Supreme Court of Ireland Decisions

1. This appeal concerns the public procurement rules of the European Union. The European Court of Justice has answered a question referred to it by this Court, in 1999. The judgment of the European Court was given in 2001. The parties are not agreed on the extent to which that judgment determines the issues on the appeal. The respondents complain, in particular, that the appellant (for brevity hereafter described as “SIAC”) seeks to rely on parts of the judgment of the European Court to pursue issues which had not previously figured in the appellant’s appeal from the judgment of the High Court.

2. In 1992, the respondent County Council, (for brevity described as “the County Council”), advertised for tender a major sewerage works at Ballinrobe. The award was, as advertised, to go to the “most economically advantageous” tender and not to be made on the basis of “lowest price only.” These are the two alternative bases for advertising public works contracts under EU procurement rules.

3. The price submitted by SIAC was the lowest after mathematical adjustment. However, the consulting engineer engaged by the County Council reported that the competing tender of Pat Mulcair might prove “at the end of the day to be the lowest.” SIAC claimed in its High Court proceedings that the County Council, by relying on this conclusion, breached the EU public procurement rules. In particular, it submitted that it was not permissible to take into account the likely ultimate out-turn of the cost of the contract: SIAC’s tender, being the mathematically adjusted lowest, had to be accepted. This argument failed in the High Court. On appeal to this Court, the question whether the ultimate cost to the County Council was an admissible criterion for awarding the contract was referred to the European Court, which ruled in substance that, provided it formed part of the tender criteria, it was.

4. At the resumption of the appeal, the appellant has argued that the possibility of awarding the contract on this basis was not part of the award criteria notified in the tender documents. The County Council objects that this is a new argument: it was not advanced in the High Court. Though it was advanced on the appeal at the earlier stage, the County Council had always objected. Indeed, it was implicit in the form of the questions referred to the European Court that the criteria covered this possibility. Furthermore, they did in fact do so.

5. In these circumstances, the European Court has left it to this Court to assess, in accordance with national law, the scope of the award criteria, specifically whether they should be interpreted as notifying tenderers that the County Council would decide on the basis of the ultimate out-turn cost. In doing so, I will consider in detail those parts of those documents which bear on that issue. The objection taken by the County Council requires also consideration of the nature of the case made in the pleadings, heretofore, by SIAC.

6. On 20th February 1992, the County Council advertised an open tender procedure in the Official Journal of the European Communities for the construction of a sewerage and sewage disposal scheme for the town of Ballinrobe. It was to consist of pipelines for sewers, storm water drains, rising mains, water supply pumping stations and waste treatment works together with a detailed list of fittings such as manholes, storm overflows and drains, ventilating columns, and gullies. The notice named the Consulting Civil Engineer as Patrick J. Tobin and Company. Mr Downes of that company (“the Engineer”) was the responsible engineer, from whom documents were to be obtained. It also specified dates for completion of the works as well as for steps in the tender procedure. The award criteria insofar as they were stated in the notice were:

7. The relevant directive then in force was Council Directive 71/305/EC of 26 July 1971 concerning the co-ordination of procedures for the award of public works contracts (OJ, English Special Edition 1971 (II), p. 682), as amended (hereinafter “directive 71/305” ). Essentially, the present case is concerned only with Article 29(1) and (2):

8. It is clear that the County Council opted for the second indent of Article 29(1), i.e., that it would choose “the most economically advantageous tender” and not award on the basis of the “lowest price only.” The set of tender documents was complex, as one would expect where a local authority organises a large civil engineering project.

9. There was a voluminous Bill of Quantities, which had been prepared by the Engineer, in five substantial volumes of several hundred pages detailing each and every item of work to be carried out. Tenderers were required to price all of the more than four thousand items in the Bill of Quantities. The priced Bill of Quantities was one of the most important documents that had to be returned as part of the tender. It was on the basis of these quantities together with the provisional and prime cost sums that the tenderers submitted their tender prices. The totals thus reached produced the single total price that was entered as the tender price in the Form of Tender.

10. One provision of the Description of the Works (paragraph 1.24) provided in relevant part:

11. Twenty four tenders were received. The Engineer produced an extremely detailed report. Following arithmetic correction, the three lowest tenders were:

12. Pierse Contracting £5,623,966.15

13. The Engineer reported that all three were of equal technical merit and that SIAC had submitted the lowest mathematically adjusted tender. However, for reasons which he explained in detail, having acknowledged that the competence of SIAC was beyond question, he recommended with “the greatest reluctance” that the contract be awarded to Pat Mulcair.

14. He stated that he was disappointed with the make-up of the SIAC tender and that he was disturbed by the method of pricing. He said: “in my view [the pricing method] gives a Tender Sum which is more apparent than real.” In addition, he went so far as to doubt the validity of the tender. The principles of equality in tendering oblige awarding authorities which are not valid. In the event, he did not reject it on that ground. He went on in what became a crucial passage:

15. The nub of the Engineer’s complaint was that SIAC had zero-rated a high proportion of items in the Bill of Quantities. This is permissible and it had been done by Pat Mulcair but to a much lesser extent. Of 4,097 items in the Bill of Quantities, SIAC zero rated 1,125 or 27.5%; Pat Mulcair zero rated 741 or 18%. Mulcair had priced all major items, leaving only lesser items among the 18% unpriced. The Engineer considered that the Mulcair tender was “the most balanced of the three lowest tenders containing as it does very very few items with high rates or rates above the ordinary.”

