The Federal Court of Justice (ruling of June 3, 2020, Ref.: XIII ZR 22/19) has taken a clear position: Anyone who is excluded from procurement procedures has legal protection. Regardless of whether the exclusion is ordered in a specific procurement procedure or applies generally and for the future. The second important point is that in the event of conflicts of interest, the contracting authority should put its own house in order first.
A Berlin case. The plaintiff is a registered association that conducts ecological studies and prepares scientific reports. An employee of this association is married to a particularly high-ranking employee of the client and defendant, namely the Senator for Environment, Transport and Climate Protection. The State Secretary of the Senate Department for the Environment, Transport and Climate Protection, so to speak the number 2, now issued a fateful directive. By e‑mail, he instructed the department heads to no longer commission the association in order to avoid a conflict of interest and to exclude offers from the association as unsuitable.
The association did not put up with this and sued to have the ban on procurement lifted. After the district court upheld the action, the Court of Appeal issued a strange sentence. …
Keynote 1: Legal protection is also available against general blocks on procurement
The Federal Court of Justice’s core statement No. 1, which was perhaps deliberately provoked by the Court of Appeal, is as follows: There is legal protection against blocks on the award of contracts, even if they are imposed outside concrete award procedures, i.e. as it were in the abstract for the future. The bidder concerned can bring an action in civil court to have such blocks lifted. This key statement is important. This is because blocked bidders very often do not even learn about smaller award procedures. They are removed from the list of bidders and no longer called. So how are they supposed to seek legal protection in a specific procurement procedure that is currently ongoing? This is not possible, and the Federal Court of Justice has also recognized this. This means for all companies affected by public procurement blocks: They do not have to wait until they possibly learn of an award or participate in an award on the off chance and then take action against the exclusion decision. Instead, they can simply sue to have the award block lifted if they are of the justified opinion that the award block is unlawful. For all contracting authorities, this means: Be careful with the outwardly announced statement that a bidder is no longer to be involved in the future. The lack of a time limit for such a block, and possibly also the lack of a restriction in terms of content, means that legal action must be expected. You should therefore think carefully about whether and how you bar a company from participating in procurement procedures.
Keynote 2: The client must clean up its own backyard first (and no facts are ever the same)
A significant reason for exclusion for all practical purposes is the conflict of interest of persons involved in the awarding of contracts. Here, a simple question arose: Does the senator really have anything to do with awarding rather insignificant contracts to an association in which her husband works — possibly also in a completely different field?
The legal hitch is Section 124 (1) No. 5 GWB. According to this, the contracting authority can exclude a company from the award if there is a conflict of interest in the implementation of the award procedure which cannot be eliminated by other, less drastic measures. According to the Federal Court of Justice, this provision must also apply outside of specific award procedures. It can be added that many federal states have also issued corresponding regulations for the area “below the EU thresholds”. I.e., the principle is generalizable. Anyone with a conflict of interest may not participate unless the conflict of interest can be eliminated by other, less drastic measures.
The decisive question here was whether a conflict of interest already existed if one spouse had something to say at the contracting authority while the other worked in a bidding company. The law is tough on this point. Pursuant to Section 6 (4) in conjunction with (3) No. 3a VgV, it is presumed that the contracting authority employee in question has a conflict of interest if his or her spouse is employed for remuneration by a candidate or bidder.
But does that lead to mandatory exclusion? The ultima ratio in such cases is to exclude the applicant or bidder. But only if the conflict of interest cannot be resolved in any other way. It is precisely a last resort. In contrast, the BGH states that the contracting authority is initially required to exclude bodies or employees with a conflict of interest from participating in the award procedure. This must of course, it may be added, also be properly documented.
In the Berlin case, the BGH ruled accordingly. The senate administration should ensure that the senator does not participate in procurement procedures in which her husband’s employer will participate. That was quite sufficient. Especially since the senator’s husband had no right of direction, let alone personnel management.
Public-sector clients are familiar with the factual problem from a wide variety of contexts. In every local council, there are members who do not vote one time or another because of a conflict of interest. So nothing new under the sun? Not quite. The practice — of imposing a ban on procurement regardless of a specific award — has come under further pressure.
Bidders can rejoice. They do not have to fear “in-house” injunctions. If a bidder learns that he is on a “blacklist” of some kind, the motto is “attack is the best form of defense”. The Federal Court of Justice has pushed this door wide open.
*This legal tip is not a substitute for legal advice in individual cases. By its very nature, it is incomplete, nor is it specific to your case, and it also represents a snapshot in time, as legal principles and case law change over time. It cannot and does not cover all conceivable constellations, serves entertainment and initial orientation purposes and is intended to motivate you to clarify legal issues at an early stage, but not to discourage you from doing so.