Private tendering

Private tendering

An organization may choose to structure the procurement of a product or service through a tendering procedure. When an organization chooses to do so, it can be deemed that the organization observes the principles of the tendering procedure.

Whether tenderers could reasonably rely on the principles of the Public Procurement Act being observed in a particular situation depends on a number of specific circumstances. First, the program used in the procurement is examined. Subsequently, the applicable (ancillary) conditions are assessed. Finally, the nature of the parties is considered.

Questions regarding private tendering? Contact us.

What is a private tender?

A private tender is a tender organised by a party that not a contracting authority within the meaning of the Public Procurement Act 2012. Examples include a company, a housing association, a healthcare institution, or a foundation that puts a contract on the market via a competitive process, without being legally obliged to do so. Since the Public Procurement Act 2012 does not, in principle, apply here, the principle of freedom of contract: the private contracting authority determines the rules of the procedure itself.

However, that principle is not absolute. Once someone sets up a procurement-like process, they can—often unknowingly—still bind themselves to procurement principles. For MKB Juristen, this is all in a day's work: our mixed teams of lawyers and in-house counsel advise both the international group issuing a European procurement competition and the local construction entrepreneur or the baker on the corner bidding for a private contract.

Does the Public Procurement Act 2012 apply to private procurement?

No, not directly. The Public Procurement Act 2012 focuses on contracting authorities (public authorities and public-law institutions) and special-sector companies. A purely private contracting authority falls outside this scope and is therefore not obliged to tender at the European or national level. If you would like to know whether you *do* fall under the law, please read our page on the procurement obligation and the applicable threshold amounts.

Nevertheless, the absence of a statutory obligation does not mean that the private contracting authority is completely free. Through the law of obligations — in particular the principles of reasonableness and fairness under Articles 6:2 and 6:248 of the Dutch Civil Code — and pre-contractual good faith, the principles of equality and transparency can still have a “reflex effect”.

When is a private contracting authority bound by equality and transparency?

The Supreme Court established the general rule in its judgment of 3 May 2013 (KLM/CombiCar, ECLI:NL:HR:2013:BZ2900). A private contracting authority is not by definition bound by the principles of equality and transparency. Whether those principles nevertheless apply depends on the procurement conditions and on the expectations that (potential) tenderers could reasonably derive. Factors weighing in this regard include: the program used, the (boundary) conditions of the procedure, and the nature of the parties involved.

The core issue: even when the law does not apply, a contracting authority may have bound itself to the rules of the game it establishes itself. Anyone who uses the structure, language, and appearance of a formal tender quickly creates the expectation that they will act fairly and transparently. If they subsequently breach that trust—for example, by secretly renegotiating with a single bidder—this may be unlawful or contrary to pre-contractual good faith, resulting in liability for damages or even a forced award.

Explicitly exclude or accept principles

The most important advice for private contracting authorities is to leave no ambiguity. You can include in the tender documents:

• explicitly declare the principles applicable, so that tenderers know where they stand and you offer a level playing field; or
• expressly exclude the principles and the Public Procurement Act 2012 and reserve the right to modify or terminate the procedure at any time, for any reason whatsoever, without being obliged to award a contract or pay compensation.

Silence is the greatest risk. If you do not comment on the status of the principles, the judge may infer from the circumstances that bidders could reasonably expect you to act fairly and transparently. A well-formulated reservation is not a formality, but determines whether you retain your contractual freedom.

Risks and pitfalls in private tendering

In practice, things go wrong on a limited number of points:

• Unintended binding: standard procurement jargon, an award criterion such as the “most economically advantageous bid,” or a formal-looking process create the expectation that the principles apply — even without this being the intention.
• Broken-off negotiations: the failure to discontinue proceedings at a time when doing so is unacceptable according to pre-contractual reasonableness and fairness may lead to an obligation to continue negotiations or to compensation.
• Unequal treatment: favoring one tenderer, for example by entering into price agreements or renegotiations exclusively with that party, violates the principle of equality if that principle applies.
• Substantial modification: changing the assignment or the conditions during the course of the contract so substantially that other parties could have competed may be unlawful.
• Unclear reservations: a reservation that is too vague or invoked too late does not hold up.

Our approach for clients and bidders

MKB Juristen represents both sides of the table. For private contracting authorities , we draft watertight tender documents and reservations so that you retain your contractual freedom and are not unintentionally bound. For tenderers, we assess whether you could reasonably rely on compliance with the principles, whether you have been treated unfairly, and whether the contracting authority was entitled to break off negotiations — and, if necessary, we litigate. Our mixed teams of lawyers and in-house counsel work for clients and tenderers of all sizes, from international corporations to the baker around the corner.

If things go wrong regarding the outcome of a procedure, we also assist with objections against an award decision. Private procurement is part of our broader Public Procurement Law.

Frequently asked questions about private tendering

Am I required to tender as a private party?
No. A purely private client is not legally obliged to tender. If you choose to do so voluntarily, you may, however, bind yourself to the principles you establish yourself.

Can I exclude the procurement principles?
Yes, provided you do so expressly and in a timely manner in the tender documents and make a clear reservation to be able to modify or terminate the procedure.

Am I allowed to terminate a private tender midway?
In principle yes, but not at a time when breaking off is unacceptable according to pre-contractual reasonableness and fairness. A well-founded reservation increases your room for maneuver.

I was wrongly passed over in a private tender. What now?
Have it assessed whether you could reasonably rely on compliance with the principles and whether you were treated unfairly. Sometimes, further negotiations, the award of the contract, or compensation can be enforced.

Questions about private tendering? Contact us for a no-obligation consultation.