Publication

When organising a public procurement, contracting authorities have considerable freedom to determine the necessary tender criteria for evaluating any bids submitted by tenderers. This is based upon the presumption the contracting authority knows what goods or services it requires from the tenderer. Therefore, the contracting authority itself defines the priority needs concerning the tender criteria. The latter right of the contracting authority is provided for under Article 51 of the Public Procurement Law (Publisko iepirkumu likums) (hereinafter, the “PPL”).

The question arises, however, is the freedom a contracting authority unlimited in determining the tender criteria during a public procurement process? The short answer to this question is, no. The freedom of contracting authorities is limited by the applicable Latvian law. The freedom of action granted to contracting authorities is limited by the fundamental principles set out in Article 2 of the PPL; according to which contracting authorities are obligated to ensure: (i) the transparency of the procurement procedure; (ii) free competition among suppliers, (iii) equal and fair treatment; (iv) and the effective use of the contracting authority’s resources.

The scope of compliance with the tender criteria (as defined by the contracting authority) and the fundamental principles of the PPL may vary within each individual procurement, as there is no single yardstick in the field of public procurement for determining whether there has been a violation of the basic principles of the PPL.

Within the existing Latvian case-law, there are a number of situations in which the court does not identify any violations of the basic principles and rejects the tenderer’s objections. According to the applicable case-law, it is possible to indirectly conclude what could potentially indicate a violation of the fundamental principles under the PPL.

Brief factual background concerning the dispute

The Ministry of Finance (hereinafter, the “FM”) announced an open tender, “Mobile communication services for the Ministry of Finance, its subordinate institutions and the Fiscal Discipline Council” (id. No. FM 2022/7 (CI)) (hereinafter, the “Tender”). SIA “Tele2” (hereinafter, “Tele2”), disagreeing with the criteria contained within the Tender, appealed to the Latvian Procurement Monitoring Bureau (hereinafter, the “PMB”) challenging the decision. The PMB’s decision was not subsequently found in Tele2’s favour, whom subsequently challenged the decision in court, arguing the FM’s criteria had been developed in favour of one operator – SIA “Latvijas Mobilais Telefons” (hereinafter, “LMT”).

The FM and the PMB defended the criteria as lawful, objective and closely related to the needs of the FM. In the court of first instance, Tele2 failed to convince the court of the invalidity of the tender requirements. Tele2 then subsequently appealed the first instance judgment to the Supreme Court. However, the Supreme Court also rejected Tele2’s appeal, stating the tender criteria included in the Tender were proportionate, with the aim of obtaining the most appropriate service quality meeting the FM’s contracting requirements.[1]

The arguments submitted by the appellant concerning the Tender criteria

In Tele2’s opinion (within its appeal), the tender criteria selected by the FM artificially restricted competition and created an unjustified advantage for one market participant – LMT – in a market where the quality of basic services provided by the operators is homogeneous.

Tele2 further opined that the Tender criterion “number of base stations” (criterion 1.1.1. in the Tender),[2] cannot explicitly mean the provision of a higher quality mobile communication service:

(i) The Public Utilities Commission (hereinafter, the “PUC”) in its opinion (dated 19 January 2022) did not recognise the “number of base stations” as an appropriate tender criterion to include in public procurement tenders, but rather recommended assessing the declared coverage reflected on the Mobile Network Operator’s (hereinafter, “MNO”) websites;[3]

(ii) The Ministry of Transport’s 2021 guidelines mentioned the “number of base stations” as an undesirable tender criterion within public procurement tenders;[4] and

(iii) The Competition Council considered the “number of base stations” as an undesirable tender criterion within public procurement tenders on the understanding it cannot ensure better service quality.

In that regard, Tele2 further emphasised the exact number of base stations cannot be verified, as state-owned enterprise –VAS “Elektroniskie sakari” does not count the actual active equipment and therefore the criterion is not objective.[5]

Tele2 also criticised the Tender criteria “number of customer service points of the tenderer” (criterion 1.1.2. in the Tender) and “call-back” or “call-back service” (criterion 1.1.10. in the Tender),[6] stating they do not reflect the actual quality of the service provided, but rather the business model of a specific MNO. Therefore, such criteria are: (i) not related to the subject matter of the procurement; and (ii) unjustifiably restrict competition, as they likely provide an anti-competitive advantage to those businesses that have historically established a wider network of branches or maintain a specific service that is broadly used today.

