Friday, 31 July 2015

Grounds for ineffectiveness under reg.99 Public Contracts Regulations 2015

Reg.99 of the Public Contracts Regulations 2015 (PCR2015) establishes the grounds for ineffectiveness of contracts already entered into by the time the Court determines whether there was a breach of the duty owed under regs.89 and 90 PCR2015. As reg.99(1) clearly states, there are three grounds for ineffectiveness, which map those foreseen in Art 2d of Directive 89/665, as amended by Directive 2007/66 (consolidated version available here).

First ground: lack of prior publication
Under reg.99(3) PCR2015, the first ground applies where the contract has been awarded without prior publication of a required contract notice. That is, in all instances were the award of the contract without prior publication was not allowed under the rules of Part 2 PCR2015--which mainly boils down to cases of improper use of the negotiated procedure without prior publication in cases not covered by reg.32 PCR2015.

This first ineffectiveness ground can be disapplied under reg.99(3) and (4) PCR2015 where a set of cumulative conditions are met, which amount to prove that the contracting authority erred in good faith in the assessment of the possibility to award the contract without prior publication and, in any case, gave transparency to its intention to award the contract (ie created equivalent transparency of the award of the contract). These conditions are: (a) the contracting authority considered the award of the contract without prior publication of a contract notice to be permitted by Part 2; (b) the contracting authority has had published in the Official Journal a voluntary transparency notice expressing its intention to enter into the contract [with the requirements of reg.99(4), of which the justification of the decision of the contracting authority to award the contract without prior publication of a contract notice is especially important]; and (c) the contract has not been entered into before the end of a period of at least 10 days beginning with the day after the date on which the voluntary transparency notice was published in the Official Journal [ie there has been a standstill period equivalent to that required by reg.87 PCR2015].

One of the key issues in the application of the exception in reg.99(3) PCR2015 is the assessment of the discretion/diligence of the contracting authority in its assessment of the possibility to award the contract without prior publication in order to meet the condition in reg.99(3)(a) PCR2015. This was discussed in Fastweb, C-19/13, EU:C:2014:2194, where the CJEU rejected the lenient approach recommended by AG Bot (who proposed a stringent test whereby recourse to the exception would only be declined if "the contracting authority has deliberately and intentionally infringed the rules on advertising and competitive procedure", which I criticised here) and established a clear duty of diligent assessment of the possibility to award without prior notice by the contracting authority (see paras 46-52, particularly 50, where the CJEU stressed that "the review body is under a duty to determine whether, when the contracting authority took the decision to award a contract by means of a negotiated procedure without prior publication of a contract notice, it acted diligently and whether it could legitimately hold that the conditions laid down in [Art 32 of Directive 2014/24/reg.32 PCR2015] were in fact satisfied"; emphasis added) [for discussion, see A Brown, "When will publication of a voluntary ex ante transparency notice provide protection against the remedy of contract ineffectiveness? Case C-19/13 Ministero dell'Interno v Fastweb SpA" (2015) 24(1) Public Procurement Law Review NA10-16]. 

Consequently, it seems clear to me that the interpretation of the conditions for the exception to the first ground of ineffectiveness to apply needs to be restrictive and ultimately rely on objective tests [see R Caranta, "Remedies in EU Public Contract Law: The Proceduralisation of EU Public Procurement Legislation" (2015) 8(1) Review of European Administrative Law 75, 83-84].

Second ground: contract entered into in violation of suspension obligation
As foreseen in reg.99(5)(a) PCR2015, the second ineffectiveness ground applies where the contracting authority has entered into the contract in violation of an existing suspension of its contract-making powers under: (i) reg.87 PCR2015 (the standstill period), (ii) reg.95 PCR2015 (contract-making suspended by challenge to award), or (iii) reg.96(1)(b) PCR2015 (interim order). 

In any of theses cases, under reg.99(5) PCR2015, three additional cumulative conditions need to be met for the ineffectiveness ground to apply: (1) there must also have been a breach of the duty owed to the economic operator in accordance with reg.89 or 90 PCR2015 in respect of obligations other than those imposed by reg.87 (the standstill period) and Chapter 6 of Part 3 PCR2015 (ie mainly, regs.95 and 96) [the 'additional breach']; (2) the breach of the existing suspension of the contracting authority's contract-making powers has deprived the economic operator of the possibility of starting proceedings in respect of that additional breach, or pursuing them to a proper conclusion, before the contract was entered into; and (3) that additional breach has affected the chances of the economic operator obtaining the contract. 

This set of additional breaches boils down to clarifying that a mere infringement of the suspension obligation does not trigger the ineffectiveness of the contract if the contracting authority complied scrupulously with the rules governing the tender. However, this does not mean that the contracting authority can take a free pass and disregard suspension obligations, nor that it cannot face other consequences derived from the infringement of the suspension obligation, such as a shortening of the duration of the contract and/or the payment of a financial penalty as required buy reg.102(2)(b) and (3) PCR2015 (commented in due course). Those can also be coupled with the payment of damages to the aggrieved tenderer, although they will probably be unlikely or reduced if it cannot prove that its chances of having obtained the contract were affected (which could ultimately reduce the incentive to claim under this ground, of course). Hence, the inapplication of the ground of ineffectiveness to the mere infringement of the suspension obligation does not come without consequences and contracting authorities need to take compliance with it seriously.

