A price justification without a single figure, and still good enough: Egemin keeps the electromechanics of the Pierre Vandamme lock in Zeebrugge, Fabricom draws a blank
At 12.3 million euros, Egemin bid over 1.5 million less than Fabricom for renewing the electromechanical equipment of the Pierre Vandamme lock and fell 1.8 % below the threshold of article 110, § 4 of the Royal Decree of 8 January 1996; its price justification contained no figures at all, yet the Council of State dismissed Fabricom’s urgent application: a non-numerical justification can suffice for a total price, and the Flemish Region had assessed it concretely, together with its own price analysis.
What happened?
The Flemish Region, Department of Mobility and Public Works, Roads and Traffic Agency, put out to open tender the works ‘Port of Zeebrugge – renewal of the electromechanical equipment of the Pierre Vandamme lock’ (specifications MDL/10C01), estimated at 17,093,810.55 euros including VAT and published in the Official Journal of the EU of 15 October 2010 and the Belgian Tenders Bulletin of 18 October 2010. The contract had two parts: the renovation, including maintenance during the guarantee period, and maintenance after final acceptance, for one year renewable up to five years. For the ranking, the specifications added the renovation price to five times the annual maintenance price, plus VAT. Moreover, the lock had in principle to remain in service during the works: at least one gate at each lock head and all bridges at all times. At the opening on 14 December 2010 there were five tenders: Egemin (12,308,637.95 euros), Fabricom (13,859,191.40 euros), Cegelec (13,869,208.72 euros), VS&E (16,660,141.67 euros) and Spie (16,749,830.89 euros), all including VAT. Because Egemin was 1.80 % below the threshold amount of article 110, § 4 of the Royal Decree of 8 January 1996, the Region requested a justification of the total price. Egemin replied the same day, 15 December 2010, with a letter containing no figures: years of experience renovating locks, weirs and movable bridges, knowledge of the site after site visits, quotations from recognised suppliers and subcontractors, and three similar ongoing projects — the Van Cauwelaert and Kattendijk locks in Antwerp and five lock complexes on the Albert Canal. The award report, drawn up on 15 December 2010 and approved by the head of division on 12 January 2011, accepted that justification. It referred to Egemin’s completed projects and its expertise in engineering and electromechanics, to the fact that its price was 11 % lower than those of the second and third bidders, and to the finding that it had only fallen below the threshold because of VS&E’s high price. The unit prices were examined too: Egemin offered ‘keen prices’ for the electrical equipment and maintenance, but electrical equipment was its core business, the quantities were correct and no speculation was apparent. The authority explained that all tenders were 2.55 to 27.99 % below the estimate because, for such a rare and complex project, it had lacked sufficiently precise elements for its estimate. On 1 March 2011 the Flemish Minister for Mobility and Public Works awarded the contract to Egemin, with a ranking amount of 12,548,146.80 euros against 14,144,834.87 euros for Fabricom. Fabricom received the decision by registered letter of 17 March 2011 and applied for suspension under extreme urgency on 1 April 2011; Egemin intervened on 8 April and the case was heard on 14 April 2011. The objection that the application had only been lodged on 4 April and was therefore out of time failed: the registry file showed that it had been sent by fax and registered post on 1 April. On the merits, Fabricom argued that Egemin’s letter was no price justification but a list of generalities, that the authority could not possibly have examined it carefully within a few hours, that the projects cited were not comparable to renovating a lock that stays in service, and that the deviating unit prices for electrical equipment and maintenance required a query. The Council disagreed. Non-numerical information can also constitute a price justification, especially for a total price, and this one was prima facie not limited to generalities. The report did not simply copy the justification, but drew reasons from it and combined them with the findings of the authority’s own price analysis; elements it did not adopt, such as the ‘thorough study of the specific problems’, were irrelevant to the assessment. That the report was drafted the same day did not matter: no calculations were needed and it was only approved a month later. Whether Egemin had really carried out the reference projects did not have to be checked separately, since the specifications required certificates of satisfactory performance. Expertise and synergies with ongoing contracts could prima facie constitute an ‘exceptionally favourable circumstance’ within the meaning of article 110, § 3, third paragraph. As for unit prices, a query is only required if the authority intends to reject a tender for abnormal prices; here it had in fact compared those prices with the estimate and the average. Maintenance moreover accounted for only 0.4 % of the total price, and Fabricom’s own price for chapter 8 also deviated sharply from the estimate and the average. The Council admitted Egemin’s intervention, dismissed the application and ordered Fabricom to pay the costs (175 euros); Egemin bore the costs of its intervention (125 euros).
Why does this matter?
This judgment is the counterpart of the many cases in which an authority dismisses a tender as abnormally low too quickly. Here the complaint ran the other way: a competitor felt the authority had accepted a low tender too easily. The Council makes clear that the authority’s margin of appreciation in that direction is wide. A justification need not be expressed in figures, certainly not when only the total price is at issue, and expertise and synergies with similar ongoing contracts may count as an ‘exceptionally favourable circumstance’. The judgment also shows what makes an acceptance robust. The authority relied not only on what the bidder wrote, but on its own analysis: a comparison of all unit prices with the estimate and the average, a check of quantities and of the spread of overheads, and the finding that the threshold was mainly driven by an upward outlier. Anyone wishing to challenge such reasoning must do more than show that the bidder was vague. The judgment also confirms two procedural points of practical weight: an application sent by fax and registered post on the last day is in time, and an authority need not request a justification of unit prices as long as it does not intend to exclude the tender on that ground — although it remains bound to examine the regularity of the prices carefully.
The lesson
If you are a bidder seeking to challenge the acceptance of a low competing tender, focus not primarily on the weakness of the competitor’s justification, but on the authority’s assessment. If it carried out its own price analysis, compared the unit prices and explained why the threshold was crossed, your chances are slim. Look at your own tender too before attacking an item: Fabricom’s maintenance price deviated just as sharply. If you have to justify a low price yourself, qualitative arguments are allowed, but make them concrete: name the reference projects, explain the synergies and make sure they match what the specifications require. If you are an authority, do not justify accepting a low price by copying the bidder’s letter, but test it against your own analysis and retain only the arguments that convince you. Explain why your estimate is off when all tenders fall below it. And watch the figures in your own report: here the analysis spoke of an 11 % gap with the second and third tenders, while the draft decision mentioned 1 %.
Ask yourself
As a bidder: is your criticism aimed at the competitor’s justification or at the way the authority assessed it? Do you know that a justification of the total price can suffice even without figures, as long as it is not limited to generalities? For your own low price, can you point to concrete reference projects and synergies that amount to an ‘exceptionally favourable circumstance’? Have you checked whether your own unit prices for the item you attack in the competitor’s tender do not deviate just as much? As an authority: does your acceptance of a low price rest on your own analysis of unit prices, quantities and overheads, or only on the bidder’s letter? Have you explained why all tenders fall below your estimate, and do the percentages in your award report and draft decision match?
About this database
The Council of State (Raad van State / Conseil d'État) is Belgium's supreme administrative court. In disputes over public procurement — from contract awards to tenderer exclusions — the Council of State is the final arbiter. The rulings in this database are summarised by TenderWolf in plain language, with practical lessons for tenderers and contracting authorities. View all rulings →