With regards to the Tender criteria concerning roaming (“number of roaming operators” and “number of roaming countries” (criteria 1.1.3.-1.1.4. in the Tender)),[7] most MNOs provide a similar country coverage and therefore all applicants would receive the maximum number of points under these Tender criteria. However, the number of MNO roaming partners in each country does not in of itself guarantee the provision of a better quality of service, as sufficient coverage and quality can also be provided with fewer MNO roaming partners. Tele2 further emphasised the FM had not sufficiently demonstrated the use of the service under the criteria concerning “exotic” countries or countries with extremely limited connection to the FM’s business activities and given the significance it should have been given considerable weight in the contracting authority’s assessment under the Tender.[8]

In Tele2’s view, the FM has not sufficiently justified the parameters or definitions of the criteria and connection with the actual needs of the FM, as well the proportion of points awarded under the criteria. All MNOs provide excellent or near-excellent quality, therefore minor differences in measurements do not significantly affect the customer experience. It was stated that from 2021, the PUC will no longer perform separate measurements (e.g., download and upload speeds, latency, etc.).[9] Therefore, it is no longer possible to monitor these indicators during the term of the tender contract. In Tele2’s opinion, the FM had selectively chosen precisely those parameters in which LMT has relative advantages over other MNOs, while excluding other objective indicators under the Tender criteria in which Tele2’s results (or other MNOs) would be better.

Finally, Tele2 contested the Tender criterion “data transmission in the 5G network in the territory of Latvia” (criterion 1.1.15. in the Tender),[10] due to the fact that during the time of the announcement of the Tender, it was already clear LMT was the only technological MNO leader in 5G development with Latvia. By attaching considerable weight to the aforementioned criterion under the Tender, the FM was essentially “favouring” one operator and as a result restricting effective competition.[11] Tele2 also raised a similar objection regarding the Tender criteria concerning “call management solutions” (criteria 1.2.1. and its sub-sections in the Tender), underlining the detailed list of functions is undeniably tailored to a specific technical solution that is only available to certain market participants.

It is worth underlining, 80% of the Tender criteria are formulated and verified using publicly available information, which the appellant (in this instance Tele2) can no longer influence in practice when submitting a tender.  Consequently, actual competition is only possible within and between a limited part of the criteria when being assessed by the contracting authority.

In its appeal, Tele2 referred to Article 18 of Directive 2014/24/EU[12] and maintained the criteria does not fully comply with the principles of non-discrimination, equal treatment, transparency and proportionality, as well as factually underlining that in such tenders concerning provision of such services (telecommunications) only one candidate participates (not other Latvian MNOs) and LMT systematically wins, which in turn restricts effective competition in such tenders.

The Supreme Court’s findings and conclusions concerning the dispute

In essence, the Supreme Court agreed with the findings and conclusions reached by the court of first instance. The Supreme Court underlined Article 51 of the PPL permits and provides the contracting authority with the freedom to determine the weighting of each tender criterion so as to determine the most: (i) suitable service or product; and (ii) economically advantageous tender offering.  A contracting authority is therefore not required to align the tender criteria in such a way so that all tenderers can win the tender and neither is it obliged to ignore or lower its requirements to the benefit of all market participants.[13]

With regard to the source of the information utilised by the contracting authority to determine the Tender criteria, the Supreme Court highlighted there are only a few MNOs in Latvia and their activities (in terms of price and service quality) are highly transparent, as well as applicable national regulatory laws require the publication of a large amount of information concerning the marketplace. It is therefore natural to expect customers to select publicly available quality parameters as the necessary tender criteria. Accordingly, the establishment of certain criteria for the evaluation of tenders cannot be considered “favouritism” simply due to the fact not all market participants can offer equal quality or simply because, due to the availability of information, the contracting authority could expect a competitor to receive a higher rating.[14]

The Supreme Court underlined that Tele2’s argument regarding the admissibility of the number of base stations criterion under the Tender was unfounded, as the number of base stations logically and indirectly characterises the availability and functionality of the provision of mobile telecommunications. The court of first instance had assessed the opinions of professional institutions, providing a reasoned and independent assessment. Tele2’s arguments, on the other hand, were contradictory, as it objected to both the publicly verifiable Tender criteria and the Tender criteria declared by the MNOs themselves. The Supreme Court also disagreed that coverage should be tested throughout the country, as this would be disproportionate and has not been proven absolutely necessary. Furthermore, testing carried out in other similar procurements has not yielded significantly different results that would confirm the risk of “favouritism”.[15]

Further, the Supreme Court upheld Tele2’s allegations of “favouritism” were completely unfounded, as the number of base stations criterion was not disproportionately weighted and the criteria were not defined in such a way as to provide individual preference to any particular tenderer. The fact that some of the (Tender) criteria are publicly known in the marketplace does not prevent the contracting authority from freely using that criteria in accordance with its actual needs. The Supreme Court further underlined if the criteria were to be excluded solely upon the understanding they could predictably influence the outcome of a tender, this would mean abandoning essential quality assessment indicators concerning the criteria. Notably, the fact that price cannot be used to compensate for a lower quality assessment is not favouritism, but the contracting authority’s freedom (or right) to determine the balance between criteria (quality and price) in accordance with the PPL.[16]