Third ground: framework agreements and dynamic purchasing systems
As established in reg.99(6) PCR2015, this last ground applies where all the following conditions are met: (a) the contract is based on a framework agreement or was awarded under a dynamic purchasing system; (b) the contract was awarded in breach of any requirement imposed by: (i) reg.33(11) PCR2015 (award of contracts based on framework agreements through re-opening of competition), or (ii) reg.34(21) to (24) PCR2015 (award of contracts under dynamic purchasing systems); and (c) the estimated value of the contract is equal to or greater than the relevant threshold mentioned in reg.5 PCR2015. This ground is relatively straightforward in theoretical terms but, practically, the problem for its application derives from the opacity or delayed transparency of the decisions to award contracts within framework agreements or under a dynamic purchasing system (see here). Thus, it may have limited practical relevance, unless economic operators involved in these schemes have access to the required information and keep the contracting authority under close scrutiny.

Reg.99(7) PCR2015 establishes an exception to this third ineffectiveness ground that is parallel to that in reg.99(3) and (4) [see above], whereby it does not apply if all the following are met: (a) the contracting authority considered the award of the contract to be in accordance with reg.33(11) PCR2015 or reg.34(21) to (24) PCR2015; (b) the contracting authority has, despite reg.86(5)(c) PCR2015, voluntarily complied with the requirements set out in regulation 86(1) to (4) (regarding notices of decisions to award a contract); and (c) the contract has not been entered into before the end of the standstill period. Given that it shares the basic elements of the exception to the first ground, an equally restrictive interpretation is required.

Thursday, 30 July 2015

Remedies where the contract has been entered into under reg.98 Public Contracts Regulations 2015

Reg.98 of the Public Contracts Regulations 2015 (PCR2015) adopts a similar structure as reg.97 and determines the remedies available where the contract has been entered into. The list of remedies available where there has been a breach of the duty owed to an economic operator in accordance with regs.89 or 90 and the contract has been entered into differs from that in reg.97 in that it is both more prescriptive and more inclusive.

Under reg.98(2) PCR2015, the Court (a) must, if it is satisfied that any of the grounds for ineffectiveness of reg.99 PCR2015 applies, make a declaration of ineffectiveness in respect of the contract unless reg.100 PCR2015 requires the Court not to do so; (b) must, where required by reg.102 PCR2015, impose penalties in accordance with that regulation; (c) may award damages to an economic operator which has suffered loss or damage as a consequence of the breach, regardless of whether the Court also makes a declaration of ineffectiveness or imposes penalties; and (d) must not order any other remedies.

Reg.98(3) PCR2015 clarifies that paragraph (2)(d) is subject to reg.103(3) and (9) (additional relief in respect of specific contracts where a framework agreement is ineffective) and does not prejudice any power of the Court under reg.101(3) or 102(12) (orders which supplement a declaration of ineffectiveness or a contract-shortening order). 

The set of remedies available where the contract has been entered into is sufficiently complex as to require its specification in several regulations, particularly as the eventual ineffectiveness of the contract improperly awarded is concerned. In my view, other than the issue of ineffectiveness and its effects (commented later in relation to other regulations), the most controversial remedy under reg.98 PCR2015 concerns the award of a compensation for loss or damage. In that regard, the issues recently discussed in Energy Solutions EU Ltd v Nuclear Decommissioning Authority [2015] EWHC 73 (TCC) concerning the discretion of the Court (not) to grant damages are most relevant.

In that regard, it is worth reminding that, in its Judgment of 23 January 2015 in Energy Solutions v NDA, the High Court ruled on a preliminary issue in a public procurement dispute and held that the review court has no discretion (not) to grant damages for losses resulting from a breach of the public procurement rules. In my view, the Energy Solutions v NDA Judgment should be criticised at least for two reasons: firstly, because it misinterprets the EU rules on public procurement remedies and their link with the general principle of State liability for breaches of EU law; and secondly, because it creates an analytical framework based on the commercial decisions of disappointed bidders that would result in excessive (strategic) claims for damages. My arguments are fully developed here.

In my view, given that it is possible to challenge award decisions beyond the mandatory stand-still period and, consequently, after the contract has been awarded in conditions that make its declaration of ineffectiveness difficult [see comment to reg.99(5) PCR2015], the Court should overrule Energy Solutions v NDA and go back to an interpretation whereby a judgment of ‘reasonableness’ of the claim (and, significantly, of the time at which the proceedings are started) is conducted on a case by case basis and damages are by no means awarded automatically. 

Granted, this interpretative option creates legal uncertainty and may trigger further litigation at EU level. Consequently, in the long run, it would be preferable to amend the Public Contracts Regulations 2015 so that the standstill period and the time-limit to initiate actions coincide. In that case, I would expect the standstill to be extended, rather than the time-limit to be reduced. One way or the other, though, the system needs fixing in order to close the gaps that can now trigger excessive (strategic) litigation.

