State aid SA.22843 implemented by France in favour of Société Nationale Maritime Corse-Méditerranée  OJ L220/20
The Commission concludes that if an EU law compliant public procurement procedure produces only a single bid capable of acceptance then the contracting authority may not be entitled to rely on procurement as excluding the possibility of the public contract giving rise to State aid.
This was a complaint regarding the terms of a contract signed between the Corsican municipal authorities and a private passenger ship operator for various routes between Corsica and Marseille over the period of 2007-2013.
Because of fluctuations in passenger number throughout the year, the authorities commissioned service providers to guarantee certain minimum service levels during ‘off-season’ periods. It was contended that the consideration for these services could be regarded as public service compensation within the meaning of the ECJ’s well-known Altmark judgment.
The procurement process was commenced on 30 December 2006, using the negotiated procedure. Two bidders, SNCM and Corsica Ferries, lodged tenders. On 7 June 2007, the Corsican authorities awarded the contract to SNCN. Importantly, Corsica Ferries’ bid was not subject to final evaluation because the authorities considered that it had failed to satisfy one of the mandatory selection criteria under the procurement, namely, that it could not commence operations on or before 1 July 2007. Consequently, the Corsican authorities had ultimately been presented with only one bid that was capable of acceptance.
The Commission began its analysis by reciting its standard position that a public procurement procedure only excludes the possibility of State aid if it allows for the selection of the tenderer capable of providing those services “at the least cost to the community”: §169. It also recorded its reservations (previously articulated in a number of different contexts) about the efficacy of the negotiated procedure in ensuring free and effective competition, noting that the breadth of the discretion enjoyed by authorities under the negotiated procedure means that procurements conducted on that basis must be considered on a case by case basis when determining whether the procurement has excluded the possibility of State aid: §170.
Because the Corsican authorities were ultimately left with only a single bid that was capable of acceptance, the Commission held that: “the procedure therefore did not allow the Corsican Transport Board to compare several offers and to select the most economically advantageous”: §172.
The Commission found that: “the fact that two bids were actually submitted was not sufficient to guarantee effective competition, insofar as the competing bid was not able to provide a credible alternative”: §173.
The Commission considered that this conclusion was “reinforced” by a number of features of the tender process that, on the facts, potentially operated to impede free and effective competition (the privileged position of the incumbent, the short time period envisaged between contract award and the date for commencement of services and provisions allowing the Corsican authorities to grant exemptions from the rules): §§175-177.
This decision is potentially significant. Although the Commission was specifically concerned with the fourth Altmark criterion and whether the Corsican authorities had demonstrated that the public service compensation element of the relevant contract could be treated as falling entirely outside the State aid regime, the Commission’s reasoning on whether the public procurement procedure could be relied upon to exclude the possibility of an ‘advantage’ (and thus State aid) is framed in general terms. By parity of reasoning it should apply equally to the broader issue of whether a competitive public procurement procedure can be relied upon to preclude the risk of a public contract giving rise to State aid.
UK public procurement and State aid practice has typically been to assume that a contract concluded after a procurement procedure that complies with EU procurement law will produce a market price and so does not confer any relevant ‘advantage’ for the purposes of the State aid regime.
The writer’s view is that, at least in some circumstances, this assumption is unduly optimistic (it is important to note that in N264/2002 London Underground PFI/PPP, the Commission only referred to a “presumption” that a competitive tender would preclude State aid).
The Commission’s decision confirms that if a procurement results in the authority only receiving a single bid capable of acceptance, the mere fact that an EU compliant procurement has been initiated and conducted will not be sufficient to conclude that no State aid arises. Given the relative frequency with which significant UK PPP/infrastructure procurements produce an outcome of this sort, with only one final round bid being deemed capable of acceptance, this analysis could have significant implications for the State aid risk in these projects.
Joseph Barrett, 11KBW