You may know that a new Directive has been adopted that affects the way in which parties can seek redress in the case of breaches of procurement rules. The following is a brief summary of the effect of the EURD on your procurement operations, and sets out those areas on which the Scottish Government is consulting before being transposed into Scots law by 20 December 2009 at the latest.

If you wish to participate in the consultation, the full text can be found on the Scottish Government website. The consulation period will close on 31 October 2008.

The EURD seeks to achieve three changes: (i) harmonise the standstill arrangements during which period tenderers may challenge the contract award; (ii) introduce "ineffectiveness" as a remedy against contracts awarded illegally, and (iii) introduce new review procedures including an entitlement to apply for a review of a contracting authority's decision before the award of a contract. Each of these is discussed in more detail below.

1. Standstill period

In future, once a contract award decision is made and communicated to the tendering parties, there must be a minimum 10 or 15 day standstill period (depending on the form of communication) before the conclusion of the contract. This will allow tenderers to consider the award before it is concluded.

The Scottish Government is seeking views on whether to implement the two optional derogations from the standstill period: where an OJEU (Official Journal of the EU) contract notice is not required; and where there is only one tenderer. It is also seeking views on whether the minimum period is satisfactory.

Dynamic purchasing systems and frameworks

The provisions relating to the standstill period may also have an impact upon dynamic purchasing systems (DPS) and frameworks, with different rules applying to above threshold call-offs and below threshold call-offs. In respect of above threshold call-offs, the standstill period can be waived. However, if authorities choose this option, then ineffectiveness will apply where there has been a breach of the existing mini-competition rules. With regard to below threshold call-offs, the standstill period can be waived, without ineffectiveness being made available. The derogation relating to DPS and frameworks is optional, although the Scottish Government anticipates that stakeholders will prefer the derogations to be transposed. Feedback is welcomed.

2. Ineffectiveness

In future a contract can be considered ineffective by an independent review body if the contracting authority has awarded the contract illegally. National law must determine the consequences resulting from a contract being considered ineffective. Contracts can be cancelled retrospectively on all contractual obligations, or prospectively on all obligations that have yet to be performed. The Scottish Government seeks views on which of the two available options should be adopted.

The EURD also provides an option for national law to allow the court to decide not to render a contract ineffective, if it finds that there are good reasons for the effects of the contract to be maintained.

Exemptions from ineffectiveness

There are a number of exemptions from ineffectiveness where a contracting authority considers that the publication of a contract notice in the OJEU is unnecessary. These are mandatory for transposition and apply where:

  • publication of a contract notice in the OJEU is not required by the relevant procurement Directive
  • the contracting authority has published a voluntary ex ante transparency notice in the OJEU, expressing its intention to conclude the contract
  • at least 10 days has elapsed from the publication of that notice before the contract is awarded.

The Scottish Government also draws stakeholders’ attention to the exemption from ineffectiveness, if the related standstill derogation is exercised where call-off contracts have been awarded under DPS or framework agreements. Ineffectiveness shall not apply where:

  • The contracting authority has sent a contract award decision, with a summary of reasons for that decision, to the tenderers concerned, and at least 10 days (electronic) / 15 days (other means) has elapsed from the date the decision is sent to tenderers.
  • There has been compliance with the detailed rules on mini-competitions.

This exemption only applies to the public sector, not the utilities sector. The Scottish Government describes the above provisions for purposes of clarity, specific comments are not sought.

3. Review procedures

The EURD adds to current review procedures. At the moment member states are required to ensure that decisions taken by contracting authorities may be reviewed effectively. In Scotland suppliers may access both formal and informal review procedures.

The current Scottish Regulations allow suppliers to bring proceedings in the Sheriff Court or the Court of Session against contracting authorities which have infringed their obligations to comply with the Regulations, or any other enforceable community obligation, which may be relevant to awarding a contract.

The Scottish Government has introduced a Single Point of Enquiry, where suppliers can seek advice on public procurement legislation and raise issues and concerns about public procurement practices in Scotland. The recommendations of the Single Point of Enquiry do not have legal effect.

The Scottish Government seeks comments on the effectiveness of the review procedures currently available to suppliers. In particular, it welcomes feedback on potential barriers to the use of the above procedures and any ways in which the current review procedures could be improved.

4. Penalties

The Directive requires 'effective, proportionate and dissuasive' penalties to be implemented. These are not specified, and the Scottish Government is seeking comments on how penalties should be implemented. They may be left to the discretion of the courts.

5. Summary: The key consultation points

  1. Should the standstill provisions apply where notification in the OJEU is not necessary and where there is only one tenderer?
  2. Are the minimum standstill periods satisfactory?
  3. Which form of cancellation of ineffective contracts should be applied; retrospective or prospective?
  4. Are the current review procedures effective?
  5. Should the Scottish Government implement optional measures about seeking review of contracting authorities' decisions in advance, and introduce a [second?] suspension period after a reply to a review is issued to allow time to consider further legal action?
  6. What changes (if any) are necessary to make penalties effective, proportionate and dissuasive?