Aggrieved bidder should not be penalised by mistake of contracting authority

Whenever a bidder in a public call for tenders feels that a decision taken by a Contracting Authority has been unjust in its regard the first possibility for legal redress is the Public Contracts Review Board

Whenever a bidder in a public call for tenders feels that a decision taken by a Contracting Authority has been unjust in its regard the first possibility for legal redress is the Public Contracts Review Board. In order for an objection before the Public Contracts Review Board (PCRB) to be valid the applicable law requires that the company submitting an objection also includes a deposit equivalent to 0.50 per cent of the estimated value set by the contracting authority of the whole tender. The law sets a minimum of four hundred euro (€400) for such deposit and caps the amount to a maximum of fifty thousand euro (€50,000). The legislator introduced this provision in order to ensure that objections are not filed frivolously by every bidder who is not selected in a public call as the system would not cope should every bidder not selected were to submit an objection.

The estimated value of a public contract which is a services contract would vary depending on the duration of such contract. At times public calls are based on a time-limit for a contract with a possible extension period. Should the estimated value of a public contract be based on the time-limit of the contract or should it include the extension period? Clarity on this matter is crucial at the point of submitting an objection once as aforementioned an objection before the PCRB hinges on the deposit which in turn is to be calculated on the 0.50% of the estimated value. And what happens if the contracting authority commits a mistake in the calculation of the estimated value, should such an error penalise the bidder who is objecting?

This issue of the deposit calculated on an estimated value which value had been wrongly calculated by the Contracting Authority arose in the General Cleaners Co. Ltd v. Drettur tal-Kuntratti et, Court of Appeal case decided on the 22 June, 2022. The applicable law binding a contracting authority on how it is to calculate an estimated value clearly states that the estimate of the value of a tender has to be based on the total amount payable including any contract extensions as stipulated in the public call.

The Public Call for which General Cleaners put in a bid stated that the contract was to be for twelve months, with a possible extension of another two months. The contracting authority erroneously calculated the estimated value solely on the twelve months when according to law they were supposed to calculate it on the twelve months as well as on the contract extensions.

When General Cleaners acted upon their grievance by submitting an objection before the PCRB they calculated their objection deposit on the estimated value as published by the contracting authority which estimated value was incorrect by no fault of the General Cleaners. Upon General Cleaners submitting their objection, the winning bidder placed a preliminary plea that such an objection was null on the basis that the estimated value upon which the deposit was calculated was wrong and it was argued that therefore the deposit was the wrong amount. The PCRB upheld this preliminary plea and threw out General Cleaners’ objection.

General Cleaners took the matter to the Court of Appeal and rightly so the Court of Appeal overturned the decision of the PCRB on this preliminary plea. One of the main points stated in the Appeal by the General Cleaners was that when calculating a deposit to be paid as required to file an objection before the PCRB, a bidding company cannot be expected to do the work of a contracting authority and should therefore rely on the information provided by such contracting authority irrespective of whether the contracting authority calculated an estimated value wrongly. The Court of Appeal emphasised the literal meaning of the applicable law which states that the deposit for the objection has to be based on the values as estimated by the contracting authority. The Court added that the parties have a right to rely on the information as declared by the contracting authority and such parties should not have to pay for the mistakes as committed by such contracting authorities.

In its judgment the Court of Appeal did not shy away from admonishing the PCRB for having based its decision on a series of previous cases which had very different circumstances to the case at hand. The Court also admonished the contracting authority for having taken the position that the objection was invalid when it was its own mistake which created the confusion in the first place.

The appeal by General Cleaners was found to be more than justified and the Court ordered the decision of the PCRB to be annulled and to proceed with the objection on its merits. Furthermore, the Court ordered the winning bidder and the contracting authority to pay €1,000 each as additional expenses in view that their contestation was a frivolous one.

This judgment has provided much needed clarity on how an aggrieved bidder is to calculate the deposit to be paid. On a broader note, it highlights a major problem in Malta’s justice system where many quasi-judicial bodies are manned by persons who do not have a legal background and who in view of their lack of legal knowledge may take wrong decisions on pleas raised, which decisions can seriously impede justice being served. While there is always the remedy of appealing such wrong decisions before the Court of Appeal this case sheds a spotlight on the need for more legal professionals to sit on quasi-judicial bodies such as the PCRB.