As a result of the recent judgments handed down by the Supreme Court of Latvia (Senāts), there is now welcomed clarification within the case-law concerning the legality of a contracting authority’s decision to terminate a procurement procedure.
A decade ago, the only way to successfully challenge a contracting authority’s decision to terminate a procurement procedure was if the contracting authority had failed to provide any justification for its decision.
The case-law has since evolved whereby the courts (or the Latvian Procurement Monitoring Bureau (Iepirkumu uzraudzības birojs)) must not only assess whether the justification provided by the contracting authority is objective, but also whether the decision violates any fundamental principles of the public procurement rules.
In that regard, the Supreme Court’s latest judgement states:[1] “The Senate acknowledges that the purpose of judicial review, when evaluating the termination of a procurement procedure at the request of an interested party, is to determine whether the contracting authority’s decision is arbitrary and whether it violates public procurement law norms, particularly the fundamental principles of these laws.”
In this article, we examine the concept of ‘objective justification’, clarify what constitutes the fundamental principles of the public procurement law and delve into examples from recent practice.
The concept of ‘objective justification’
Section 230 of the Regulations on the procedure for procurement procedures and design contests[2] provides that: “The contracting authority shall decide to terminate a declared procurement procedure or design contest in cases provided for in these regulations and the [PPL], as well as in cases where the Procurement Monitoring Bureau’s Complaints Examination Committee has decided so in accordance with the [PPL]. In other cases, the contracting authority may terminate a declared procurement procedure or design contest at any time if there is an objective justification for doing so.”
The respective case-law has established an ‘objective justification’ refers to certain circumstances that demonstrate the advisability of terminating the contract award procedure, considering:
The Senate’s case-law emphasises that an objective need for terminating a procurement is crucial if the termination is considered after the bids have already been opened. As this stage in the process creates an inherent risk that the contracting authority may become biased in its decisions and formally rely upon its discretion to determine the objective economic rationale.[4] Therefore, the stage of the procurement procedure at which the contracting authority considers termination is significant.
The case-law also underlines the context of the procurement procedure’s termination is essential, namely the circumstances and the contracting authority’s actions before and after this decision. The contracting authority’s behaviour enables an assessment of whether the justification provided in the decision, even if objectively valid on its own, is not merely a formal cover for ensuring the interests of a pre-selected bidder.[5]
The Supreme Court has also highlighted that when considering how to achieve its objective economic rationale or other interests and contemplating procurement termination, the contracting authority must simultaneously consider the overall procurement process and transparency from the perspective of an objective observer.[6]
Thus, even if the justification on paper appears to be ‘objective’ (for instance, the contracting authority references the need to amend a procurement’s technical requirements), the court must still assess whether the procurement’s termination context and stage indicates potential arbitrariness and favouritism on the contracting authority’s part.
Fundamental principles of public procurement rules
The Court of Justice of the European Union (CJEU) recognised as early as 2003 that if a contracting authority identifies an error in its initial assessment of the circumstances and requirements after reviewing the received bids (and the tender details prevent the selection of the most economically advantageous offer) the authority may decide to terminate the procurement. However, such a decision must comply with the fundamental principles of European Union public procurement law.[7]
Section 2 of the Public Procurement Law (Publisko iepirkumu likums) details that the law’s purpose is to ensure procurement transparency, free competition for suppliers, equal and fair treatment of suppliers, and efficient use of the contracting authority’s resources while minimising risk. These principles permeate the entire public procurement process and must be considered in any decision related to public procurement, including decisions to terminate a procurement procedure.[8]
Another general principle frequently applied is the principle of good administration. For instance, in the 2022 Antea Polska Judgment, the CJEU applied the general principle of good administration, clarifying the contracting authority’s obligation to justify its decision regarding the non-disclosure of confidential bid information.[9]
The author believes that the decision to terminate a procurement procedure should also comply with the principle of good administration. Applying this principle could be relevant, for example, when a decision to terminate the procurement has weak justification. Another situation where the Procurement Monitoring Bureau or the court would have grounds to evaluate the contracting authority’s actions in light of the principle of good administration is the announcement of a procurement procedure’s results (including termination) immediately before a holiday period, allowing only a few working days to prepare a challenge.