Wednesday, 29 July 2015

Remedies where the contract has not been entered into under reg.97 Public Contracts Regulations 2015

Reg.97 of the Public Contracts Regulations 2015 (PCR2015) lists the remedies that can be provided by the Court where the contract has not been entered into. However, this regulation does not prejudice any other powers of the Court--and, consequently, the available remedies can be broader if the claimant can resort to a different legal basis.

Under reg.97 PCR2015, where the contract has not yet been entered into and once the Court determines that a decision or action taken by a contracting authority was in breach of the duty owed in accordance with reg.89 or 90 PCR2015--ie that there has been a breach of the applicable rules and that the aggrieved party had active standing to claim for such breach; the Court may do one or more of the following: (a) order the setting aside of the decision or action concerned; (b) order the contracting authority to amend any document; (c) award damages to an economic operator which has suffered loss or damage as a consequence of the breach. 

This set of remedies is clearly tailored towards correcting the infringement--either by setting it aside or having it modified--and providing the claimant with sufficient compensation for the loss or damage suffered as a consequence of the breach. Of these remedies, the one that tends to trigger more difficulties is the compensation for loss or damage (further discussed tomorrow). 

However, an important point that can be easily overseen is that of the interconnection of the remedies. In my view, given that reg.97 is exclusively concerned with cases where there is no issue of ineffectiveness of a contract and its effects, as well as the possibility to exclude them (see comment to regs.98 and ff), the proper interpretation of reg.97(2) PCR2015 is that the Court must always grant either a remedy under reg.97(2)(a) and set aside the the decision or action concerned, or a remedy under reg.97(2)(b) and order the contracting authority to amend any document; and in either of the cases, where appropriate, it can additionally grant compensation for loss or damage. However, damages cannot be granted as a self-standing remedy under reg.97(2)(c) PCR2015 and claims exclusively for damages should be dismissed. 

The reason for this interpretation lies in the ancillary nature of the compensation for loss or damage under the EU system of public procurement remedies, which has never been intended as a main remedy (see arguments here). In that regard, given that the contract has not yet been entered into, if the Court can eg set aside the challenged award decision and make the contracting authority go back to the procedural moment prior to the relevant breach of the duty owed to the claimant, there may well not be any (relevant) loss or damage to be compensated--other than legal costs, possibly. Hence, a systemic interpretation of reg.97 PCR2015 should restrict the award of compensation for loss or damages to very exceptional cases because, in the absence of contractual completion, the situation should be relatively easy to correct and claimant's interests should be satisfied by retracting the tender to the moment prior to the infringement of the duty owed by the contracting authority.

A different (also difficult) claim would be for the economic operator to intend to have the award decision amended in its favor under reg.97(2)(b) PCR2015; for instance, where the claim is that the scores were improperly calculated and a proper application of the scoring rules should have resulted in such award. In these cases, the Court may well be reluctant to carry out any such sort of "amendment" of the document reflecting the award decision and rather refer the case back to the contracting authority for such recalculation. 

However, in my view, nothing should oppose a direct finding that a contract should have been awarded to claimant if the Court has all necessary information to determine ipso facto that such would be the clear (unique) result of a proper application of the rules. Either way, where the Court is able to determine which bidder should have been awarded the contract, it should take all appropriate steps to ensure that the remedy used creates that result.

Tuesday, 28 July 2015

Interim orders under reg.96 Public Contracts Regulations 2015

Reg.96 of the Public Contracts Regulations 2015 (PCR2015) establishes rules for the adoption of interim measures aimed at securing the possibility of setting aside an award decision that has been challenged or, reversely, to lift the suspension of the contract-making powers of the contracting authority following such a challenge under reg.95 PCR2015. In any case, however, the adoption of interim measures cannot shorten the mandatory non-litigation related stand-still period (Alcatel stand-still) [reg.96(4)], and the limited scope of the interim measures foreseen in reg.96 PCR2015 does not prejudice any other powers of the Court [reg.96(5) PCR2015].

When it comes to interim measures concerned with the suspension of the contract-making powers of the contracting authority under reg.95(1) PCR2015, reg.96(1) PCR2015 clearly foresees that the Court may, where relevant, make an interim order bringing it to an end, as well as an order restoring or modifying that requirement [reg.96(1)(a) and (b)]. In order to do so, ie in order to bring the litigation-related stand-still obligation to an end, the Court must consider whether, if reg.95(1) PCR2015 were not applicable, it would be appropriate to make an interim order requiring the contracting authority to refrain from entering into the contract; and only if the Court considers that it would not be appropriate to make such an interim order may it make an order to bring it to an end [reg.96(2)]. 

For discussion of the highly contentious issue of the lifting of the automatic suspension obligation (now) derived from reg.95(1) PCR2015, see L Wisdom, "United Kingdom: automatic suspensions in the TCC: the cases of NATS and Group M" (2015) Public Procurement Law Review NA44-50; R Ashmore, "Fresh hope for a fresh award but realism must prevail: High Court upholds automatic suspension on contract-making in a public procurement action but finds no illegal award or material variation: R (Edenred (UK Group) Limited) v HM Treasury and others" (2015) Public Procurement Law Review NA88-93; and L Wisdom, "Another automatic suspension lifted in the TCC: Solent NHS Trust v Hampshire County Council" (2015) Public Procurement Law Review NA140-143. All these comments stress the link between lifting the suspension and confining the remedies available to the claimant to a compensation for damages (which will be discussed regarding regs.97 and 98).

