Case T-195/05

Deloitte Business Advisory NV

Commission of the European Communities

(Public service contracts – Call for tenders for programme evaluation activities and other activities in the public health sector – Rejection of a tender – Conflict of interest)

Judgment of the Court of First Instance (Fourth Chamber), 18 April 2007

Summary of the Judgment

1. Budget of the European Communities – Financial Regulation – Provisions applicable to tendering procedures

(Council Regulation No 1605/2002, Art. 94)

2. Budget of the European Communities – Financial Regulation – Provisions applicable to tendering procedures

(Commission Regulation No 2342/2002, Art. 146(3), second subpara.)

1. Article 94 of Regulation No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities applies – according to the provisions of that regulation – to all public contracts financed in whole or in part by the Community budget. Thus no distinction is made according to whether the procurement procedure in question relates to a framework contract or another type of contract.

However, that provision permits exclusion of a tenderer from a procurement procedure only if the situation of conflict of interest to which it refers is real and not hypothetical. That does not mean that a risk of conflict of interest is not sufficient to exclude a tender. In principle, it is only when the contract is performed that a conflict of interest can become real. Before conclusion of the contract, a conflict of interest can be only potential and Article 94 of the Financial Regulation therefore implies an assessment in terms of risk. That risk must actually be found to exist, following a specific assessment of the tender and the tenderer’s situation, for that tenderer to be excluded from the procedure. The mere possibility of a conflict of interest cannot suffice for that purpose.

It follows that, in the procedure for the award of a framework contract, account must be taken of the fact that specific contracts, award of which will give rise to a check that there is no risk of conflict of interest, must come into being before the successful tenderer for the framework contract is entrusted with the performance of specific tasks. Thus, in such a case, the risk that a conflict of interest will in fact arise can be considered only where there are material circumstances placing the tenderer in a position where it is unable to avoid the risk of bias in the performance of the majority of the tasks under the framework contract.

(see paras 66-68)

2. The second subparagraph of Article 146(3) of Regulation No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of the Financial Regulation gives the evaluation committee the option of requesting from tenderers additional information concerning the supporting documents submitted in relation to the exclusion and selection criteria. It follows that that provision cannot be interpreted as imposing a duty on the evaluation committee to request such information from tenderers.

(see para. 102)

JUDGMENT OF THE COURT OF FIRST INSTANCE (Fourth Chamber)

18 April 2007 (*)

(Public service contracts – Call for tenders for programme evaluation activities and other activities in the public health sector – Rejection of a tender – Conflict of interest)

In Case T‑195/05,

Deloitte Business Advisory NV, established in Brussels (Belgium), represented by D. Van Heuven, S. Ronse and S. Logie, lawyers,

applicant,

Commission of the European Communities, represented by L. Pignataro-Nolin and E. Manhaeve, acting as Agents,

defendant,

ACTION for annulment, firstly, of the Commission’s decision rejecting the tender from Euphet for the public procurement contract ‘Evaluation Framework Contract covering the policy areas of [the Directorate-General for] Health and Consumer Protection, Lot 1 (Public Health) – call for tenders SANCO/2004/01/041’ and, secondly, of the Commission’s decision awarding that contract to a third party,

THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Fourth Chamber),

composed of H. Legal, President, I. Wiszniewska-Białecka and E. Moavero Milanesi, Judges,

Registrar: J. Plingers, Administrator,

having regard to the written procedure and further to the hearing on 11 October 2006,

gives the following

Judgment

Legal framework

1 The award of service contracts by the Commission is governed by Title V of Part One of Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ 2002 L 248, p. 1, ‘the Financial Regulation’) and Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of the Financial Regulation (OJ 2002 L 357, p. 1, ‘the Implementing Rules’).

2 Pursuant to Article 89(1) of the Financial Regulation:

‘All public contracts financed in whole or in part by the budget shall comply with the principles of transparency, proportionality, equal treatment and non-discrimination.’