Notably on the same day, the Supreme Court considered another dispute concerning another public procurement in the telecommunications industry. In this instance, the applicant was SIA “BITE Latvija” (hereinafter, “Bite”) and the contracting authority was the University of Latvia.[17] In this case, Bite’s appeal was ultimately rejected by the Supreme Court and underlined “favouritism” cannot be considered as setting (quality) criteria for the assessment of tenders simply because not all market participants can offer equal quality under the criteria, or simply because, due to the availability of information in the public domain, the contracting authority could predict that a particular competitor would receive a higher evaluation.[18] Finally, the Supreme Court held the PPL does not provide that if a tenderer who is unable to compete on quality criteria alone would be offset by offering a lower price in the their tender.[19]

Conclusions

In light of the above, the criteria for evaluating tenders are closely linked to the freely determined objectives defined by the contracting authority itself. Namely, if the contracting authority’s objective is to receive high-quality mobile telecommunications and internet services, it has the freedom or right to set tender criteria to ensure receipt of the highest quality service.

The Supreme Court is therefore maintaining its previously upheld precedent, in which it assess whether the tender criteria comply with the fundamental principles: (i) transparency of the procurement procedure; (ii) free competition among suppliers, (iii) equal and fair treatment; (iv) and the effective use of the contracting authority’s resources. If a tenderer challenges tender criteria it has the burden to provide evidence why other criteria should be used that are consistent with the objective defined by the contracting authority.

Nevertheless, this does not ultimately mean individual criteria cannot be considered disproportionate and/or inconsistent with the basic principles of the PPL over time. By way of example, in another case, the contracting authority had specified in the tender documents that the projector lamps to be purchased must have a minimum power of 235 watts (the criterion). The court found this criterion to be disproportionate, as technological developments made it possible to provide the required amount of light with a less powerful bulb.[20]

It is undeniable that technological capabilities in the telecommunications industry are constantly evolving, so there may come a time when the number of base stations, roaming partners or service points may not be indicative of the highest quality service criteria. This is particularly true if the criteria are set by a public authority operating within the framework of the applicable regulatory law,[21] with the caveat that a public authority will not always be able to quickly determine service quality requirements if its methodology for determining these requirements does not correspond to reality or is outdated.

In sum, when organising a tender, contracting authorities should carefully assess the compliance of publicly available information with technological reality, and, as far as possible, during market research or consultations with suppliers, consult with experts in the field who can confirm whether the previous criteria are outdated and the contracting authorities’ objectives can be achieved with other technical solutions, thus ensuring the effective use of the their resources.

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[1]          Please refer to the Supreme Court judgement in Case No. A420203122, SKA-54/2025 (Riga, 1 August 2025), ECLI:LV:AT:2025:0801.A420203122.9.S.

[2]          Please refer to the FM Regulations concerning an open tender, titled: “Mobile communication services for the Ministry of Finance, its subordinate institutions and the Fiscal Discipline Council”, (approved at the meeting of the Procurement Commission on 2 February 2022, Minutes No. FM2022/7 (CI)_2, Riga, 2022).

[3]          Please refer to the PMB Decision No. 4-1.2/22-54 (22 April 2022).

[4]          Please refer to the PMB report titled, “Desired requirements/criteria to be included in mobile and fixed communications procurements”, available at: https://www.iub.gov.lv/en/media/5262/download.

[5]         Supra 3.

[6]         Supra 2.

[7]          Supra 2.

[8]          Ibid.

[9]        Please refer to the PUC’s report titled, “Electronic Communications Service Quality Report for 2021”, (approved by the Public Utilities Commission Council at its meeting on 24 February 2022, prot. No. 8, p. 9), available at: https://www.sprk.gov.lv/sites/default/files/editor/ESPD/Faili/Parskati/KVALITATES_PARSKATS_2021.pdf

[10]        Supra 2.

[11]        Ibid.

[12]        Please refer to the European Union, Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC, Official Journal of the European Union, L 94, 28 March 2014, 65–242.

[13]        Please refer to the Supreme Court judgement in Case No. A420203122, SKA-54/2025 (Riga, 1 August 2025), ECLI:LV:AT:2025:0801.A420203122.9.S., at paragraph 12.

[14]        Ibid, at paragraph 13.

[15]        Ibid, at paragraph 15.

[16]         Ibid, at paragraph 19.

[17]         Senate of the Republic of Latvia, Administrative Case Department, Judgment in Case No. A420258322, SKA-124/2025 (Riga, 1 August 2025), ECLI:LV:AT:2025:0801.A420258322.12.S.

[18]        Ibid, at paragraph 10.

[19]        Ibid, at paragraph 19.

[20]         Please refer to the Administrative District Court judgement, 15 June 2016 in case No. A42-00638-16, A420279815, at paragraph 8.

[21]        Please refer to Article 40 of the Electronic Communications Law under which the PUC determines the quality requirements for communications services and the methodology for measuring them.