16. His other complaint related to the treatment of a provisional sum of £90,000 under the Heading “ Materials.” The Instruction to the Tenderers stated: “Percentage addition for overheads, profit etc.” Instead of making an addition, SIAC, in effect, deleted this provisional sum by simply writing in “-100%”. Pat Mulcair wrote “+0%.”

17. It should be recorded, of course, that both tenderers made, as they were entitled to under the terms of the tender, a substantial general adjustment to his preliminary costed tender sum: SIAC deducted “£100,000 and Pat Mulcair £557,546.” In the end, the SIAC tender, as adjusted, was some £131,000 lower than Pat Mulcair’s. The Engineer also noted in his report that SIAC had not furnished a date for completion as they were required to do. However, this is no longer an issue, as it was decided in the High Court that this did not affect the decision.

18. The Engineer recommended accepting the Mulcair tender. The County Manger made an order on 25th August 1992 approving the acceptance and the Minister for the Environment approved. The County Council entered into a contract with Pat Mulcair and the works were completed.

19. SIAC sought, pursuant to the procedure laid down, an explanation for the failure to award them the contract. The County Council, in compliance with the directive, gave its response in a letter of 30th August 1993, as follows:

20. SIAC instituted proceedings in the High Court, firstly by way of judicial review, and, secondly by way of Special Summons. They did not seek to prevent the contract with Pat Mulcair from proceeding which it, in fact, did. They sought declarations that the County Council had acted in breach of the public procurement requirements, any issue of damages being left over until the determination of that issue. Laffoy J gave judgment on 17th June 1997 dismissing the claim.

21. The Judicial Review Statement alleged that the SIAC tender was the “most economically advantageous” and that that of Pat Mulcair was not. It referred to the reasons for the award furnished by the County Council in its letter of 30th August 1993. One of the County Council’s reasons, cited in the Statement was:

22. Laffoy J heard expert evidence about the basis of the Engineer’s report. In particular evidence was given by Mr Staveley, a consulting engineer, on behalf of SIAC, with regard to the opinion of the Engineer upon which the County Council based its award of the contract. SIAC relied on the evidence of Mr Staveley to claim that the Engineer’s advice was incorrect even in the sense, for the purpose of judicial review, of being “ irrational” or “ unreasonable.” Laffoy J expressed her conclusions on this issue in a passage showing that “ ultimate cost ” was the issue in the hearing before her. She spoke of the discretion exercised by the County Council, as the awarding authority “in a context in which a large measure of professional expertise as to the final out-turn came into play.” She went on to say that “underlying the ..challenge on the ground of unreasonableness or irrationality is the assertion that Mr Staveley is correct in his professional opinion that Mr Downes’ [the County Council engineer] professional opinion that the applicant’s tender, although the lowest, would not turn out to be the most economically advantageous..... is incorrect.” (page 30 of the unreported judgment).

23. There were three main issues involved in the attack on the County Council’s decision.

24. One is no longer in contention on the appeal and can be dealt with briefly. The Engineer criticised SIAC in his report for failure to specify a completion date. Each tenderer was required to specify a completion date. However, this was not made one of the award criteria. Nonetheless, Laffoy J concluded on the evidence that the Engineer had attributed no substantial relevance to this issue and the tender was not rejected for this reason. Although one ground of appeal criticises the learned trial judge’s failure to find that the County Council had taken into account an irrelevant consideration, that matter has not been pursued on the hearing of the appeal.

25. The first of the remaining substantial arguments concerned the provisional sum of £90,000. The Engineer’s concern was that SIAC, by making a 100% deduction, had simply deleted this item from the contract. SIAC, however, at a pre-adjudication meeting said that the item was overpriced and that they believed that, if required to perform this work, they would have to do so free of charge. The Engineer considered that SIAC, by treating the matter in this way, rather than by an adjustment, had distorted the tendering process. The Engineer treated SIAC as providing nil expenditure under this heading which gave them an advantage in the tendering process. Laffoy J noted, however, that, “even if one adjusted the competing tenders to reflect this possible, if unlikely, eventuality, by reducing Mulcair’s tender price by £99,000 ( the provisional sum of £90,000 plus £9,000 in respect of VAT), the result was that the Applicant’s tender was still lower than Mulcair’s.” She continued: “However, the likelihood of there being no expenditure on dayworks material was extremely remote and, if a sensitivity analysis had been carried out by Mr Downes, as Mr. Staveley presumed in his report.........the appropriate reduction on Mulcair’s tender price to eliminate the distortion would have been of a lesser order than £99,000 and the differential between the Applicant’s tender and Mulcair’s tender on that adjusted basis would have been greater than £31,391.13.”

