Challenge (14.12.2023 Decision No. 21 (Kurzeme Planninig Region (Saarte Liinid))

POWER OF ATTORNEY FOR PROVISION OF LEGAL SERVICES Hereby aktsiaselts Saarte Liinid, registry code 10216057, seat at Saare maakond, Saaremaa vald, Kuressaare linn, Rohu tn 5, 93819, represented by management board member Kaida Kauler, authorizes attorney at law Kristina Uuetoa-Tepper of Law Office Tepper & Partnerid, to represent aktsiaselts Saarte Liinid in submitting a challenge on behalf of Kurzeme Planning Region, registry code 90002183562, to repeal State Shared Service Centre 14 November 2023 financial correction decision No. 21 (document No. 11.1-13/23/1312). Power of attorney is valid until challenge proceeding is terminated. Date in digital signature. AS Saarte Liinid, registrikood 10216057 Info: +372 453 0140 | [email protected] | https://saarteliinid.ee Rohu 5, Kuressaare, 93819 Saare maakond SEB Pank, SWIFT: EEUHEE2X | IBAN: EE301010022030455004 13.12.2023 State Shared Services Centre Suur-Ameerika 1, 10122 Tallinn [email protected] [email protected] Person filing the challenge: Kurzeme Planning Region Registry No. 90002183562 Representative of the person filing the challenge: vandeadvokaat Kristina Uuetoa-Tepper Law Office Tepper & Partners Lelle tn 24, 11318 Tallinn E-post [email protected] CHALLENGE 14 November 2023 Financial Correction Decision No. 21 Hereby the signatory submits a challenge on behalf of Law Office Tepper & Partners client1 aktsiaselts Saarte Liinid (hereinafter PP), who is authorized to submit the challenge on behalf of Kurzeme Planning Region2 (hereinafter LP). I Request of the challenge Repeal 14 November 2023 State Shared Services Centre financial correction decision No. 21. II Reasoning of the challenge 1. On 14 November 2023 State Shared Services Centre (hereinafter MA) sent to LP a financial correction decision No. 21, by which it decided:  5% of the costs of the procurement contract concluded as a result of public procurement “Ringsu sadama väikelaevasadama laiendus“(ref. No. 199174) (hereinafter Ringsu) by PP are ineligible;  5% of the costs of the procurement contract concluded as a result of public procurement “Munalaiu sadama väikelaevasadama laiendus II” (ref. No. 198843) (hereinafter Munalaiu) by PP are ineligible. (hereinafter Decision). LP finds that the Decision is unlawful and hereby submits a challenge to repeal it. 2. The Decision was preceded by a draft decision sent to LP by MA on 20 September 2023. On 6 October 2023 LP replied, that it opposes the draft decision, and attached relevant comments prepared by PP (hereinafter Comments). LP finds that MA has not 1 Annex 1 – Power of attorney issued by aktsiaselts Saarte Liinid 2 Annex 2 – Power of attorney issued by Kurzeme Planning Region OÜ Advokaadibüroo Tepper & Partnerid Telefon +372 667 1550 [email protected] Lelle 24, 11318 Tallinn Registrikood 11527161 www.tepper.ee 1  considered arguments of Comments in accordance with discretion rules and has not fulfilled the obligation to give a proper reasoning. In order not to repeat the Comments in full, LP hereafter shall refer to relevant parts of the Comments, which become parts of this challenge and shall be considered during the review of the challenge. 3. The violation underlying the Decision is that PP failed to add words “or equivalent” to all the standards included in the building design documentation, which were part of Ringsu and Munalaiu procurement documents. MA is of the opinion, that this constitutes a violation of Public Procurement Act (hereinafter PPA) § 88 (3) and (7). 4. MA finds that the violation discriminated potentially interested entrepreneurs and artificially hindered competition by favoring entrepreneurs who were familiar with such standards. MA finds that there exists a possibility that the number of tenderers would have been higher, if PP had enabled to offer “equivalent solutions”, and therefore had a negative impact on the EU budget. 5. PP remains of the opinion, that as three tenders were submitted in both Ringsu and Munalaiu, then there are no grounds to assume, that there were unjustified obstacles to competition. This is supported by relevant judicial practice (see paragraphs 1 – 4 of page 4 of the Comments). 6. PP does not agree with MA’s statement, that interested entrepreneurs were not aware of options to submit tenders based on equivalent standards. There were several clear possibilities to consider. An interested potential tenderer could rely on PPA § 114 (3), which prohibits PP to reject a tender with equivalent standards. This is also supported by recent judicial practice (see last paragraph of page 4 and paragraphs 1 – 3 of page 5 of the Comments). 7. PP emphasizes – section 5.1 of the technical specifications of Ringsu and Munalaiu procurements clearly stated that equivalent “products and materials” could be offered. Therefore, MA’s conclusion, that section 5.1 of the technical specifications only covers product standards, is clearly unfounded (“it [section 5.1] only covers the product standards”, see page 6 of the Decision). 8. MA has not properly analyzed and considered PP’s arguments based on procurement contract terms and conditions, namely sections 3.1.3 and 8.1.3 of applicable General Terms of Construction Contracts (hereinafter ETÜ 2013) (see page 4 and paragraphs 1 – 3 of page 5 of the Comments). 9. MA has stated that “A general condition of the ETÜ may be relevant ex-post, for example in the case of practical substitution of a single product or material. It is certainly not equivalent in terms of assurance to using the words “or equivalent” for a significant list of standards in the tender documents, nor does it allow the bidder to assume that he can use equivalent working procedures and solutions”. 10. PP is of the opinion that this MA’s statement is clearly not true and this alone constitutes a grave discretion error, which should lead to the repeal of the Decision. Regulation in given sections of ETÜ 2013 is not limited to “substitution of a single product or material”, as MA finds. Section 3.1.3 of ETÜ 2013 allows the contractor “to deviate from the requirements of the building design documentation”. Section 8.1.3 of ETÜ 2013 provides contractor’s right to “make amendments in the building design documentation”. 