Time to prepare for the Remedies Directive

There are a number of strategies local authorities can use to avoid falling foul of the Remedies Directive, writes Simon McCann.

The Public Contracts (Amendment) Regulations 2009 SI No. 2992 implementing the EU Remedies Directive will come into force on 20 December, necessitating major changes in the way authorities run tenders. The EU’s intention is to crack down on ‘direct awards’ i.e. contracts let without advertisement, by making it easier to bring claims and increasing the penalties for getting it wrong. The economic downturn has also led to a noticeable rise in complaints, therefore authorities need to adapt their practices now to avoid claims.

The consequences of breaching the regulations are now more serious than ever. If grounds exist, a court must render contracts ineffective, and must impose fines. A court may also shorten contract terms and compensate the aggrieved bidder and third parties affected by the contract being rendered void.

The Regulations make three main changes; enhanced post-tender notice requirements, stronger ‘standstill’ provisions, and tougher remedies.

In respect of tenders which must be commenced by an OJEU notice, authorities must issue an ‘award decision notice’ to all who submitted bids. This must be done as soon as possible after making the award decision, and by the most rapid means possible. The notice must contain:

  • The award criteria;
  • The recipient’s and the winner’s scores;
  • Reasons for the decision;
  • The winner’s identity;
  • When the standstill period starts and ends, and the date when the contract may be entered into.

This is considerably more detail than authorities currently provide and therefore creates more risks. Getting it wrong can put any subsequent contract award at risk.

Bidders may request further reasons as to why they were unsuccessful. These must be given within 15 days. However, it is probably safer to give this information as well in the award decision notice, so that the authority has complied with all its obligations in one go.

Authorities cannot enter into a contract (where an award decision notice is required), without allowing a standstill period. The period ends at midnight on the 10th day after the date of the notice (15 days if not served by e-mail or fax). If the period ends on a non-working day, it must be extended to midnight on the next working day.

The most significant change is the seriousness of the sanctions for breaching the rules, which include ineffectiveness of the contract.

There are three grounds for ineffectiveness. The first is if the authority has not published an OJEU notice, when it should have done, unless the authority considered this was not required and placed a voluntary ‘transparency notice’ in the OJEU indicating its intention to award, and allowed a standstill period. Therefore, even if you believe that the contract does not have to be advertised, it pays to publish a transparency notice and observe a standstill period.

The second ground is where the authority has finalised a contract in breach of the standstill period. In addition, the authority must have breached a provision of the Regulations other than the standstill rules, and the claimant must have lost the chance of bringing proceedings before the contract was finalised, and the breach affected the claimant’s chances of winning the contract.

The third ground relates to frameworks, where the authority has breached the ‘mini-tender’ rules for awarding specific contracts. There is a defence where the authority considers that it has complied with these requirements, has issued an award decision notice, and has observed a standstill period.

The best defence to all these is greater transparency about the award process and reasons. Observing the notice and standstill requirements, even where not strictly necessary, will cut the risk of ineffectiveness dramatically.

If the contract has not been entered into when legal proceedings start, then the authority cannot enter into the contract until the court has heard the matter. The authority may apply to court to release the suspension and the court has wide discretion to release or continue the suspension, or impose undertakings and conditions. If a ground for ineffectiveness exists, the court can order the setting aside of any decision, the amendment of any document, and damages.

If the contract has been entered into, and a ground for ineffectiveness exists, then the court must declare the contract ineffective and impose a fine. The court may also award damages to the claimant and compensation to any other affected party (eg a winning bidder who has lost a contract as a result). The court however, cannot compensate third parties where the contract sets out the consequences of ineffectiveness. Therefore, contracts should now contain provisions to deal with ineffectiveness and limiting the authority’s liability.

As now, claims must be brought promptly and in any event within three months from the date when the breach arose (although courts are likely to allow more time where the claimant could not have been aware of the breach before time ran out). Courts however, may not extend time where ineffectiveness is sought as a remedy.

Special time limits apply where the claimant seeks ineffectiveness. If either the authority has complied with its notice and standstill obligations, or it has voluntarily done so where the tender process did not have to be commenced by an OJEU notice, then the time limit is 30 days from receipt of the award decision notice. In all other cases, it is six months from the date of finalising the contract.

In order meet the time limits, the claimant must start proceedings and serve a claim form on the authority. A mere complaint is not enough.

Where an ineffectiveness ground exists, the court only has limited power to decline to render a contract ineffective. This applies where there is an over-riding reason in the general interest. Mere economic reasons will not be enough. Urgency (e.g. a contract for vital medical equipment) is likely to be a strong reason. However, urgency caused by the authority’s own delay in tendering will not be a sufficient reason. If the court decides not to order ineffectiveness, it must impose a fine, and may shorten the contract’s duration.

The effect of ineffectiveness is prospective. Therefore already performed obligations will not be overturned, but unperformed obligations must be stopped.

Where a framework agreement is ineffective, then any specific contracts awarded under it could be ineffective, if legal proceedings start within the relevant time period after finalising those contracts.

The new Regulations will not apply to any tender process where an OJEU notice was published before 20 December, any framework set up before 20 December, or any contract awarded under a framework set up before 20 December.

Some tactics which may help to reduce the risk are:

  • Always publish an OJEU notice and observe the notice and standstill requirements, unless it is certain that you don’t have to;
  • If an OJEU notice was not published, consider publishing a ‘transparency notice’ and allowing a standstill period. Alternatively, publishing an award notice and observing the notice and standstill requirements can cut the risk period from six months to 30 days;
  • With major, high-value contracts, consider a six month delay to contract commencement (if timescales permit), so that the risk of ineffectiveness has passed before contract performance starts;
  • Include contract provisions dealing with ineffectiveness and limiting liability; and
  • Thoroughly review procurement procedures before 20 December to ensure they comply.

Simon McCann is a partner at Morgan Cole. He can be contacted via This email address is being protected from spambots. You need JavaScript enabled to view it..