Exclusion of tenderer due to grave professional misconduct was justified

Background

In October 2023, the Danish Road Directorate launched a public procurement for seven lots of winter services, including de-icing and snow clearing of the lanes of the national highway network, in accordance with the Danish Procurement Act. The procurement was subject to an accelerated procedure because the Danish Road Directorate had had to terminate the existing contract for the specified routes concluded in July 2023 early due to the previous supplier's grave professional misconduct.

The reason given for the Danish Road Directorate's early termination of the existing contract with reference to the supplier's misconduct was that, in connection with the preparations for the winter season 2023/2024, the Danish Road Directorate had found several severe defects in the vehicles used, including discrepancies between vehicle identification numbers (VIN) and registration numbers. Also, several vehicles had failed the MoT test, some license plates were registered to passenger cars instead of lorries, and some license plates were associated with vehicles which had been deregistered with the Danish Motor Vehicle Agency.

An undertaking which had previously acted as a sub-supplier under the terminated contract and shared the same manager as the supplier under the terminated contract, submitted a bid in the new public procurement. However, in November 2023, the Danish Road Directorate informed the tenderer that they were excluded under the mandatory grounds specified in section 136(4) of the Danish Procurement Act due to the manager's grave misconduct, which rendered the integrity of the manager, the tenderer and the previous supplier questionable.

The Danish Road Directorate cited as reasons for the exclusion the issues that led to early termination of the existing contract and the fact that the manager had been involved in this dishonest conduct.

The Danish Road Directorate also noted that the tenderer had submitted a suspicious invoice while acting as sub-supplier under another contract for the winter season 2022/23. The suppliers were eligible for compensation for their investments at the time of the Danish Road Directorate's cancellation of the contract before the investments had been depreciated, but during the review of the invoices the Danish Road Directorate discovered that the tenderer's (the sub-supplier) invoice had the same invoice number as other invoices, and that the page headers of the invoices appeared to have been fabricated specifically for the occasion. The Danish Road Directorate reported this to the police on the day after sending the letter concerning exclusion.

The tenderer responded to the exclusion by lodging a complaint with the Danish Road Directorate, stating that the undertaking had implemented several measures restoring their reliability ("self-cleaning"). Accordingly, the tenderer's manager had resigned and relinquished ownership of the undertaking, and the manager's spouse had taken over as manager of the tenderer's undertaking. As the new manager, the spouse would launch several initiatives, including establish a board of directors, and ensure that in the future the former manager would only be involved as a driver. Also, another driver had received a written warning for swapping license plates.

The Danish Road Directorate obtained an advisory statement from the Danish Competition and Consumer Authority ("CCA") to determine whether the documentation for reliability provided by the tenderer was adequate. The CCA found that the tenderer had not proved their reliability and emphasised that no documentation had been provided which addressed the authenticity of the invoices. Instead, only information about setoffs in various outstanding amounts had been provided. It was also stressed that the tenderer had failed to provide any documentation that adequate measures had been implemented to prevent the conduct leading to the swapping of license plates and operation of vehicles that had failed MoT tests.

The tenderer was excluded and subsequently filed a complaint with the Danish Complaints Board for Public Procurement.

The decision of the Danish Complaints Board for Public Procurement

The decision is an interim decision concerning suspensive effect but has become the Board's final decision because the complaint was subsequently withdrawn.

In terms of the Danish Road Directorate being entitled to exclude the tenderer in question under section 136(4) of the Danish Public Procurement Act, the Complaints Board stated that it is up to the Danish Road Directorate to prove, as the contracting authority, that the tenderer is guilty of grave professional conduct, which renders the tenderer's integrity questionable.

It is not necessary that a final judgment to the effect that the burden of proof has been discharged is available. Documentation of their own experiences or those of others will be sufficient in the circumstances.

The documentation provided by the Danish Road Directorate included their report to the police and documentation from their supplier of garage services. Having reviewed the information related to the matters reported to the police and the nature of the documentation provided by the Danish Road Directorate, the Complaints Board found that the Danish Road Directorate had proved that the tenderer in question was guilty of grave professional misconduct, which rendered their integrity questionable.

As for the issue of "self-cleaning", the Complaints Board stated that the Danish Road Directorate has considerable discretion in evaluating whether a tenderer has taken appropriate technical, organisational and employment measures. The Complaints Board can only set aside the discretion in case of a subjective or incorrect assessment, or if the discretion is obviously wrong.

The Complaints Board referred to the CAA's advisory statement and concluded, based on an overall assessment of the information initially available, that there was no reason to set aside the Danish Road Directorate's assessment that the undertaking had not provided sufficient documentation to prove their reliability. The resignation of the manager was not sufficient to prevent further misconduct.   

Plesner's comments

Based on the wording of the mandatory ground for exclusion in section 136(4) of the Danish Procurement Act, the contracting authority must be able to prove that the tenderer was guilty of grave professional misconduct, which renders their integrity questionable.

In alignment with previous decisions regarding the ground for exclusion in section 137(1)(4) of the Danish Procurement Act on proof that the tenderer has committed material breach of a prior public contract which lead to early termination of that contract, the Complaints Board established that it is not necessary that a judgment or a similar decision is available. The tenderer's own experiences, documentation of other parties' experiences or valid information from collaboration partners may be sufficient.

The Complaints Board's decision is particularly noteworthy as it is the first application of the new rules regarding the procurement of an advisory statement from the Danish CAA. Since 1 January 2023, contracting authorities have been required, under section 138(1) of the Danish Public Procurement Act, to obtain an advisory statement from the Danish CAA concerning the documentation of reliability provided by the tenderer before the ordering entity may make a decision regarding exclusion of a tenderer.

Contracting authorities are not obliged to follow the Danish CAA's advisory statement but at the time of the introduction of the rules it was the intention that contracting authorities would rely heavily on the statement when making decisions about exclusion of a tenderer. In the decision, the Complaints Board took into consideration the statement from the CAA and incorporated it in their decision. Accordingly, the contracting authority must be expected to stand on firm ground in terms of potential complaints when aligning their decision with the statement made by the CAA. In accordance with the established practice of the Complaints Board, the contracting authority has significant discretion in assessing whether the tenderer has provided adequate documentation to prove their reliability.

Read the Complaints Board's decision of 1 February 2024 (in Danish)