The new-look public procurement remedies -the quick guide to the changes

When did the rules change and why?

20 December 2009, when the imaginatively named Public Contracts (Amendment) Regulations 2009 and Utilities Contracts (Amendment) Regulations 2009 came into force. They strengthen the legal review procedures for dealing with procurement rule breaches and increase the remedies available.

Who needs to know?

Those advising clients on procurement strategy need to understand the changes, so as to be able to advise on compliance and how to respond to a challenge. Economic operators, on the other hand, will have more opportunity to challenge decisions made in breach of the rules.

What are the main changes?

Notification

Procuring entities have obligations to notify participants (with reasons) as soon as they are excluded from the procurement process - even if this is before the award decision is made. The rules were previously ambiguous as to when notification should be given. A procuring entity still has to inform tenderers of its decision to award the contract, or conclude the framework agreement, as soon as possible after the decision has been made.

Standstill period

The standstill period (the enforced wait between announcing the award decision and entering into the contract - to allow for any challenge) remains at 10 days if the standstill notice is sent electronically or by facsimile, but is 15 days where sent by other means (or, if the period is shorter, 10 days from the date the last tenderer receives the standstill notice).

Reasons

Reasons for the award decision, including the criteria used to reach that decision and the “characteristics and relevant advantages” of the successful tenderer, must be given to unsuccessful tenderers at the beginning of the standstill period, and not, as previously, on request.

Suspending the procedure

The new Regulations provide for an automatic suspension of a contract award procedure where proceedings are started to challenge a decision, until either the court ends the suspension, or the first instance proceedings come to an end without any order continuing the suspension.

Declaration of ineffectiveness

Where a contract had been entered into, damages were previously the only remedy. Under the new-style Regulations, however, a court can declare a contract prospectively “ineffective” where there has been a serious breach of procurement rules (as defined in the Regulations) - for example where a contract is awarded without prior publication of a required contract notice in the Official Journal.

Avoidance?

A declaration can be avoided by the procuring entity publishing a “voluntary transparency notice” in the Official Journal – if the contract is not entered into within 10 days of publication and no challenge is made during that period.

Overriding reasons not to?

Courts will not make declarations of ineffectiveness if “overriding reasons relating to a general interest require that the effects of the contract should be maintained”. But “general interest” does not mean economic interests directly linked to the contract – for instance, costs from delays in signing the contract or starting the procurement procedure again, costs relating to legal obligations resulting from the ineffectiveness, or costs resulting from a change of entity performing the contract.

Ineffective framework agreements

Framework agreements may be declared ineffective for the same reasons. Any contracts awarded under them can also be declared ineffective if awarded in breach of the specified framework procurement requirements (as defined in the Regulations), so long as the estimated value of the contract exceeds the relevant threshold. A declaration will not be made if the procuring entity complies with the standstill notice requirements.

A declaration of ineffectiveness in respect of a framework agreement does not automatically apply to a contract issued under it. The court has to make a separate declaration for each relevant contract.

Financial penalties and contract shortening

Once a contract has been concluded, the additional remedies of financial penalties and contract shortening may apply. Financial penalties will always accompany declarations of ineffectiveness and, in the event of specified serious breaches where no entitlement to a declaration is established (or none is sought), or the overriding reasons apply, a court must impose a financial penalty (a civil penalty of an amount ordered by the court) or contract shortening (where the duration of the contract is shortened to an extent specified by the court) (or both). Any penalty or contract shortening must be “effective, proportionate and dissuasive”, but no further guidance on the amount of the penalty or the length of the shortening is given.

Time limits for claims

An economic operator (which for this purpose means anyone who was involved in the tender process or who would have wished to have been involved) has six months to bring an ineffectiveness claim but this can be reduced to 30 days where the procuring entity has published a contract award notice justifying why no prior notice was published, or has otherwise notified the economic operator of the conclusion of the contract and a summary of the relevant reasons.

Which contracts and procedures are caught by the new Regulations?

The new Regulations do not affect any contract award procedures commenced, or any awards of contracts under framework agreements, before 20 December 2009. For further details of these and the other changes see the Regulations at http://www.ogc.gov.uk/.

OGC guidance on procurement rules and development agreements

The case of Auroux v Roanne in the European Court of Justice (see issue 56) prompted some uncertainty about the applicability of the EU procurement rules to development agreements entered into by public authorities. The OGC has now issued preliminary guidance but it is neither definitive nor comprehensive, it depends on future feedback from the European Commission and, most importantly, it does not apply to agreements made by local authorities under s106 of the Town and Country Planning Act 1990 or to agreements in connection with the exercise of compulsory purchase powers. A further paper on this subject is to be published by the OGC “…in due course”.

ECJ to rule on EU conflict on procurement limitation period

According to Advocate-General Kokott’s opinion in the European Court of Justice case of C-406/08 Uniplex v UK, however, to comply with the principle of effectiveness (namely that national procedural rules must not render virtually impossible or excessively difficult the exercise of rights derived from Community law) the UK courts would invariably be required to exercise that discretion so that the three month period would not start to run until the time when the applicant knew or ought to have known of the alleged breach. And this could be some time after the relevant breach. The Court of Justice of the European Union (the CJEU, as it is now called) has an important choice to make in this case deciding which view to follow.