contracts 17 by realising three of the funda- (2) Explanations of the price submitted and the nature of those explanations. This refers to the first, fourth and fifth 17 — Case 103/88 Fratelli Costanzo v Comune di Milano [19891 ECR 1839, end of paragraph 18 (hereinafter 'Fratelli questions. Costanzo').

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27. Once the tenderers qualifying for award of the contract have been selected 25. Giving effect to those requirements and upon application of the rules on participa- the pursuit of that objective can only be tion, that award is also subject to objective achieved if those who wish to be awarded parameters of assessment, whether the public contracts can apply on an equal lowest bid or the most economically advan- basis, without any discrimination whatso- tageous. If the second criterion is applied ever; 19 to this end, a system based on the awarding authority must set out in objectivity at all levels, in terms of both advance the selection criteria in the con- substance and form, is indispensable. tract documents or contract notice, stating Firstly, by setting objective criteria for their respective importance. 23 participation in the tender and award of contracts. 20 Secondly, by making provision for open procedures in which transparency is the norm. 2 1

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system whereby tenderers apply on an 30. Those principles must be applied equal footing, which must underlie the remembering that the award of public award of public contracts, means that any contracts is a way of managing public person who wishes to be awarded a con- interests in which authorities invite per- tract of this kind must know beforehand sons — natural persons or legal per- what he must do to be awarded it, so that sons — to collaborate in realising objec- the awarding body is confined (given the tives asked of them which, in every discretion involved in the technical evalua- instance, require an efficient response. On tion) to applying parameters set out in the certain occasions, such efficiency is in rules, both those rules governing public conflict with the pace which a selection contracts in a general sense, and those procedure, complete with guarantees, which involve in particular a specific con- requires. For this reason the Directive tract, that is to say the contract documents excludes certain contracts from its field of or the contract notice. 24 application and, in particular cases, ordin- ary procedures for award of contracts and brings forward the time-limits in some instances. 26

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consideration explanations submitted to it, possibility of providing explanations especially those relating to the economy of regarding the tender, or after applying an the construction method, the technical oral verification procedure. 28 solution chosen, the exceptionally favour- able conditions available to the tenderer for the execution of the work, or the originality of the work proposed.

32. There are three consequences deriving 3. Automatic setting of the threshold indi- from the above: cative of irregularity

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34. A system such as that described above particular as required by Article 30(4) of conforms to the requirements of Arti- the Directive. cle 30(4) of the Directive and the principles underlying selection of the contractor.

37. Admittedly, automatic setting of the irregularity threshold, together with the requirement to submit explanations of the price with the tender and during the 35. I have stated that, according to Arti- exclusion stage, before the verification cle 30(4), the concept of an abnormally procedure and without a hearing, of those low tender is very precise and must be tenders which are abnormally low may be determined for each contract according to incompatible with the requirements of the the specific purpose it is intended to fulfil. Directive. However, that consequence can- In my view, an irregularity threshold based not per se be put down to the system of on a figure calculated using the bids setting the irregularity threshold, but to the submitted for a contract, bids which, by enforcement of that requirement or to definition, are made in accordance with the implementation of the exclusion system. purpose of the contract, is perfectly in line with the aims of the Directive. As the representative of Mantovani stated at the hearing, the system allows the market to establish the threshold, above which a tender may be considered irregular, for 38. In Fratelli Costanzo the Court did rule each contract. Moreover, given that the that the Directive31 prohibits systems of criterion represents an objective figure, all automatic exclusion from procedures for applicants are on an equal footing. No the award of contracts, but the automatic party has any advantage with respect to the exclusion procedure rejected by the Court others in submitting its bid. is a procedure carried out without any oral verification procedure, not a procedure based on an irregularity threshold using mathematical criteria. 32

4. Explanation of the price tendered 42. In this way, therefore, the selection procedure is speeded up and efficiency increased which, as I said earlier, is also a requirement deriving from Community law on public contracts. In the course of the procedure described above, when a bid is A. Explanations which must be submitted considered abnormally low, the awarding with the tender authority can proceed, without further delay, to verification of the details and assessment of the explanations submitted, without having to wait for the tenderer to produce them; the tenderer may provide further explanations at the hearing which must take place before the tender is 40. It can be seen from the principles to rejected. which selection in public contracts must conform, and which I have outlined above simply in descriptive terms, that there is nothing in the Directive in general nor in Article 30(4) which specifically prohibits a requirement, under threat of exclusion from the tender procedure, that the tender In fact, it may happen that on viewing the should be accompanied by an explanation documentation submitted alongside the of at least 75% of the price specified in the tender and the clarifications provided at tender conditions. This constitutes an that point, the awarding authority decides objective requirement which all applicants to admit the tender. 33 The procedure for must satisfy. awarding the contract can be continued without the delay that would arise if no explanatory documentation had been sub- mitted ab initio and it was necessary to hear the applicant in order for an explana- tion to be provided.

