Babylonian confusion in public procurement law

Reference requirements and core competencies are often not the most unequivocal requirements in tender documents. And yet these requirements are of essential importance: if a tenderer meets the requirements, it may take part as a suitable tenderer in the tendering procedure. If a tenderer does not meet the requirements, it is excluded from the tendering procedure. In light of this sanction, it therefore comes as no surprise that the question is often raised in case law how provisions in tender documents should be interpreted: on the basis of their literal wording and linguistic meaning (known in the Dutch as the CAO-norm), or rather on the basis of the parties’ intentions (the Haviltex-norm)? And do the same standards apply when the tendering procedure has been completed and the contract has been entered into?

Case

The Court of Appeal of The Hague recently issued a judgment in a dispute between parties regarding the interpretation of the agreements made between them.

The dispute related to the payment of the costs of additional work and materials. After a public tendering procedure, the municipality of Rotterdam (the “Municipality”) awarded Hompert-Renes B.V. (“Hompert-Renes”) the contract for work in the Maas tunnel, including the removal of coating from the tunnel tubes, the repair of a finishing layer and the application of a surface treatment. Hompert-Renes had subcontracted part of the contract to Gebroeders van Kessel (“Van Kessel”). Van Kessel was to repair the finishing layer of the tunnel tubes and apply the surface treatment.

Van Kessel charged the Municipality €800,000 for additional work and materials. The Municipality refused to pay that amount. The parties took the matter to court.

The Court

In the first instance, the court found that the Municipality had to pay Van Kessel part of the amount (€87,229.71). The court ruled that the parties had agreed on a list of rates. That list included the costs of any additional work; the Municipality had to comply with those agreements made. The court rejected the rest of Van Kessel’s claim, on the grounds that Van Kessel had failed to comply with the further agreements regarding the substantiating of extra mortar use. Van Kessel denied the existence of those further agreements and appealed that rejection. The Municipality also filed an appeal against the partial allowance of the costs of additional work.

The Court of Appeal

The Court of Appeal subscribed to the Court’s ruling. It found that the agreements on the payment for additional work, based on the list of rates, were crystal clear:

“13. (...) The reason for this is that the List of Rates is crystal clear in stating the times at which overtime pay was due. If that had been unclear to the Municipality, it should reasonably have enquired about this, which it apparently failed to do; all the so more because large professional parties are involved that did business with each other, and the linguistic explanation of the List of Rates therefore carries great weight. The mere fact that the List of Rates was drawn up after the phasing of the work had been changed and after it was made known (at the Municipality's request, incidentally) that all the work had to be performed at the times stated (i.e. outside normal working hours) is entirely insufficient to arrive at a different ruling.”

With regard to the costs of the extra mortar used, the Court of Appeal found that the parties were aware from the start that the costs of the actual work would be higher. That was why the parties had made agreements regarding the use of extra mortar. In making its assessment, the Court of Appeal considered not only the (literal) wording of the agreement, but also at the parties’ intentions. The Court of Appeal found:

“23. (...) The Court of Appeal agrees with Van Kessel that the agreement made between the parties provided that Van Kessel was allowed to produce evidence of the quantity of mortar used by presenting order forms. However, Van Kessel cannot reasonably argue that that sufficed, since the Municipality insisted from the start (at the first site meeting of 4 January 2016 already, when the work on the west tube had yet to begin) and each time thereafter, that more had to be done and that Van Kessel had to keep a log. That was not done, or in any event not sufficiently. Nor is there any indication that Van Kessel protested at the site meetings or in any other manner against the comments in question made by the Municipality/principal (OG) about further records and documentation. It could reasonably have been expected to do so if it had truly believed that its manner of “producing evidence” sufficed. Major interests of professional parties were involved. In the Court of Appeal’s opinion it goes without saying that the Municipality wished to be able to verify the use of the mortar that was to be settled.”

Public procurement law principles

In public procurement law, there are two moments in particular at which interpretation disputes arise: during the tendering procedure (when the interpretation of the tender documents is at issue) and after the tendering procedure (when the interpretation of the contract is at issue, which often includes the tender documents).

In a dispute during the tendering procedure, the CAO-norm is the main criterion. In the CAO-norm, the textual and linguistic interpretation of provisions of the tender documents is leading. The transparency principle requires that the contracting authority formulate the conditions and requirements in a tendering procedure “in a clear, precise and unequivocal manner”; see also the Succhi di Frutta judgment. In principle, a tenderer is not involved in that formulation; the linguistic interpretation of the provisions therefore prevails.

In a dispute after the tendering procedure (therefore relating to the (awarded) contract), the Haviltex-norm prevails. A contract is a bilateral juridical act and it makes sense also to consider the parties’ intention in interpreting provisions; all the more so if the draft contract did not for part of the tender documents and was drawn up after the tendering procedure. Please note that if a framework agreement is entered into after the tendering procedure and that agreement formed part of the tender documents, the framework agreement is more likely to be interpreted on the basis of or in accordance with the CAO-norm. The Court of Midden-Nederland ruled accordingly in interpreting an operating agreement:

“4.5. Because the Operating Agreement is the tailpiece of the tendering procedure, the interpretation of the Operating Agreement must be based on the interpretation of the tender documents on which it is based.”

Tips and points for attention

In the case in question the Court of Appeal applied both the CAO-norm and the Haviltex-norm in interpreting the agreements made between the Municipality and Van Kessel: it applied the CAO-norm to the list of rates and the Haviltex-norm in the interpretation of the agreements made regarding the use of extra mortar.

The Court of Appeal’s judgment is not new, but sooner a confirmation of established case law. That established case law requires clear-cut and unequivocally formulated tender documentation. A contracting authority is therefore well advised to clearly state the requirements and conditions of the tender.

If a contracting authority and a tenderer wish to make agreements after the tendering procedure has been completed, they must be carefully record them in writing. Beware that oral agreements are also relevant factors in disputes regarding the interpretation of awarded contracts: all the more reason to record (oral) agreements in writing. Please note that agreements made (after a tendering procedure) may not lead to an essential change in the contract. That would give rise to a new contract, which must be put out to tender; see also the Pressetext judgment.

More information on sustainable procurement or calls for tenders as a contracting party, or on submitting tenders, can be found at www.innovatiepartnerschap.info.

See also our earlier blog on the CAO-norm and the Haviltex-norm in public procurement law.

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Contact details

Leyla Bozkurt

T +31 20 238 20 01
M +31 6 53 453 021

Réshmi Rampersad

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