For a tender to be cancelled serious irregularities must be proven

The fact that the contracting authority did not follow anti competition recommendations does not mean that the tender should be cancelled. This was held by the Court of Appeal, presided by the Chief Justice Mark Chetcuti and Judges Giannino Caruana Demajo and Anthony Ellul on 6 September 2022. The case’s name is Vivian Corporation Limited -v- Central Procurement and Supplies Unit et

The appeal was lodged by Vivian Corporation Limited following a decision of the Public Contracts Review Board. The Board rejected a request for a tender to be withdrawn by the Central Procurement and Supplies United (CPSU) for the purchase of “ready-made feeds for preterm and new-born babies”.  The only criteria was based on the cheapest price. Vivian Corporation claimed that only one supplier may win this tender. The Review Board did not agree that the tender should be cancelled. The decision referred to a report issued by the Malta Competition and Consumer Affairs Authority (MCCAA) which sought that tenders should “better its procurement process for the well-functioning of the secondary markets….”

The Court of Appeal went into the Board’s decision. The Board held that a tender may be cancelled by the Director of Contracts or by the contracting authority within specific parameters outlined in Article 90(3) of the Public Procurement Regulations. Vivian Corporation argued that the CPSU did not follow the norms of the Court of Appeal, which held that it should follow the recommendation of the Director General (Competition) of the possible anti-competition consequences when it choses a tenderer. The Appellant Company held that this tender distorts competition on the market. The report presents recommendations on alternative procurement practices which are intended to remove any negative impact in the market.

The CPSU argued that this issued was already decided November 2020 and had rejected the claims. The Court of Appeal also dealt with the same issues was decided against the Appellant Company on 17 March 2021. The other parties to this case also filed statement of defence. MCCAA argued that the Office for Competition conducted an inquiry in terms of the Competition Act with regard to infant milk formula and the tendering process at Mater Dei Hospital. It recommended that the CPSU should change its public procurement practices to avoid harming competition.

The Court of Appeal 2021 judgement explained that market dominance is not illegal, but the abuse of that dominance is illegal. If a dominant player in the market manipulates the prices, this would be contrary to law.

The Board took into account the report and the Court of Appeal judgement and found that the contracting authority could proceed with the tender as is.

The Appellant Company, Vivian Corporation held that the circumstances are now different from the 2021 judgement, as the contracting party is asking for the cheapest price. This meant only one supplier would qualify. This would bring an unfair advantage as mothers would continue to use the same product that would be given to them in hospital. The Appellant Company wanted that the tender allow multiple brands. The Court of Appeal failed to see where there was a change of circumstances to the previous case.

The Court of Appeal held that the law does not give the discretion to the Review Board cancel a tender for whatever reason, but it may cancel a tender when there are irregularities in the tendering process. If no irregularity  is shown the Board and the Court cannot by law cancel the tender. The Appellant Company held that there was no breach of the law, but the appeal concerns that the contracting authority did not follow the recommendation outlined in the report. The question is whether the fact that the recommendations were followed amounts to an irregularity. The Malta Competition and Consumer Affairs Authority Act allows the authority to give advice to public authorities in carryout their duties. However, these recommendations are not binding. The Court of Appeal is not allowed to carry out an investigation but it is to decide on public procurement. The Court cannot substitute its authority with that of the contracting party.

The Court of Appeal also looked at the current Maltese legislation and the European Directive 2014/24/UE and although it is desirable that the tendering process does not effect negatively the competition rules, it does not mean that a tender should be cancelled.

The fact that the contracting authority is insisting to go ahead with the tender process does not mean that its intention is to distort the market. The Appellant Company did file a bid in order to win that bid. It gave a performance guarantee. If it were chosen then it would not refuse to sign the contract because of anti-competition considerations.

As such the Court held that it did not find serious enough irregulatorities to justify the cancellation of the tender.

The Court then moved to reject the appeal.