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Every contracting authority sees the perfect winner of a procurement contract as a company with an impeccable reputation. According to Directives 2014/24 and 2014/25 good reputation can be invoked through a requirement for supplier’s professional capabilities or as a ground for exclusion. Previously the Latvian Parliament permitted contracting authorities to exclude a bidder from a procurement procedure for anti-competitive conduct. The new procurement laws add a new optional exclusion ground to it – serious professional misconduct.

How to find a bidder with a good reputation?

The laws[1] now permit the contracting authorities to exclude bidders or candidates who have seriously infringed rules of professional conduct from the procurement procedure. Although the contractor is free to choose, whether to apply this ground for exclusion, the laws prescribe a rigorous procedure for selecting the specific infringements. Bidders and candidates can be excluded only if the judgement regarding their infringement has entered into force less than a year before the bid submission date. If the contracting authority chooses to exclude the bidder from the procurement due to professional misconduct, it shall follow these steps:

1. Ensure that the violations listed in the tender documentation relate to the object of the award or the procurement procedure.

The contracting authority must choose a specific violation from the Infringements List[2]. It contains various violations from the Latvian Criminal Law and the Administrative Violations Code (Krimināllikums and Latvijas Administratīvo pārkāpumu kodekss). Unfortunately, the list was adopted hastily and will be revised in summer 2017. Therefore, the contracting authorities should follow the possible changes to the list in autumn 2017, but suppliers may lobby for amendments to exclude those violations, which are difficult to appeal in practice.

2. Ensure that the violations relate to the object of the award.

Even if a specific violation is in the list, contracting authorities have to make sure that the infringement is related to the award’s object or the procurement procedure itself. Only then may the contracting authorities choose the infringement violation as a ground for exclusion. This obligation is based on the principle of proportionality, which is established in the laws.

So, the contracting authority must balance the selected violations with:

• the object of the award, for example choosing marine pollution violations in port dredging tenders, or

• the procurement procedure, choosing, for example, accounting offenses in any tender.

The contracting authority may not choose, for example, the penalty for burning forests as a ground for exclusion from IT services tenders.

3. Assess, whether the chosen violations reasonably restrict competition.

The contracting authorities must assess the effect the exclusion grounds would have on competition in the tender. The previous step required assessing proportionality, however, the laws also aim to ensure competition. Therefore, the contracting authorities must avoid requirements that could unreasonably restrict competition, for example, list all possible violations, so only one bidder meets the award requirements. This can be avoided by studying the market.

How to check a foreign company’s reputation?

Contracting authority shall check the impunity of Latvian suppliers in the Criminal Records Register. The laws require contracting authorities to treat foreign suppliers the same way as the locals. Therefore, the contracting authority must verify certificates or statements confirming absence of equivalent violations in the bidder’s seat country. The contracting authorities can verify that other European Union Member States have similar penalties by requesting information from bidders themselves or in the e-Certis system. Moreover, foreign construction companies will need to submit such information when applying for the classification of construction businesses mandatory from 2019.

How to prove good reputation?

Bidders who face excessive award requirements for good reputation have several options.

First, the contracting authority should have the opportunity to amend the excessive requirements, so the bidders should ask how the violation relates to the subject of the award or procedure. The contracting authority is obliged to explain this relation in the same way as  any other question regarding procurement documentation. If the contracting authority does not comply, the bidder can challenge requirements of the tender before the Procurement Monitoring Bureau. The grounds for appeal were explained above.

Second, bidders may request the contracting authority to restore reliability The proof of reliability should be submitted with the bid and contain information about measures, which the bidder has taken to eliminate the consequences of specific violations, and ensure that it will not happen again. For example, the bidder has fired employees, who were in breach of their contract, or installed cameras in all the company’s vehicles.

You will find a detail explanation on Latvian procedures for restoring bidder reliability on our website https://vilgerts.com/wp-content/uploads/2016/06/insider-PP-20160527_v2-lven.pdf .

[1] Article 42(2)2 of Public Procurement Law and Article 48(2)2 of Public Services Providers Procurement Law.

[2] Annexes of Cabinet of Ministers Regulations No 109 “Rules of professional conduct” of February 28, 2017.