The upcoming revision of the Public Procurement directives must support fair competition and quality jobs in construction. A recent study of the EU Court of Auditors shows that public authorities make too little use of the possibility to include mandatory social clauses in public tenders and that the “lowest price” is still the main criterion to award a contract.
In this regard, the EFBWW welcomes the recent court case in which the Norwegian Public Roads Administration rejected a tender to build a large tunnel in the north of Norway, submitted by the Italian company Itinera S.p.A, which has a history of violating labour rights in another country (i.c. Denmark).
On 29th July 2024, the Norwegian Public Roads Administration decided to reject the proposal after having received information that the company was involved in several cases in Denmark where labour rights had been violated. Danish trade unions were contacted and provided information about ongoing and closed cases. Since the qualification criteria in the tender required compliance with collective agreements, the company was not allowed to participate in the tender. Itinera S.p.A contested this decision, but on 1st October 2024, the court (Oslo tingrett) ruled in favour of the Norwegian Public Roads Administration considering the decision was correct, in relation to the requirements set out in the tender.
The court referred to the European Court of Justice ruling in the case of Tim SpA v Consip from 2020, underlining the importance of subcontractor compliance in public procurement. This clarified EU public procurement rules, allowing contracting authorities to exclude a company from tendering if one of its subcontractors is found to have violated labour, social or environmental obligations. This is a practical example of where such an exclusion is not only lawful, but necessary and possible.
The EFBWW welcomes the Norwegian Public Roads Administration’s decision to exclude the company from the tender process and the court’s decision in favour of the Norwegian Public Roads Administration. The EFBWW calls on the Norwegian Court of Appeal (Borgarting lagmannsrett) to reject Itinera’s appeal and to confirm the outcome.
The EFBWW calls on the EU legislators to push for:
- · Legally sound and mandatory social criteria on social and employment aspects, such as social fraud and social dumping, non-application of collective agreements, etc.
- · Pre-procurement (ex-ante) strategies to prevent bidders with low professional integrity from entering the tendering process. Accreditation systems are a possibility to determine companies’ technical, financial capacity, but also professional integrity prior to the tender process. Criteria of professional integrity should encompass fair and decent working conditions, clean records on social and employment aspects, respect of collective agreements, etc.
- · Limits in subcontracting and requirements for joint and several liability flanked by clear due diligence reporting and direct jobs.
- · Abolition of the "lowest price option" and exclusion of abnormally low tenders from the bidding process.
- · Grounds for excluding companies from tender processes.
- · Control, monitoring and sanction mechanisms - Control and monitoring should be done by an independent body. In large public cross-border contracts the European Labour Authority (ELA) has the potential to coordinate control and monitoring procedures.
- · Mandatory application of collective agreements.
- · Hiring locally to strengthen EU regions and local communities.
It has been proven many times that the lowest price comes at a high social and societal cost. Awarding contracts on the basis of the “lowest price” frequently results in social fraud, breaches of regulations, extremely poor-quality works/services and unfair competition while ultimately driving up costs considerably either during performance of the contract or after it has been completed. In consequence it must be mandatory to apply strict criteria to identify what is considered an abnormally low tender and, thus, what must be rejected and excluded from the bidding process, whatever the underlying reasons are, including social considerations.