Public procurement law regulates the process by which public
organisations enter into contracts for goods, works and services.
The Public Contracts (Scotland) Regulations 2006 ("the
Regulations") give effect in Scots law to the European
Commission's Consolidated Directive on Public Procurement
(2004/18/EC). Public procurement law effects a wide range of
organisations in the public sector and businesses in the private
The Regulations generally apply when the procuring body
satisfies the wide definition of being a "contracting
authority"; the contract being put out to tender is either for
public works, services or supplies; and the estimated value of the
contract, which cannot be deliberately split into smaller
contracts, equals or exceeds the relevant financial threshold.
Although below threshold contracts are, on the face of it, not
caught by the Regulations, there is case law which supports the
argument that where the contract is of "certain interest"
to suppliers located in other EU member states, contracting
authorities must still procure them in line with the general
principles outlined below – colloquially known as the
cross border interest argument.
The growing body of case law emphasises the importance of the
contracting authority abiding by the principles of
non-discrimination, equal treatment, transparency, proportionality
and mutual recognition throughout the procurement process when
seeking to identify the most economically advantageous tender.
These abstract principles can often prove difficult to define in
Where the preconditions are satisfied a contracting authority
must normally advertise the contract by notice in the Official
Journal of the European Union ("OJEU"). The
contracting authority has the option to follow a number of
procedures, depending on the circumstances, to award a contract:
the open procedure, the restricted procedure, the negotiated
procedure or through competitive dialogue.
Under the Regulations the contracting authority must circulate
the reasons for its decision to award a contract to the winning
bidder, the scores and the relative characteristics and advantages
of the winning bidder in an award decision notice. The contracting
authority must elect to allow a standstill period of either 10 or
15 days between the date the notification is sent to unsuccessful
bidders and the proposed date for entering into the contract.
It is during this period that an unsuccessful bidder must act.
Challenges can be raised by bidders on grounds which fall under the
umbrella allegation that the contracting authority has failed to
carry out the procurement process in compliance with the
Regulations. An action can be raised in either the appropriate
Sheriff Court or at the Court of Session.
In terms of remedies, once legal proceedings challenging the
contract award have been served the contracting authority is
automatically suspended from entering into a contract with the
winning bidder. It is then the contracting authority which
must apply to the court to set aside the automatic suspension.
When presented with such an application the Court is obliged to
consider what harm the unsuccessful bidder will suffer if the
suspension is recalled, as well as the position of the contracting
authority and the successful bidder, if the suspension were to
continue. Where there is a compelling case and a
consideration of the parties' positions favours the
unsuccessful bidder, the Court should be persuaded to continue the
automatic suspension until a substantive hearing. This may
have the result that the contracting authority will abandon the
tendering process rather than become embroiled in the Court
The Court has the power ultimately to order that the decision to
award the contract be set aside, to amend any document and to award
damages to a bidder which has suffered a loss as a consequence of a
breach of the Regulations.
In general, once the contract has been entered into, an
unsuccessful bidder will be left with the remedy of seeking damages
for loss of chance and/or loss of profit. It is possible to seek an
ineffectiveness order, effectively bringing the contract to an end;
however this is only available in limited circumstances. To date
there has been no reported case of a Scottish Court granting such
The information contained in this article is given for
general information only and does not constitute legal advice on
any specific matter.
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On 27 October 2014, the High Court issued a significant ruling which demonstrates that the Courts will stop a public contract being entered into where there is a possibility it may have been entered into illegally, without a valid contract notice and/or tender process.
In July this year we reported that NAM, the biggest oil and gas operator in the Netherlands had obtained from the European Commission a full exemption from the public procurement rules, which require contracts to be put out for competitive tender, in relation to oil and gas exploration and production activities in the Netherlands.
The recent ruling of the Court of Session in respect of the judicial review of a decision by a local authority to award a contract following a competitive tender has shed some light on when contracts valued below the procurement thresholds may be considered as having cross border interest.
The existence of an unimplemented planning permission however can cause uncertainty and therefore one of the changes made in terms of the Planning Act in Scotland 2006 was to reduce the duration of a full planning permission from 5 years to 3 years "unless the development to which the planning permission relates is begun before that expiration".
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