The Court can also make an interim order suspending the procedure leading to the award of the contract, or the determination of the design contest, in relation to which the breach of the duty owed in accordance with reg.89 or 90 PCR2015 is alleged [reg.96(1)(c)]; or suspending the implementation of any decision or action taken by the contracting authority in the course of following such a procedure [reg.96(1)(d) PCR2015].

Reg.96(3) opens the possibility for the Court to require or impose undertakings or conditions in relation to the requirement to suspend the contract-making powers of the contracting authority. Its drafting is unnecessarily complex and may seem to limit the possibility to impose undertakings or conditions to cases linked to reg.95(1) PCR2015, which would make no sense because the tenor of that regulation is unconditional. Hence, in my view, the Court has full powers to impose undertakings or conditions whenever it considers them appropriate and the contract-making powers of the contracting authority are suspended (or remain suspended) as a result of the interim order.

Monday, 27 July 2015

Contract-making suspended by challenge to award decision under reg.95 Public Contracts Regulations 2015

As Pedro briefly discussed earlier today here, reg.95 of the Public Contracts Regulations 2015 (PCR2015) sets up the conditions under which a challenge to an award decision suspends any contract-making possibilities for the contracting authority--ie triggers a litigation-related stand-still obligation.  It is important to stress that reg.95(3) PCR2015 clarifies that this litigation-related stand-still obligation does not affect any of the obligations eventually imposed by reg.87 PCR2015 (ie the Alcatel or non-litigation related stand-still obligation). Therefore, a stand-still obligation derived from reg.95 can arise even if the Alcatel stand-still period was not applicable to the specific award decision or, if applicable, has elapsed; provided the conditions set out in reg.95(1) PCR2015 are met.

In that regard, under reg.95(1) PCR2015, such litigation-related stand-still obligation applies, and the contracting authority is required to refrain from entering into the contract, where a claim form has been issued in respect of a contracting authority’s decision to award the contract, the contracting authority has become aware that the claim form has been issued and that it relates to that decision, and the contract has not been entered into. 

Hence, this is an obligation that the contracting authority needs to comply with in good faith and in order to preempt the possibility of a successful challenge beyond the minimum Alcatel period (if any), should the contracting authority still not had taken the necessary steps to conclude the contract and get its performance started. It is, in my view, a sort of estoppel that prevents the contracting authority to rush to conclude a contract only after having become aware of a challenge of the previous award decision.

Reg.95(2) PCR2015 determines that such litigation-related stand-still obligation will remain until either the Court brings the requirement to an end by interim order under reg.96(1)(a) PCR2015 (discussed tomorrow); or the proceedings at first instance are determined, discontinued or otherwise disposed of and no order has been made continuing the requirement (for example in connection with an appeal or the possibility of an appeal).

In my view, this is an important procedural mechanism and imposes clear incentives on contracting authorities to enter into contracts promptly after the expiry of the Alcatel stand-still obligation, where it applies [see reg.86 PCR2015] and, generally, once it is clear that there is no need to wait any further before proceeding to conclusion and performance.

Monday, 20 July 2015

Short break for holidays

Pedro Telles and I are taking a break to accommodate some much needed holidays. Not sure what he will do, but I intend to remain off-line for a change.

Our procurement tennis will resume on July 27 (not such a long break after all...).

Happy holidays everyone!

Friday, 17 July 2015

Starting proceedings under reg.94 Public Contracts Regulations 2015

Reg.94 of the Public Contracts Regulations 2015 (PCR2015) establishes rules for starting proceedings under Chapter 6 PCR2015. Generally, the economic operator must serve the claim form on the contracting authority within 7 days after the date of issue where proceedings are started [reg.94(1)]. For these purposes, “serve” means serve in accordance with rules of court, and for the purposes of this regulation a claim form is deemed to be served on the day on which it is deemed by rules of court to be served [reg.94(5)].
 
However, there is a requirement for speedier service of the claim where ineffectiveness or a prohibition on concluding a not yet performed contract are involved. This covers cases where proceedings are started (i) seeking a declaration of ineffectiveness, or (ii) alleging a breach of (a) the standstill period imposed in reg.87 PCR2015, (b) suspension derived from a challenge to the award decision as per reg.95 PCR2015, or (c) an obligation derived from an interim measure restoring or modifying the requirement to suspend as per reg.96(1)(b) PCR2015, where the contract has not been fully performed [reg.94(2) PCR2015].

In those cases, the economic operator must, as soon as practicable, send a copy of the claim form to each person, other than the contracting authority, who is a party to the contract in question [reg.94(3) PCR2015]. In that regard, the contracting authority must, as soon as practicable, comply with any request from the economic operator for any information it may reasonably require for the purpose of complying such a duty to send a copy of the claim form to each person, other than the contracting authority, who is a party to the contract in question [reg.94(4) PCR2015].

These requirements make sense, given the relevance of ensuring that contracts are not executed when they are affected by a significant risk of ineffectiveness.

