The OGC has opened the second of its two consultations on one of the biggest ever shake-ups in public procurement law. The public procurement Remedies Directive 2007/66/EC (the Directive) aims to address a lack of effective remedies for unlawful public contracts i.e. to deal with contracting authorities awarding a public contract in breach of EU and Public Procurement rules. The OGC's consultation considers how the Directive should be implemented into UK law, and is a second stage consultation. The detailed proposals just published reflect stakeholder responses to a higher level remedies consultation which was undertaken in 2008.
This update highlights some key changes which the OGC anticipates will be made to the Public Contracts Regulations 2006 (the Regulations) for public contracts in England and Wales. These are of interest for Scottish public contracts also, as the Scottish Government should be issuing its consultation proposals for implementing the Directive into Scots law shortly, and they are likely to be similar to OGC's proposals in many respects.
Mandatory Standstill Period
The notorious ECJ case of Alcatel highlighted real limitations in the original 1989 and 1992 Remedies Directives. In response the Regulations and their Scottish equivalent require there to be a 10 day 'Standstill Period' between bidders being told of a contract award decision and when that contract can be entered into. In addition, if by midnight on the second working day of the Standstill Period, a contracting authority receives a written request from a bidder for reasons why it was unsuccessful, then the authority must inform that bidder of the characteristics and relative advantages of the successful tender, and if necessary the Standstill Period must be extended to give the bidder three working days to consider the information provided.
Essentially, therefore the purpose of the Standstill Period is to allow bidders to raise any concerns they may have about a procurement, to obtain precise information without delay, consider whether their concerns are well-founded and if so to exercise the statutory remedies that may be available. At present there are remedies in damages and also potentially set aside decisions taken by an authority (or to order the amendment of any document). As well as clarifying the standstill period requirements and confirming that 'promptly' shall never mean less than 10/15 days, the Directive offers a variety of tougher sanctions and introduces the new bidder weapon of possible "ineffectiveness".
The Directive leaves it to Member States to decide if "ineffectiveness" should be applied 'retrospectively' to 'undo' the effect of a public contract, or 'prospectively' so as to release the parties from future obligations under a public contract.
Most stakeholders took the view that ineffectiveness should mean prospective cancellation coupled with alternative remedies. They saw retrospective cancellation as likely to be unjustifiable and disproportionate, and involving too great a risk to successful bidders and funders. OGC have agreed, also recommending that the Courts should have the flexibility not to apply ineffectiveness where there are "overriding reasons relating to a general interest" for maintaining the contract.
The Directive provides for some alternative penalties in particular circumstances and it is for Member States to determine these in detail and when they should be available.
Stakeholder comments were mixed but in line with the majority OGC propose both possible alternative remedies be available, namely contract shortening and imposing fines. These remedies are to be effective, proportionate and dissuasive, and partly for that reason there is no current proposal to set a maximum level for fines.
Significantly, OGC propose that where the remedies rules and procedures have been breached but there is no substantive breach of the procurement rules (in terms of a flawed contract award decision, for example), only these alternative remedies will apply.
As a potential new remedy for bidders, therefore, contract ineffectiveness is going to be reserved "to the most serious circumstances, for which ineffectiveness was designed as both a deterrent and a cure."
Time limits are very important in relation to the exercise of procurement remedies. For exercising ineffectiveness claims, the OGC proposes to adopt the minimum time periods set out in the Directive so there will be just 30 days for published award decisions, but 6 months in such other cases as bidders not being notified of the award decision or no OJEU contract award notice being published.
The consultation is lengthy and complex – it invites views from stakeholders on some but not all new provisions for the draft Regulations, and raises other important policy questions such as how ineffectiveness is to apply to Framework Agreements, individual call-off contracts awarded under them and also Dynamic Purchasing Systems.
But it is clear that the Directive is going to have a very significant impact on procurements, affecting how contracting authorities carry out procurements and how bidders react when aggrieved – and if you want to have your say it's not too late to do so!
The OGC's consultation closes on 24 July 2009 and the full consultation document and draft Regulations can be found at: