A recent ruling by the District Court of The Hague held that the National Police did not have to put a contract out to tender because it had been declared secret. In the ruling, the court explains why that declaration of secrecy was justified in this case.
OSINT assignment without tendering
The case to which the judgment of the District Court of The Hague (in Dutch) relates concerns a tender by the National Police. This uses an OSINT system for (investigative) investigations in which information from public sources is collected and analyzed. The contract for this system was awarded without a tender, because of a secrecy. A software company disagrees with the private award to its competitor and argues that the contract should have been put out to tender. However, the damage has already been done and the software company is now claiming damages.
Formal secrecy in a public contract
First of all, the software company argues that the contract was never declared secret. However, the court does not go along with this. The court first considers that the "declaration" has no special form, but must relate to a specific order. In this case, the secret declaration is sufficiently specific because several internal departments of The National Police approved it and the assignment was then described in an internal procurement system as a "secret contract."
Secret declaration in itself insufficient
Contrary to what the legal text suggests (see Article 2.23 Procurement Act 2012, paragraph 1 (e) in Dutch), this is not the end of the matter. The court must then assess whether there are security interests and whether they could not have been safeguarded with less drastic measures.
Assessment of the safety risks
The court then tests the presence and severity of security interests with restraint. DNP explains that information about the software system could be misused by third parties. These could gain access to the system (partly) on the basis of that information. The court follows this explanation.
Proportionality and alternatives to secrecy
The question then arises whether less drastic measures were possible. The court considers alternatives put forward by the passed software company and follows DNP's conclusion that they do not offer a solution.
A first alternative would be a European procurement procedure under the Procurement Act 2012, in which - apparently after preselection of candidates or an initial selection of tenders - agreements are made with participants about confidentiality and security. A second alternative is application of the Defense and Security Procurement Act, which also provides for "sensitive material" to be shared with a limited group of participants.
Both alternatives involve more risk than one-to-one awards, DNP said, because under those alternatives, multiple parties learn about the information rather than one party. The logic of that view is also undeniable, according to the court. That does not change with contractual fines, penalties or other sanctions for breach of agreements, because such measures do not provide absolute certainty.
Finally, the court addresses the partial alternative of "splitting" into a secret part and a non-sensitive part. For technical-substantive reasons, this does not appear to be a reasonable alternative here.
Court confirms exception to tender obligation
The court comes to the conclusion that the National Police could successfully invoke the exception ground of article 2.23 Procurement Act 2012 (in Dutch), paragraph 1 part e.
The case shows that it is up to the procurer to explain his reliance on the exception. He must address both the presence of security interests and the absence of less drastic alternatives. If that substantiation is there, the court tests it only with restraint. Purely substantive criticism of the substantiation will usually not get an unsuccessful candidate very far.
Are you a government agency or market party dealing with sensitive contracts or doubts about the obligation to tender? Feel free to contact our specialists. We will be happy to discuss the legal possibilities and risks with you.