Thursday, 16 July 2015

Special time limits for seeking a declaration of ineffectiveness under Reg. 93 Public Contracts Regulations 2015

Reg.93 of the Public Contracts Regulations 2015 (PCR2015) establishes special time limits for seeking a declaration of ineffectiveness. In this case, proceedings still need to be started within 30 days [reg.93(2)(a)], but the relevant time when the clock starts ticking changes (see below). In any event, though, proceedings must be started within 6 months beginning with the day after the date on which the contract was entered into [reg.93(2)(b)]. For these purposes, proceedings are to be regarded as started when the claim form is issued [reg.93(7) PCR2015].

Therefore, the general rule is that ineffectiveness can be sought up to 6 months after the contract was entered into, except in two specific cases in which potential claimants can be seen as possessing specific information that triggers their duty to start procedures within 30 days from the relevant fact.

The first case concerns procedures where a relevant contract award notice has been published in the Official Journal of the European Union, in which case the relevant date is the day after the date on which the notice was published [reg.93(3)]. For that purpose, a contract award notice is relevant if, and only if the contract was awarded without prior publication of a contract notice; and the contract award notice includes justification of the decision of the contracting authority to award the contract without prior publication of a contract notice [reg.93(4) PCR2015]. 

The second case concerns procedures where the contracting authority has informed the economic operator of the conclusion of the contract, and a summary of the relevant reasons, in which case the relevant date is the day after the date on which the economic operator was informed of the conclusion or, if later, was informed of a summary of the relevant reasons [reg.93(5)].  Such “relevant reasons” means the reasons which the economic operator would have been entitled to receive in response to a request under reg.55(2) PCR2015 [reg.93(6)].

Wednesday, 15 July 2015

General time limits for starting proceedings under reg.92 Public Contracts Regulations 2015

Reg.92 of the Public Contracts Regulations 2015 (PCR2015) establishes the general time limits for starting proceedings to seek remedies other than ineffectiveness derived from breaches of Part 2 PCR2015 or EU actionable procurement rules [time limits for proceedings seeking ineffectiveness are established in reg.93 PCR2015]. 

In general, and in a simplified manner, proceedings must be started within 30 days beginning with the date when the economic operator first knew or ought to have known that grounds for starting the proceedings had arisen [reg.92(2)]. However, the Court may extend the time limits imposed where it considers that there is a good reason for doing so [reg.92(4)], but it must not exercise that power under so as to permit proceedings to be started more than 3 months after the date when the economic operator first knew or ought to have known that grounds for starting the proceedings had arisen [reg.92(5) PCR2015].

For discussion on the calculation of these time limits, see R Ashmore "Curing the "incurable"? The possibility of serving a technically defective claim form "out of time" as recognised in Heron Bros Limited v Central Bedfordshire Council" (2014) 23(4) Public Procurement Law Review NA134-NA139. Even if the case discussed was Irish (and hence subjected to different rules), the issue of knowledge in relation to time limits for bringing proceedings is addressed in an interesting way by P McGovern, "Application of the principle of transparency in stating criteria, and application of the concept of knowledge in relation to time limits for bringing proceedings: the case of Gaswise Limited v Dublin City Council" (2014) 23(5) Public Procurement Law Review NA145-NA148.

Tuesday, 14 July 2015

Enforcement of duties through the Court under Reg. 91 Public Contracts Regulations 2015

Reg.91 of the Public Contracts Regulations 2015 (PCR2015) determines that economic operators can enforce the duties owed to them under regs.89 and 90 through the Court and, in particular, reg.91(2) assigns competence for such proceedings to the High Court

Reg.91(1) PCR2015 determines that breach of the duty owed in accordance with reg.89 or 90 is actionable by any economic operator which, in consequence, suffers, or risks suffering, loss or damage. This is not necessarily limited to those that actually participated in the tender procedure and other economic operators can claim if they believe that the breach of the PCR2015 prevented them from participating [see P Craig and M Trybus, "England and Wales", in R Noguellou & U Stelkens, Comparative law on public contracts (Brussels, Bruylant, 2010) 339, 360].

Monday, 13 July 2015

Duty owed to economic operators from certain other (non-EEA) states under Reg. 90 Public Contracts Regulations 2015

Similarly to reg.89, reg.90 of the Public Contracts Regulations 2015 (PCR2015) creates a duty owed to economic operators from certain other (non-EEA) states whereby contracting authorities must comply with the provisions of Part 2 PCR2015; and any enforceable EU obligation in the field of public procurement in respect of a contract or design contest falling within the scope of Part 2 PCR2015.

Under reg.90(1) PCR2015, this duty is owed also to an economic operator from a GPA state, but only where the GPA applies to the procurement concerned; and to an economic operator which is not from an EEA state or a GPA state, but only if a relevant bilateral agreement applies. This comes to specify the duty of equal treatment and non-discrimination that the GPA and bilateral international trade agreements can create.

For the purposes of duties owed to economic operators from GPA state (ie any country, other than an EEA state, which at the relevant time is a signatory to the GPA), the GPA applies to a procurement if the procurement may result in the award of a contract of any description; and at the relevant time a GPA State has agreed with the EU that the GPA shall apply to a contract of that description, and the economic operator is from that GPA state [reg.90(2)]. This could have been expressed simply and more directly by reference to the schedules of coverage of the GPA (available here) as amended from time to time.

