December 2009

The OGC has published detailed guidance on the new Remedies Directive, in three parts:

• Part 1: About the rule change, including transitional provisions
• Part 2: The new rules on the standstill period (including additional guidance on the level of detail to be included in award notification letters)
• Part 3: The new remedies rules

Earlier this month the Scottish court gave an interesting judgment in the case of Sidey Ltd v Clackmannanshire Council & Anor. Readers will probably be aware that recent amendments to the Public Contracts Regulations 2006 have implemented the EC Remedies Directive in the UK and given the courts a power to declare public contracts “ineffective” in certain cases where there has been a breach of the procurement rules.

This Scottish decision shows that the courts may well exercise the power to declare public contract “ineffective”, even where the public contract was entered into before 20 December 2009, notwithstanding the fact that the new rules are stated not to have any effect on procurement processes commenced before 20 December 2009.

Briefly, in this case, the contracting authority voluntarily followed a procurement process, even though the contract was actually below the threshold for the application of the Regulations. There were breaches at the evaluation stage, and Sidey Ltd brought a challenge. The court upheld the challenge and ruled that the contract should be set aside, because no standstill provisions had been observed and therefore Sidey Ltd had had no opportunity to seek redress for the technical breach. As such, the court made its judgment as if the Remedies Directive were already in force.

It is true that the court was probably heavily influenced by the fact that the contracting authority admitted that there had been manifest errors at the evaluation stage which had led to the wrong result. Nonetheless the case does show that contracting authorities should not simply assume that the transitional provisions to the new rules will automatically protect public contracts dating from prior to 20 December. It also shows that if contracting authorities opt to follow a procurement process on a voluntary basis, then the courts are likely to treat the contract as if the rules applied in full.

The Public Contracts Regulations 2006 only apply to procurements where the value of the proposed public contract falls over a specified threshold (although the general requirements of non-discrimination, equality of treatment and transparency must still be respected for under-threshold contracts). There are different thresholds depending on whether it is a public works, public supply or public services contract. These thresholds will be as follows from 1 January 2010:

PUBLIC SUPPLY CONTRACTS
Contracting Authorities specified in Schedule 1 – £101,323 (€125,000)
Other Contracting Authorities – £156,442 (€193,000)
Indicative notices – £607,935 (€750,000)
Small Lots – £64,846 (€80,000)

PUBLIC WORKS CONTRACTS
Contracting Authorities specified in Schedule 1 – £3,927,260 (€4,845,000)
Other Contracting Authorities – £3,927,260 (€4,845,000)
Indicative notices – £3,927,260 (€4,845,000)
Small Lots – £810,580 (€1,000,000)

PUBLIC SERVICES CONTRACTS
Contracting Authorities specified in Schedule 1 – £101,323 (€125,000)
Other Contracting Authorities – £156,442 (€193,000)
Part B Services – £156,442 (€193,000)
Indicative notices – £607,935 (€750,000)
Small Lots – £64,846 (€80,000)

The new Remedies Directive coming into force on 20 December 2009 contains a remedy of ineffectiveness – a challenger may in certain circumstances apply to court to have a public contract declared ineffective. One of these circumstances is where the contract was awarded without any advertisement or competition, in contravention of the The Public Contracts Regulations 2006.

However, a safe harbour is available. Contracting authorities who believe they are justified in awarding a contract without competition can protect themselves against a claim for a declaration of ineffectiveness by publishing a voluntary transparency notice in the OJEU, and by observing a voluntary standstill period of ten days from the day after the date of the notice.

The standard form for these voluntary transparency notices has now been published and is available for download from the EU Commission.

The amended Remedies Directive comes into force on 20 December 2009. The new rules include more detail on the content of award decision notices sent to bidders, and a new power for courts to make public contracts ineffective in certain circumstances. These changes are being introduced via amendments to The Public Contracts Regulations 2006.

While it is clear that new procurements commenced on or after 20 December will be fully subject to the new rules, it is less obvious what is required of procurements that have already been started (but not yet finished) before 20 December.

It’s true that the UK regulations do state that "nothing in these Regulations affects any contract award procedure commenced before 20th December 2009”. The difficulty, however, is that the parent EC Directive from which these amendments come, and which takes precedence over them in terms of legal force, contains no transitional provisions at all, simply stating that “Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 20 December 2009.”

There must therefore be a risk for contracting authorities which conduct debriefs along the old lines after 20 December in reliance on the transitional provisions in the Regulations that a disgruntled supplier will allege that the Directive requires the standstill and review element to be run along the new lines after 20 December, even for procurement processes that were commenced before that date.

Contracting authorities may decide the safest option is to run all debriefs in accordance with the new rules after 20 December, regardless of whether they are strictly required to do so by the letter of the UK Regulations. This may the best option where there are relatively few suppliers who need to receive the new, more detailed award decision notices. Where there are a large number, though, this may not be an attractive route to take.