Denmark: The extent of a contracting authority's duty to investigate and the scope of the The Public Procurement Directive Article 57, 4, litra c

In a ruling on June 21, 2024, the Danish Complaints Board for Public Procurement (The Complaints Board) defined the extent of a contracting authority's duty to investigate and the scope of the exclusion ground concerning misconduct, which renders the economic operators’ integrity questionable, as outlined in article 136, no. 4 of the Procurement Act. This provision implements Article 57, section 4, litra c of The Public Procurement Directive, with the modification that the exclusion ground is mandatory in Danish procurement procedures.

Company is awarded transportation contracts, despite previous unsatisfactory services

On March 19, 2024, Bornholm's Regional Municipality (BRK) issued a tender notice for several framework agreements for passenger transportation services, including special needs transportation and transport for children. The tender material included the exclusion ground from Article 57, section 4, litra c, which relates to misconduct, which renders the economic operators’ integrity questionable, but did not include Article 57, section 4, litra g of The Public Procurement Directive, which relates to early termination of a prior public contract, damage or other comparable sanctions.

After the tender deadline passed, a tenderer informed BRK that another tenderer previously has experienced cancellation of a contract in 2023 with another Danish municipality for similar transport services due to longstanding unsatisfactory services. On May 13, 2024, BRK announced the award of contracts, stating that all tenderers had been assigned routes.

The concerned tenderer then filed a complaint against the contract award, arguing that BRK violated Article 57, section 4, litra c by awarding contracts without investigating whether the other tenderer should be excluded under this provision.

Material Breach is not serious negligence

The Complaint Board stated that the public entity’s duty to examine whether the exclusion ground in Article 57, section 4, litra c, was relevant did not go beyond the general duty to investigate in cases of doubt.

The Complaints Board also found that previous breaches of contracts could fall under Article 57, section 4, litra c if they were severe enough to cause doubt about the tenderer’s integrity. The contracting authority must, however, have the discretion to assess whether a breach should fall under the provision.

As for any duty to investigate in this particular tender, The Complaints Board considered that the previous breach of contract was based on the tenderer’s failure to plan routes according to contract requirements and that this led to delays, excessive wait times, and unsupervised deliveries of children.

The Complaints Board did not find that this information suggested that Article 57, section 4, litra c, could be applicable and therefore also no obligation for BRK to investigate further.

Does a breach cause doubt about integrity?

The Complaints Board did, as described, not find that the specific details in the other municipality's press release – concerning multiple delays and unsatisfactory performance by the supplier – triggered a duty to investigate further under Article 57, section 4, litra c. The ruling does not specify exactly when such investigative duty arises.

In a prior decision from February 1, 2024, The Complaints Board did, however, sustain the application of Article 57, section 4, litra c, where a tenderer when performing the previous contract for winter services had breached this severely in more ways including by altering license plates and using unauthorised vehicles, which led to the public entity filing a police report.

Such behaviour did enable the public entity to assess that the criteria in Article 57, section 4, litra c, were fulfilled and therefore exclude the tenderer but it is not clear from this decision whether an assessment stating that this article was not applicable would also have been possible due to the discretionary nature of this assessment.

Regarding the difference between Article 57, section 4, litra c and g, as suggested by the wording of the provisions, the key distinction lies in the actor's integrity. A lack of ability is unlikely to fall under Article 57, section 4, litra c, while deliberate breaches and fraud might fall under both Article 57, section 4, litra c and g.