Remedies Directive – same rights, more remedies?

by Kenny Ling

Previously the consequences of being in breach of the procurement rules were in certain circumstances limited, for instance if a public contract was already entered into, damages would be the only remedy available to a complainant. This position was changed by the Public Contracts (Amendment) Regulations 2009 (“the Amendment Regulations”) which came into force on 20 December 2009 and made the consequences of breaching the procurement rules more serious by introducing the remedy of “ineffectiveness”.

This note provides an overview on the remedy of ineffectiveness.
 
Ineffectiveness

There are three circumstances when a court must make a declaration of ineffectiveness:

1. Where there has been an award of a contract without prior publication of a contract notice where prior publication is required under the procurement rules.

2. Where a contract has been concluded without a standstill period having been applied or without adhering to the Suspension Obligation combined with a breach of procurement rules, which has reduced the claimant’s prospect of winning the contract.

3. Where a standstill period has not been applied for above threshold call-off contracts (or agreements further to a dynamic purchasing system) and the call-off rules have been breached.

Consequences of ineffectiveness

Where a declaration of ineffectiveness is made the contract is automatically cancelled from the date when the declaration is made. The court must also order the contracting authority to pay a civil financial penalty. The court may also award damages to a claimant that has suffered loss or damage as a consequence of the breach.

Where a declaration of ineffectiveness is not made because of overriding reasons or where, for instance, the standstill period had not been applied but there had been no accompanying breach of the procurement rules, the court must order either a shortening of the duration of a contract or payment of a civil financial penalty or both.

Where a declaration of ineffectiveness is made in respect of a framework agreement, the call-off contracts which have already been awarded do not automatically become ineffective. The court must make a separate declaration of ineffectiveness in respect of each call-off contract.

In summary, the Amendment Regulations have made the consequences for breaching procurement rules more serious and if you are uncertain as to how the Amendment Regulations operate or affect your organisation we would advise you to take legal advice.

Kenny Ling is a solicitor in Burnetts' construction and engineering team. Burnetts is the only law firm in Cumbria with specialist procurement lawyers who provide fulltime industry legal expertise.

Dec 2009