26. Laffoy J did not, however, reach any further conclusion on this item, although SIAC claims that the County Council’s reason for refusal in this respect was invalid or mistaken.

27. The second substantive issue relates to the pricing of the Bill of Quantities and is more central to the reason for the making of the award to Mulcair. The Engineer criticised the approach of SIAC to the pricing of the Bill of Quantities. As already indicated, SIAC zero-rated a higher proportion of items than Mulcair. The Engineer’s concern was that this would affect his ability to control work and expenditure under the contract. As stated by Laffoy J, his worry was that “the assessment at adjudication stage of the effect of quantity fluctuations on the contract price was difficult, if not impossible, to evaluate.” And “control of the price of ordered variations post-contract would be difficult, if not impossible, if the Applicant’s tender was accepted.” Mr Staveley gave evidence that it was the duty of the Engineer to seek clarification at the pre-adjudication interview of the quantities allowed for by the tenderers and the rates applicable thereto.” The Engineer, on the other hand, considered that such procedures would open the door to post tendering. Laffoy J summarised the opposing contentions of the engineers at considerable length. Again, contrary to the submission of SIAC, she did not find that the Engineer or the County Council had adopted a mistaken or invalid approach. A passage cited by SIAC for this purpose, stating that “Mr Downes was entitled to and should have required the Applicant’s representatives to produce a complete build-up of prices at the pre-adjudication interview,” is taken from the learned trial judge’s summary of Mr Staveley’s evidence.

28. Central to the debate was the County Council’s view that SIAC’s treatment of the pricing of the Bill of Quantities posed a serious risk that it would be difficult, if not impossible to control the cost of the contract and SIAC’s response that the County Council failed to investigate and quantify this alleged danger, in particular by seeking clarification from SIAC in the post-tender and pre-adjudication process. This, in turn, raised the question of whether a tenderer should be allowed the facility of explaining such matters post-tender, i.e., outside the tendering procedure.

29. Laffoy J did not go further than to summarise the opposing contentions. She held that the County Council had “reserved to itself the discretion to choose the criteria by which the most economically advantageous tender should be identified.” She continued:

30. Her approach was that the tendering was very competitive, with a difference of less than £131,000 between the two lowest corrected tenders in a contract valued in excess of £5.5 million and which the Engineer estimated at in excess of £6.2 million. In fact, as mentioned above, she had at another point considered the difference to be somewhat in excess of £31,000. The choice between those figures depends, of course, on the treatment of the provisional sum of £90,000 plus VAT in respect of dayworks materials. Having adopted that view of the figures, she noted that the discretion of the County Council was based on an estimation of quantities by the Engineer “the accuracy of which could only be ascertained when the contract had been awarded and the implementation of the works was in hand, in other words, in a context in which a large measure of professional expertise as to the final out-turn came into play, both on the part of the tenderers and on the part of the adjudicator.” She approached her task of judicially reviewing the decision on the principle that : “The Court’s function [was] to determine whether the [the County Council’s] decision was unreasonable in the sense that it plainly and unambiguously flew in the face of fundamental reason and common sense, or not.” Her final conclusion on the conflict of experts was: “It is not the Court’s function to assess the two conflicting professional opinions to determine which is correct on the balance of probabilities.” Since SIAC had not discharged the onus in the terms of the principle of judicial review which she had posited, she dismissed the claim.

31. In their Notice of Appeal, SIAC took issue principally with the approach of the learned trial judge to the exercise of judicial review, in particular her adoption of what might be called a pure Wednesbury test. A number of grounds of appeal criticise her conclusions on this issue, arguing in general terms for a modified approach to judicial review for cases, such as the present, involving the protection of rights derived from Community law. As already stated, SIAC also continued to maintain that it was not legitimate for the County Council to make the award on the basis of the likely ultimate out-turn of the cost of the contract. Since, SIAC’s tender, being the mathematically adjusted lowest, it simply had to be accepted.

32. Faced with this argument, this Court, employing the machinery of Article 234 EC, asked the European Court of Justice whether “the awarding authority is obliged to award the contract to the contractor who shall have tendered the lowest price or [whether] the awarding authority [is] entitle[d] to award the contract to the contractor with the second lowest price on the basis of the professional report of its consulting engineer that the ultimate cost of the contract to the awarding authority is likely to be less if the contract is awarded to the contractor who tendered the second lowest price than it would be if the contract were awarded to the contractor who tendered the lowest price..”

