The Federal Supreme Court Clarifies Legal Protection in Cases of Prematurely Concluded Procurement Contracts
The Federal Supreme Court ruled that in cases of procurement contracts prematurely concluded following a procedure under the rules of the Intercantonal Agreement on Public Procurement, primary legal protection must in principle be granted. The cantonal appeal bodies must therefore examine whether such a contract can, in exceptional cases, be declared void or whether the procurement agency can be ordered to terminate or amend the contract. Only if this is not possible will damages be awarded. Importantly, such damages are not necessarily limited to the expenses incurred by the bidder in connection with the preparation and submission of its offer.
Facts and Background
Once a procurement procedure is completed and the contract awarded, the contracting authority usually seeks to implement the project as quickly as possible. The school district of Wängi (Canton of Thurgau) was apparently in particular haste. On the very first morning after expiry of the appeal period against the award decision – namely on 5 September 2023 at 10 a.m. – it signed the procurement contract with the successful bidder. At that time, the authority was not yet aware of the appeal lodged with the Thurgau Administrative Court. However, according to the Federal Supreme Court, it should have expected that the bidder excluded from the procedure due to alleged formal errors would file an appeal.
By decision of 8 September 2023, the Administrative Court granted suspensive effect to the appeal, expressly stating that no procurement contract may be concluded until a contrary ruling is issued. On 13 March 2024, the Administrative Court upheld the appeal and declared the exclusion of the complainant from the procurement procedure unlawful. However, it considered that it need not rule on the lawfulness of the contract conclusion itself, since in its view legal protection was exhausted in the finding of unlawfulness of the exclusion. Against this ruling, the excluded bidder lodged a subsidiary constitutional complaint with the Federal Supreme Court, challenging the Administrative Court’s decision on several grounds. The Federal Supreme Court rendered its judgment on 19 May 2025 (2D_14/2024).
The Legal Question
The ruling addresses the issue of what happens to a procurement contract concluded prematurely, and specifically whether in such a case primary legal protection (Article 58 par. 1 PPA / IAPP) or only secondary legal protection (Article 58 par. 2 PPA / IAPP ) must be granted. Primary protection preserves the complainant’s chance of obtaining the contract by allowing the review body to decide the matter itself or remand it with binding instructions. Secondary protection is limited to compensation of expenses incurred for preparing and submitting the offer. According to the wording of the law, secondary protection applies once the contract with the successful bidder has already been concluded. However, as the Federal Supreme Court clarified, this is not always the case.
The judgment concerned a municipal procurement procedure governed by the Intercantonal Agreement on Public Procurement (IAPP). Nevertheless, it is likely to have an important effect also for procurement under the Federal Act on Public Procurement (PPA) in case international treaty obligations exist.
Key Provision – Standstill
Both the PPA (for the treaty-bound sector) and the IAPP contain a standstill provision (Article 42 par. 2 PPA / Article 42 par. 1 IAPP), requiring that the contract with the successful bidder may be signed only after the expiry of the appeal period, unless the competent appeal body has granted suspensive effect to an appeal against the award decision. According to the Federal Supreme Court, it must be established that no appeal has been lodged or that any such appeal does not have suspensive effect (either because no request was made or it was denied). In practice, this is usually clear only several days after expiry of the appeal period. The model explanatory report on the IAPP specifies a period of usually five days that must be observed after expiry of the appeal period.
In the case at hand, the procurement contract was signed already on the morning of the first day after expiry of the appeal period. At that moment, the conditions for the expiry of the standstill period had not been met. Both the Federal Supreme Court and the Administrative Court therefore held that the contract was concluded prematurely and was thus unlawful.
Violation of the Standstill Provision – Generally Primary Legal Protection
The Federal Supreme Court examined whether the Administrative Court’s view – that legal protection was exhausted by merely declaring the exclusion unlawful – complied with the prohibition of arbitrariness. It found it did not, holding instead that violations of procurement law must, wherever possible, be sanctioned through primary legal protection. This serves to enforce procurement law and ensure the effectiveness of judicial remedies.
As to what should happen to a prematurely concluded contract, the Court noted that several approaches are conceivable and described the issue as one of fundamental legal importance. Yet, in its remittal decision, it remained strikingly vague on the concrete solutions.
The Administrative Court was instructed to examine whether the prematurely concluded contract might be void. However, the Supreme Court restricted this by stating that nullity may only exceptionally be assumed, e.g. in cases involving criminal conduct such as corruption. Absent such exceptional circumstances, the Administrative Court must assess whether the contract could be dissolved or amended, or whether the contracting authority could be ordered to do so.
Only if none of these options proves proportionate in the circumstances – i.e. if primary protection is not realistically available – will secondary protection ultimately apply.
Importantly, the Federal Supreme Court opened the door to potentially higher damages at least for cantonal (and municipal) procurements. It held that in cases of prematurely concluded contracts, compensation is not necessarily limited to the bidder’s expenses for preparing and submitting its offer. Where an unlawful and harmful act of the contracting authority accompanies an erroneous decision, damages may be claimed under the applicable cantonal liability law.
Comments and Open Questions
At first glance, the ruling provides welcome clarification on how first-instance courts should handle prematurely concluded contracts: they must immediately order, even on a super-provisional basis, that implementation of the procurement project be suspended. Thereafter, they must examine how primary protection may be granted.
The instructions given to the Administrative Court, while seemingly concrete, remain vague and likely impracticable. The bar for declaring a contract void is set very high and will rarely be met. The Supreme Court itself acknowledged that nullity entails legal uncertainty and often fails to reflect the interests at stake in a given case. As such, nullity will likely in practice almost always be excluded.
This leaves the Administrative Court with the task of examining whether it is still possible and proportionate to order the authority to terminate or unwind the contract. This depends heavily on whether the contract has already been fully performed, and if not, whether it can be divided into stages. In the present case, this examination will likely prove futile, since neither the Administrative Court nor the Federal Supreme Court granted suspensive effect to the appeal. By now, the project in question – a timber construction with façade for a kindergarten – has most likely already been completed.
For the wrongfully excluded bidder, the ruling will therefore probably not result in primary protection. However, the prospect of potentially higher damages remains.