Public Procurement

The Remedies Directive

Roger Cotton & Christine O’Neill

Brodies LLP

December 2009

Session 1

Introduction

• The Scottish Procurement Directorate and Brodies

• Series of 4 training sessions

• Guidance to be published

What we will cover

• Session 1 The old remedies and the new remedies

• Session 2 Standstill period and debriefing

• Session 3 Key areas of risk Managing the risks

Reminders - the legal framework

• Procurement processes are regulated by law

• Breaches have legal consequences

• Bidders have always had remedies available to them

• The remedies available change on 20 December 2009

Concepts and terminology

• Framework / contract (and dynamic purchasing systems)• OJEU • Pre-qualification phase• Tender phase• Standstill• Ineffectiveness• Economic operator

Remedies for breach of what?

• The two-tier nature of procurement law

• Tier 1: The Public Contracts (Scotland) Regulations 2006 The Utilities Contracts (Scotland) Regulations 2006

(implementing the procurement directives)

• Tier 2: The “general principles” derived from the Treaty of Rome

Which tier applies?

• The regulations: Above the financial thresholds Some types of service contract (Part A services)

• The general principles: Below the financial thresholds Other types of service contract (Part B services)

Old remedies

• Mandatory standstill

• Interruption to process

• Damages

• Complaints to EU Commission

• Single Point of Enquiry

Mandatory standstill (changes)

• Not a remedy in itself

• Facilitates other remedies

• Between decision and award

• 10 day minimum

• Rapid debrief

Interruptions to process (changes)

• Interdict – preventing the next step At any time during process - during standstill or before Suspends the process The balance of convenience

• Court orders to correct the process Order to set aside a decision Order to amend any document

Damages (continues)

• The primary remedy after contract award• Assessment of damages

Bid costs Loss of profit Cases to be considered later

Time limits (changes)

• “Promptly”• 3 months• Extension for “good reason”

EU Commission (continues)

• Any interested party can complain

• Complainer cannot insist on proceedings

• Commission action against UK government

• Fines and risk of forced termination

Single Point of Enquiry (continues)

• Scottish Government service

• No power to award remedies

• “Honest broker” – seeks resolution

• Relationship with more formal disputes

New remedies – please refer to...

Standstill (new)

• To be covered in session 2

Automatic suspension (new)

• Not a remedy in itself

• Proceedings served before contract award

• May not award until: proceedings disposed of; or court order

Interruptions to process (new)

• New guidance for the court on whether to suspend a process.

• The court may refuse where the negative consequences are likely to outweigh the benefits, having regard to: need for effective and rapid review consequences for all interests likely to be harmed public interest

Ineffectiveness (new)

• Worst breaches only direct award standstill or suspension failure + substantive breach flawed framework or DPS call-off, above threshold

• Cancels a contract after its award

• Prospective cancellation (not retrospective)

• Cancelled obligations must not be performed

Ineffectiveness - consequences

• Unwinding the result – the court must make an order

• The court must have regard to what the contract says about ineffectiveness

Avoiding ineffectiveness

• Ground 1: Direct award voluntary transparency in advance of award a new OJEU notice and a 10 day period

• Ground 2: Standstill breach plus substantive breach standstill compliance

• Ground 3: Flawed framework or DPS voluntary standstill equivalent

Arguing against ineffectiveness

• Overriding reasons for contract to continue

Not economic interests directly linked to contract, including costs of delay costs of new procedure costs of supplier change costs of legal obligations arising from ineffectiveness

Not indirect economic interests, unless consequences disproportionate

Ineffectiveness – time limits

• 6 months from award, unless:

• 30 days, if: contract award notice in OJEU; or notification to all economic operators

Fines and curtailment (new)

• Standstill breach, but no substantive breach Court must order a fine or curtailment

• Ineffectiveness Court must order a fine

• Refusal to grant ineffectiveness (i.e. overriding interest) Court must order a fine or curtailment

The extent of fines/curtailment

• The courts have discretion• “Effective, proportionate and dissuasive”

• The court must have regard to what the contract says about curtailment

• Payment is to the Scottish Consolidated Fund

The approach of the courts

• Lightways (interdict)• Aquatron (damages)• Letting International (framework interdict)• McLaughlin and Harvey (framework set-aside)• Henry Brothers Magherafelt (framework set-aside and

call-offs)• DR Plumbing (contract set-aside)• Federal Security Services (contract set-aside)• Federal Security Services (standstill)

Lightways

• Lighting maintenance contract

• A number of breaches

• Balance of convenience favoured the authority

• Price differential considered

Aquatron

• Fire fighting equipment

• Lost profit calculations

• Following on from the Harmon case

• Discounting profit – loss of chance

Lettings International

• Property Management framework arrangement

• Interdict against future contracts

• Case did not decide the remedy No set-aside Addition to panel?

McLaughlin and Harvey

• Construction framework arrangement

• Framework set aside

• Distinction between a “contract” and a “framework”

• Damages an inferior remedy

• Public policy reasons

Henry Brothers (Magherafelt)

• Construction framework arrangement

• Framework set aside

• Contracts already awarded allowed to stand

Setting aside the contract

• What the old regulations say:

“the Court shall not have power to order any remedy other than an award of damages in respect of a breach ... if the contract in relation to which the breach occurred has been entered into”

DR Plumbing

• Contract for central heating installation

• Standstill period not implemented

• Interim interdict – balance of convenience

• Set aside of “purported” contract

Federal Security Services

• Contract for security services

• Contract awarded• What does “contract” mean?

• Set aside of “purported” contract

Federal Security Services (again)

• For a Part B services contract, only certain regulations apply.

• The standstill provisions do not apply• Contract for security services• Part B “residual” services

• General principles demand a standstill period• “Exceptional contracts”

Conclusions

• “The approach of the courts to breaches of procurement law, and their willingness to look to make awards to redress unfairness, mean that although the implementation of the remedies directive is intended to set out clearly what is required, and what is possible, uncertainty will remain”.

Public Procurement contacts

Roger Cotton: roger.cotton@brodies.com

0131 656 0129

Christine O’Neill: christine.oneill@brodies.com

0131 656 0286

ScottishProcurementDirectorate@Scotland.gsi.gov.uk

0141 242 5921