The Office of Government Commerce (OGC) has last week published a consultation document on the UK’s approach to the implementation of Directive 2007/66/EC on improving the effectiveness of appeal procedures concerning the award of public contracts (New Remedies Directive).
The New Remedies Directive must be implemented in all Member States by 20 December 2009. It amends the current directives on remedies for breach of the public procurement rules, Directives 89/665/EEC (public contracts) and 92/13/EEC (utilities contracts).
The OGC is seeking views on the implementation of those aspects of the New Remedies Directive which are optional. These relate particularly to the new contractual “ineffectiveness” remedy under which a contract may be challenged up to six months after it has been concluded, and the optional derogations from the mandatory standstill period between the award decision and contract conclusion. The deadline for responses on the consultation is 24 October 2008.
The standstill period
The UK procurement rules provide for a minimum 10-day standstill period between the date of dispatch of notice of the award decision and conclusion of the contract. This standstill period (which applies to both public contracts and utilities contracts) allows aggrieved bidders the opportunity to have the award decision reviewed and the tender process injuncted, before the contract is entered into.
Transposition of the New Remedies Directive will mean that the UK Regulations will have to be amended to allow for a longer standstill period (a minimum of 15 days) where the award decision has been sent to bidders by non-electronic means. The OGC is seeking views on whether these minimum time-periods are satisfactory or whether the UK rules should provide for longer periods.
The New Remedies Directive provides for optional derogations from the standstill period where: (i) an OJEU contract notice is not required (e.g. Part B services); or (ii) there is only one qualifying bidder. In relation to dynamic purchasing systems or framework agreements optional derogations would allow contracting authorities in the public sector to waive the standstill period in relation to above threshold call-offs and apply the “ineffectiveness” remedy instead. The OGC seeks views on the extent to which these optional derogations should be implemented in the UK.
The new remedy of contractual “ineffectiveness”
The most notable change introduced by the New Remedies Directive is the new remedy of contractual “ineffectiveness”. This enables an aggrieved bidder in certain circumstances to apply for the contract to be set aside up to six months after it has been concluded.
Contracts will be considered “ineffective” where:
(i) the authority has not published a contract notice in the OJEU where this is required by the rules; or
(ii) the authority has not complied with the rules on review procedures (such as the standstill obligation or the requirement that the tender process is suspended pending court decision) but only where this has deprived the bidder of the opportunity to pursue pre-contractual remedies and the breach of the rules has affected the bidder’s chances of winning the contract; or
(iii) in the case of a dynamic purchasing system or framework agreement, the authority has not observed the standstill obligation (where the derogation has not been implemented) and there has been an infringement of the rules on mini-competition.
The New Remedies Directive leaves it up to the Member States to clarify the consequences in national law of a contract being considered “ineffective”. There are two possibilities: retrospective cancellation of all contractual obligations or prospective cancellation of only those obligations yet to be performed.
The OGC recognises that there may be problems with retrospective cancellation in circumstances where a building or other infrastructure asset is already under construction. It therefore seeks views whether national law should provide for either retrospective or prospective cancellation or whether the courts should have a discretion between the two.
Alternative penalties
The OGC also seeks views on other issues including the availability of alternative or additional penalties (i.e. fines and the shortening of duration of contracts).
For further information on the OGC’s consultation, please click here.