B. Nature of the explanations 46. It appears from a joint interpretation of both indents that, before rejecting a tender by reason of the fact that it is abnormally low, the awarding authority must ask the applicant for any details and explanations it considers relevant. In response to this 44. The second indent of Article 30(4) request, and to support his proposal, the provides that, to assess abnormally low tenderer must submit explanations he con- tenders, the awarding authority may take siders relevant, without any limitation, into consideration explanations regarding including those mentioned in the second the economy of the construction method or indent. the technical solution chosen or the excep- tionally favourable conditions available to the tenderer for the execution of the work or the originality of the work proposed by the tenderer. All the explanations must be taken into 34 — A separate question, not referred to in any of the questions consideration by the awarding authority in this reference, concerns the fact that in practice (see paragraph 10(b) of this Opinion) there is a further when it makes its final decision on whether requirement to submit in a sealed envelope documents to accept or reject the tender, including the which are used to verify the data included in the explanation and that the envelope is opened only if the explanations outlined in the second indent. tender exceeds the irregularity threshold and qualifies as abnormally low. In principle, in such an instance there is This provision is not a block rule, and does no different, unjustified treatment between tenders which not set out a restrictive list of reasons and are abnormally low and those which are not. Both are rejected if they do not meet the requirements in issue. The explanations which may be submitted, but, only situation of unjustified discrimination and legally on the contrary, simply explains the general inadmissible would be if both types of tenders were submitted and the envelope was empty in both cases or did rules in the first indent. not contain the necessary documentation. In fact, if there is an envelope but it does not contain documentation or if the contents are not the relevant documentation, the tender will automatically be rejected as inadmissible, in accor- dance with the rules on the contract notice (see para- graph 10(c) of this Opinion). In that case there would be unjustified inequality of treatment between tenders con- sidered as abnormally low and those exceeding the irregularity threshold, the envelope being opened only in the first instance. Thus a tender which is not abnormally low may go through the selection procedure and, further- 47. Consequently, a provision limiting the more, reach the award stage without satisfying a require- ment which, under the rules on the contract notice, category of explanations which the appli- constitutes a condition of admissibility for the tender. cant in an abnormally low tender may

51. Nothing can prevent an undertaking from offering a different price — a lower 48. An applicant submitting a tender which price — than that indicated as the mini- exceeds the irregularity threshold must mum in official lists for particular elements have the opportunity to put forward his of the work. A proposal made by a tenderer arguments and, in order to support the is complex in its content, it is not mono- worth of his proposal, to present any lithic, which means the various elements explanations he considers relevant. How- can be combined to reach a price and ever, it is possible to provide clarifications conditions of execution which make it the only if the tenderer has sufficient flexibility, most attractive option in the general inter- in a situation of free competition, to est. To deprive a person wishing to be provide lower prices than his competitors awarded a contract of the possibility of and, thus, to put forward plans for the most justifying the reasons why a lower price is advantageous contract in the general inter- being offered than that set in official lists est. Therefore, where there is no such means ruling out the beneficial effects flexibility, any explanation is redundant. deriving from fair competition and con- demning the tenderer to automatic exclu- sion of his tender.

49. In principle, this would be the case if prices were officially fixed. Where prices are controlled, no explanation is necessary, as such explanation is provided by the 52. In view of the foregoing I propose that rules. If a tenderer has put forward differ- the Court should answer the fourth and ent prices in that instance, the proposal fifth question put by the Consiglio di Stato cannot be justified. In that case, exclusion by stating that Article 30(4) of the Direc- of the explanations would not be incompa- tive prohibits a national law requiring the tible with the Directive. awarding authority, as part of its verifica- tion of abnormally low tenders, to take into consideration only particular explanations 35 — See above, paragraph 7. and to exclude those explanations referring

53. In this Opinion I have repeatedly stated 55. Where a tender is considered abnor- in different contexts that Article 30(4) of mally low, after opening the envelope the Directive prohibits the automatic exclu- containing the documents with the support- sion of tenders considered to be abnormally ing information for the explanations sub- low. Before adopting a decision to exclude, mitted at the outset, and before deciding on the awarding authority must request, in the outcome, the awarding authority is writing, details of the constituent elements required to request any explanations it of the tender which it considers relevant. It considers relevant. Taking into account was the intention of the Community legis- the latter explanations, as well as those lature that no tender should be rejected submitted initially and the supporting without the applicant being able to provide documents, it must make its decision on ample explanation. The oral verification whether to exclude the tender or accept it. procedure is obligatory as the Court ruled in Transporoute, Fratelli Costanzo and Dona Alfonso. 36

(a) A mechanism for automatically identifying tenders which overstep a thresh- old indicative of irregularities which is such that undertakings are unable to ascertain that threshold in advance before submitting their tenders is not in conflict with Article 30(4) of the Directive;

(b) Article 30(4) of the Directive does not prohibit the call for tender containing a clause excluding undertakings who do not submit with their tenders explanations in respect of the price indicated, being equal to at least 75% of the figure specified in the tender conditions;

(c) Article 30(4) of the Directive prohibits a national law from requiring an awarding authority to verify abnormally low tenders by taking into account only certain explanations and from excluding those tenders referring to items for which minimum figures can be inferred from official lists; and

(d) Article 30(4) of the Directive does not permit an exclusion procedure for abnormally low tenders where the tenderers do not have the chance to provide explanations following the opening of the envelopes and before the adoption of the decision to exclude.

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