‘See the award proposal’ — which you never received: VMW sees SODRAEP’s rejection and the award to Persyn suspended, even though it sent the reasons afterwards
The Flemish water company VMW rejected SODRAEP’s lowest tender for a 600 mm supply main between Menen and Geluveld for abnormal unit prices and a technical defect in the flushing chambers, but only communicated a decision referring to an ‘award proposal of 14 December 2011’ that it expressly refused to provide; on 2 February 2012 the Council of State suspended both the rejection and the award to Persyn, holding that sending the reasons after all on 12 January 2012 — a week after the extreme-urgency application, with a ‘new standstill period’ — did not deprive SODRAEP of its interest in the plea.
What happened?
VMW launched an open tender for the laying of a 600 mm supply main at Wervik-Zonnebeke (‘Menen-Geluveld supply’), estimated at 6,204,893.24 euros and published on 4 October 2011 in the Belgian Bulletin of Tenders and on 7 October 2011 in the Official Journal of the EU. At the opening on 28 November 2011 six tenders were on the table. SODRAEP was cheapest at 3,163,511 euros excl. VAT (3,163,491 euros after arithmetical check), Persyn second cheapest at 3,569,800.11 euros. VMW asked both bidders to justify certain unit prices. In a note of 14 December 2011 to the board, SODRAEP’s justification was accepted for two items and rejected for the others; for item 29.6 ‘Flushing chambers’ VMW also inferred a technical irregularity from the explanation, since a flushing chamber cannot possibly be assembled from leftovers and welded together at the price quoted. Persyn’s justification was found acceptable; after re-ranking its price was 15.60 % below the new average of 4,229,615 euros, which was likewise checked. On 16 December 2011 the board decided to reject SODRAEP’s tender as irregular and award the contract to Persyn. The notification of 19 December 2011 contained only the decision, which for its reasons referred to ‘the award proposal of 14 December 2011’, and stated that an appeal lay to the Council of State within fifteen calendar days. On 23 December 2011 SODRAEP requested that proposal by registered letter, noting that the time limit could only run from receipt of all documents. VMW refused on 29 December 2011: SODRAEP had received ‘the full reasoned decision’, which satisfied article 65/8, 2°. SODRAEP filed its extreme-urgency application on 3 January 2012, with a single plea alleging breach of the formal duty to state reasons and of articles 65/5 and 65/8 of the act of 24 December 1993. On 12 January 2012 VMW ‘after all’ sent an extract of the note of 14 December 2011, declared that this notification ‘replaced’ that of 19 December, announced a new fifteen-day standstill period and asked the Council to adjourn the case until it was clear whether SODRAEP would file a new application. Before the Council, VMW argued that SODRAEP no longer had an interest: its only grievance had been met ‘in the most far-reaching way’, and a suspension would merely oblige VMW to retake the same decision. Chamber president Dierk Verbiest did not follow that. Reasoning by reference is adequate only if the document referred to has been communicated to the addressee, is itself adequately reasoned, is endorsed in the final decision and is not contradicted by conflicting advice. Here the rejected unit prices and the reasons concerning the flushing chambers were set out exclusively in the note to the board, which SODRAEP had not received before 3 January 2012. The formal duty to state reasons therefore appeared breached as regards the rejection, and that defect also vitiated the award to Persyn, which partly rested on that rejection. Sending the note on 12 January — more than a week after the application, after SODRAEP had requested it a few days after the first notification and after it had still been refused on 29 December — did not deprive SODRAEP of its interest: the purpose of the formal duty to state reasons excludes that a bidder should have to make do with reasons communicated only after it has exercised a remedy, and the possibility of a new application (leaving aside whether multiple extreme-urgency applications are even permitted) does not make good the fact that it had to formulate its grievances blind. The Council also pointed out that the alternative — letting SODRAEP raise new pleas against the late reasoning within the pending procedure, or adjourning the case — would disrupt the Auditor’s examination, the right to an adversarial hearing, the position of potential interveners and the strict time limits of the extreme-urgency procedure (time limit for appeal, tender validity period). An immediate suspension, by contrast, prevents execution and gives VMW the opportunity to withdraw the decision, retake it — in the same form or not — and notify it properly, after which SODRAEP can seek relief without procedural complications. The Council ordered the suspension under extreme urgency of the decision of 16 December 2011, both as regards SODRAEP’s rejection and the award to Persyn. The judgment is silent on costs.
Why does this matter?
This judgment states clearly what a contracting authority must send when it rejects a tender for abnormal prices or a technical defect: not a decision referring to an internal award proposal, but the reasons themselves — which items, why the justification is insufficient, why the technical specifications were not met. Articles 65/5, 6° and 65/8 of the 1993 act (today articles 5, 6 and 8 of the remedies act of 17 June 2013) require precisely that, and the settled rules on reasoning by reference leave no room for a document the bidder does not have. More important still is the second part: VMW’s attempt to cure the defect during the proceedings. The judgment says, in essence, that an authority cannot turn back the clock by sending the reasons after all, announcing a ‘new standstill period’ and asking the Council for an adjournment. The formal duty to state reasons exists so that a bidder can decide with full knowledge whether to go to court; a bidder who had to do so without the reasons keeps its interest. The Council also grounds this procedurally: the tight extreme-urgency procedure does not tolerate pleas added after the application, and a suspension that forces the authority to retake and re-notify is the cleanest way out. In practice this means that a notification which merely refers to a report not enclosed yields a serious plea from day one — and that the authority can no longer repair it once the bidder has filed its application. This line was later continued in, among others, judgment no. 242.318 (‘the authority must provide you with the full reasoning’) and, on the distinction between notification and decision, judgment no. 258.802.
The lesson
For contracting authorities: when notifying a rejection, enclose the extract of the reasoned decision that contains the reasons themselves — the rejected items, the assessment of the price justification, the technical findings. A reference to an ‘award proposal’ or ‘note to the board’ that is not enclosed does not suffice, and refusing to provide that document on request only makes it worse. If you discover the defect after an extreme-urgency application has been filed, do not expect a late dispatch with a ‘new standstill period’ to save the case; the clean route is to withdraw, retake and notify properly. For bidders: if the notification of your rejection refers to a document you do not have, request it immediately by registered letter — as SODRAEP did on 23 December — and do not let the fifteen-day period lapse in the meantime. A refused or late report is in itself a serious plea that can suspend both your rejection and the award to your competitor, even if you do not yet know the substantive reasons. Do not be caught by the argument that you ‘no longer have an interest’ because the reasons have since been communicated: the Council does not accept it. And be aware that the suspension does not mean your prices are normal — VMW could retake the decision; your gain is the chance to litigate with the reasons in hand.
Ask yourself
Does the notification you send as a contracting authority contain the reasons for the rejection themselves, or does it refer to an internal report the bidder does not have? Would you provide that report if the bidder requested it, or refuse on the ground that ‘the reasoned decision’ has been communicated? Do you realise that sending the reasons after the extreme-urgency application does not remove the applicant’s interest and leads the Council to suspend rather than adjourn? And as a bidder: did you immediately request by registered letter the document the notification refers to, and file your application within fifteen days even without knowing the reasons? Do you know that a breach of the formal duty to state reasons in the rejection also taints the award to your competitor? Are you prepared for the authority to retake the same decision after the suspension, this time with the reasons attached?
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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 →