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Public procurement remedies made more effective

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Emily Bourne

Senior PSL

London

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16 December 2009

The new Public Procurement Remedies Directive must be implemented by Member States by 20 December 2009. We review the main changes introduced by the Directive and advise as to good procurement housekeeping practices.

Introduction

Over two years ago, on 15 November 2007, a new directive (Directive 2007/66) was adopted which amended the EU rules on remedies in public procurement. It is only later this month, however, that the full effects of the revised rules will be felt across the European Union since Member States have had until 20 December 2009 to implement the changes into their national laws. The goal is to create a more effective set of legal remedies than currently prescribed by the Remedies Directives (Directive 89/665 in relation to public sector contracts and Directive 92/13  in relation to utility contracts), thereby improving the options for unsuccessful bidders and potential tenderers and ultimately ensuring that contracting authorities obtain better value for money. The new rules confirm yet again that it is also in the interest of the successful bidder (and parties related to the bidder, such as its lenders) to require a procurement compliant process.

What are the main changes?

Immediately following the adoption of the new Directive, we produced an article "Public Procurement Remedies Directives: Revisions Adopted " which set out the main changes introduced. Below is a reminder of what those are.

Standstill

Improving unsuccessful bidder's rights to challenge award decisions, the new Directive codifies the "standstill procedure", ensuring future certainty and consistency of application of the standstill period post the ECJ's 1998 ruling in Alcatel. A new provision prevents contracting authorities from concluding a contract before the end of 10 calendar days after the notification of its decision to award the contract (15 days if the notice is not faxed or sent electronically).

The notification, giving the "characteristics and relative advantages of the tender selected" and the name of the successful tenderer, must be sent to tenderers "concerned". This is a potentially broad group possibly including tenderers excluded prior to the final stage of the procurement procedure. Going forward bidders should therefore have sufficient time and information to seek review and prevent a contract being signed. (Prior to the adoption of the new Directive, Member States could provide in their legislation that an illegal contract could not be overturned once signed, limiting remedies to damages.)

Subject to certain derogations, infringements of the standstill period could result in the contract being "rendered ineffective" following a challenge brought before a review body.

Ineffectiveness

Combating the illegal direct award of contracts, the new Directive introduces a new remedy of "ineffectiveness". National review bodies will be able to render signed contracts awarded in breach of the procurement rules (i.e. without prior transparency/OJEU notice and offering the contract out to competitive tender or in breach of the standstill provisions) "ineffective" after their conclusion.

Any application for ineffectiveness must be brought within 30 days of the contract award notice (or within six months of contract conclusion if no notice is published).

Generally a contracting authority found to be in breach will be required to re-tender the contract, this time in compliance with the procurement rules. Only in exceptional cases can the review body uphold the contract and apply alternative penalties (such as fines or shortening the contract duration) – where it considers that there are "overriding reasons relating to a general interest" to keep it in place.

Good housekeeping practices

As before, contracting authorities and/or successful tenderers are advised to:

  • be transparent about the tender process and the reasons for selection, disqualification and award decisions;
  • take great care to ensure that contracts are not illegally awarded directly, documenting the reasons why the procurement rules are thought not to apply and a summary of the procurement process;
  • watch out for changes during the procurement process and after contract award since "material" changes may trigger the need to re-advertise;
  • wait out the 30-day period before commencing work;
  • take advantage of a new "safe harbour". Where a contracting authority considers that the procurement rules do not apply, it can issue an ex ante notice in the OJEU (explaining its justification for doing so) expressing its intention to conclude a contract without following the procedures in those rules, abide by the standstill period and then safely conclude the contract, without risk of it being rendered ineffective; and
  • contractually provide for mutual rights and obligations if the contract is subsequently found to be ineffective.

New standard forms for the publication of notices in accordance with the new procedures have been published in the Official Journal (Regulation 1150/2009 ).

Implementation in Member States

In December 2007 we produced an insight  detailing how the new directive would impact on the national procurement rules of a number of EU Member States, namely Belgium, France, Germany, Italy, the Netherlands, Spain and the UK.

For an update on the position in any Member State, please be in touch with your usual Allen & Overy contact, your national A&O procurement contact or one of the contacts listed above.

Andrew Denny