Was the security clearance requirement proportional?
Two bidders complained, independently, of their rejection in a mini-tender for the repair and maintenance of warships. The reason given for their rejection was that they did not meet a requirement for security clearance of the workers who would be working on the ships. Both argued that the requirement was in conflict with the principle of proportionality.
The Danish Complaints Board for Public Procurement’s decisions of 30 April 2020 (Fayard A/S vs. the Danish Ministry of Defence Acquisition and Logistics Organisation) and 1 May 2020 (Karstensens Skibsværft A/S vs. the Danish Ministry of Defence Acquisition and Logistics Organisation)
In 2015, the Danish Ministry of Defence Acquisition and Logistics Organisation (DALO) put out tenders for six framework agreements for the repair and maintenance of warships. Under the terms of the contract notice (and the framework agreements), tenderers were required to ensure that everyone who would be working on the tasks, whether employed by the tenderers themselves or by their subcontractors (if any), would have security clearance.
In November 2019, DALO issued a mini-tender under one of the agreements, inviting bids on a classification inspection of the inspection vessel Thetis. The three shipyards on the framework agreement all submitted tenders. DALO informed the tenderers that the contract would be awarded to Orskov Yard and that neither Fayard’s nor Karstensens Skibsværft’s tenders conformed with the tender conditions. The reason given was that neither of the two had submitted a statement that only personnel with proper security clearance would be used.
The requirement for security clearance and the principle of proportionality
Fayard and Karstensens Skibsværft both, in their respective complaints, claimed that the Danish Complaints Board for Public Procurement should find the requirement for security clearance to be disproportionate and, on those grounds, annul DALO’s decision to award the contract to Orskov Yard.
It was stated in the proceedings that DALO had previously awarded contracts under the framework agreements without checking whether the requirement for security clearance was met. DALO, however, said that in November 2018 it had decided to focus more on the requirements of the framework agreements, including the requirements that suppliers should have security clearance, both at corporate and individual levels.
The complainants argued that the security clearance requirement had not been clearly announced and, as mentioned, had not previously been enforced by DALO. Also, the complainants believed the requirement was disproportionate, given that work at a shipyard involves many different employees and sub-suppliers, and to require all of them to have security clearance was disproportionate.
DALO submitted that the security clearance requirement had been clearly announced (also in the documents of the specific mini-tender) and was a part of the framework agreements. And while DALO confirmed that it had indeed adopted a stricter approach to enforcement, it insisted that this was perfectly objective, fully proportionate, and in no way discriminated among tenderers.
Affirmation by the Complaints Board
The Danish Complaints Board for Public Procurement was satisfied that the terms and conditions of the framework agreements and of the mini-tender itself required tenderers to ensure security clearance at both corporate and individual levels. Also, the invitation to tender stated that tenderers were required, when submitting their tenders, to confirm to DALO that the employees who would be assigned to the concrete task all had security clearance. The requirement for security clearance was therefore clearly announced and did not conflict with the principles of equal treatment and transparency. The Danish Complaints Board for Public Procurement further stated that the requirements were in place to ensure that Denmark could live up to its international obligations, including its NATO obligations, and did not violate the principle of proportionality. The Complaints Board emphasised that, in the context of this particular mini-tender, DALO was under a duty to ensure that the successful tenderer met these requirements, regardless of how strictly DALO had enforced these requirements in previous mini-tenders.
Our comments
The decisions showcase the difficulty of invoking the principle of proportionality. It is the contracting authority’s prerogative to lay down the requirements it wishes to impose on suppliers, and the Danish Complaints Board for Public Procurement will not easily be persuaded to set aside those requirements. The contracting authority is then obliged to ensure that bidders meet those requirements ‒ no matter the extent to which they have enforced previously.
The decisions also show that every mini-tender is to be regarded a separate process in and of itself. DALO’s failure to enforce the security clearance requirement in previous mini-tenders (under the same framework agreement) therefore does not preclude DALO from enforcing it now.
Contact