33. The European Court gave judgment on 18th October 2001. It began by explaining that it could not resolve differences concerning the interpretation of the tender documents. Such interpretation was a matter for the national court. It then summarised concisely the general principles of the public procurement system:

34. It then stated that the criteria for an award based on the most economically advantageous tender are not listed exhaustively in the second indent of Article 29(1) of directive 71/305. It emphasised, nonetheless, that it would be incompatible with directive 71/305 if the award criteria were interpreted so as to confer “on the adjudicating authority an unrestricted freedom of choice....” (paragraph 37). However:

35. Then, in a passage which forms the basis of much of SIAC’s case on the resumed hearing, it reiterated that “in order for the use of such a criterion to be compatible with the requirement that tenderers be treated equally, it is first of all necessary..........that that criterion be mentioned in the contract documents or contract notice.” (paragraph 40). Furthermore, since the “principle of equal treatment implies an obligation of transparency in order to enable compliance to be verified...” (paragraph 41):

36. The Court of Justice finally proceeded to give the following answer to the question referred by this Court:

37. At this point it is necessary to consider the grounds of appeal. SIAC, at the resumed hearing of the appeal relied on those parts of the judgment of the European Court which emphasised the need for award criteria to be stated in the tender documents and notice. SIAC has stated in its written submissions that this issue is of fundamental importance. Counsel for SIAC, Mr Bill Shipsey S.C. stated at the opening of the appeal that paragraphs 40 to 44 of the judgment, which I have summarised rather fully, are at the heart of the appeal. In substance, he objected that the criterion of ultimate cost was not mentioned in any of the contract documents. Miss Finlay S.C., on behalf of the County Council objected that no previous claim had been made to the effect that the award criteria did not include an assessment of the tenders on the basis of which was the most economically advantageous in the sense of the question referred to the European Court, namely the “ultimate cost of the contract.” The County Council had objected when the matter had been raised prior to the reference. She claimed that the decision of this Court to make the reference regarding “ ultimate “ or “ out-turn” cost implied that the Court did not accept SIAC’s contention.

38. In order to rule on this objection, it is necessary to identify the substance of the claim made by SIAC in the High Court. It seems clear that the ambit of the entire debate in the High Court was whether the Engineer was correct in his conclusion that SIAC’s tender, though the lowest arithmetically, might ultimately prove to be less advantageous. All parties were aware that the Engineer had reported that SIAC’s lowest tender was “more apparent than real.” SIAC vigorously contested the correctness of this view, contending that it was “unreasonable” or “irrational.” It does not appear to have been contended, on the other hand, that the County Council was not entitled to take “ultimate cost” into account.

39. The reason for rejection furnished by the County Council, quoted above and cited in the Judicial Review Statement, put SIAC on express notice that the County Council had interpreted “most economically advantageous” as encompassing control of costs during the performance of a measure and value type of contract. In the grounding affidavit the deponent on behalf of SIAC said that SIAC had submitted the lowest tender and that the grounds advanced by the County Council were “ utterly capricious, unreasonable and improper...” He said that “no reasonable person could legitimately or properly reject the applicant’s tender, as not being the most economically advantageous tender on the grounds outlined.....in [the] letter of 30th August 1993.” Nonetheless, SIAC did not complain at that stage that such an approach was not permitted by the award criteria or include that point in the grounds upon which it sought judicial review.

40. Laffoy J clearly stated that the County Council had chosen “contractual criteria which were stated in the contract notice.” She did not, however, decide as a distinct issue whether the advertised award criteria permitted reference to “ultimate cost.” That was simply not an issue in the proceedings before her.

41. Next, it is material to consider the grounds of appeal. Grounds 14 and 15 state as follows:

42. Nowhere in those grounds is it suggested that the criterion of “ultimate cost” was not among the notified award criteria. In this respect, grounds 14 and 15 contrast with ground 17, which reads:

43. As I have already mentioned the question of the “period for completion” mentioned in ground number 17 is no longer an issue in the case. However, that ground mentions the award criteria, whereas grounds 14 and 15 do not.

44. In this light, I am satisfied that the objection taken by the County Council is well founded. The High Court did not decide the issue; it did not form part of the grounds of appeal. Furthermore, it would appear to have been a rather futile exercise for this Court to refer to the European Court the admissibility of the criterion of “ultimate cost,” if that was not accepted as one of the award criteria.

45. It is contrary to the function and practice of the Court, as an appellate court, to entertain appeals on matters which have not been argued or decided in the High Court. I would, therefore, uphold the objection taken by the County Council to the admissibility of argument relating to the award criteria.

46. At this point, it is necessary to take up the other threads of the proceedings. I will first state the position in its essence. SIAC, as already stated, claimed that the decision of the County Council on the award was invalid as being contrary to the terms of the directive. In substance it was unreasonable and irrational, because it awarded the contract to Pat Mulcair, whereas SIAC’s tender was the lowest. Laffoy J rejected this argument applying the Wednesbury test. It was not her function, she considered, to determine which of the two competing professional opinions was correct on the balance of probabilities. Throughout the High Court, at the original appeal hearing and in the European Court SIAC maintained specifically that the County Council was not entitled to take into account the ultimate out-turn, but must award on the basis of the lowest mathematically adjusted tender. This point was decided against SIAC. The European Court held that ultimate out-turn was a permissible element but added the important proviso that this must have been included in the award criteria as notified.

