Sectoral Public Procurement Procedures: Exclusion of supply bids with majority third-country origin

In its decision of 2 June 2020 (case file no. 19 Verg 1/20), the Higher Regional Court of Brandenburg confirmed the exclusion of the bid for the supply of tram vehicles placed by a company based in the PRC under Sec. 55 of the German Regulation on the Award of Contracts in the Field of Transport, Drinking Water Supply and Energy Supply (SektVO).

Three municipal transport companies, Stadtverkehrsgesellschaft mbH Frankfurt (Oder), Cottbusverkehr GmbH and Verkehrsbetriebe Brandenburg a.D. Havel GmbH, had initiated a procurement procedure for the supply of 45 tram vehicles. A bidder based in the PRC submitted a final bid and declared that 70 % of the goods and materials required for the manufacture of the trams originated from countries that are not contracting parties to the Agreement on the European Economic Area (EEA) or to an agreement on mutual market access within the meaning of Section 55 (1) SektVO. After initially excluding the bid for other reasons, the contracting authorities finally decided to exclude the bid according to Section 55(1) SektVO. This provision allows sector contracting authorities of a supply contract to reject bids where more than 50 % of the total value of the goods originates from countries that are not parties to the Agreement on the European Economic Area and with which no other agreements on mutual market access exist.

In agreement with the Public Procurement Tribunal of Brandenburg, the Higher Regional Court of Brandenburg confirmed the contracting authorities' approach. In particular, the court rejected the bidder's objection that Section 55(1) SektVO and its basis in EU law, Article 85(2) of Directive 2014/25/EU, violate European primary law and further clarified that Section 55(1) SektVO is also applicable vis-à-vis companies based in third countries. Concerning the time of the exclusion of the bid, the OLG Brandenburg stated that it did not have to take place immediately and was also still possible in the review procedure before a public procurement tribunal.

In sectoral award procedures concerning supplies, contracting authorities thus have a sharp instrument at their disposal to exclude bids with a high share of third-country supplies. At the same time, exclusions on the grounds of lack of suitability are likely to become more important for all procurement procedures - at the latest when the German competition register starts operating as planned this year. Contracting authorities will then have a further source of information in addition to the bidder’s self-declarations. By the end of 2020, the Federal Cartel Office had already established its Competition Register Department (“W”).