Litigation & Arbitration |  Feb 18, 2021

Public Tenders and Contracts in Malta; An Insight into the Key Requirements and Notions

Authors: Jonathan de Maria & Nina Fauser

Under Maltese law, the main legislative instrument in the field of public tendering and contracting is the Public Procurement Regulations, Subsidiary Legislation (‘SL’) 601.03. These Regulations transpose the provisions of Directive 2014/24/EU (the ‘Directive’) of the European Union (‘EU’), dealing with public procurement.

Under the Public Procurement Regulations, as per Article 217, selection criteria in relation to a public tender can relate to 3 aspects as discussed below, namely:

  1. Suitability to pursue the professional activity;
  2. Economic and financial standing; and
  3. Technical and professional ability.

1) Suitability to pursue the professional activity

In terms of the first criterion, contracting authorities may require operators to be enrolled in one of the professional or trade registers as per Annex XI of the Directive. In Malta, this would mean that the economic operators would be required to provide their VAT registration number, as well as their Trade licence number. In the case of a commercial partnership or company, the offeror would also need to provide their partnership / company registration number issued by the Malta Financial Services Authority (‘MFSA’).

2) Economic and financial standing

Under the second requirement, in order to assess an operator’s economic and financial standing and confirm that they possess the necessary capacity to perform the contract, contracting authorities may impose requirements in this regard including for example, confirming that such operators have a certain minimum yearly turnover. The imposition of such bid bonds and performance guarantees is at the discretion of the contracting authority.

‘Bid bonds’ or ‘tender guarantees’ are sometimes imposed by contracting authorities on economic operators. These serve to guarantee that the successful tenderer will undertake the contract under the terms at which they bid. In terms of the General Rules Governing Tendering, bid bonds provided by tenderers who have not been selected by the public authority shall be released within 30 calendar days from the publication of the award, or the cancellation of the tender. A performance guarantee on the other hand is sometimes imposed by contracting authorities in order to ensure that once the tender has been awarded and the contract signed, the contractor shall complete the contract according to the agreed terms and conditions. Generally, the bid bond of the successful tenderer shall be released on the submission of a valid performance guarantee.

3) Technical and professional ability

In relation to the third criterion, contracting authorities may impose requirements to confirm that an operator has the required technical and professional ability, by ensuring that such operators possess the necessary human and technical resources, as well as the necessary experience to perform the contract to an appropriate quality standard. In practice, confirming that the economic operators have a sufficient level of experience could be required (and demonstrated) by suitable references from contracts which were previously performed by the operator.

Administrative compliance

Another aspect which must be taken into consideration in the case of public tendering, is the aspect of administrative compliance. When tender specifications are issued, various administrative specifications will also be included, which must be adhered to by the operator. A number of forms and tender documents would need to be submitted, which would relate to the three criteria discussed above. Indeed, in the case E.C. Municipals Limited vs. Dipartiment tal-Kuntratti et., decided on the 27th March 2020, the Court of Appeal stated that even if the contract had been recommended to be given to a specific offeror, if it was found that any of the required documents had not been provided with the offer, then the signing of the contract could not take place. Necessary information must be distributed equally to all economic operators throughout the process.

Additionally, when tender specifications are published, it is essential that such specifications shall be published in a fair and equal manner, giving all parties an equal opportunity to be awarded the tender. In the case of IOT Malta Ltd. vs. Kunsill Lokali Valletta et., decided on the 29th April 2019, the Valletta Local Council had issued a public tender in relation to the deployment of a Parking Management System. Various offers were submitted, including the offers by IOT Malta Ltd. and CVA. Subsequently, the Evaluation Committee decided to reject IOT’s offer since the value to operate and maintain the system which was provided by IOT was not deemed to be final. The €158,865 offer of CVA was accepted, despite the fact that IOT’s €114,905 offer was cheaper. IOT claimed that as per Article 53(6) of the Public Procurement Regulations, “technical specifications shall afford equal access of economic operators to the procurement procedure and shall not have the effect of creating unjustified obstacles to the opening up of public procurement to competition”. In this case, the Court of Appeal concluded that there was a violation of Article 53(6) since CVA was given additional information which was required to make a complete offer. The Court ordered that the tender be published once more from scratch, with all the information required in order to submit the offer being distributed equally to all economic operators.

The notion of ‘MEAT’ (Most Economically Advantageous Tender)

Additionally, the award of public contracts must be based on the ‘most economically advantageous tender’ notion, which is often referred to as ‘MEAT’. This shall be identified on the basis of the price or cost, using a cost-effectiveness approach. Other criteria such as environmental, social, technical, aesthetic, and functional aspects may also be taken into consideration.

In a recent case of Toncam Properties Ltd. vs. L-Onorevoli Ministru tal-Affarijiet Ewropej et. (28/01/2020), the concept of ‘MEAT’ was discussed in relation to a tender for the leasing of premises to House Departments and entities within the Ministry for European Affairs and Equality. The Board noted that in accordance with EU Directive 2014/24, the award criteria should not be the cheapest offer, but rather “the most economically advantageous offer, in other words, value for money”.

GVZH Advocates has extensive experience in dealing with public procurement issues. Having represented both local and international investors in major projects both in Malta and abroad, GVZH Advocates will be able to advise on foreign direct investment (‘FDI’), public procurement and infrastructure, as well as cross-border transaction advisory.

If you have submitted an offer for a tender and believe that such offer has been unjustly rejected and need assistance, please reach out to GVZH Advocates on litigation@gvzh.mt. Also, for further information about how GVZH Advocates can help you with your projects or public procurement legal requirements, kindly contact us on procurement@gvzh.mt

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