Public Procurement Matters December 2009

Implementation of new remedies from 20 December 2009

The long-awaited implementing provisions of the 2007 Remedies Directive have now been published, and the Public Contracts (Amendment) Regulations 2009 will enter into force as of 20 December 2009 and essentially cover procurements commenced after that date. This creates a variety of changes to the Public Contracts Regulations 2006, which are all designed to improve public procurement procedures from the specific perspective of bidders’ rights.

The primary change is the introduction of a new remedy – a declaration of ineffectiveness – to be available from the court in situations of the perceived worst procurement infringements. This remedy will introduce two major new concepts to public procurement: firstly it will allow (for a limited period of time) contracts that have already been entered into to be stopped; and, secondly, it will be accompanied by a civil financial penalty (ie. a fine) to be imposed on the procuring authority concerned. These new possibilities are in stark contrast to the prevailing situation in which the only remedy available to a challenger once a contract is in force is damages, and an authority breaching procurement is never liable to any fines for misconduct of procurement.  As explained below, the changes look set to make a big difference to the general procurement landscape, and will particularly affect risk assessments and corresponding negotiations with economic operators when it is not absolutely clear whether the procurement rules apply at all, for example in some of the circumstances identified around land transfers, the “Roanne” judgement, and the OGC’s recent paper on that. 

Other new rules will have an important impact too, such as the automatic suspensive effect that bringing proceedings will have in future in any case where a decision to award has been taken but the contract has not yet been entered into. This will obviate any need to apply for a specific injunction in such a case and will rather put the onus on the procuring authority to apply to the court for a specific order overturning the suspension if it has good grounds to do so. We will now proceed to explain this and the other changes brought about by the new rules in more detail.

Suspensive effect of bringing proceedings where contract not already entered into
As noted above, the new rules bring about a new requirement for procuring authorities to refrain from entering into a contract where this has not already been done and proceedings have been issued challenging a decision to award to a particular operator based on a breach of the procurement rules.  This suspension will only end following a court order or other termination of the proceedings.  Previously, an economic operator bringing a challenge against a decision to award had to seek an injunction from the court if it wanted actually to prevent the contract from being entered into pending resolution of the main proceedings. This was an important consideration if, as has been the case, the only remedy once a contract has been entered into is damages. Seeking injunctions is costly and uncertain, which therefore dissuades parties from seeking them. General rules of law provide that injunctions are only available provided it is found that:

(i) there is a serious issue to be tried;

(ii) that damages may not be an adequate remedy for any interference with either party’s rights which may have occurred; and

(iii) the balance of convenience does not favour granting the injunction sought.

The new rules remove the need for a challenger to apply for an injunction and effectively places the burden on the procuring authority concerned to obtain an order waiving suspension, if it specifically wishes to enter into the contract immediately, notwithstanding the challenge (for example because the challenge is considered without merit and the contract is urgent). Effectively now, in obtaining an order waiving the suspension, procuring authorities will need to address similar considerations to stop the suspension, as a bidder would need to address previously to get an injunction, but in reverse. This places the burden firmly on the procuring authority rather than the other way round. This issue alone is expected to swing the balance of power in procurement challenges considerably towards the challenging bidder(s).