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Towards the recognition of a right to competitive public procurement?

- Robert Zimmermann
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 The problem of eternal contracts

Entities subject to public procurement law sometimes conclude contracts for the provision of services or supplies for an indefinite period without renewal of the award procedure. This can be illustrated by the example of a municipality awarding the contract for the collection of urban waste to a private company or a government department concluding a supply contract for computer equipment (including maintenance) with a private supplier. These contracts are concluded for an indefinite period or renewed (sometimes tacitly) at regular intervals. The consequence may be that the contract is de facto awarded for eternity. What legal means is available to a competing company, potentially interested in the market, ready to make an innovative and interesting offer, but which comes up against a wall because the local authority in question does not issue a new call for tenders? So far, the answer has been that not much can be done, since the law does not limit the duration of contracts concluded after the award of a public contract, nor does it give the potential bidder the right, enforceable against the public entity concerned, to put the contract out to tender again. However, this frustrating situation may change following a recent ruling by the Federal Supreme Court (ATF 2C_697/2019 of 21 August 2020).

The Facts

The company A. SA applied to the Valaisan administration for a permit to operate a helicopter rescue company. It was refused, as the services offered by two existing companies were, in the opinion of the competent authority, sufficient to meet the needs. A. SA appealed to the Cantonal Court, concluding that a call for tenders should be issued for helicopter rescue operations. It took the view that the mandate to provide helicopter rescue services should be subject to public procurement law. The Cantonal Court dismissed A. SA appealed to the Federal Supreme Court, which ruled in its favour: the appeal was upheld, the judgment under appeal was set aside and the case was referred back to the competent cantonal department for the opening of a tendering procedure.

The Federal Supreme Court’s ruling

The Valaisan law on health care provides that rescue missions for people who are ill, injured or in danger on cantonal territory are the subject of a cantonal rescue organisation, for the purposes of which authorisations are granted to rescue companies, which are periodically renewed by means of a call for tenders (see 2.1). The law is silent on the frequency of these tenders. On the basis of the preparatory work on the applicable cantonal law, the Federal Supreme Court has ruled that a revision of the emergency planning system should take place every five to ten years. In this case, the existing authorisations were granted in 2003. By refusing to issue a new call for tenders in 2018, the cantonal authorities interpreted cantonal law arbitrarily, which led to the admission of the appeal (see 2.3). The Federal Supreme Court ruled that Article 2 para. 7 LMI, which requires the cantonal and municipal monopolies to compete with each other, did not apply in this case because there was no consideration in favour of the State, which is a constituent element of the concession (see 3).

The prospects for the future

The Federal Court’s ruling opens a door in favour of companies that would like to bid for a public contract, but whose access is closed by a previously concluded contract (for an indefinite or indefinitely renewable period) with a competitor. Where the applicable law provides that the provision of supplies or services must be the subject of a public contract, it will be possible for the company seeking this contract to invite the contracting authority to issue a call for tenders. If this request is rejected, it would be possible to use the legal remedies available under the applicable (federal or cantonal) law. However, for this to be worthwhile, the contract in question must have been awarded and then a contract must have been concluded for at least a few years. A period of five years seems adequate, because it guarantees the successful bidder a certain security and stability in its contractual relations with the contracting authority, but also gives competitors the opportunity to put forward an innovative and competitive offer. Knowing that public procurement contracts will be regularly challenged promotes entrepreneurial initiative and opens up competition, which is the main objective of public procurement law.

 Robert Zimmermann

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Robert Zimmermann

Post published on in Procurement law

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