3 Under Article 94 of the Financial Regulation:

‘Contracts may not be awarded to candidates or tenderers who, during the procurement procedure:

(a) are subject to a conflict of interest,

…’

4 Under Article 99 of the Financial Regulation:

‘While the procurement procedure is under way, all contacts between the contracting authority and candidates or tenderers must satisfy conditions ensuring transparency and equal treatment. They may not lead to amendment of the conditions of the contract or the terms of the original tender.’

5 Article 138 of the Implementing Rules provides:

‘1. Contracts shall be awarded in one of the following two ways:

(a) under the automatic award procedure, in which case the contract is awarded to the tender which, while being in order and satisfying the conditions laid down, quotes the lowest price,

(b) under the best-value-for-money procedure.

2. The tender offering the best value for money shall be the one with the best price-quality ratio, taking into account criteria justified by the subject of the contract such as the price quoted, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, profitability completion or delivery times, after-sales service and technical assistance.

…’

6 Pursuant to Article 146(3) of the Implementing Rules:

‘Requests to participate and tenders which do not satisfy all the essential requirements set out in the supporting documentation for invitations to tender or the specific requirements laid down therein shall be eliminated.

However, the evaluation committee may ask candidates or tenderers to supply additional material or to clarify the supporting documents submitted in connection with the exclusion and selection criteria, within a specified time-limit ...’

7 Article 147(3) of the Implementing Rules states:

‘The contracting authority shall then take its decision giving at least the following:

(a) the name and address of the contracting authority, and the subject and value of the contract or of the framework contract,

(b) the names of the candidates or tenderers rejected and the reasons for their rejection,

(d) the reasons for the rejection of tenders found to be abnormally low,

(e) the names of the candidates or contractor selected and the reasons for that choice by reference to the selection and award criteria announced in advance and, if known, the proportion of the contract or the framework contract which the contractor intends to subcontract to third parties,

(f) in the case of negotiated procedures, the circumstances referred to in Articles 126, 127, 242, 244, 246 and 247 which justify their use,

(g) where appropriate, the reasons why the contracting authority has decided not to award a contract.’

8 Article 148(3) of the Implementing Rules provides:

‘If, after the tenders have been opened, some clarification is required in connection with a tender, or if obvious clerical errors in the tender must be corrected, the contracting authority may contact the tenderer, although such contact may not lead to any alteration of the terms of the tender.’

Background to the dispute

9 On 14 December 2004, the Commission published in the Supplement to the Official Journal of the European Union (OJ 2004 S 243) a contract notice for the award of a framework contract entitled ‘Evaluation framework contract covering the policy areas of [the Directorate-General for] Health and Consumer Protection, Lot 1 (public health) – invitation to tender Sanco/2004/01/141’ (‘the framework contract’).

10 It is clear from sections 7.1.3 and 7.1.4 of the specifications relating to the tendering procedure (‘the specifications’) that the framework contract is to relate in particular to the evaluation of the programme of Community action in the field of public health established by Decision No 1786/2002/EC of the European Parliament and of the Council of 23 September 2002 adopting a programme of Community action in the field of public health (2003-2008) (OJ 2002 L 271, p. 1).

11 The specifications divide the tasks to be carried out under the framework contract into two main tasks. The first task (‘main task 1’) is to conduct studies and to provide services intended to assist in the design and preparation of Community programmes or policies, their ex-ante assessment and the ‘organisation of evaluation activities’. The second task (‘main task 2’) is to carry out mid-term, final and ex-post evaluations of programmes, policies and other activities. According to the specifications, the framework contract must allow specific contracts to be concluded in accordance with the Commission’s needs. It must be concluded in principle for a period of 24 months with the possibility of renewal for two further periods of 12 months each.

