The Office of Government Commerce (OGC) has launched the second stage of its consultation on the implementation in England, Wales and Northern Ireland of the EU directive on remedies in public procurement (Directive). A consultation on the implementation for Scotland is expected shortly.
The Directive must be implemented by 20 December 2009 and responses to the OGC's current consultation are requested by 24 July 2009.
The current consultation contains draft Regulations which transpose the mandatory provisions of the Directive and some of the optional provisions following stakeholder comments from the first consultation (see our earlier Law-Now on the first stage consultation).
As well as seeking feedback on the draft Regulations, the OGC seeks views on transitional provisions i.e. whether the rules should apply only to new procurement processes beginning after 20 December 2009. Views are also sought on how to treat call-off contracts when the parent framework has been set aside as ineffective.
The consultation refers to both the public sector rules but notes that for the utilities sector the relevant issues are largely the same. Comments are invited in relation to both the utilities and public sector rules.
The draft Regulations
The standstill period
The draft Regulations transpose the following provisions:
- a mandatory suspension period during which the award decision can be challenged and interim measures, set aside of the decision and damages can be awarded (this provision was not optional);
- the duration of this standstill period, being 10 days for notice of award decision sent by fax or electronic communication; if other methods used to communicate the decision, either 15 days from the day following the date on which the notice of award decision was despatched or 10 days from the day following date of receipt of such notice, whichever is the later;
- the optional standstill derogations, such that no standstill obligation would apply where (i) no OJEU notice was required, (ii) there was only one tenderer concerned, and (iii) in respect of call-off contracts under a framework or dynamic purchasing system (this was only an option under the public sector rules).
New remedy of contractual "ineffectiveness"
The draft Regulations provide for the following:
- Prospective cancellation of the contract coupled with financial penalty rather than retrospective cancellation (which was not supported by any stakeholders);
- Contracts will be "ineffective" where one of three grounds apply:
- (i) the authority has not published a contract notice where this is required by the rules;
- (ii) the authority has not complied with the rules on review procedures (such as standstill obligation, the requirement to suspend the tender process pending court decision, or interim order of the court) but only where the infringement has deprived the bidder of the opportunity to pursue pre-contractual remedies and this is combined with a breach of the relevant procurement rules and that has affected the bidder's chances of winning the contract;
- (iii) in the case of a dynamic purchasing system or framework agreement, the authority has breached the rules on mini-competition or award of contracts under dynamic purchasing systems and the call-off exceeds the relevant threshold.
- The courts have the flexibility not to apply ineffectiveness where there are "good reasons" for maintaining the contract (which include overriding reasons relating to a general interest and exclude economic interests directly linked to the contract).
Alternative penalties
The draft Regulations implement the majority-favoured approach of transposing both options of contract shortening and fines as an alternative to ineffectiveness in certain circumstances.
The OGC believes that in the vast majority of cases, alternative penalties would be the more appropriate remedy where the breach of fault is the remedies procedural rules (standstill obligation, requirement to suspend the tender process pending court decision, or interim order of the court) rather than a substantive breach of the procurement rules.
Where ineffectiveness is an appropriate remedy, prospective cancellations will be coupled with a financial penalty.
The OGC has stated that it does not intend to develop specific criteria for the level of penalties or set a maximum fine level. This means the courts will have maximum flexibility in dealing with cases provided that penalties are "effective, proportionate and dissuasive".
Time-limit for bringing proceedings
Where a declaration of ineffectiveness is not sought, the review time limits of "promptly" or in any event 3 months from the date when ground for bringing the proceedings first arose, remain intact. The only amendment is that "promptly" can never mean less than 10/15 days.
Where a declaration of ineffectiveness is sought, the time-limits applicable are 30 days where the authority has publicised the award (either by notifying the tenderers of the decision or via the publishing of a contract award notice in the OJEU) or 6 months otherwise.
OGC seeks further comment
Stakeholders views are sought on the draft Regulations and, amongst other things:
- whether the rules should apply only to new procurement processes beginning after 20 December 2009;
- what suitable transitional provisions should be put in place to deal with (i) illegal direct awards; (ii) call-offs from a framework agreement or dynamic purchasing systems;
- what, if any, impact there should be on live call-off contracts when the parent framework agreement is declared ineffective;
- whether it is desirable to narrow the OGC's previous policy of informing all participants of the award decision (even those who were eliminated at pre-qualification stage) so that information relating to an award decision is distributed only to the bidders and candidates left in the process.
Please click here for the text of the consultation document. The draft Regulations and second draft impact assessment are available here. To discuss the implications for your business or get help in compiling your consultation response please contact us.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 07/05/2009.