47. On the resumed hearing of the appeal, SIAC have relied on this proviso, claiming that the original tender criteria did not give notice of the intention of the County Council to approach the granting of the award on that basis. For the reasons explained above, I do not think this Court can entertain that ground. That, however, is not the end of the case. SIAC maintains that the decision of the County Council was, nonetheless, not a valid exercise of its function as awarding authority. The opinion of the Engineer was subjective and demonstrably incorrect. Moreover, the test applied by the learned trial judge to the judicial review of the decision was not the correct one.

48. At this point, I propose to consider the admissible grounds now advanced by SIAC to challenge the decision and then to consider the test.

49. SIAC continued to maintain throughout the hearing that cost must be treated as synonymous with price, emphasising that Laffoy J had said in her judgment that the terms “were used interchangeably in the contract documentation” and that she was satisfied they “were intended to have the same meaning.” Although the County Council had relied on the notion of ultimate or out-turn coat, this was nowhere expressly mentioned in the report of the Engineer. Since cost and price were the same, the price had to be the same as the tender price. The County Council had not acted consistently, since it applied the criterion of out-turn cost only to the two lowest tenders.

50. Insofar as the trial judge held the County Council to be entitled to rely on clause 1.24 of the Specification to “make comparisons between the prices quoted and their estimate of costs, ” for the purpose of adjudicating between tenders, this was unlawful and a misconstruction of that clause. Zero-rating was a legitimate procedure and had been used by Mulcair. In response to the Engineer’s concern about being able to control the cost of the contract, SIAC draws attention to the conditions of contract as giving the Engineer adequate power to manage the contract. In particular, the contract permits the Engineer to vary rates of prices, though accepting that any such procedure could be made the subject of an arbitration under the contract, which might lead to an increase in cost for the County Council.

51. Turning to the substance of the evaluation by the Engineer, SIAC says that he did not conclude that the SIAC tender would, in fact, turn out to be more expensive than Mulcair’s but only that it might be. The Engineer did not act objectively. He assumed that the quantities which he had himself estimated were wrong and underestimated certain aspects of the work. He did not make any calculation of the likely out-turn cost. SIAC relies on one passage from page 27 the judgment of Laffoy J as a determination that the Engineer had failed properly to assess the respective treatments of the Bill of Quantities. It reads:

52. This is based on a misreading of the judgment. Laffoy J was, at that part of her judgment summarising the evidence of the respective Engineers, and, in the passage in question that of Mr Staveley. This becomes clear when one reads page 28, where she says that she has not intended an exhaustive “resumé of Mr Staveley’s analysis and criticism of Mr Downes’s evaluation and comparison of the three lowest tenders.” Moreover, SIAC’s view would be inconsistent with the learned trial judge’s statement that she did not consider it her function to assess the conflicting professional opinions. I will, however, treat this passage as a submission made on the appeal.

53. In addition to all the foregoing, SIAC submitted that Laffoy J had been incorrect to assess the validity of the decision of the County Council to award the contract a test of “unreasonableness” or “irrationality.” The so-called Wednesbury test (from Associated Provincial Picture Houses Limited v Wednesbury Corporation [1948] 1 KB 223), as also applied in this jurisdiction in The State (Keegan) v The Stardust Compensation Tribunal [1986] IR 642 and O’Keeffe v An Bord Pleanála [1993] IR 39 was not appropriate. Council Directive 89/665/EEC of 21 December 1989 on the co-ordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts (OJ No 1 395/33 of 30 December 1989) requires a fresh and different form of summary procedure more suited to the Community law nature of the remedy especially the principle of effectiveness. Advocate General Jacobs, in his opinion in the reference in this case, it was noted, thought that the “test for objectivity should be ... rather less extreme.” (paragraph 53) than that applied by Laffoy J.

54. The County Council’s principal argument throughout the proceedings has been that, having specified the most economically advantageous tender and not the lowest price for the purpose of Article 29(1) of directive 71/305, it was entitled, as a matter of Community law, to exercise a discretion and to award the contract on the basis of a recommendation from its consulting engineer as to which tender was likely to yield the lowest cost in the long run. The decision of the European Court determined the matter entirely in favour of the County Council, which has always accepted and applied the principles of transparency and equal treatment and the need for the professional opinion to be based on objective factors.

55. Miss Finlay repeated that the award concerned a measure and value contract. It is of the nature of such contracts that the quantities in the performed contract will be remeasured and invariably turn out to be different from those in the Bill of Quantities. Hence, cost should mean the cost to the County Council. She drew particular attention to a paragraphs 45 and 48 of the opinion of Advocate General Jacobs, where he explained the uncertainties of such contracts, the potential effects of zero-rating and the value of the professional judgment of an experienced consultant.

56. With regard to the appropriate standard of judicial review, Miss Finlay, for the County Council, submitted that the decision of an awarding authority falls to be reviewed according to principles of Irish law subject to the Community law principles of effectiveness and equivalence. The test of reasonableness, applied by the learned trial judge, specifically in respect of the professional opinion of the consulting Engineer, was, she argued, appropriate. She relied on the decision of the Court of First Instance in Case T-19/95 Adia Interim S.A. v Commission [1996] ECR II-321, in which it was held that the review by that court of a decision of the Commission in an open tender for agency staff “should be limited to checking there has been no serious and manifest error.”