12 The specifications also set out several grounds for the exclusion of tenderers.

13 One of those grounds, set out in section 9.1.3 of the specifications, which reproduces Article 94 of the Financial Regulation, is formulated as follows:

‘Contracts may not be awarded to candidates or tenderers who, during the procurement procedure:

(a) are subject to a conflict of interest …’

14 With a view to tendering for the contract in question, Deloitte Business Advisory NV formed a consortium with the London School of Hygiene and Tropical Medicine, the Nederlandse Organisatie voor toegepast-natuurwetenschappelijk onderzoek (Netherlands Organisation for Applied Scientific Research, TNO) and the Istituto superiore di sanità (National Health Institute, Italy) for the evaluation of European public health (European Public Health Evaluation Task Force, ‘Euphet’), assisted by other bodies such as the Karolinska Institutet (a Swedish medical research and education centre). The applicant acts as the legal representative of that group.

15 On 10 February 2005 Euphet submitted a tender to the Commission under the tendering procedure. Euphet’s tender includes a paragraph with the heading ‘Independence’, which reads as follows:

‘Euphet understands and accepts that none of the evaluation organisations or their staff should have the slightest existing or potential conflict of interest in the performance of their task under the framework contract. We confirm that all the participants in Euphet are entirely independent of the Commission and that we do not foresee any risk in this regard at present. Furthermore, we undertake to conduct a detailed prior check in connection with each specific contract in order to ensure that the teams we propose are composed of members who are able to work in complete independence and to provide an objective and independent external assessment. If, in the course of execution of the projects, the slightest problem should arise which could have a bearing on this key principle, we would notify the Commission immediately and work with it to seek to rectify the situation.’

16 By a letter of 22 April 2005, the Commission informed Euphet that its tender had been rejected since the evaluation committee for the contract had found there to be risks of conflicts of interest within Euphet. In the decision rejecting the tender, the Commission noted as follows:

‘The evaluation committee examined the offers concerning possible Conflict of Interest … The definition of [conflict of interest] is provided in the draft contract that was included in the tender documentation. This definition reads:

“The Contractor shall take all necessary measures to prevent any situation that could compromise the impartial and objective performance of the Contract. Such conflict of interests could arise in particular as a result of economic interest, political or national affinity, family or emotional ties, or any other relevant connection or shared interest.”

In the context of an evaluation contract, a case of [conflict of interest] could take place if the tenderer is being, or has been, involved in the implementation of the subject to be evaluated. This situation could involve the evaluator assessing his/her own work, and there is a great risk that the conflict of interest affects the objectivity – which is a crucial factor for an evaluation – of the evaluator. It is also being stressed in the Specifications of the Tender that objectivity has to be ensured in evaluations.

The following information was found concerning the Euphet main and supporting partners’ involvement in … activities [of the Directorate-General for health and consumer protection (SANCO)].

– London School of Hygiene and Tropical Medicine (LSHTM) has a large number of grant contracts (14 listed) with SANCO.

– TNO has a large number of grant contracts with SANCO/Public Health.

– Istituto Superiore di Sanitá (ISS) has one grant contract with SANCO/Public Health and another one is planned to be signed in the coming months.

– Karolinska Institutet (KI) has a large number of grant contracts with SANCO/Public Health.

The evaluation committee concluded that Euphet does not acknowledge the fact that a number of the consortium partners have a large involvement in the implementation of the Public Health programme. Considering the great risk of [conflict of interest], a detailed and concrete explanation would have been required to provide a sufficient level of understanding of how the [conflict of interest] issue should be addressed and the risks should be eliminated. However, the approach proposed is not sufficient, and no satisfactory assurance is provided by the tenderer that [conflict of interest] could be avoided.’

17 In the decision rejecting the tender, however, the Commission adds that it would not be signing the framework contract with the successful tenderer until a period of two weeks had passed.

18 By a letter dated 3 May 2005, Euphet contested the Commission’s position and, inter alia, asked it to respond by 4 May 2005, failing which it would bring the matter before the Court of First Instance.

