© OECD

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OECD Headquarters, Paris, 24-25 April 2014

Current Practices in Complaints Review: Examples from the Region

and the EU

Erika Bozzay, SIGMA

© OECD

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Country example: HUNGARY

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I. INSTITUTIONAL FRAMEWORK

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Dual System of Public Procurement Review

Two separate paths of review:

1. a specialized review body (first instance)

appeal against its decision to administrative court (second instance)

remedies other than damages

2. civil courts

damages

render the contract ineffective in a given case

But: no direct way to civil courts!

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Prior Complaint to the Contracting

Authority

BUT:

• possibility to complain directly to the contracting authority as well

• optional - not a precondition for judicial review

• getting more and more frequent way of dispute settlement in public procurement cases in Hungary (and most complaints do not go any further)

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First-instance Review Body

PUBLIC PROCUREMENT ARBITRATION BOARD

• operates in the framework of Public Procurement Authority (PPA)

independent part of PPA + independent from the

government, from Contracting Authorities BUT: there is a risk of collusion

• permanent body, founded by law in 1995 • takes decisions on the basis of legal rules • its decisions are legally binding, subject to an

appeal in administrative courts

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Public Procurement Arbitration Board

• specialized for public procurement cases - experience and expertise!

• members:

civil servants (appointed by the PP Council)

must fulfil almost the same requirements such as judges (e.g. not having been convicted for a criminal offence)

minimum criteria: higher education degree, 3 years working experience + for lawyers: bar exam

BUT: not only lawyers are members - panels include public procurement experts with economic, transport, IT, construction or engineering background as well

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Public Procurement Arbitration Board

• Members (cont.) Strict conflict of interests rules:

• members cannot assume other paid occupation except scientific, teaching, artistic or other legally protected intellectual activity

• no membership with financial obligation in business companies

• no political membership

• no financial interest above a certain threshold in a business company

shall act in an independent and impartial manner

are not subject to any kind of instruction but solely to law

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Second Instance Review

• Appeal against the decision of the PPAB:

Administrative Courts

(unfortunately no special procurement panel within the court)

• Administrative court may change or annul the decision of PPAB

BUT: the general rule is to change the decision (and finish the debate)

annulment only in specific cases

02-May-2014 9

© OECD

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II. AVAILABLE REMEDIES

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Remedies

Public Procurement Arbitration Board:

Setting aside of procurement decisions (including the contract award decision)

Interim measures

Penalties

Civil courts:

Damages

Annulment of concluded contract

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© OECD

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III. LEGAL FRAMEWORK

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Scope of the Review System

The review system applies equally to contracts below and above EU thresholds

all contracting authorities and entities (utilities)

defence procurements as well

Any act relating to the award procedure before and after the contract has been concluded may be challenged

(most frequently in practice:

• conditions of the contract notice, esp. selection and award criteria

• technical specifications

• Designation of the winner or unsuccessful termination of the tendering procedure)

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Initiation of proceedings

Who has the right to make a claim?

1. Bidders, candidates – but they have to show a special interest in the context of the contract in question

2. Economic operators who are not bidders but whose right or legitimate interest has been harmed or is likely to be harmed by an activity or default which is in conflict with the PPL (e.g. potential bidders, candidates)

3. Chambers or interest representation organisations with an activity related to the subject-matter of procurement

but only against the illegal nature of the contract notice, the documentation or the amendment thereof

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Initiation of proceedings

4. Contracting authorities

5. Entities, institutions authorized in PPL, e.g.: President of the Public Procurement Authority

State Audit Office

Government Control Office

Hungarian State Treasury

Commissioner for Fundamental Rights (Ombudsman)

Entity granting subsidy for a procurement

Hungarian Competition Authority

the public prosecutor, etc.

