TEGOS (formerly TGS Baltic) associates successfully advised the Estonian Transport Administration and won the case in two trials. In the civil proceedings, the court dismissed the action in its entirety. The plaintiff then appealed, but the district court also dismissed the action.
The plaintiff was a cleaning and maintenance service provider that contracted with the Estonian Transport Administration in 2020 to provide general cleaning and maintenance services for the Administration’s facilities. The plaintiff claimed more than EUR 2 million from the Estonian Transport Administration for additional cleaning services provided in March and April 2021. Estonian Transport Administration refused to pay, justifying its refusal on the basis of the actual market price of the service, which was approximately EUR 2 500.
What exactly happened? In the spring of 2020, the Public Road Administration (now the Estonian Transport Administration) was looking for companies to clean their service offices. For the four buildings in the northern service area, Krausberg Eesti was the best bidder, offering cleaning services such as cleaning of premises, lawn mowing, floor cleaning and de-slippering at the lowest price.
Candidates had to submit their tenders for the basic cleaning and maintenance services and various additional services. Additional services, such as tree cutting and granite chipping in parking areas, were optional. The prices of the services submitted as part of the tender were not the main object of the procurement and were not a criterion in determining the best offer.
The problem arose when it emerged that the applicant had charged EUR 100 per square metre for the removal of granite chippings, which was more than 660 times the market price. The transport authority commissioned the service without knowing that the service provider intended to charge an abnormally high price. Nor did the service provider warn the Administration of the anomalous price, which is to be expected of contractors acting in good faith. The work was carried out and the company charged a fee of €1.6 million.
Administration tried to challenge the price and negotiate, but as no agreement could be reached, the cleaning company filed a lawsuit. However, the claim was rejected by the court.
Carel Kivimaa, senior associate at TEGOS (formerly TGS Baltic), commented: “This court victory is an exciting landmark case, as it touches on important legal principles such as fairness, good faith and reasonableness, public order and proper performance of contracts. The issue certainly raises a debate on how these principles can be applied in this case through public procurement law and what the principles are in such disputes.”
The TEGOS (formerly TGS Baltic) team included Chirag Mody and Carel Kivimaa.