19 By a fax of 4 May 2005, the Commission acknowledged receipt of the letter from Euphet and stated:

‘Because we need more time to examine the questions raised in your letter, we will not proceed with the signing of the contract for a further period of 15 days from the date on which this letter was sent.’

20 By a fax of 19 May 2005, the Commission replied that it was maintaining its position and rejecting the tender submitted by Euphet.

Procedure and forms of order sought

21 By application lodged at the Registry of the Court of First Instance on 19 May 2005, the applicant brought the present action.

22 By a separate document lodged at the Registry of the Court of First Instance on the same day, the applicant made an application for interim measures, seeking, on the one hand, suspension of execution of the decision rejecting the tender and the decision awarding the contract to another tenderer (‘the award decision’) and, on the other, an order preventing the Commission, firstly, from notifying the award decision to the successful tenderer and, secondly, from signing the relevant contract, on pain of a fine of EUR 2.5 million.

23 By order of 26 May 2005, the President of the Court of First Instance ordered the Commission not to sign the framework contract until a final order had been made on the application for interim measures.

24 By order of 20 September 2005, the President of the Court of First Instance dismissed the application for interim measures.

25 Upon hearing the Report of the Judge-Rapporteur, the Court of First Instance (Fourth Chamber) decided to open the oral procedure.

26 The parties presented oral argument and their answers to the questions put by the Court at the hearing on 11 October 2006.

27 The applicant claims that the Court should:

– declare the action well founded,

– annul the decision rejecting the tender,

– annul the award decision,

– order the Commission to pay the costs.

28 The Commission contends that the Court should:

– declare the applicant’s application unfounded and dismiss the action,

– order the applicant to pay the costs.

Law

29 In support of its action, the applicant raises, in essence, two pleas in law, alleging, respectively, that Euphet was unlawfully excluded from the tender procedure on grounds of a risk of conflict of interest and that it was unlawfully deprived of the possibility of supplying additional information with regard to the conflict of interest.

The first plea in law, alleging the unlawful exclusion of Euphet from the tender procedure on grounds of a risk of conflict of interest

30 The applicant’s arguments seek to show, in essence, firstly, the lack of reasoning in the decision rejecting the tender with regard to the existence of a conflict of interest, secondly, the lack of a conflict of interest and, thirdly, infringement of the principle of protection of legitimate expectations and of Article 138 of the Implementing Rules.

Breach of the duty to give reasons concerning the existence of a conflict of interest

– Arguments of the parties

31 In the context of the first part of its first plea, alleging breach of the general duty to give reasons and of Article 147(3) of the Implementing Rules, the applicant submits that the decision rejecting the tender is based on incorrect and insufficient reasons with regard to the existence of a conflict of interest.

32 The reasons given by the Commission for its decision rejecting the tender are incorrect since the evaluation committee – certain extracts of whose report are set out in the present judgment – concluded wrongly that Euphet did not acknowledge the fact that a number of the consortium partners are greatly involved in the implementation of the Public Health programme. Euphet’s tender clearly stated that certain Euphet partners were involved in ongoing activities for the DG ‘Health and Consumer Protection’.

33 The Commission’s reasons for its decision rejecting the tender are also incorrect, since at no time did it state why the course of action suggested by Euphet was inadequate and why it offered no satisfactory assurance that all conflicts of interest could be avoided. Moreover, according to the applicant, although the invitation to tender required a minimum of seven experts, Euphet’s tender included 65 curricula vitae, 45 of which were of persons who had nothing to do with the organisations named by the Commission, and therefore Euphet would always have been capable of carrying out the different tasks without there being a conflict of interest. The 20 persons connected to organisations named by the Commission would be faced with a conflict of interest only if they carried out activities of type D for main task 2, which has many aspects, thus enabling them to work on a number of evaluation files without any risk of conflict of interest. Since the conditions for selection were particularly stringent, Euphet had tried to gather a large number of experts who were likely to have experience in the activities of the DG ‘Health and Consumer Protection’. Accordingly, a necessary and sufficient condition would have been to propose a way of resolving conflicts of interest, which is a condition that Euphet would have met in the present case.