57. I approach the appeal at this stage on the following assumptions. Firstly, the nominal difference between the tender prices was of the order of £131,000. In this respect, Laffoy J has found in favour of SIAC, even without determining an adjusted difference between the two prices, and there is no cross-appeal or notice to vary. Furthermore, it seems correct that SIAC’s decision to reduce that amount by 100% meant that SIAC would, if called upon by the Engineer have had to perform that work as part of the tender price, and thus, in effect, free. The Engineer’s criticism that SIAC should have done this by way of addition to the general deduction does not appear convincing, since that would have had the same effect. Secondly, SIAC may not complain, for reasons already given that the award criteria did not include ultimate or out-turn cost. My reason for this is exclusively that SIAC had not made any such complaint either in the High Court or, assuming that could be relevant, in the notice of appeal. It is, no doubt, understandable that SIAC should seek to criticise the award criteria. The European Court in its judgment and the Advocate General in his Opinion laid emphasis on the need for the criteria to be clearly stated in the contract documents. This is, of course, fundamental. The cases show that an individual tenderer may get an unfair advantage by negotiating on a criterion different from those advertised and upon which others have based their tenders. Although I recognise this remark as being obiter, I think it would have been, to say the least, more transparent and, therefore, desirable that the contract documents specify more exactly, firstly, the possibility that excessive zero-rating could be deemed by the Engineer to have a distorting effect on a tender price, secondly that it might affect the capacity of the Engineer to manage the contract and to control its cost and, thirdly, that the award would be made with due regard to the probable ultimate or out-turn cost to the awarding authority. In Case 31/87 Beentjes v Netherlands [1988] ECR 4635 (“ Beentjes”), the Court of Justice was speaking of a contract criterion of “the most acceptable offer” in a Dutch tendering procedure and said:

58. This passage is, in substance, a restatement of the requirement contained in Article 29(2) of directive 71/305 that, even where the criterion is the most economically advantageous “the authorities awarding contracts shall state in the contract documents or in the contract notice all the criteria they intend to apply to the award.” For the reasons already given, SIAC is not, nonetheless, in a position to raise this issue at this late stage. By my above obiter remarks, I wish merely to emphasise the need to notify award criteria as clearly as possible so as to avoid future litigation and uncertainty.

59. With those assumptions in mind, I turn to consider the submissions of the parties.

60. I am pleased to adopt the succinct statement by Advocate General Jacobs (paragraph 33 of the Opinion) that the “main purpose of regulating the award of public contracts in general is to ensure that public funds are spent honestly and efficiently, on the basis of a serious assessment and without any kind of favouritism or quid pro quo whether financial or political.”

61. While the Advocate General went on to say that the “main purpose of Community harmonisation is to ensure in addition abolition of barriers and a level playing field.” , the public procurement directives can be invoked by tenderers from all Member States, including that of the awarding authority (see Case C-87/94 Commission v Belgium [1996] ECR I-2043 (" Walloon Buses ") paragraph 33 and Advocate General Lenz paragraph 24). The directives were adopted on the Community legal basis of Treaty provisions conferring legislative competence to harmonise or approximate laws of the several Member States which may hinder trade in goods or services. Once adopted, the Community public procurement directives enure for the benefit of all Community undertakings. Thus, in the present case, the Court referred a question to the Court of Justice, though the applicant is an Irish Company challenging the decision of an Irish authority.

62. The principle of equal treatment of tenderers lies, as the European Court has said, at the heart of the directive. Thus the awarding authority may not enter into negotiations with an undertaking whose tender does not comply with the award conditions. (see Case C-243/89 Commission v Denmark [1993] ECR I-3353, the “Storabaelt Bridge” ). That would not respect the rights of other tenderers. The principles most relevant to the present case were laid down in Beentjes, cited above. The European Court held that a rule for the award of public works contracts would be incompatible with Community law if it was interpreted in such a way as to confer “unrestricted freedom of choice” on the awarding authority. (paragraph 16 of the judgment). “On the other hand, such a provision is not incompatible with the directive [directive 71/305] if is to be interpreted as giving the authorities awarding contracts discretion to compare the different tenders and to accept the most advantageous on the basis of objective criteria....” (paragraph 17).

63. These principles have been supplemented by the judgment of the European Court in the present case. Subject to the reiteration of the fundamental obligation of awarding authorities to respect the principles of equality, transparency and objectivity, the Court ruled, firstly, that, where the award is on the basis of the most economically advantageous tender, the awarding authority may award on the basis of ultimate cost and, secondly, that it may rely on the professional opinion of an expert for that purpose. The Court, having referred to Beentjes, put the first of these points as follows at paragraph 38:

64. As to the second, it stated at paragraph 44:

65. A simple comparison, then, of the tenders of SIAC and Pat Mulcair reveals that, on the basis assumed by me, that of the former was some £131,000 lower. It is common ground that, in the case of a measure and value contract, it is assumed that the final quantities will not be the same as that estimated by the Engineer for the purpose of the tender documents. They are intended to be an estimate, but they can only that. It is common and even accepted practice for tenderers to adopt different strategies in the pricing of the Bill of Quantities. This process is complex. The tenderers try to foresee what the actual quantities will be and to price in a manner which gives the best chance of being awarded the contract as well as protecting the long-term profitability of the work. Sometimes they may judge that the Engineer has overestimated the quantities; sometimes that he has understated them. By the practice of zero-rating, the tenderer omits a price for an item by explicitly or implicitly including it under another heading. This may affect the long-term cost of the contract in both cases. By zero-rating an item, the contract takes the risk that he will have to perform more work or supply more materials, if the Engineer has underestimated. On the other hand, where the Engineer has overestimated the employer will get a smaller allowance or reduction on the remeasurement.

