A two-year-old company cannot produce three sets of accounts: the Council of State suspends the award of the maintenance contract for the Floreffe sorting and shredding plant
BEP-Environnement awarded the preventive and corrective maintenance of its sorting and shredding plant in Floreffe to Step Solutions, a company incorporated in 2010, even though the specifications required the balance sheets and turnover of the last three closed financial years on pain of exclusion; the Council of State held that the company’s youth was no ‘legitimate reason’ to exempt it, rejected the objections of lateness (the intermunicipal body had notified the decision only by registered letter, not by fax or email, so the time limit had never started running) and of lack of authority of T.P.F. Utilities’ board, and suspended the award because the authority failed to show that the plant would come to a halt without the contract.
What happened?
The Namur waste intermunicipal BEP-Environnement published on 2 December 2011 in the Bulletin des adjudications and on 6 December 2011 in the Official Journal of the EU a notice for a general call for tenders to outsource the preventive and corrective maintenance of its sorting and shredding plant in Floreffe, where wood and bulky waste from the recycling parks are processed. Article 6, 3) of the specifications required every bidder to prove its economic and financial standing by three documents: a bank statement or proof of professional-risk insurance, the profit-and-loss accounts and balance sheets of the last three closed financial years, and a statement of overall turnover and turnover in the relevant activity over the last three financial years. Bidders who failed to supply the required documents would, according to the specifications, be excluded from the procedure. Two bids were submitted on 26 January 2012. On 16 February 2012 the management committee awarded the contract to Step Solutions; according to its bid the contract amounted to 237,160 euros excluding VAT. The contract was to start on 1 April 2012. BEP notified T.P.F. Utilities by registered letter of 20 February 2012, received on 23 February — but not by fax or email. T.P.F. raised six objections on 2 March; on 13 March BEP replied that it would not withdraw its decision. On 4 April 2012 T.P.F. lodged a single application for annulment and suspension under extreme urgency; the hearing took place on 13 April. BEP first objected that the action was late and lacked the required urgency: T.P.F. had known the decision since 23 February and knew the contract would start on 1 April. The Council followed its own judgments no. 217.044 of 23 December 2011 and no. 218.369 of 8 March 2012: article 65/8, § 1, third paragraph of the Act of 24 December 1993 prescribes a double notification (fax, email or other electronic means and, the same day, a registered letter), and article 65/11 starts the standstill period only from that notification. Disregarding that formality also means that the fifteen-day time limit of article 65/23, § 3 never starts. Nor does the Act impose on the applicant any duty of diligence other than acting within that period; the delay BEP complained of was the result of its own omission. The second objection also failed: article 19 of T.P.F.’s articles of association allows two directors acting jointly to represent the company in ‘all judicial and administrative proceedings’, which reasonably includes actions before the Council of State; that the decision to litigate had been taken collectively by the board rather than by two directors alone was irrelevant, as long as at least two directors had signed it — which disposed of BEP’s quorum argument. On the merits T.P.F. pointed out that Step Solutions had been incorporated only on 10 March 2010, with a capital of 21,000 euros, a corporate purpose focused on precision machining in a workshop rather than on-site industrial maintenance, and a single worker who had performed exactly 16 hours in the 2010 financial year; it could not possibly produce three balance sheets and three turnover figures. BEP replied that the analysis report listed a bank statement or insurance certificate, a turnover statement and ‘balance sheet, balance-sheet extracts or annual accounts’, that a newly formed company cannot have three balance sheets for a legitimate reason — by analogy with the case law on missing social-security certificates for companies without staff — and that article 70 of the Royal Decree of 8 January 1996 allows alternative evidence. The Council read the specifications differently: by requiring balance sheets and turnover over three years, BEP had itself decided that it wanted to know the evolution of bidders’ financial position over a ‘sufficiently long’ period, and had thereby de facto reserved the contract to companies at least three years old. Incorporation in 2010 was therefore no legitimate reason to exempt Step Solutions; BEP could not lawfully decide that its standing was proven when the specifications prescribed exclusion. The first plea was to that extent serious; the remaining complaints did not need examination. In the balance of interests BEP argued that maintenance had been running since 1 April and could not be interrupted without endangering the plant, workers’ safety (possible ATEX zone), the warranty on the new machinery and the public service: 5,800 tonnes of material were expected in March and April, the high season ran until mid-October, the plant had to operate from 6 a.m. to 10 p.m. and a new European procedure would take at least three months. The Council found none of this proven: BEP did not show that the plant would necessarily stop without this contract, nor that it could not ensure maintenance itself in the meantime by hiring one or more qualified employees. The Council suspended the award decision, ordered immediate execution of the judgment and reserved the costs.
Why does this matter?
The judgment contains two lessons, each of which can decide a case on its own. The first concerns double notification. Since the Act of 23 December 2009, an award decision must be communicated by fax or email and, the same day, by registered letter. An authority that sends only the registered letter may assume that the standstill and the fifteen-day time limit simply run, but the Council says the opposite here for the third time in a row: the period does not start, full stop. BEP thereby lost not only its objection of lateness but also its argument that T.P.F. had waited too long; the Council turned the reproach back on the authority that had skipped its own formality. The second lesson concerns selection criteria the authority writes itself. By requiring balance sheets and turnover over three financial years, and writing the exclusion of those who fail to produce them into the specifications, BEP had bound itself. The Council did not accept that a newly formed company could be exempted ‘for a legitimate reason’: the requirement itself determines who may take part, and an authority that wants to admit a young firm must word its specifications differently before bids are opened, not apply them loosely afterwards. The analogy with missing social-security certificates for companies without staff failed because there the obligation itself is absent, whereas here three years of evidence of standing was the very core of the criterion. Finally, the balance of interests: an authority that wants to avert a suspension by invoking continuity of public service must substantiate it. General descriptions of what goes wrong without maintenance were not enough; the Council wanted evidence that the plant would actually stop and that the intermunicipal body could not bridge the gap itself. The judgment was moreover delivered while the contract had already been in execution for two weeks — the suspension came despite a running contract.
The lesson
For bidders: check how every award decision was communicated to you. If you received only a registered letter, the standstill and your time limit have not started running — that gives you breathing space, but use it to build your case, not to wait. Investigate the chosen competitor: incorporation date, capital, corporate purpose and the accounts filed with the National Bank are public and supplied the decisive argument here. If the specifications demand three balance sheets and the winner is two years old, you have a serious plea. Also make sure your decision to litigate is taken and signed by the right body under your articles; BEP tried to catch T.P.F. on a quorum point. For contracting authorities: send every award decision the same day by email or fax and by registered letter, and keep proof of both — otherwise no time limit runs and an unsuccessful bidder can still surprise you weeks later. Write selection criteria you actually intend to apply: requiring three sets of accounts on pain of exclusion shuts out start-ups and you may not let them in afterwards. If you want to give young companies a chance, provide expressly for alternative evidence in the specifications. And if you want to avoid a suspension on continuity grounds, document concretely why the service cannot do without the contract and why you cannot bridge the gap yourself.
Ask yourself
Did you receive the award decision by email or fax and by registered letter of the same day, or only by registered letter — and do you know what that means for your time limits? Have you looked up the chosen bidder’s accounts, incorporation date and corporate purpose and compared them with the selection requirements? Is your decision to go to the Council of State signed by the persons your articles designate for that? As an authority: can you prove, for every bidder, that double notification took place? Does your specification contain an exclusion clause whose consequences for start-ups you have thought through? And if it comes to a suspension, can you show with figures and documents that your service will actually stop without the contract?
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 →