34 As subsidiary points, the applicant observes that the fact that one or more Euphet partners had received grants from the Commission is not such as to cast doubt on their objectivity in all circumstances. The applicant also notes that the Commission raises that point, and the fact that several of the experts engaged have received grants from the DG ‘Health and Consumer Protection’, for the first time in its defence.

35 It is for the Commission to show concrete proof that a particular tenderer has a conflict of interest, and if such a risk could justify the exclusion of a tenderer – which is not the case here – the Commission ought to state that clearly in the invitation to tender, so that tenderers so forewarned can take that risk into account when forming their teams.

36 The Commission disputes, firstly, the allegation that the decision rejecting the tender is based on incorrect reasons, maintaining that it was fully entitled to hold that Euphet did not acknowledge the fact that a number of Euphet partners were greatly involved in the implementation of the Public Health programme in question in the present case. Although the curricula vitae of some of the partners in Euphet disclosed their involvement in the implementation of the programme of Community action in the public health sector, Euphet did not see the need to notify the Commission of a potential risk of conflicts of interest, and stated as follows:

‘We confirm that all the participants in Euphet are entirely independent of the Commission and that we do not foresee any risk in this regard at present.’

37 Furthermore, that ground for exclusion – exclusion for conflict of interest – which is set out in Article 94 of the Financial Regulation and reproduced in section 9.1.3 of the specifications, was – by choice – drafted in wide terms by the Commission, since the assessment as to whether there is a conflict of interest requires a concrete examination by the adjudicating authority on the basis of the documents in the file.

38 The Commission further takes the view that it gave sufficient explanation of the reasons for its finding that there was a conflict of interest with regard to Euphet. It adds that its letter of 19 May 2005 was not a statement of reasons a posteriori but a response to the arguments raised in the detailed letter from Euphet’s lawyers of 3 May 2005. Accordingly, Euphet has sufficient knowledge of the reasons for the decision rejecting the tender.

39 Finally, the Commission rejects the applicant’s assertion that it would still have been possible to carry out certain evaluation tasks without risk of conflict of interest, since the tender included 65 curricula vitae, 45 of which were of persons who have no connection with the Euphet partners in respect of which the Commission had found a conflict of interest. The experts proposed by Euphet did not all carry the same specific weight and, in its tender, Euphet classified its experts according to their experience in the areas of ‘Evaluation’ and ‘Public Health’. On that basis a points system was established on a scale from A to D. Analysis of the qualifications of the experts proposed by Euphet shows that most of those given the highest points – and, it may be supposed, those who play the most important role in the actual performance of the evaluation tasks – are connected with organisations which received large subsidies from the Commission for carrying out work relating to the Community public health programme. Each partner in the consortium is also a member of the contract committee which oversees performance of the contract. Furthermore, the applicant has tried to create a homogeneous team and it is rather implausible that those organisations or experts would be excluded from carrying out certain tasks, irrespective of the consequences that that would have for the quality of the work to be done.

40 Moreover, the Commission refutes the argument that it should have made express mention of the ‘risk of a conflict of interest’ as a specific ground for exclusion in the specifications, thus depriving Euphet of the opportunity to take that risk into consideration.

41 Firstly, the grounds for exclusion are exhaustively laid down in Articles 93 and 94 of the Financial Regulation, the possibility of conflict of interest is mentioned in Article 94 and repeated word for word in the specifications.

42 Secondly, Euphet was perfectly aware of the problem of conflicts of interest when it drafted its tender since it stated therein: ‘Euphet understands and accepts that none of the evaluation organisations or their staff should have the slightest existing or potential conflict of interest in the performance of their task under the framework contract’. Aware of the fact that the risk of conflict of interest – not merely actual but also potential – was incompatible with performance