Clarification of competition restricting agreements in the public procurement procedure

New obligatory ground for exclusion: participation in a competition restricting agreement

As per Section 62 (1) n) of the PPA:

“Any economic operator may be excluded from participation in a public procurement procedure as a tenderer, candidate tenderer, subcontractor, or from the attestation of competence, who according to the Section 11 of Act LVII of 1996 on the Prohibition of Unfair Trading Practices and Unfair Competition (hereinafter: Competition Act) or according to Article 101 of the Treaty on the Functioning of the European Union (hereinafter: TFEU) has been guilty and sanctioned within the previous three years of a legal offense by final and executable decision of the competition authority, or by final and executable court ruling passed in conclusion of the judicial review of the said decision of the competition authority; or if the tenderer has been condemned, and fined, for a similar offense by another competition authority or court within the previous three years.”

 In contrast to the former Act CVIII of 2011 on Public Procurement, the PPA introduces participation in a competition restricting agreement as an obligatory ground for exclusion. Previously the contracting authorities could decide in their discretion whether to use this ground for exclusion in the tender or not.

However in accordance with Section 62 (1) n) of the PPA, all economic operators are obligatory excluded from the procedure, if they were fined in a final judgement within the last 3 years for competition restricting practices regardless whether the infringement was committed in a public procurement procedure or not.

This is a significantly stricter exclusion to the previous one.

This may lead to the strange situation that even an assumed effect-based infringement with a low fine may cause the economic operator’s exclusion from public procurement procedures, whereas an economic operator, which participated in hardcore cartel, who – thanks to the Leniency Policy of the Authority was exempted from the fine –is not under exclusion.

New institution: self – clarification

In view of the foregoing anomaly, and all the efforts of the European Union in the field of harmonization of public procurement procedures, a new institution was introduced by the legislator under the auspices of the self-clarification to the PPA.

Section 64. (1) of the PPA states that:

“Apart from the grounds for exclusion provided for in Section 62 (1) b) and f), any economic operator may not be excluded from a public procurement procedure if, according to the final ruling of the Procurement Authority (hereinafter: Authority) or according to a court ruling – in the case of judicial review -, the measures the economic operator has taken before the time of submission of the tender or request to participate are sufficient to demonstrate its reliability despite the existence of the relevant ground for exclusion.”

As per the above, the self-clarification not only provides opportunity for exemption to the economic operator, which participated in restrictive agreements, but it may provide exemption for other grounds of exclusion listed in PPA, enabling the economic operators to participate in public procurement procedures despite previous infringements.

Having regard to the fact that the verification of the reliability is in the interest of the economic operator, the self – clarification procedure is initiated by the economic operator through its request submitted to the Authority.

Pursuant to Section 188 (1) of the PPA, in order to establish the reliability, the economic operator shall submit a request to the Authority in which three conjunctive criteria shall be proven for the sake of a positive consideration of the request. In the request, a detailed argumentation and evidence regarding to all criteria shall be provided, as listed below.

According to Section 188 (2) of the PPA: “In the interest of demonstrating its reliability, the economic operator that is subject to any grounds for exclusion shall prove that:

1. 1.       it has paid or undertaken to pay compensation – in the amount accepted by the aggrieved party – in respect of any damage caused by the criminal offense, misconduct or infringement;

1. 2.       it has clarified the facts and circumstances in a comprehensive manner by actively collaborating with the competent authorities; and

1. 3.      it has taken concrete technical, organizational and personnel measures that are appropriate to prevent further criminal offenses, misconduct or infringement.”

In case the Authority does not accept the argumentation and provided evidence in the submitted request sufficient for establishing the reliability, the Authority may request the economic operator to submit additional statement, evidence and documents within an appropriate time-limit.

If the request is confirmed by sufficient evidence, the Authority will state the reliability of the economic operator in its decision that cannot be conditional or cannot impose any additional obligation upon the economic operator. This decision shall be accepted by any contracting authority without further consideration during the participation in a public procurement procedure.

If the Authority – or the court in the case of a judicial review – rejected the request, the economic operator may resubmit the request regarding the same grounds for exclusion if it wishes to demonstrate its reliability by means of measures taken after the rejection of its previous request.

Having regard to the fact that there are no further guidelines provided either by the PPA or by academic writings to reinforce the criteria to be clarified in the self-clarification procedure, the practice of the Authority shall establish the measures necessary for self-clarification, including  what constitutes a sufficient evidence. This presents new challenges for the economic operator who is interested in the establishment of the reliability.