Smiling Smileys

The Smiley labelling scheme of the Danish Working Environment Supervisory Authority is aimed at informing the public in a straightforward manner about results of recent inspections of working premises in all types of enterprises. Labelling such premises with green smiling smileys indicate a high level of working environment protection with the “crown-smiley” signalling that the premises in question are subject to certification and thus continuous monitoring of working environment. 

Arbejdstilsynets fire smiley

Where premises have been labelled with angry yellow and red smileys this denotes on the other hand that shortcomings have been identified.

In a tender concerning bus-services in a Danish municipality the smiley scheme was used as criterion for evaluating working environment; – not as part of shortlisting qualified bidders but as part of the later stage of identifying the winning bid. A highest score of 100 points would be awarded where all garages, workshops and other relevant premises of the bidder had been given a crown-smiley and for example 70 points where more than half of premises had green smileys. On the other end of the scale no points would be scored at all in case of any premise being labelled with a red smiley. 

A remarkable detail was that a score of 50 points would be given where less than half of premises had earned a green smiley – and no red smileys, of course. 50 points would in other words also be awarded in case of no existing premises at all. This meant that enterprises with no existing premises would in fact be in a better position than enterprises with just one premise having been labelled with a red smiley and where the overall rating was therefore reduced to 0 points.

This manner of evaluating was subject to a complaint to the Danish Complaint Board a few months ago. The complaint did not focus on the 50-point rule. Rather, as regards the entire manner of evaluating, the point was made that it worked to the advantage of enterprises already locally established, either as the existing bus operator or otherwise because of strong presence within the municipality. In fact, enterprises without existing premises – as newly established or from outside the local area – would never be able to obtain more than 50 points and therefore excluded from gaining maximum points of 100. It was therefore claimed that the criterion not least for this reason violated the principle of equal treatment.

It is on the basis of case law from the European Court of Justice (CJEU) considered a requirement that tender conditions must be designed so as to neutralise as much as possible the advantage that the existing contractor inevitably has when the contract is re-tendered. The complainant did on this basis also argue that working environment could have been evaluated according to criteria without the strong focus on existing premises and thus without giving advantage to the existing operators of bus services. 

The municipality on its part argued that the 50-point rule could in fact be seen to balance out the advantages of existing operators by allowing some points to be given even in cases of no existing premises. Furthermore, that the issue of working environment was deliberately not set as a minimum criterion, which would have resulted in outright rejection of bidders in some cases and thus their exclusion from the remaining tender procedures. A possibility for new enterprises to gain maximum points would in the opinion of the municipality allow them to an unreasonable advantage compared to existing operators with their considerable investments in local premises.

The Board pointed out in its decision that the problem in relation to equal treatment had to do with the fact, that bidders without local premises were excluded from scoring higher than 50 points, since any scoring above that level would require such premises. The Board did, not unexpectedly, consider it irrelevant that some enterprises may have different investment strategies than others. This would not justify differentiated treatment. What mattered in relation to equal treatment is “…that no tenderer must be excluded in advance from being able to submit tenders that can be awarded maximum points due to the chosen evaluation model.” Enterprises are excluded “in advance” when a criterion concerns the situation already before a tender is submitted.

The Board agreed with the complainant that working environment could have been made subject to more “neutral” criteria in the interest of competition. A requirement for premises to be established as of the start of the contract coupled with guarantees as to the level of smiley labelling that bidder aims at obtaining does not exclude anything “in advance” and was mentioned as a possible alternative. 

Another decision from the Board from a few years earlier in 2020 also dealt with insufficient neutralisation of competition. The case concerned a tender for school-transport of children with special needs. The tender conditions included requirements that price is based on price per kilometre per passenger for the shortest distance between school and the home of each child. There was in addition the requirement that transport duration per child should be maximum 60 minutes. 

The tender dossier did not include any information about existing number of children and locations presently involved in the school-transport. Even though these numbers may well vary over time, the Board was of the opinion that the existing transporter obviously had such information and would be in a better position to submit a competitive bid. The Board observes that the contracting authority could relatively easily have provided such information in the tender dossier and in this way neutralised any competitive advantage.

The two cases are good examples of what neutralisation actually requires. In other words what should have been done in the planning of the tenders when the contracting authority realised that a tender condition was biased in favour of the existing contractor. In the school-transport case the problem was related to the tender specifications whereas the smiley-case concerned the award criteria. The concrete steps would in the school-transport case be relatively simple, namely to include factual information concerning existing locations and distances. In the smiley-case what needed to be neutralised was the criterion as such. As demonstrated earlier this required an actual redesign of the criterion.

The smiley -case evokes two other questions, namely whether smileys are    actually suitable as award criterion in the first place and whether it is in fact discriminatory to require the smiley-labelling as the sole acceptable proof concerning working environment.

As regards suitability, it could be argued that that the smiley-criterion concerns existing facilities of the bidder, in other words his technical capacities, and not what he is to deliver, namely the bus services. Early CJEU-case law[1] ringfenced selection and award as two distinct stages of the tender process. This was later consolidated in the EU directives and essentially meant that selection and award criteria should not overlap and that selection criteria concerning for example technical capacity/skills would not be suitable as award criteria.   It is true that some degree of grey area between selection and award criteria was introduced via later CJEU-case law[2] opening up for use of any criterion be used in the award phase where it concerns the quality of what is to be delivered. In the case of the smileys the relevance in relation to the quality of bus services is certainly debatable; – after all, working environment is an objective in itself and not a means for improving for example bus schedules.

The discriminatory effect of insisting on a specific label as sole proof of certain qualities was raised in notably the so-called Dutch Coffee – case[3], where the point was made that a label could not be used in this manner, ..”without  (including in the tender dossier) the criteria underlying those labels and without having allowed proof that a product satisfies those underlying criteria by all appropriate means”. The 2014 amendments to the EU directives allows the use of labels as award criterion under certain specific conditions concerning the manner of adopting these underlying criteria, including required consultations of stakeholders. The extent to which these conditions were fulfilled in the case of the smiley scheme would be debatable as well.

[1] C-31/87, Beentjes, notably paragraph 17 of the decision.

[2] C-532/06, Lianakis

[3] C-368/10, Dutch Coffee