For the purposes of duties owed to third country economic operators, a relevant bilateral agreement applies if there is an international agreement, other than the GPA, by which the EU is bound; and in accordance with that agreement, the economic operator is, in respect of the procurement concerned, to be accorded remedies no less favourable than those accorded to economic operators from the EU in respect of matters falling within the scope of the duty owed in accordance with reg.89 PCR2015 [reg.90(3)]. 

In my view, reg.90(3) PCR2015 could have been expanded to bilateral agreements that may bind the UK without necessarily binding the EU (either currently or in the future, which is at least theoretically are possible, depending on how the EU exercises its trade competences in the future; for discussion, see Y Devuyst "European Union trade policy after the Lisbon Treaty: the Community method at work" in N Witzleb, A Martinez Arranz & P Winand (eds), The European Union and Global Engagement: Institutions, Policies and Challenges (Cheltenham, Edward Elgar, 2015) 138-158].

More generally, the normative question of whether all candidates and tenderers should be afforded the same protection regardless of their nationality remains open and is a complex issue in trade regulation. At the EU level, the proposal of the European Commission to potentially limit access to procurement markets (and hence, the available remedies) by third country economic operators has not gained as much traction as could have been expected when it was first proposed [for discussion, see K Dawar, "The Proposed ‘Buy European’ Procurement Regulation: An Analysis" (2012) 11 Global Trade Alert 89-97].

In my view, opting for universal protection of tenderers could incentivise participation by economic operators from jurisdictions without strong (legal) trade links with the UK and the EU and, more generally, it is hard to understand why contracting authorities would be allowed to disregard the legitimate expectations of economic operators genuinely interested in a public tender--which could strengthen competition and challenge incumbents in cosy relationships with the public sector. However, this is clearly a normative point and, as mentioned regarding reg.89 PCR2015, it is clearly not the UK (English) tradition to give extensive rights of claim against the public sector. Hence, the scope of protection devised in reg.90 PCR2105 needs to be interpreted in strict terms

Friday, 10 July 2015

Duty owed to economic operators from EEA states under Reg. 89 Public Contracts Regulations 2015

Reg.89 of the Public Contracts Regulations 2015 (PCR2015) sets the duty owed to economic operators from EEA states, whereby contracting authorities are required to comply with the provisions of Part 2 PCR2015; and any enforceable EU obligation in the field of public procurement in respect of a contract or design contest falling within the scope of Part 2 PCR2015. Reg89(2) PCR2015 explicitly states that such obligation is a duty owed to an economic operator from the United Kingdom or from another EEA state. 

For a continental lawyer, this is a regulation that does not make much sense and that seems superfluous. Under general conceptions of public law (at least in Spain and in other countries based on the French system of public law and public administration), public bodies (and other contracting entities governed by public law) must abide by the law and any infringement can result in individual rights to claim for any negative consequences of such a procedural or substantive breach. 

On the contrary, as far as I understand it, under English (and Welsh?) public/administrative law, individuals and undertakings only have a claim against the public sector if it breaches a duty owed to them. This has been made quite clear in a recent opinion of Lord Reed, in a recent Supreme Court decision where he stressed that:
A public authority can violate the rule of law without infringing the rights of any individual: if, for example, the duty which it fails to perform is not owed to any specific person, or the powers which it exceeds do not trespass upon property or other private rights. A rights-based approach to standing is therefore incompatible with the performance of the courts’ function [on review] of preserving the rule of law ... [AXA General Insurance Ltd. v HMAdvocate [2011] UKSC 46, [2012] 1 A.C. 868 at [169]–[170]; apud JNE Varuhas, “The Reformation of English Administrative Law? “Rights”, Rhetoric and Reality” (2013) 72 Cambridge Law Journal 369-413, 382; emphasis added].
Consequently, reg.89 PCR2015 is the cornerstone of the system of remedies envisaged in Chapter 6 PCR2015, as it creates the rights to claim on the basis of a breach of such duty for economic operators from EEA states. The extension of such duty (and ensuing right to claim) to economic operators from certain other states is established in reg.90 PCR2015, which will be discussed tomorrow.

The existence of broader possibilities to challenge procurement-related decisions without the coverage of a duty owed under regs.89 and 90 PCR2015 is a contentious issue under English law. For discussion, see SH Bailey, "Reflections on standing for judicial review in procurement cases" (2015) 24(4) Public Procurement Law Review 122-132. See also P Henty, "Can a trade union judicially review a breach of the PCRs?: R. (on the application of Unison) v NHS Wiltshire Primary Care Trust and others" (2012) 21(4) Public Procurement Law Review NA203-207; and SH Bailey, "Contracting and judicial review: R. (on the application of A) v Chief Constable of B Constabulary" (2013) 22(4) Public Procurement Law Review NA106-108.

Thursday, 9 July 2015

GC stresses need for balanced protection of confidential information in public procurement (T-536/11)

In its Judgment in European Dynamics Luxembourg and Others v Commission, T-536/11, EU:T:2015:476, the GC has dismissed a challenge against a European Commission's decision to limit the disclosure of (confidential) information made available to a disappointed tenderer. 

