The European Union, as early as 1989, made its first attempts to harmonise public procurement rules 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.
With the recent overhaul in 2014, the EU legislative framework for public procurement has become increasingly more complex and wider in scope. Malta has transposed this framework into Maltese law, principally, the Public Procurement Regulations.
However, 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 majority of the rules are founded in one or more of these general principles.
A corollary aspect of equal treatment and transparency is the remedies aspect of procurement. As part of the EU legislative framework, there is a specific Remedies Directive (1989/665/EC, as amended). Its principal objective 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 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 the government’s purchasing policies and procedures. This is evident from the year-on-year increase in cases heard before the PCRB and the relative speed by which disputes are resolved: two to four months before the PCRB and four to five months before the Court of Appeal (if 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 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 bids. This guarantees legal certainty and 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 its willingness to hear these applications in one whole sitting 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 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 the closing date of the competition. That is the Court of Appeal’s position and one which sought to strengthen the pre-contractual remedy and direct economic operators to use it in a timely fashion.
A few market players have misused this remedy to unnecessarily stall competitive tender procedures, block new entrants to a market or win some more time to formulate a bid. This misuse has been sporadic but, nonetheless, there was good reason to address it. Although such abuse might, in theory, expose the perpetrator to damages, our courts have been less inclined in practice to award damages in such instances, by applying a relatively high legal standard.
The government has sought to address this misuse by passing two far-reaching amendments to the pre-contractual remedy.
The first, passed on November 15, 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 per cent of the estimated financial value of the potential public contract is to be paid, capped at €50,000. If a multimillion euro tender was split into lots, 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, passed on May 15, 2020, requires the application is filed not just before the closing date of the tender but “within the first two-thirds of the time period allocated in the call for competition for the submission of offers”.
I believe these amendments have made the pre-contractual remedy ineffective. The pre-contractual remedy is usually useful in complex procurement and, for example, in the procurement of novel or innovative medicine – both 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, I believe economic operators are unlikely to invest €50,000 (in most cases at least) in an uncertain venture, especially 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 this is never guaranteed.
As to the new time-limit imposed for the exercise of this remedy, there is an inherent difficulty to calculate it since the submission period is regularly extended. 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 and adequate opportunity for interested parties to learn of procurement procedures and prepare their bid accordingly.
The totality of that time period is important for reasons related to transparency and genuine competition, so it does not make sense that the time period allowed to exercise the pre-contractual remedy is significantly shorter. This shorter time period undermines the very objectives of public procurement.
More importantly, and I say this respectfully, there is no good reason for this unreasonably short time period to be 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 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 be reinstated. Otherwise, economic operators’ trust in Malta’s public procurement framework is at risk.