By Lennard Michaux
At the beginning of March, Belgian government officials realized that normal procedures would no longer guarantee the required supply of medical masks to face the COVID-19 epidemic—a problem faced by many countries globally. Additional initiatives by the European Commission would only remedy shortages by April at the earliest. A member of the Belgian parliament therefore personally contacted a Turkish producer of such masks, negotiating an officious solution to assure future availability. The Minister of Health further pursued this path, signing a new public contract within a couple of days (see here in Dutch).
For a private entity in distress, this kind of behavior might seem reasonable: when a situation of risk occurs, red tape should be limited to a strict minimum. However, State authorities traditionally do not enjoy the same freedom of contract. Public procurement regulation indeed requires that a number of procedural and substantive requirements are respected. This is motivated by the objective of spending public funds as efficiently as possible, combined with the aim of creating a level playing field among competitors within the EU. Normally, the award of a public contract should thus respect certain deadlines and transparency requirements, in order to provide possible candidates with the appropriate time to study the tender documents, and to prepare their best offer.
How could the Belgian government nevertheless close a deal (i) without any public notification, and (ii) on such a short notice?
The answer lies in the notion of ‘urgency’ included in the Procurement Directive, and consequently also transposed in national public procurement laws. However, urgency does not refer to just one fixed type of situation. Instead, when combining the different exceptions available to contracting authorities, a spectrum of urgent situations appears.
On one end of the spectrum, we find the notion of ‘extreme urgency’. This state is caused by events unforeseen by the contracting authority, and that may in no way be attributable to it. In its case law, the ECJ—based on the wording of the relevant Preamble considerations and Articles (e.g. ‘strictly necessary’, ‘extreme’)—has narrowly construed this exception. For instance, when Germany tried to invoke the ‘unforeseen’ rejection of a project by a local body (which had the final say in whether or not to allow dredging projects), the Court did not accept this as an unforeseeable situation.
Moreover, the burden of proof regarding the extremely urgent nature of a situation lies with the contracting authority. When the city of Milan, for example, failed to include the necessary factual background to demonstrate that the construction of a waste plant was extremely urgent, the Court simply rejected the case, without even touching upon the underlying material elements.
The sudden rise of the COVID-19 virus, and the resulting shortage of medical masks, will, at least at the beginning of the epidemic, be qualified as a situation of extreme urgency. Consequently, a rare type of awarding procedure becomes available: the negotiated procedure without prior publication. This empowers contracting authorities to select one or multiple undertakings, and immediately negotiate on a future offer and contract. This is the procedure used by the Belgian Minister of Health, which given current circumstances seems to be legitimate.
Nevertheless, as bad as the COVID-19 might become, its unforeseeability is logically starting to decline: experts are gathering data from other countries, and the increased need for medical products for the coming months could no longer take anyone by surprise. This would mean that the situation could shift from being ‘extremely urgent’ to a so-called ‘state of urgency duly substantiated by the contracting authority’. The requirements for recognition thereof are far less stringent (e.g. the urgency might be attributable to the authority). Conversely, the exceptions to the general public procurement regime are also of a more limited nature.
The most common consequence of such a state of ‘mere’ urgency is the reduction of time limits:
In the case of public contracts as a response to the COVID-19 virus, the above measures should be used as a two-stage rocket. During the (current) first days of the crisis, the situation of extreme urgency can be invoked to rapidly purchase the necessary equipment to solve the shortages in the near future. When these first-line problems are avoided, a medium-term perspective should be applied based on the reduced time limits, and supported by European coordination.
Even if this situation is highly exceptional, the application of traditional public procurement procedures still guarantees the most beneficial outcome for society in general. COVID-19 should not be used as a mean to deviate from these measures for longer than necessary. Once feasible, the compromise solution based on the ‘normal’ state of urgency—a quick response time combined with a minimum level of competition—should be favored. Hopefully, the application of full-fledged public procurement rules will be restored quickly, once we have successfully battled the virus.
How dangerous it may be to replace normal public procurement procedures by urgency procedures, is unfortunately already illustrated in a number of COVID-19 cases. The Turkish producer of the medical masks referred to above now appears unable to live up to his contractual obligations. The Belgian authorities have launched a criminal investigation against the producer for fraud (see here in Dutch). Moreover, in Poland, wholesalers are terminating contracts in order to force hospitals to buy the same medical masks at much higher prices. While the Polish competition authority appears poised to resolve this issue by relying on antitrust law, it has also reminded the wholesalers ‘that the failure to fulfil or to properly fulfil a contract is subject to the regulations of Polish Public Procurement Law’. These events painfully prove how useful it is to apply regular public procurement regulation—even if only a ‘light’ version—in order to keep a minimum of control. A balance should be struck between immediate action and the required level of guarantees; otherwise, problems will only accumulate.