The Administrative Court of Public Contracts (TACP) of the Canary Islands has annulled the award by the public company Turismo de Tenerife, dependent on the Cabildo, of a contract worth more than eight million euros and lasting five years to an advertising agency for the design and management of campaigns aimed at attracting national visitors and the Portuguese market to the island.
The company that won the tender, Havas Worldwide Spain, had submitted a bid that, according to the contracting court, “could not be fulfilled” because it presented “abnormal or disproportionate” (low) values in the labour costs section, lower than those established in the terms and conditions as minimums and those included in the sectoral collective agreement. In addition, according to the recent resolution, this tenderer failed to comply with its obligations in relation to the hiring of people with disabilities.
Tenerife Tourism published the tender documents on 26 January. The aim was to hire a comprehensive marketing and communications agency for “the planning, design, coordination and management of advertising campaigns and actions”, including relations with the media, “in the national and Portuguese markets”. The basic tender budget was 1.7 million euros for one year of service, although the call for tenders included the possibility of four extensions for a total of 8.3 million.
Three companies entered the tender. In addition to the agency that already provided the service, Havas Worldwide Spain, Llorente y Cuenca Madrid and RP UNO submitted bids. The procedure was resolved with the award to Havas through a resolution dated June 3 and signed by the president of the Board of Directors of the public company, Lope Afonso (Partido Popular), vice president and councilor for Tourism of the Tenerife Island Council.
This award was challenged before the contracts court by another of the bidders, Llorente y Cuenca Madrid, which considered that the offer of fees (labour costs) presented by its competitor was “absurd, illogical, unrealistic and illusory”. The TACP has upheld this appeal and has forced the resolution to be annulled and the procedure to be taken back to the moment before the acceptance of the economic viability of Havas’ offer.
An “abnormally low” offer
The specifications required four types of workers to provide the service: an account director with 75% dedication and an account supervisor and two executives with 100% dedication. The estimated labor costs, calculated from the state agreement for the advertising sector, amounted to 115,899 euros per year. In addition, the specifications awarded a maximum of twelve points to companies that offered additional personnel: a creative director, a content supervisor and a copywriter.
Havas estimated the labour cost at 83,000 euros. RP UNO, at 131,000 euros. And Cuenca and Llorente, at 160,000 euros. All of them for seven workers, the four profiles required and the three additional ones. In a first report, the Tenerife Tourism technicians warned of the “abnormally low” offer from Havas and, therefore, activated the procedure established for these cases in the Law on Public Sector Contracts. That is, requiring the company to justify why and whether its proposal was viable.
Tenerife Tourism approved the tenderer’s response. According to the Administration, Finance, Legal Services and Investment Attraction department of the public company, there were “sufficient and motivated signs of guaranteeing adequate and satisfactory compliance with the required service.” This report highlighted that the company had submitted a “competitive” offer and had reduced other costs of providing the service, such as those related to subcontractors, industrial profit and general expenses. “Technical and strategic solutions are combined to guarantee the long-term viability of the offer,” it stated. With this report, the Board of Directors chaired by Lope Afonso gave the green light to the award, which was finally finalised last June.
After partially accessing the file, another of the competitors, Cuenca y Llorente, filed the special appeal that the Canary Islands court of contracts has just resolved. “It is not that it is presenting a competitive offer, or that it assumes certain losses,” but that Havas’ proposal “would mean breaching labour regulations,” since “it would not even allow the workers to be paid the minimum interprofessional salary,” warned this bidder, who stressed that the money offered by the successful bidder could only cover “70%” of the minimum labour costs of the contract. That is, for the four required profiles.
Both Turismo de Tenerife and the successful tenderer opposed this appeal, stating that the costs listed in the tender documents are “estimated”, that they are not binding and do not constitute a condition, and that the tenderers can finance the reduction of the economic offer with their own resources. The public company argued that the contracting procedure had been carried out “with complete impartiality”, without being influenced by the fact that Havas was the current service provider.
The successful bidder, for its part, claimed that its offer included savings in fixed costs (leases and supplies), as well as proposals to make the work “more efficient” and a guarantee of technical solvency.
In its recent ruling, the Administrative Court of Public Contracts considers that Turismo de Tenerife “was wrong in considering that Havas’ offer could be fulfilled”. This body maintains that the estimate of labour costs “is not binding”, but the requirements established in the specifications are and these required that their amount should not be less than that established in the applicable sectoral collective agreement. A requirement that, on the other hand, “would not be fulfilled” by the rest of the bidders, taking into account the economic proposals presented and the additional resources offered.
The court also notes that, both on the date of the closing of the submission of bids and at the time of the award, Havas “did not comply” with the obligations regarding the hiring of people with disabilities. The law establishes that companies with more than 50 employees (the successful bidder has more than 100) must reserve at least 2% of the workforce for people with disabilities or, failing that, have a “declaration of exceptionality” and authorization to apply alternative measures.
The company requested this declaration of exceptionality on May 28, a few days before it was awarded the contract. In the opinion of the TACP, and despite the fact that it could be foreseen that it would be granted again (it had already been granted it previously), at that time the bidder was involved in one of the assumptions of “prohibition to contract”, without this implying “an excessively formalistic pronouncement” on the part of the court, it concludes.
The decision of the court of contracts puts an end to the administrative procedure, but it can be appealed in court within two months.