The dispute between two state institutions

Written by Mgr. Vladimír Kordoš, LL. M.

At the end of 2021, the Public Procurement Office ("UVO") surprised the National Motorway Company ("NDS") and with it the Ministry of Transport and Construction of the SR ("MoT") by its decision to cancel the tender (procurement procedure) for the construction of a 14.3 km long section near Košice (Šaca - Oľšany II), which has been running for an exceptionally long time (since 2018) and where Eurovia is the winner.

The decision is neither final (NDS appealed to the UVO Council) nor published, so I can only rely on partial published information to analyse the reasons that led the UVO to make the decision. 

The reason for the cancellation is allegedly a breach of the Public Procurement Act which had or could have had an impact on the outcome of the procurement. In particular, NDS required one of the bidder's required experts, the construction manager or his deputy (the chief construction manager), to have, among other things, the experience of construction works that were contracted and governed by FIDIC, whereas the tender documents did not directly state that NDS would also accept the experience of works where the parties may have used another similar contract model, i.e. the phrase 'or equivalent' was missing.

Let us leave aside the political problem, which is undoubted, from the point of view of NDS and the MoD, the end of the procurement process, the conclusion of the contract with the winning bidder and the implementation of the construction or its reimbursement from EU funds without a significant correction is jeopardised by the decision of the Antimonopoly Office (UVO). In my short contribution, I will focus exclusively on the clause in question which caused this dispute and its analysis from the perspective of my professional experience, as in my practice I am involved in both legal advice in public procurement and development, including works contracts using FIDIC model documentation.

Where do I see the issues in dispute?

  1. Can a contracting authority require a condition defined in this way? Can the contracting authority require such a condition from the construction director or the construction manager?
  2. Can the contracting authority require knowledge specifically and exclusively of the FIDIC model contract?
  3. Is the failure to include the phrase 'or equivalent' in the requirement to demonstrate experience an irremediable error? Did or could such a breach affect the outcome of the tender?

Before expressing an opinion on the questions posed, I cannot fail to state what FIDIC is, how it is understood from the perspective of Slovak law and whether there is an equivalent to it.

FIDIC stands for Fédération Internationale Des Ingénieurs-Conseils, and in this case, we are talking about the FIDIC model contract (there are several FIDIC model contracts), which is used in dozens of countries as a legal model contract for construction projects.

From the point of view of the Slovak legal order, it is a model contract or general terms and conditions. In the case of how NDS uses the FIDIC model, it is mostly the general terms and conditions to which the contract between the NDS and the contractor refers and which become part of the contract. The contract shall, among other things, contain provisions that extend, modify or exclude the rights and obligations of the contracting parties concerning the FIDIC model contract.

In the tendering procedure in question, NDS is likely to have directly submitted a draft contract in the tender documents (together with a reference to a specific FIDIC model contract), stating that it was based on the FIDIC model contract and was interested in the successful tenderer having an expert, namely a construction manager or his deputy, who would have sufficient professional capacity to be able to exercise his rights and obligations under the contract concluded based on the FIDIC model contract, the above being demonstrated by previous experience (in a curriculum vitae).

Let us now turn to the questions raised.

   Ad 1) Can the contracting authority require technical and professional competence defined in this way? Can the contracting authority require such a condition from the construction director or the construction manager?

In my opinion no, since the subject of the contract was not the provision of legal services. The FIDIC model contract is, although at first sight complex and convoluted, 'only' a model contract which, in itself, without experience and knowledge of the law of the State whose rules are applied to the contract, is only a theoretical document and difficult to implement in practice.

If we were to accept that the requirement for the construction manager to be familiar with the legislation, the different types of contracts and the commercial terms and conditions, including the FIDIC model contracts, is not relevant, then it should not be applied by the NDS. It is not standard practice to require knowledge of any area of law when awarding contracts other than for the provision of legal services. Why should it be different for a FIDIC model contract?

In the same way that the Director of Works was not (apparently) required to have experience in, for example, accounting systems or human resources, I do not consider it relevant to require the Director of Works to have isolated knowledge/experience of the FIDIC model contracts.

As this is primarily legal expertise, it would be easier to justify and more logical for the NDS to require the bidder to be a legal expert, one of whose experience might include FIDIC model contracts. Ideally, there should be no such requirement at all when tendering for the execution of the works.

    Ad 2) Can the contracting authority require knowledge specifically and exclusively of the FIDIC model contract?

In this case, apart from the above in question 1, I agree with the publicly presented position of the NDS. If we accept that the FIDIC reference is about knowledge of a particular model contract, that is, knowledge of the law and its application, then it is at least arguable whether any other model contract can be regarded as equivalent and therefore whether it has relevance to require an equivalent at all. Knowledge of another model contract does me (almost) no good.  If the NDS the tender documents require the conclusion of a contract that includes a FIDIC model contract, then a reference from projects where another model contract or other law has been used will not be of much help.

For example, if we accept the proposition that a contracting authority may require an expert (ideally a legal expert) to have sufficient experience in providing legal advice in the field of insolvency law under Slovak law, it is not possible to substitute the experience of providing insolvency law under another law or knowledge of employment law. There is no direct equivalent to knowledge of insolvency law under Slovak law.

Nor can an interpretation that would consider the requirement of experience exclusively with FIDIC model contracts to be discriminatory be ruled out.

    Ad 3) Is the failure to include the phrase 'or equivalent' in the requirement to demonstrate the experience of an expert an irremediable error? Did or could such a breach affect the outcome of the tender?

According to the information available, it appears that the NDS did not require the tenderer to submit a "certificate" or attestation of competence or knowledge of the FIDIC model contracts. The NDS asked for evidence of the experience of a particular expert in projects where the contract was concluded using FIDIC model contracts.

It can be assumed that if any of the tenderers, as part of the request for clarification, had also asked for clarification as to whether they could provide the experience of an expert on projects where other model contracts were used, NDS would have replied that they could.

I consider the requirement to include the phrase "or equivalent" in the case of expert experience to be an unnecessary and undesirable formalism. The information available does not suggest that the failure to specify could have affected the outcome of the competition. None of the unsuccessful tenderers was excluded for failure to comply with this condition, none objected, and none was communicated as having requested clarification during the competition. It remains an open question, rather speculative, whether the above could have had such an impact that a potential tenderer did not even go ahead and bid because of such a 'discriminatory' condition.

It was not my purpose to answer the questions directly. Rather, it was to provide an expert perspective on a well-publicised dispute between two state institutions. I will be waiting with interest to see how the UVO Council will deal with the appeal, whether it will act professionally or politically, and how it will justify its decision.

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