66. The County Council included in their written submissions the following helpful explanation by a well-known writer (Max Abrahamson, Engineering Law and the I.C.E. Contracts, p 14):

67. This passage was quoted by the Engineer, Mr Downes, in a letter addressed to the County Council which was exhibited in an affidavit sworn in the proceedings. It is backed up by several quotations tending to show that the concept of an unbalanced bid is well known and something against which the consulting Engineer must guard so as to protect his clients.

68. The significance of the specific issue of zero-rating was also appreciated by the Advocate General at paragraph 47 of his Opinion:

69. It is difficult for SIAC, in the face of these statements, to maintain that, where the award is to be made on the basis of the most economically advantageous contract, and the contract is one of measure and value, the lowest tender price must automatically prevail. Nonetheless, the effective mathematically adjusted difference between the lowest two tenders was the not insignificant sum of some £131.000 or some two to three per cent of the approximate likely contract price. Furthermore, it is claimed that the Engineer merely said that the Pat Mulcair tender “ might” turn out to be the lowest, not that it would. Therefore, this matter cannot be finally decided without addressing the important question of the proper standard of judicial review.

70. Directive 71/305 did not originally provide for any remedial or enforcement machinery, though the European Court in Beentjes held it to have direct effect in national law so as to be capable of being relied upon by affected individuals before national courts (paragraphs 38 to 45 of the judgment).

71. Directive 89/665/EEC of 21 December 1989 on the co-ordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts ( OJ No L 395 of 30th December 1989 p 33) (“the Remedies Directive”) recited the lack of “any specific provisions ensuring [the effective application..” of , inter alia, directive 71/305.

72. The European Communities (Review Procedures for the Award of Public Supply and Public Works Contracts) Regulations, 1992 (S.I. No. 38 of 1992) give effect in the State to the Remedies Directive. Article 3 of that Statutory Instrument provides that decisions taken by contracting authorities as regards contract award procedures falling within the scope of directive 71/305 are to be reviewed according to the conditions set out in the Remedies Directive. Article 4 provides that these powers are to be exercised by the High Court. Article 8 provides that proceedings may be brought in a summary manner. However, there were no applicable Rules of Court in force at the relevant time. Hence, SIAC instituted its proceedings both by way of judicial review and special summons. Nothing appears to turn on this distinction , save possibly that it may be relevant to the test for judicial review pronounced by the learned trial judge.

73. Since it is clear that the judicial function has to be exercised by reference to the Remedies Directive, its terms are highly relevant.

74. Article 1 provides, in relevant part:

75. Article 2 provides in relevant part:

76. This State is required to provide a judicial remedy for the purposes of directive 71/305. The courts of the State must render those provisions effective in favour of those in a position to invoke them. The two classic principles applicable to that situation are those of: equivalence, i.e., the remedy must be at least as favourable as that available in national law for a similar complaint; effectiveness, i.e., as the Remedies Directive itself makes clear, a remedy which will offer appropriate and sufficient protection for the Community law rights in question.

77. Miss Finlay, in supporting the standard of judicial review enunciated by the learned trial judge, cited the decision of the Court of First Instance in Case T-19/95 Adia Interim SA v Commission [1996] ECR II -325 ( Adia). This is one of a series of cases in which the Court of First Instance has ruled on the standard of review that it will itself apply in the performance of its function under Article 230 EC (formerly Article 173) to review the legality of decisions of the Community Institutions, when they act as awarding authorities. The same general principles apply to those institutions as are applied to the Member States by the public procurement directives, transparency, equality and objectivity. That Court, in Case T-139/99 Alsace International Car Services v European Parliament , (judgment 6th July 2000. ECR reference not yet available) ruled on a complaint regarding the manner in which the European Parliament awarded a public service contract for the supply of passenger transport at the Parliament’s premises at Strasbourg. The procedure was governed by the services directive (Council Directive 92/50/EEC of 18th June 1992). The following principle is laid down in the judgment (paragraph 39):

78. Thus, it seems to be well established by a significant line of case-law of the Court of First Instance that a Community institution, when in a comparable situation to the awarding authority of a Member State, enjoys “a wide discretion” as to the criteria by which it will judge tenders and, moreover, its decisions will be annulled only if a “manifest error” can be demonstrated.

