Mechelen station: 3.66 million euros of site costs spread over 636 items instead of the lump sum — the Council suspends the 56-million award to CFE
CFE won the open tender for the structural works around Mechelen station with the lowest price of 55.96 million euros, but had spread the site-installation costs — 3,664,375 euros, expressly a lump-sum item in the specification — as a 6.5 % mark-up over the 636 other items, 545 of which were priced on estimated quantities; on the application of the second-lowest bidder, the joint venture Antwerpse Bouwwerken – Valens, the Council of State held that this departed from an essential provision of the specification, shifted the risk and made the bids incomparable, and suspended the award under extreme urgency.
What happened?
In July 2011 NMBS-Holding launched an open tender for the structural works around Mechelen station: the Tangent and the rail bypass in zone 020 and an underground car park with a kiss-and-ride zone. The estimate was 68,733,446.14 euros excluding VAT, the contract fell under the Royal Decree of 10 January 1996 for the utilities sectors and was mixed: partly at a global price, partly on a price list. The specification, after five corrigenda, set out in article 01.01.501 ‘Site installation’ a long, non-exhaustive list of services — from site huts, access roads and site stairs to security, insurance, permits and supervisory staff — and prescribed for it a global price with ‘lump sum’ as unit of measurement; the same applied to article 0.2.8.1 on site offices for the contracting authority. In the bill of quantities these were items 0017 and 0006. In addition, the general article 78 required a detailed price justification of all substantial lump-sum unit prices above 150,000 euros and of general administrative and site overheads. Eight bids were opened on 27 October 2011. CFE (MBG branch) was lowest at 56,375,000 euros, followed by the joint venture Antwerpse Bouwwerken – Valens at 57,351,226.91 euros; then came CEI-De Meyer – Jan De Nul (60.87 million), P. Roegiers & Co (65.18 million), Besix – Willemen – Van Hout – Franki (66.46 million), Van Laere – Cit Blaton – Max Bögl (67.79 million), Denys (77.75 million) and Strabag (93.96 million). On verification it was noted that CFE had quoted a very low price for item 0017 and a high one for item 0006. NMBS-Holding requested a price justification on 8 December 2011; CFE replied on 12 December that it had spread the indirect site costs proportionally over the other items. The award report accepted that explanation: article 78 could give the impression that those costs belonged to the general overheads, and the prices were deemed ‘normal’. On 30 March 2012 the board of directors awarded the contract to CFE for 55,959,249 euros, split between NMBS-Holding (28.6 million, 17 % of which for Eurostation), Infrabel (17.2 million) and the Flemish Roads and Traffic Agency (10.1 million). The joint venture Antwerpse Bouwwerken – Valens was informed on 10 April 2012 and filed an application for suspension under extreme urgency on 25 April. It argued that CFE had not priced the site installation in the lump sum but as a 6.5 % mark-up over the 636 other items, 545 of which were on estimated quantities, so that its remuneration for the site moves with the quantities actually executed — contrary to the specification, detrimental to comparability and uncertain as to the ‘lowest’ price. NMBS-Holding contended that there was ‘at least room for interpretation’ between article 78 and the lump-sum articles, that CFE’s reading was ‘not unreasonable’, that the price advantage was minimal because 111 items fell under the bidder’s duty of verification in article 84, § 2, and that simulations showed CFE remained lowest in every scenario. The Council of State sided with the applicants. The specific articles 01.01.501 and 0.2.8.1 clearly say ‘lump sum’ and prevail over the vaguely worded general article 78; no other bidder had read that article differently, and anyone in doubt could have asked for clarification — which CFE did not do. Accepting divergent interpretations in an open tender, where only price counts, makes prices incomparable. In fact CFE had quoted only 17,255 euros as a lump sum for item 0017 and an undetermined fraction of 477,901.51 euros for item 0006, while the essential part — about 3,664,375 euros out of a total of 56,374,999.95 euros — ran as a percentage on estimated quantities. That shifts the risk: the specification wanted a fixed remuneration independent of executed quantities, and in complex works of this scale it is not unrealistic that final quantities differ. The other bidders’ pricing might also have been different had they been allowed the same technique. NMBS-Holding’s simulations did not lend themselves to a prima facie review, so its ‘directive-compliant’ plea about the concept of lowest price started from a wrong premise; and a revision under article 16, § 2 of the General Contracting Conditions is something other than settling additional quantities. The first part of the first plea was serious: equality between bidders had been breached and it was no longer established that the contract had been awarded to the lowest regular bid. The Council suspended the award decision of 30 March 2012. The application against the implicit decision not to award to the applicants was, however, dismissed: a suspension creates no legal duty to award to them, all the more since only the regularity of CFE’s bid had been examined. The intervening party bore 125 euros in costs for its intervention.
