A local authority (a public entity) was purchasing transports, such
as school taxi and school buses, using a public procurement procedure.
In an award decision the 14 August 2006 the local authority decided to
give the contract to The Bus Company. Another tenderer, the Taxi
Company, asked for a review at the Administrative Court who decided that
the award decision must be changed and the tender from The Bus Company
In a new award decision the 13 November 2006 the local authority evaluated the tenders and decided to terminate the public procurement procedure without an award.
The Taxi Company appealed against the decision to terminate the procedure on the following grounds : The local authority had not shown any valid reasons for its decision. The termination was therefore against the principle of transparency. The judgments from the ECJ in cases C-20/00 and C-28/00 say that it is the part who is terminating the procedure who has the burden of proof for that there are good reasons for this. Otherwise the termination is illegal and the decision must be annulled. The local authority has claimed that its budget would be overdrawn with 400 000 Euros if it had to comply with the court´s decision to correct the award decision. That would mean an increase of the total budget with 23 percent according to the local authority. But, the local authority had not shown any facts to prove this. It is not compatible with the public procurement rules to terminate a procedure just because the contract is too expensive. Such a reservation means that there is no transparency in the procedure.
The local authority contested the appeal from the
Taxi Company and said : In the specification of criteria it was written
that the procurement procedure might be terminated if the local
authority’s budget were to be exceeded. The judgment from the
administrative court meant that the only tender that did not exceed the
budget must not be awarded with a contract. All other remaining tenders
were exceeding the budget with 400 000 Euros. This extra cost would
occur every year in a period of 5 years, that is, the local authority
would have to cut down on other activities with 2 million Euros. The
local authority has given a lengthy description of its budget for the
public procurement procedure and of the fact that the budget, if the
tender from the Taxi Company must be accepted, should be very much
The specification has been very well elaborated. The local authority has planned the procedure very thoroughly. It is not politically possible to accept the tender from the Taxi Company – it is too expensive. There was no other choice than to terminate the procurement procedure.
The administrative court in first instance approved the appeal from the Taxi Company and said : The EJC judgment in C 92-00 Hospital Ingenieure (47) says that when an entity adopts a decision to withdraw an invitation to tender it is required to comply with the fundamental rules of the Treaty in general and the principle of non-discrimination in particular. If an entity wants to terminate a procedure without an award it must present valid reason for its decision. Such a fact could be changed circumstances that could not be foreseen. The examination of its budget presented by the local authority is not enough. The local authority should, for instance, have made a comparison with other similar procurements by other local authorities – but it has not. Therefore, the decision to terminate the procedure without an award was not motivated by reasons founded on facts and it does not comply with the EU principle of equal treatment.
The local authority appealed to the Administrative Court of Appeal. This court approved the appeal and said :
In the specification it is clearly stated that the local authority might terminate the procedure if the level of price would exceed the transport budget. The tenderers have not asked any questions concerning the budget limits. The budget is not so unrealistic that it cannot be taken into account. It is indisputable that this budget would have been exceeded if the local authority would have awarded the contract according to the new award decision. The local authority has made it probable that it had valid reason for terminating the procedure.
The Taxi Company appealed to the Supreme Administrative Court and asked for a preliminary ruling from the ECJ.
The verdict of the Supreme Administrative Court
The court referred to the following case law : C-92/00 Hospital Ingenieure art. 40, 41 and 47 , and C-244/02 Kauppatalo Hansel and said that a preliminary ruling was not necessary since the ECJ already had made an interpretation of the relevant EC law. The court continued :
A public entity has an obligation to use a public procurement procedure when it wants to purchase goods, services or public works. Then the entity has to open up for competition. The entity has the right to decide when it is possible to start a procurement procedure and when a procedure must be terminated. The possibilities to terminate a procurement procedure is however limited. Of the case law from the ECJ (cited above) it is clear that a decision to terminate the award procedure must be based on valid reasons and must not be arbitrary. Such a decision must also follow the EU Treaty fundamental principles, especially the principle of non-discrimination.
The court finds it well enough explored that all remaining tenders were higher than the municipal budget could afford. The service turned out to be more expensive than the local authority had counted on.
Therefore the Court finds that the decision to terminate the public procurement procedure is based on valid reasons and that it is not contrary to any fundamental EU principles.
The appeal should be rejected.