In the case at hand, the Commission had redacted some of the comments made by the evaluation team in order to protect business secrets of tenderers ranked higher than Evropaïki Dynamiki. The latter argued that, by doing so, the Commission failed to discharge its duty to give reasons for its decision not to rank Evropaïki Dynamiki first in the cascade mechanism that would determine call-offs within a framework agreement for software services. The GC dismissed Evropaïki Dynamiki's challenge on the basis that the Commission had struck an appropriate balance between Evropaïki Dynamiki's right to access the information needed to defend its legal rights and third party business interests.

Some of the issues discussed (again) by the GC are worth mentioning, particularly as the duty to disclose the relative merits of the bids submitted by the successful tenderers is concerned (for a recent discussion, in relation to the UK's transposition of disclosure and debriefing rules in Directive 2014/24, see here).  The GC, with a good sense of the need to balance the right to be informed of the reasons for an award decision with the rights of competitors to have their business secrets protected, dismissed Evropaïki Dynamiki's challenge on the following grounds:
48 ... although the applicants submit that the Commission must disclose the information concerning the other successful tenderers’ bids that could be considered to be confidential and state how those tenderers could be harmed by that disclosure, they merely make a general request, without indicating, in the part of the pleadings relating to that plea in law, the comments or the parts of the bids to which they refer, whose disclosure is allegedly necessary for effective legal and judicial protection.
49 It should be recalled that ... the contracting authority is entitled not to disclose certain details where disclosure would hinder application of the law, would be contrary to the public interest or would harm the legitimate business interests of public or private undertakings or could distort fair competition between those undertakings.
50 In addition, it is apparent from the case-law that, in the context of an action brought against a decision taken by a contracting authority in relation to a contract award procedure, the adversarial principle does not mean that the parties are entitled to unlimited and absolute access to all of the information relating to the award procedure concerned. On the contrary, that right of access must be balanced against the right of other economic operators to the protection of their confidential information and their business secrets. The principle of the protection of confidential information and of business secrets must be observed in such a way as to reconcile it with the requirements of effective legal protection and the rights of defence of the parties to the dispute and, in the case of judicial review, in such a way as to ensure that the proceedings as a whole accord with the right to a fair trial (see, to that effect, judgment of 23 November 2011 in bpost v Commission, T‑514/09, EU:T:2011:689, paragraph 25 and the case-law cited). It is apparent from the applicants’ detailed observations set out in their letter of 5 August 2011 that they had sufficient knowledge of the relative advantages of the other successful tenderers’ bids (T-536/11, paras 48 to 50, emphasis added).
The GC could not have expressed it in any clearer terms, and this line of reasoning clearly aims at reaching an appropriate balance between, on the one hand, facilitating access to procurement remedies by disclosing necessary information and, on the other hand, ensuring the protection of information which disclosure could have a negative effect on competition and/or harm legitimate business interests. 

This is a much needed restriction of the excessive level of transparency that oftentimes affects public procurement settings and, consequently, must be warmly welcomed [for discussion, see A Sanchez-Graells, The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives (University of Leicester School of Law Research Paper No. 13-11, 2013)].

Applications to the Court and their interpretation under reg.88 Public Contracts Regulations 2015

Reg.88 of the Public Contracts Regulations 2015 (PCR2015) establishes some rules for the interpretation of Chapter 6, which concerns applications to the Court on the basis of the facilitation of remedies derived from the notification obligations and standstill period of regs.86 and 87 PCR2015. The content of reg.88 PCR2015 does not deserve independent comments (cfr Pedro's views), as it simply introduces some precisions and cross-references that need to be taken into account when interpreting the rules of regs.89 to 104 PCR2015. Hence, those precisions will be taken into account and highlighted were relevant.

Wednesday, 8 July 2015

Facilitation of remedies under regs.85 to 87 Public Contracts Regulations 2015


Regs.85 to 87 of the Public Contracts Regulations 2015 (PCR2015) establish rules for the facilitation of remedies. They create both an obligation to issue notices of decisions to award a contract or conclude a framework agreement [reg.86] and to comply with a standstill period prior to entering into the contract or concluding the framework agreement [reg.87]. 

These regulations are not a result of the transposition of Directive 2014/24, but rather of Directive 89/665 as amended by Directive 2007/66 [for discussion, see the contributions to S Treumer & F Lichere (eds), Enforcement of the EU public procurement rules (Copenhagen, DJØF, 2011)]. Indeed, as stressed in the Explanatory Memorandum of the PCR2015, "[t]hese Regulations also re-enact the relevant provisions of the Remedies Directives (Directive 89/665/EEC as amended by Directive 2007/66/EC), on remedies and review procedures for public procurement, as implemented by the UK in the Public Contracts Regulations 2009" (para 2.1). 

In that regard, the Explanatory Memorandum also clarifies that "[t]he general approach has been to move the existing remedies rules from the 2006 Regulations into this instrument, with only comparatively minor amendments, including adjustments necessary to mesh with the new Regulations overall and some minor drafting improvements. However, we have taken the opportunity to provide for the remedies to be available not only to economic operators from non-EEA countries where covered by the WTO Agreement on Government Procurement (which the 2006 Regulations did) but also to those from other third countries where required by any other international agreement by which the EU is bound" (para 7.3). Consequently, there are no significant changes resulting from regs.85 to 87 PCR2015.