Practical examples
When examining the termination of a bus repair procurement procedure after the bids had been opened and the bidders’ financial proposals had been published, followed by the announcement of a new procurement procedure for the same subject matter, the Supreme Court concurred with the lower court’s view that terminating the procurement was unjustified:
“Regarding the termination of the procurement procedure after bids have been opened, the Supreme Court has previously emphasised that terminating the procurement procedure after the opening of bids to correct relatively minor deficiencies in the procurement documentation may raise concerns about the motives behind the contracting authority’s actions and whether the decision is made in good faith. Moreover, this issue is not solely about whether the contracting authority’s justification is merely a formal cover for other interests but rather about whether the totality of circumstances in the specific situation raises such concerns.
Consequently, the significance of the identified deficiencies in the procurement documentation and their potential impact on the pool of bidders and their ability to objectively compare offers is important. In situations where not only the bids have been opened but also the bidders’ offered prices have been published, these considerations must also assess the impact such termination might have on undisturbed competition. In deciding whether to terminate or continue the procurement, it is necessary to evaluate which option poses a lesser risk to the interests protected by the fundamental principles of public procurement law.
In this regard, it is essential to emphasise that, as recognised by the Court of Justice of the European Union, the primary objective of EU public procurement rules is to ensure undistorted competition across all Member States. Achieving this objective requires that contracting authorities, whether in an ongoing contract award procedure or future procedures, do not disclose information that could distort competition.
Meanwhile, the Supreme Court’s case-law has previously recognised that disclosing prices before conducting a repeated analogous procurement contradicts the principles of fair supplier competition, as a bidder preparing an adjusted offer already knows the price level offered by another bidder under the given requirements within the specified timeframe and can adjust its bid accordingly. Thus, there is a significant risk of compromising competition if one procurement is terminated and a similar procurement is immediately re-announced without significantly changing the initial requirements, thereby revealing other bidders’ prices from the first procurement.”[10]
The Supreme Court emphasised the contracting authority’s stated objective reasoning for terminating the procurement is not always sufficient to deem the decision lawful. If a bidder’s complaint argues the termination violates the fundamental principles of public procurement law, the court must examine those arguments.[11]
The Procurement Monitoring Bureau’s current practice regrettably lags behind the Supreme Court’s case-law precedent to date. The Procurement Monitoring Bureau recently refused to review a complaint about the legality of terminating a procurement procedure under the circumstances whereby the contracting authority decided to terminate the procurement after publishing not only the bidders’ financial offer summaries but also their full financial offers. Disregarding the Supreme Court’s recent Judgments, the Procurement Monitoring Bureau failed to consider whether terminating the procurement at that particular stage and under those circumstances conflicted with the fundamental principles of public procurement law.[12]
Summary
The latest Judgements handed down by the Supreme Court concerning the legality of terminating procurement procedures offers some form of hope that a common practice carried out in Latvia’s procurement environment — terminating the procedure when the preferred winner has not submitted the most economically advantageous offer — will soon be eradicated.
Moving forward, if a complaint by another bidder cites a violation of the fundamental principles of public procurement law, the Procurement Monitoring Bureau or the court will be required to assess whether the stated reason for terminating the procurement, even if formally objective, is actually a cover for some hidden intention of the contracting authority, and whether the stage of the procedure itself is an obstacle to the termination decision.
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[1] Supreme Court Judgment of 10 November 2023 in Case SKA-211/2023, Paragraph 9.
[2] Cabinet of Ministers Regulation No. 107 of 28 February 2017.
[3] Supreme Court Judgment of 10 May 2022 in Case No. SKA-471/2022, Paragraph 25.
[4] Supreme Court Judgment of 28 February 2017 in Case No. SKA-706/2017, Paragraph 20.
[5] Supreme Court Judgment of 13 March 2017 in Case No. SKA-682/2017, Paragraphs 5 and 13. See also, for example, Supreme Court Judgment of 24 May 2017 in Case SKA-246/2017, Paragraphs 14 and 15.
[6] Supreme Court Judgment of 10 February 2017 in Case No. SKA-187/2017 (A420385914), Paragraph 10; Senate Judgment of 10 May 2022 in Case SKA-471/2022, Paragraph 25
[7] The Court of Justice of the European Union Judgment of 16 October 2003 in Case C-244/02, Kauppatalo Hansel, Paragraph 36.
[8] Supreme Court Judgment of 10 November 2023 in Case SKA-211/2023, Paragraph 8.
[9] The Court of Justice of the European Union Judgment of 17 November 2022 in Case C-54/21, Antea Polska, Paragraph 66.
[10] Supreme Court Judgment of 10 November 2023 in Case SKA-211/2023, Paragraph 14.
[11] Ibid.
[12] Procurement Monitoring Bureau Decision No. 4-1.5 of 14 October 2024 (not published, pending litigation).
March 14, 2025 by Debora Garanča, Partner
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