Why does this matter?
In an open tender price is the only award criterion, and that turns the way a bidder builds up its price into a question of regularity, not of skill. CFE did what contractors often do: spread the general site costs over the unit prices. Here, however, the specification had expressly placed those costs in two lump-sum items, and that lump sum was no accounting detail. A lump sum places the risk on the contractor: if the site costs more, that is his problem; if it costs less, that is his profit. A percentage on items priced on estimated quantities does the opposite — the remuneration for the site rises with every extra cubic metre of earth or concrete settled at final account. The Council called it by its name: the risk lies differently from what the specification intended, and that touches the essence of the price quotation. On more than 3.6 million out of 56 million euros, that is no marginal phenomenon. The judgment is also a lesson in reading specifications. NMBS-Holding put forward the ambiguity of its own article 78 to save the bid; the Council answered with a classic rule — the specific provision prevails over the general — and a pragmatic observation: seven other bidders had understood the specification, and CFE could have asked a question. A contracting authority that accepts divergent interpretations of its pricing rules undermines the very comparability an open tender presupposes. Equally important is what the Council did not do: it did not follow the simulations with which NMBS-Holding sought to show that CFE remained cheapest in every scenario. In an extreme-urgency procedure only a prima facie review is appropriate, and whether an irregularity affects the ranking only arises if it is not substantial. A departure from the pricing rules in principle is. Finally, the judgment shows the limits of what a losing bidder can ask: suspension of the award to the winner, yes; suspension of the ‘implicit refusal’ to award to him, no — because that would presuppose a duty to award that does not follow from a suspension, certainly not while his own bid has not yet been examined for regularity.
The lesson
For bidders: for every item in the bill of quantities, look at the unit of measurement and the nature of the contract. If it says ‘lump sum’ or ‘global price’, the full cost of that service must sit in that item, even if it is customary in your sector to spread site costs as a percentage. A general provision on price justification or overheads gives you no licence to depart from a specific, clear provision of the specification. If you are unsure how two provisions relate, ask a written question during the procedure — the absence of such a question was held against CFE here. If you are second-lowest, know that a misplaced cost item in the winner’s bid can yield a serious plea, but seek only the suspension of the award itself; the ‘implicit refusal’ to award to you adds nothing. For contracting authorities: if you want site costs in a lump-sum item, say so consistently in the technical provisions, the bill of quantities and the administrative provisions, so that an article on price justification does not become a back door. If on verification you discover that a bidder has shifted costs, do not accept it with a ‘not unreasonable interpretation’ or with simulations showing he still remains lowest: in an open tender the manner of pricing is itself an essential condition, and the Council reviews prima facie, not with spreadsheets.
Ask yourself
For every lump-sum item in the bill of quantities, have you checked that your full cost is in it, or do you spread general site costs as a percentage over unit prices because you always have? If you find two provisions of the specification contradictory, did you ask for clarification in writing before submission, or are you betting on the reading most favourable to you? Do you realise that a price build-up that allocates risk differently from what the specification prescribes is treated in an open tender as a departure from an essential provision, regardless of whether you remain lowest? As a contracting authority: are your rules on lump-sum items and on overheads mutually coherent, and would you accept a shift of millions between items because one bidder ‘could read’ your text differently? And are you aware that your simulations on the ranking will not serve as evidence in an extreme-urgency procedure?
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