In the Italian case Rad Service, a tenderer intended to rely on the technical and professional capacities of another undertaking in order to demonstrate satisfaction of the selection criteria in a public procurement procedure. However, this undertaking had submitted a declaration to the contracting authority which did not mention a criminal offence committed by its owner and legal representative. Italian procurement legislation provides that, under such circumstances, the contracting authority must exclude the tenderer concerned from the procurement procedure, which is what happened in this case.
The case was brought before the Italian Council of State, which referred a question to the Court of Justice as to whether the Italian legislation was contrary to EU public procurement law, in that it deprived the excluded tenderer from the possibility of making a replacement of the undertaking concerned.
In this regard, Article 57 of EU Directive 2014/24 sets out the situations where contracting authorities may (or, as the case may be, must) exclude tenderers from participation in a procurement procedure: the so-called “grounds for exclusion”. These grounds for exclusion apply equally to undertakings whose capacities tenderers rely on in order to fulfil the applicable selection criteria. Withholding information required for the verification of the absence of grounds for exclusion (such as information on criminal convictions) is itself considered a non-compulsory ground for exclusion.
In addition, under Article 63 of Directive 2014/24, the contracting authority “shall require” that the tenderer replaces an entity on whose capacities it intends to rely and in respect of which there are compulsory grounds for exclusion. This contracting authority “may require or may be required by the Member State to require” such a replacement where the entity is subject to non-compulsory grounds for exclusion.
In its judgment of 3 June 2021 in Rad Service, the Court of Justice started by clarifying the latter rule pertaining to non-compulsory grounds for exclusion. It ruled that, while Member States may lay down an obligation for the contracting authority to require the tenderer to make a replacement of the entity subject to grounds for exclusion, they cannot, by contrast, deprive that contracting authority of the option to require such a replacement on its own initiative. Member States may only replace that option with an obligation for the contracting authority to make such a replacement. In the Court’s view, this is in line with the principle of proportionality.
The Court also recalled that, pursuant to Article 57, paragraph 6 of Directive 2014/24, operators may provide evidence of so-called “self-cleaning” measures in order to demonstrate their reliability despite the existence of relevant grounds for exclusion. In those circumstances, even before requiring a tenderer to replace an entity whose capacities it intends to use, on the ground that it is in one of the situations referred to in Article 57 of Directive 2014/24, the contracting authority must give that tenderer and/or that entity the opportunity to submit to it corrective measures in order to demonstrate that it may once again be considered a reliable entity. It is only if the entity against which there is a ground for exclusion failed to take corrective action or if the corrective action which it has taken has been deemed inadequate by the contracting authority, that the latter may or, if required by national law, must, require the tenderer to replace that entity.
Moreover, the Court of Justice stressed that the contracting authority must have regard to the means available to the tenderer for establishing whether there was a failure on the part of the entity on whose capacities it intended to rely. In the case at hand, the tenderer claimed that it could not have been aware of the criminal conviction of the owner of the ancillary undertaking concerned, because that conviction was not public under Italian law. In the Court’s view, should this claim be corroborated by the Italian Council of State, the tenderer could not be accused of having failed to exercise due care and attention. Accordingly, it would be contrary to the principle of proportionality to prevent the replacement of the entity covered by a ground for exclusion.
Finally, the Court of Justice underlined that a request by a contracting authority for the replacement of an entity on whose capacities a tenderer intends to rely must not result in the tenderer submitting what would in reality appear to be a new tender. This would materially amend the initial tender and, hence, be in contradiction with the principles of transparency and of equal treatment.
In the light of the above, the Court of Justice concluded that EU public procurement law precludes national legislation under which the contracting authority must automatically exclude a tenderer from a public procurement procedure in the case where an ancillary undertaking on whose capacities that tenderer intends to rely made an untruthful declaration as to the existence of criminal convictions that have become final, without being able to require or, at the very least, in such a case, permit that tenderer to replace that entity.
Please contact Peter Teerlinck or Raluca Gherghinaru for further information about this case and/or general legal advice relating to public procurement.