The court must make a ‘declaration of ineffectiveness’ if satisfied that one of three grounds applies (Regulation 99 of the PCR 2015):
- the authority has awarded a contract without prior publication of a contract notice, where one was required (i.e. makes an illegal direct award);
- the authority has failed to impose a standstill period or suspend the contract award following a challenge, which has prevented the challenger from raising proceedings or pursuing those proceedings to their proper conclusion before the contract was entered into, and there has also been a breach of the duty to comply with the other regulations governing the contract award procedure which has affected the chances of the economic operator obtaining the contract. (i.e. an aggravated breach when following an advertised tender process); or
- the authority has breached the rules on mini-competitions under a framework agreement or dynamic purchasing system and the value of the call-off contract is above the relevant threshold (i.e. an illegal call-off contract).
To protect against the risk of an ineffectiveness challenge to the lawful direct award of a contract, an authority can publish a Voluntary Ex-Ante Transparency (VEAT) notice on the UK e-notification service. The purpose of a VEAT notice is to notify the market of an intention and justification for a direct award. Provided the authority then observes a 10-day standstill period before entering into the contract, the first ground for ineffectiveness does not apply.
The third ground of ineffectiveness (illegal call-off contract) does not apply where the authority has communicated the contract award decision to bidders and observed a valid standstill period.
Otherwise, if one of the ineffectiveness grounds is satisfied, the court will make a declaration of ineffectiveness, setting aside the contract and rendering unenforceable all rights and obligations under it from the date of the order. The court may, however, decline to make a declaration of ineffectiveness where it is satisfied that overriding reasons relating to a general interest require that the enforceability of the rights and obligations arising from the contract should be maintained.
When a court declares a contract ineffective, the court must also impose a financial penalty on the authority (there is no upper limit) and deal with consequential matters, making such other orders as it considers necessary to address the consequences of the ineffectiveness order (see Regulation 102 of the PCR 2015).
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