The Administrative Court of Public Contracts (TACP) of the Canary Islands has voided the award given by the public entity Turismo de Tenerife, under the Cabildo, for a contract exceeding eight million euros, lasting five years, to an advertising agency for the creation and management of campaigns intended to attract domestic visitors and the Portuguese market to the island.
The successful bidder, Havas Worldwide Spain, had submitted a proposal that, as stated by the contracting court, “could not be executed” due to presenting “abnormal or disproportionate” (low) figures in the labour costs section, which were below the minimums stipulated in the terms and conditions and the sectoral collective agreement. Furthermore, according to the recent ruling, this bidder failed to meet its obligations concerning the employment of individuals with disabilities.
Tenerife Tourism published the tender specifications on 26 January. The objective was to engage a full-service marketing and communications agency for “the planning, design, coordination, and management of advertising campaigns and initiatives”, which included media relations, “in the national and Portuguese markets”. The initial tender budget was set at 1.7 million euros for a one-year service period, although the tender call also allowed for four extensions, bringing the total to 8.3 million.
Three companies participated in the tender process. Besides the agency already providing the service, Havas Worldwide Spain, Llorente y Cuenca Madrid and RP UNO also submitted bids. The situation was concluded with the contract being awarded to Havas through a resolution dated 3 June and signed by the president of the Board of Directors of the public company, Lope Afonso (Partido Popular), who is also the vice president and councillor for Tourism of the Tenerife Island Council.
This award was contested before the contracts court by another bidder, Llorente y Cuenca Madrid, which claimed that the fee structure (labour costs) offered by its rival was “absurd, illogical, unrealistic, and illusory”. The TACP upheld this challenge, mandating the annulment of the resolution and the reinstatement of the procedure back to the point before the financial viability of Havas’s proposal was accepted.
An “abnormally low” proposal
The specifications required four types of staff to deliver the service: an account director with 75% dedication, an account supervisor, and two executives with 100% dedication. The anticipated labour costs, calculated based on the national agreement for the advertising sector, were estimated at 115,899 euros per annum. Additionally, the specifications granted a maximum of twelve points to agencies that proposed extra personnel: a creative director, a content supervisor, and a copywriter.
Havas assessed the labour cost at 83,000 euros. RP UNO proposed 131,000 euros, while Cuenca and Llorente estimated it at 160,000 euros. All bids included seven employees: the four required profiles and the three supplementary ones. In an initial report, the technicians from Tenerife Tourism cautioned about Havas’s “abnormally low” offer and consequently initiated the process outlined for such instances in the Law on Public Sector Contracts. This required the company to justify the viability of its proposal.
Tenerife Tourism approved the bidder’s response. According to the Administration, Finance, Legal Services, and Investment Attraction department of the public body, there were “sufficient and substantiated indicators” to ensure adequate and satisfactory delivery of the requested service. This report underscored that the agency had submitted a “competitive” bid and had reduced other service-related costs, such as subcontractor fees, industrial profit, and general expenses. The report asserted, “Technical and strategic solutions are integrated to ensure the long-term feasibility of the proposal.” Following this report, the Board of Directors, chaired by Lope Afonso, approved the award, which was ultimately finalised last June.
Following partial access to the file, another competitor, Cuenca y Llorente, lodged the special appeal just resolved by the Canary Islands court. “It is not just that it is presenting a competitive offer, nor that it assumes certain losses,”
However, Havas’ offer “would involve violating labour regulations,” as “it would not even allow employees to receive the minimum interprofessional wage,” cautioned this bidder, who emphasised that the funds proposed by the successful bidder could merely cater to “70%” of the minimum labour expenses for the contract. This is applicable for the four necessary profiles.
Both Turismo de Tenerife and the successful tenderer rejected this appeal, asserting that the costs outlined in the tender documents are “estimates,” which are not obligatory and do not constitute a stipulation. They also stated that the tenderers might fund the reduction of the financial offer with their own assets. The public entity contended that the contracting process was conducted “with complete impartiality,” without being swayed by the fact that Havas was the present service provider.
For its part, the successful bidder asserted that its proposal encompassed savings in fixed expenses (leases and supplies), along with initiatives to enhance work “efficiency” and an assurance of technical competence.
In its recent verdict, the Administrative Court of Public Contracts opined that Turismo de Tenerife “erred in believing that Havas’ proposal could be met.” This authority maintains that the estimation of labour costs “is not obligatory,” however, the stipulations laid out in the specifications are indeed mandatory, and these required that their amount must not fall short of what is determined in the pertinent sectoral collective agreement. This requirement, conversely, “would not be fulfilled” by the other bidders, considering the financial offers presented and the supplementary resources provided.
The court further noted that, at both the deadline for bid submissions and the point of awarding, Havas “did not adhere” to the obligations concerning the employment of individuals with disabilities. Legislation dictates that firms with over 50 employees (the successful bidder employs more than 100) must allocate at least 2% of the workforce for individuals with disabilities or, alternatively, possess a “declaration of exceptionality” and permission to implement alternative measures.
The company sought this declaration of exceptionality on May 28, just days prior to being awarded the contract. According to the TACP, despite the likelihood that it would be granted again (it had already received it previously), at that moment the bidder was engaged in one of the conditions of “prohibition to contract,” without this indicating “an excessively formalistic pronouncement” from the court, it concludes.
The court’s decision concludes the administrative proceedings, but it remains open to appeal in the courts within two months.
