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Ask The Expert – Remedies Directive

Monday January 18th, 2010

By Eddie Regan, PASS Consultant

PASS consultant Eddie Regan answers your queries on the new Remedies Directive.

Q What is the new Remedies Directive?

A An important new Directive came into effect on 20 December 2009, signalling major changes in public procurement processes.

The European Union published the amended Remedies Directive 2007/66/EC on 20 December 2007. The main policy objectives of the Directive are the harmonisation of the standstill period and the introduction of ineffectiveness as a potential remedy for illegal direct award contracts. On 20 December 2009, the two-year time limit for its introduction into UK law expired, so buyers and suppliers need to be aware of what the new legislation means for them.

Q Why has the old Directive been amended?

A As a result of several consultations, the European Commission identified two particular concerns in relation to the operation of the previous Remedies Directive. Firstly, it found that legal remedies which could be invoked by bidders before the actual conclusion of a contract were not sufficiently effective in all Member States and required strengthening. Secondly, the Commission concluded that increased measures were required to combat the illegal direct award of contracts, which it views as the most serious violation of EC procurement rules.

The standstill period already exists in UK legislation. This was as a result of the European Court of Justice judgments in the ‘Alcatel’ case, which introduced a mandatory ten-day standstill period between the notification of an award decision and the date of contract conclusion for all procurements that are subject to the full scope of the EU Public Procurement Directives.

Q What are the most significant changes?

A The new Directive means some changes in the operation of the legislation, including a new ten-day timescale for notification of an award by electronic means and 15 days for other (non-electronic) means. There are also some derogations from the standstill period, such as when no OJEU notice is required or when there is only one tenderer.

The second significant amendment is the introduction of ineffectiveness in situations where a contracting authority has awarded a public contract in breach of the procurement rules (ie without prior transparency or awarding the contract without a competitive tender process). Ineffectiveness applies to both illegal direct awards and failures in the standstill period. Where ineffectiveness applies, the courts may set aside a contract if they deem it appropriate to do so.

In cases where the courts do not set aside a contract, they can apply alternative penalties, such as shortening the contract, awarding damages and civil financial penalties.  

These penalties have many intended effects, including improved rules governing remedies on the award of public contracts; ensuring that the procurement process becomes more transparent; further dissuading contracting authorities from awarding contracts illegally; and satisfactorily addressing situations where awards are made illegally.

One of the problematic areas identified under illegal direct awards is the misuse of the negotiated procedure without prior publication. Accordingly, the EU has introduced a new notice format called the Voluntary Ex Ante Transparency notice (VEAT).

Contracting authorities should publish a VEAT notice when a negotiated procedure without prior advertising is used. In normal instances of ineffectiveness, the challenge period is six months; however, this may be reduced to 30 days on publication of a VEAT notice. The Tracker service will incorporate VEAT notices, which will enable suppliers to challenge potential contract awards.

Q Is there any further literature on the new Directive?

A The Office of Government Commerce has published the new UK Public Contract (Amendment) Regulations 2009 – 2009 No 2992, which can be found at: www.opsi.gov.uk/si/si2009/uksi_20092992_en_1

In addition, the OGC has published a further interpretation of the Public Contract Regulations 2006 (as amended); this can be found at: www.bipsolutions.com/docstore/pdf/Regulation_32_unofficial_consolidation.pdf

For fuller information and listings on all the new Directives, please see:

www.ogc.gov.uk/procurement_policy_and_application_of_eu_rules_uk_regulations.asp 

The new Remedies Directive – what it really means 

  • The revised standstill period – which includes a new ten-day timescale for notification by electronic means and 15 days for other (non-electronic) means – will give unsuccessful bidders the time to examine the decision of the contracting authority.
  • It will also give the bidder time to decide whether or not it would be appropriate to initiate a review procedure, without the risk that the contract may be concluded so quickly as to limit their means of redress.
  • Also in the new Directive is the introduction of ineffectiveness as a potential remedy for illegal direct contract awards. Ineffectiveness applies to both illegal direct awards and failures in the standstill period and, where ineffectiveness applies, the courts may set aside a contract where deemed appropriate.
  • Prior to the adoption of the new Directive, the Remedies Directives only allowed a business which had suffered as a result of an illegally awarded contract to seek a review for damages, and did not permit the contract to be opened again to competition. The deterrent effect on contracting authorities of a potential damages review was limited. Now, the risk (both in a financial and reputational sense) of having to re-tender the contract should cause contracting authorities to think twice before awarding an illegal direct contract.
  • Note that the Directive includes a useful ‘safe harbour’ for contracting authorities where they consider that a contract does not fall within the procurement rules. If the contracting authority issues an ex ante award notice, explaining the reasons why it considered it was not necessary to comply with the procurement rules, then the provisions allowing the contract to be rendered ineffective will not apply.

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