79. It is not conceivable that the courts of the Member States are required to apply a different standard of judicial review to their own awarding authorities. This emerges clearly from a reading of the other decision upon which Miss Finlay placed reliance, even if that case, Case C-120/97 Upjohn Ltd v Licensing Authority established by the Medicines Act 1968 [1999] ECR I-223, did not concern public procurement. The Court of Appeal of England and Wales had referred a question to the Court of Justice about judicial review of a decision by a licensing authority to revoke, pursuant to applicable Community law rules, the marketing authorisation of a medicine. It asked whether the national court should “decide whether the said decision was the correct decision as opposed to one which the licensing authority could reasonably have reached on the material before it..” The Court essentially answered the question in the negative. The national court was not bound to “substitute [its] own assessment of the facts and, in particular of the scientific evidence relied on in support of the revocation decision for the assessment made by the national authorities....” (paragraph of the judgment).

80. The Court explained the parallel functions, when reviewing the legality of decisions, of the Community and national judicatures as follows:

81. There are obvious common threads which run through any system of review of administrative decisions, where especially the primary decision-making function is administrative or governmental. The function of the courts is to guarantee legality, though that notion itself has a number of elements, some procedural and some substantive. The passages which I have cited speak of “ manifest” error as the test for judicial review adopted by the Community courts. This is the standard which applies to the appreciation of facts by the decision-maker. They do not say that this test must be adopted by the national courts. I would observe, however, that the word, manifest, should not be equated with any exaggerated description of obviousness. A study of the case-law will show that the Community Courts are prepared to annul decisions, at least in certain contexts, when they think an error has clearly been made.

82. The decisive additional consideration in the area of the public procurement is the explicit concession of a wide margin of discretion to awarding authorities.

83. I do not think, however, that the test of manifest error is to be equated with the test adopted by the learned trial judge, namely that, in order to qualify for quashing, a decision must “plainly and unambiguously fly in the face of fundamental reason and common sense.” It cannot be ignored that the Advocate General thought the test should be “rather less extreme.” Such a formulation of the test would run the risk of not offering what the Remedies Directive clearly mandates, namely a judicial remedy which will be effective in the protection of the interests of disappointed tenderers. It is significant, I think, that Member States are required to make available, where appropriate and necessary, measures of interim relief ( i.e., potentially halting the public procurement procedure) and damages.

84. The courts must be ready, in general, to render effective the general principles of the public procurement, already discussed. Where a failure to respect the principles of equality, transparency or objectivity is clearly made out, there is, of course, no question of permitting a margin of discretion. Equally, where the tender is on the basis of the lowest price (first indent of Article 29(1)), the courts must be ready to restrain any breach. Even in cases of the most economically advantageous contract, it is clear that unlimited discretion can not be permitted. The margin of discretion enjoyed by the awarding authority does not absolve it from explaining a choice, such as was made in the present case, of a tender other than the lowest. Indeed, Laffoy J did not hesitate to express her view that the County Council had been incorrect in its treatment of the 100% reduction applied by SIAC to the £90,000 provisional sum for dayworks materials.

85. Therefore, I am satisfied that the courts, while recognising that awarding authorities have a wide margin of discretion, must recognise that this cannot be unlimited. The courts must exercise their function of judicial review so as to make the principles of the public procurement directives effective. In the case of clearly established error, they must exercise their powers. The application of these principles may not, in practice, lead to any real difference in result between the judicial review of purely national decisions and of those which require the application of Community law principles.

86. It is now necessary to return to the instant case. The essential judgment to be made is whether the County Council has adequately explained its decision to award the contract to Pat Mulcair, when the corrected SIAC tender was lower by the sum of approximately £131,000, or of the order of two to three per cent of the value of the contract. The determining elements are that the County Council will ultimately have to bear the cost, that this can not be predicted with accuracy at the time of the award, that the expert independent advice of the consulting Engineer was to the effect that the SIAC approach to pricing would render management and control of the contract and particularly its price significantly more difficult. In these circumstances, it was not necessary that the County Council or its engineer produce calculations or estimates of the manner in which the out-turn of quantities would impact on cost. It is the fact that the out-turn is uncertain that is decisive. I think that the County Council acted within its margin of discretion. I do not think it exercised that discretion in an unfettered way. It followed objective and objectively verified criteria.

87. I would reject, in particular, the contention that the County Council should have used the pre-adjudication phase to seek clarification from the tenderers, particularly SIAC, of the pricing method used and the quantities upon which they had based their prices. The Engineer was correctly cautious about this approach. The pre-adjudication discussions and clarifications must not offer the opportunity to one tenderer to adopt a method of pricing which has not been available to competitors. The case of Walloon Buses shows that this procedure cannot be used to permit one tenderer to propose a method of performing the contract which was not among the award criteria. I also reject the criticism that the County Council rejected other tenderers on the basis of price alone and did not act consistently. SIAC cannot complain that other tenderers were eliminated on a basis different from itself. Its complaint must be restricted to the comparison with the treatment of Pat Mulcair.

88. For all these reasons, I would dismiss the appeal and affirm the order of the High Court.