Regulation: public procurement - the new EU Remedies Directive

The Office of Government Commerce's (OGC) second consultation on the new Remedies Directive (2007/66/EC), which sought views on draft implementing Regulations, closed on 24 July 2009.

The OGC is now finalising the Regulations and preparing guidance in readiness for their implementation on 20 December 2009. The purpose of the new Remedies Directive is to improve the effectiveness of review procedures in the award of public contracts. The key changes to be introduced into UK law by the proposed Regulations are:

• Standstill rules: the current 10-day standstill period remains, although the Regulations clarify that the standstill period will start at midnight at the end of the day on which the notice is sent to unsuccessful bidders.
  
  The standstill letter must include more detailed information about the winning tender than is required under the present rules, although details of the precise requirements are awaited.
• Suspension of contract: once a legal challenge has been launched contract-making is suspended until the court makes an order or the proceedings are determined, discontinued or otherwise disposed of. This contrasts with the current rules which require an applicant to obtain an interim injunction during the standstill period to prevent the award of a contract.
• Ineffectiveness remedy: the court must rule a contract ineffective if:
  • it has been awarded without prior publication of an Office of Government Commerce (OJEU) notice (unless this is permitted by the procurement rules); or
  • there has been a failure to comply with the rules on standstill and suspension, combined with a breach of the procurement rules which has affected the claimant's chances of winning the contract.

An exception applies where the court is satisfied that for reasons of overriding public interest, the effects of the contract should be maintained.

Where the court declares a contract ineffective, the ineffectiveness will be prospective so that future obligations under it will be cancelled. The court must also impose a fine on the authority and may also award damages to the claimant.

The proposed Regulations also provide that where no declaration of ineffectiveness is made by reason of the overriding general interest or where, for example, there has been a breach of standstill procedures but no accompanying breach of the main procurement rules, the Court must nevertheless order the contract to be shortened, or impose a fine, or both.

The new rules represent a radical overhaul of the current public procurement regime. This is likely to encourage stricter compliance by public bodies while raising the risk of challenge when the rules are not followed.

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