Remedies – Public sector buyers beware!
Posted by Tim Williams on December 23, 2009
On Sunday the Remedies Directive (2007/66/EC) was implemented in UK legislation. In England, Wales and Northern Ireland, the Office of Government Commerce (OGC) had drafted ‘The Public Contracts (Amendment) Regulations 2009’ (SI 2009/2992). While in Scotland the Scottish Procurement Directorate (SPD) had drafted The Public Contracts and Utilities Contracts (Scotland) Amendment Regulations 2009 (SSI 2009/428). Although both sets of regulations are implementing the same European Directive there are some significant differences in the detail, although in this article I’ll only concentrate on the main effects.
Why are the regulations being amended?
Firstly, as a member of the European Union the UK has an obligation to implement directives in national legislation within the transitional period set out when the directive is first published. Directive 2007/66 was published in December 2007 and member states were given 2 years to implement it at a national level. The directive has three main objectives, as follows:
- Strengthen the review procedures
- Harmonise the standstill period across Europe
- Introduce new remedies, e.g. ineffectiveness (cancellation of the contract) for the most serious breaches
The new Regulations will take effect for any new procurement that starts after 20th December 2009, e.g. any contract advertised in the Official Journal after this date will be covered by the new Regulations. Importantly for framework agreements that were commenced before 20th December, any call-off contracts that are entered into will not be covered by the new rules. As a framework can have a maximum life of 4 years, some contracts may not be covered until December 2013.
Changes to the standstill period
The standstill period is the time that must be allowed between a purchaser informing all candidates of their decision and the point at which they enter into a contract with the successful bidder. This period is to allow ‘unsuccessful’ candidates to challenge the decision if they feel that a mistake has been made in the evaluation process.
The reasons for the award decision must now be released at the start of the standstill period, wheras before a supplier had to request this information within 2 days of being notified. The length of the standstill period must take into account different means of communication, i.e. at least 10 days for electronic means (fax or email) and at least 15 days for post, hand delivery, etc. A precise statement of the standstill period should also be included with the notification.
Modifications to the ‘old’ remedies
The ‘old’ remedies available under the procurement regulations are still available. The Court has the power to:
- Order an injunction/interdict, to suspend the procurement
- Set-aside decisions taken unlawfully
- Award damages
The injunction/interdict remedy has been beefed-up as the contracting authority is obliged to automatically suspend the procurement when a review of the contract award decision is sought in the courts. This is potentially the most powerful element of the new legislation as it will mean that purchasers have to be much clearer in the choice of selection and award criteria and the transparency of the evaluation process, otherwise they will find their decisions being challenged with a consequent delay to the contract award.
The new ineffectivesness remedy
There are three main grounds on which a court may rule that a contract which has already been awarded is ineffective, as follows:
- Breach of the obligation to advertise a contract in the Official Journal (OJEU)
- A combined breach where there is a breach of the procurement regulations and the standstill period/automatic suspension requirement
- A breach of the mini-competition rules when a call-off contract (which has a value above the OJEU limit) is being awarded under the terms of a framework agreement. But, if the authority has observed a standstill period ineffectiveness will not apply.
In the UK an ineffectiveness ruling has two main consequences:
- All contractual obligations are cancelled from that point forwards (prospective cancellation)
- A fine on the authority which must be ‘effective, proportionate and dissuasive.’
What can a contracting authority do to limit their risks?
- In general, sticking to the rules offers good protection. It is when an authority tries to take a shortcut or circumvent the rules in some way that the risk of being caught increases dramatically.
- Observing a standstill period is a shield from ineffectiveness
- The European Commission has introduced a new voluntary contract award notice, catchily named the Voluntary ex-ante Transparency notice (VEAT), which gives protection where the procurement itself has not been advertised.
- The period during which a contract can be ruled as ineffective can be reduced from 6 months to 30 days by ensuring that all interested parties have been notified.
- We expect that authorities will begin to include terms in their contracts to pre-agree how a contract will be unwound if the courts rule that it is ineffective.
What impact will the Remedies Regulations have on suppliers?
Firstly, expect to see contracting authorities tighten up the specification of their selection and award criteria as well as the way in which they have evaluated the bids. Secondly, the quality of debrief information should also improve significantly in order to demonstrate that they have followed the rules correctly and most importantly that they have evaluated the tenders fairly. Thirdly, if you think that you haven’t been treated fairly you are in a much stronger position to ask the authority to review their decision and prove to you that they have been objective. Fourthly, if you are the successful bidder there is the risk that the contract you have been awarded could be cancelled during the first 6 months. To avoid finding youself in this position you should check that i) the contract was advertised correctly and ii) was there a standstill period in which all the candidates were notified of the intention to award you the contract?