2 11. It is evident that all the standards, which constitute the alleged violation, are parts of the building design documentation and therefore, “design solutions”, which are open to amendments in accordance with procurement contracts’ terms and conditions. There are no limitations in these sections which exclude the possibility to carry out the procured works based on equivalent standards, no matter how comprehensive or important they are. 12. Also, open procedure procurement contract terms are considered standard terms (Law of Obligations Act § 35 et seq.) that must be interpreted as a reasonable person with characteristics like the other party was supposed to understand it in the same circumstances. In case of doubt, the standard terms are interpreted in the tenderer’s favour. Therefore, sections 3.1.3 and 8.1.3 cannot be interpreted in a way which limits their applicability to cases “of practical substitution of a single product or material”. 13. Although the regulation of sections 3.1.3 and 8.1.3 of ETÜ 2013 is not identical to words “or equivalent” at face value, then substantially it had the same effect, which excludes the possibility of discrimination of any interested entrepreneurs nor hindered competition. This is supported by recent judicial practice. Tallinn Circuit Court, 30 June 2023 decision (case No. 3-21-2384), has in an analogous case (see sections 12 – 13.6 of the given judgement), elaborated: “The contracting authority has left the assessment of equivalence to the phase of contract performance and has not deemed it significant at the stage of submitting bids. Interested tenderers can be expected to familiarize themselves not only with the construction project but also with the potential draft of the procurement contract to be concluded. Section 2.17.4 of the Variku School procurement contract project provided the tenderer with confidence at the stage of preparing and submitting the tender that, during the contract performance phase, they have the right to demand the replacement of the item or service with an equivalent one as specified in the project according to the standard. Therefore, in the assessment of the appellate court, the conditions reflected in the construction project did not, on the one hand, hinder entrepreneurs from submitting bids on equal terms, and on the other hand, did not harm the competition in the disputed public procurement procedures (Public Procurement Act § 88(7)).” 14. The reasoning of Tallinn Circuit Court rested on underlying procurement contract term, which excluded the customer’s right to reject coordination of the substitution without a good reason (see section 13.2 of the judgement). PP draws MA’s attention to the fact that section 8.1.3 of ETÜ 2013 also states, “If it concerns equivalent construction products, design solutions or equipment, then the customer shall not refuse to provide the consent”. Therefore, all interested entrepreneurs could consider, that they are able to carry out the works based on equivalent works, even if all standards named in the building design documentation disclosed by PP during Ringsu and Munalaiu procurements did not have words “or equivalent” added to them. 15. PP does not agree with MA’s consideration that the alleged violation is significant (see paragraph 4 of page 7 of the Comments and paragraphs 1 and 2 of page 8 of the Comments). MA has not provided an observable explanation, why PP’s argumentation was not deemed relevant. 3 16. It indirectly follows from the Decision, that MA considers the violation significant, because of the share number of standards (without words “or equivalent”) and that such requirements have a connection to a large portion of the works (paragraph 2 of page 6 of the Decision). PP points out that most of the standards listed in the Decision concern “products and materials” and are therefore covered by the equivalency clause in section 5.1 of the technical specifications. Such standards cannot constitute a violation. The first part of MA’s reasoning is therefore false. Standards and guidelines about quality of general and special parts of construction works have a connection to a large portion of construction works but this alone cannot make the violation significant. All interested and capable entrepreneurs could consider that part of the works is the preparation of operational design documentation, which includes elaborating on the source documents, incl. all standards and guidelines. 17. As the alleged violation, according to recent judicial practice, did not discriminate against any potential interested entrepreneur nor hinder competition, then it cannot have an actual or potential negative impact on EU budget. The lack of negative impact on EU budget is further solidified by examples of PP public procurements, were all PP § 88 (2) documents were covered by the general equivalency clause, but the actual number of tenders was even lower than in Ringsu and Munalaiu (see page 9 of the Comments). 18. Therefore, even if words “or equivalent” did not explicitly cover all standard of the building design documentation, such a violation shall be deemed formal in terms of 14 May 2019 Commission decision C(2019) 3452 annex (see paragraphs 3 – 6 on page 8 of the Comments). Sincerely, /signed digitally/ Kristina Uuetoa-Tepper Attorney at law Annexes: 1) Power of attorney issued by aktsiaselts Saarte Liinid 2) Power of attorney issued by Kurzeme Planning Region 4 Saatja: [email protected] Saaja: "RTK Info" <[email protected]> Teema: Challenge (14.12.2023 Decision No. 21 (Kurzeme Planninig Region (Saarte Liinid)) Kuupäev: 2023-12-13 14:48 Tähelepanu! Kiri saabus väljastpoolt ametit/RM valitsemisala. Palume linke ja faile mitte avada, kui kiri on saabunud tundmatult aadressilt! 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