Client Update Bulletin

The Public Contracts (Amendment) Regulations 2009
The Utilities Contracts (Amendment) Regulations 2009

The Amendment Regulations

The Public Contracts (Amendment) Regulations 2009 and the Utilities Contracts (Amendment) Regulations 2009 came into force on 20 December 2009. These Regulations amend the existing Public Procurement Regulations to give effect to the new European Directive on Remedies. They apply to a significant amount of works and services procured by utilities and the public sector.

These Regulations aim to provide more effective remedies to disappointed tenderers in cases of breach.

The main changes introduced by the Regulations are:

• the introduction of a harmonised standstill period and new requirements for standstill notices;
• the introduction of new fines and penalties;
• a finding of 'ineffectiveness' for particularly serious breaches – this could render contractual relationships null and void;
• immediate suspension of the contract award procedure when proceedings are commenced.

The Regulations do not have retrospective effect. They only apply to procurements which commence on or after the 20 December 2009.

This briefing note outlines the key provisions contained within the Amendment Regulations and issues that arise.

1. New Standstill Provision and contract award information

A contracting authority must notify all bidders of its decision to award a contract. The notice must contain the following information:

• the criteria for the contract award;
• the score of the party receiving the notice;
• the score of the successful party;
• the reasons why a tenderer has been unsuccessful;
• the characteristics and advantages of the successful tender; and
• the legal effect of the standstill period.

The standstill periods are:

• notification to tenderers sent by fax/email – 10 days
• notification to tenderers sent by post – 15 days

The standstill period is not required if:

• there is only one tenderer;
• the contract is based on a framework agreement;
• the contract is awarded under a dynamic purchasing system; or
• there is no requirement for prior publication of a contract notice in the Official Journal.
  

2. Ineffectiveness Orders

The court can make an ineffectiveness order where one of the following three grounds apply:

1. the contracting authority has entered into a contract without prior publication in the Official Journal;

2. there has been a substantial breach of the procurement rules contained in the 2006 Regulations combined with a breach of the new procedural rules:

1. bidders were not notified of the contracting authority's decision;

2. the contracting authority failed to apply the standstill period; or

3. the contracting authority entered into a contract despite proceedings having been brought against it;

3. the award of an above threshold contract based on a framework agreement or awarded under a dynamic purchasing system breaches the procurement rules.  

If an ineffectiveness order is made, the court shall:

• impose a fine on the contracting authority; and
• make any other order that it considers appropriate. This may include shortening the length of the contract, cancelling ongoing obligations, or awarding damages.

Ineffectiveness claims must be made within particular time limits:

• 30 days from the date of publication of the Contract Award Notice; or
• 30 days from the date on which bidders were notified of the contracting authority's decision; or
• 6 months in any other case.

3. Suspending a Contract

Where proceedings are brought against a contracting authority, the court may suspend the contract award procedure and the implementation of any decision or action taken by the contracting authority.

It may then decide to:

• set aside a decision or action taken by a contracting authority;
• require the contracting authority to amend any document; and
• make an award of damages to a party who suffered loss as a consequence of the breach.

Observations

Prior to the introduction of the Amendment Regulations, there was uncertainty as to how long the standstill period ought to be, what information should be provided to unsuccessful tenderers and what the consequences were of failing to apply a standstill period. The Amendment Regulations clarify these issues to ensure uniformity across the EU. Furthermore, the introduction of the new standstill provision ensures that parties can no longer rush to conclude contracts to avoid them being set aside.

The new rules provide potential benefits for unsuccessful tenderers by improving review procedures and available remedies. Unsuccessful bidders will effectively have “more muscle” in their ability to challenge decisions of contracting authorities.

It is therefore essential that contracting authorities follow the correct procurement procedures to avoid the risk of a successful challenge. The implications for a contracting authority that gets the procurement procedures wrong are substantial in relation to both reputational and financial damage.

Further, the Regulations will have serious implications for contractors and funders whose contracts are the subject of an ineffectiveness order.  

Alan Boyd
Director
Tel +44 (0) 141 567 8649
Email alan.boyd@mcgrigors.com

Caroline Wallace
Senior Solicitor
Tel +44 (0) 141 567 8653
Email caroline.wallace@mcgrigors.com

Jamie McRorie
Senior Solicitor
Tel +44 (0) 141 567 8650
Email jamie.mcrorie@mcgrigors.com