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Time Limits for Filing a Complaint

• applicants have to initiate proceedings within certain time limits

• reason for time limits: to achieve a balance between the private interests of tenderers and the public interest in legal certainty and in commencement of the execution of the contract

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Time limits for filing a complaint

• Applications shall be lodged within 15 days from the occurrence of the infringement, 10 days in cases of unlawful contract award decisions

• If the infringement become known at a later date, time limit shall begin at that date

• But no claim admissible after 90 days following the occurence of the infringement

• Special time limits: illegal direct award of the contract: 1 year following the

conclusion of the contract/beginning of performance applications against the contract notice, invitation to

tender: 5 days before the expiry date of submitting tenders

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Legal effects of launching a review

proceeding

• Initiating a review process does not suspend automatically the procurement procedure

BUT:

the contracting authority may suspend the ongoing procedure

the contract cannot be concluded until the final decision of the PPAB

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Time limits for decision making

• PPAB has to take decisions rather quickly:

within 15 days when there is no hearing,

within 30 days if a hearing is necessary

within 60 days, if the proceedings initiated against the amendment or performance of procurement contracts

an additional 10 days (in the third case 30 days) extension can be granted if justifiable circumstances arise

• courts require considerably more time to issue a judgement – there are no mandatory time limits for courts to make decisions

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Costs, Fees and Deposits

• the complaint to the contracting authority is free of charge.

• proceedings before the PPAB are subject to an administrative service fee – the amount of which depends on several circumstances;

the value of public procurement

the content of the application (the number of the elements of the plea)

• the losing party has to bear all or part of the costs of the winning party

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Communication of Decisions

PPAB decisions are

• delivered to the parties and other interested parties by regular mail

• also published in the Public Procurement Bulletin (official press of PPA, only on-line version)

• published on its own website as well:

Judgements of the court are also published on the website

The most important decisions are also published and commented in Közbeszerzési Szemle, which is a monthly legal publication.

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Database of decisions, judgements

• Decisions of PPAB and judgements of courts are available through internet

• Web-based database:

Public

Free of charge

Searching possibilities

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Unified application of law within the PPAB

• The PPAB shall operate a college for the cases and groups of cases set out in the organizational and operational regulations.

• The college shall examine the practice of the PPAB and express its opinion on the disputed legal issues in order to enhance a uniform practice of review.

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Remedy against the decision of PPAB

• Before administrative court

• The court may change the decision (and finish the debate). Annulment only in specific cases.

• The court’s decision can be appealed only in exceptional cases – as a general rule there is no third instance

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IV. PUBLIC PROCUREMENT REVIEW ENVIRONMENT AND CULTURE

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General level of knowledge

• Wide range of training opportunities for lawyers, judges, tenderers, contracting officers

• Post-graduate programmes in public procurement law and procurement management

• Policy and research institutes

• Websites and specialised journals on public procurement

• National associations on public procurement: • e.g. Hungarian Official Public Procurement Advisors’

Association (HOPPAA)

(But it is the result of a lengthy development…)

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The Operation of Review and Remedies

Systems in Practice

Annual (public) reports on the operation of the PPAB give us an overview:

• how frequently is the review system “used” by tenderers?

• are first instance decisions appealed in a second or even third instance?

• are tenderers successful and satisfied with the outcome of proceedings overall?

• which remedies are actually awarded in practice?

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Attitudes Towards Review Proceedings

• Some bidders see review proceedings as a matter of last resort

• Others intend to obstruct procurement through review proceedings (previously it was rather frequent – current answer for it: high fees, but: high fees may deter from seeking judicial review…)

• In some cases, bidders do not turn to the PPAB but ask the delegate of the relevant professional organisation which is represented at the Public Procurement Council with a request to submit a complaint instead of the company.

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Remedies Culture

• Number of cases per year: • 2010: 1011

• 2011: 1011

• 2012: 695

• Some 20% of PPAB decisions are challenged in court: • 2010: 196

• 2011: 164

• 2012: 130

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Non-official English translation of the Hungarian PPL is available on the website of the Public

Procurement Authority: http://www.kozbeszerzes.hu