Reg.85 PCR2015 simply determines that the remedies regulated in Part 3 PCR2015 only apply to contracts covered by Part 2, ie contracts with a value above the EU thresholds [see regs. 3 and 5 PCR2015].

Notices under reg.86 PCR2015
Reg.86 PCR2015 creates an obligation for contracting authorities to send to each candidate and tenderer [as defined in reg.86(7) and (8)] a notice communicating its decision to award the contract or conclude the framework agreement [reg.86(1)]. The content of those notices is detailed in reg.86(2) to (5) PCR2015. This is the set of requirements that aim to provide the candidate or tenderer with sufficient information for it to assess whether to challenge the award decision, ultimately as a guarantee of their right effective judicial protection under Article 47 of the Charter of Fundamental Rights of the European Union (see here)

In my view, they are the crux of the problem of excessive disclosure of information in the public procurement setting, particularly in view of the obligation to disclose the name of the tenderer to be awarded the contract, or to become a party to the framework agreement [reg.86(2)(c) PCR2015; see discussion in A Sanchez-Graells, The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives (University of Leicester School of Law Research Paper No. 13-11, 2013) and here]. 

In that regard, it is important to stress that reg.86(6) PCR2015 creates a straightforward exception to disclosure of certain information whereby a contracting authority may withhold any information where the release of such information (a) would impede law enforcement or would otherwise be contrary to the public interest; (b) would prejudice the legitimate commercial interests of a particular economic operator, whether public or private; or (c) might prejudice fair competition between economic operators. This is coincidental with the same exception in reg.55(3) PCR2015 (see my comments on the use of such exception here). Pedro has a very different view and considers that "price disclosure should be part of the cost ... for suppliers to work in public procurement". I strongly disagree with him on this point, not least, because the actual cost of excessive transparency is unavoidably borne by contracting authorities and, ultimately, tax payers.

In my view, a proper understanding of the exception in reg.86(6) PCR2015 and the way it should be interpreted and applied, in conjunction with reg.18(2) and (3) PCR2015 establishing the principle of competition, is fundamental to avoid the current excess of transparency in public procurement and its knock-on effect on the ease of cartelisation of public procurement markets. Hence, contracting authorities will be well-advised to adopt strategies that minimise disclosure of information where possible and proportionate, so that competition is not damaged and incentives to collusion and bid rigging are not exacerbated [for background, see A Sanchez-Graells, “Prevention and Deterrence of Bid Rigging: A Look from the New EU Directive on Public Procurement”, in G Racca & C Yukins (eds), Integrity and Efficiency in Sustainable Public Contracts (Brussels, Bruylant, 2014) 171-198].

Reg.86(5) PCR2015 sets more limited exceptions whereby contracting authorities need not comply with reg.86(1) in any of the following cases: (a) where the contract or framework agreement is permitted by Part 2 to be awarded or concluded without prior publication of a contract notice; (b) where the only tenderer is the one who is to be awarded the contract or who is to become a party to the framework agreement, and there are no candidates; (c) where the contracting authority awards a contract under a framework agreement or a dynamic purchasing system. Regarding the latter exception, it is worth stressing that the opacity it creates regarding the working of framework agreements and dynamic purchasing systems may be excessive and that a system of quarterly reporting would be preferable (see here and, in relation to reg.50 PCR2015, here).

Standstill under reg.87 PCR2015
Reg.87 PCR2015 establishes the so called Alcatel standstill obligation for contracting authorities not to enter into the contract or framework agreement subjected to a reg.86 notice until a period of 10 or 15 days has elapsed, depending on the means of communication used to send the notices to the interested candidates and tenderers. 

For discussion of the specific rules on calculation of those time and the UK (Eng & W) case law on this topic, see M Trybus, "An Overview of the United Kingdom Pubic Procurement Review and Remedies System with an Emphasis on England and Wales", in S Treumer & F Lichere (eds), Enforcement of the EU public procurement rules (Copenhagen, DJØF, 2011) 201, 216-17; and  LRA Butler, "Below Threshold and Annex IIB Service Contracts in the United Kingdom: A Common Law Approach", in D Dragos & R Caranta (eds), Outside the EU procurement directives - Inside the Treaty? (Copenhagen, DJØF, 2012) 283, 326-29].

Tuesday, 7 July 2015

Reporting and documentation requirements under Reg. 84 Public Contracts Regulations 2015

Reg.84 of the Public Contracts Regulations 2015 (PCR2015) transposes the reporting and documentation requirements established by Art 84 of Directive 2014/24. This is an area where Dir 2014/24 ended up loosing much of the bite initially included in the 2011 Commission's Proposal, which would have set a requirement for the creation of a national oversight body and triggered significant interest from practitioners [remarkably, see the UK's Procurement Lawyers' Association working group on Art 84 of the proposal].

Indeed, the oversight and monitoring obligations that Member States need to discharge were limited to the requirements of Art 83 Dir 2014/24 whereby, in order to effectively ensure correct and efficient implementation, they need to guarantee that the tasks set out in that article are performed by one or more authorities, bodies or structures. Those tasks include: i) recurrent monitoring obligations, ii) public disclosure of the results of such monitoring [art 83(2) dir 2014/24], and iii) period reporting to the European Commission by 18 April 2017 and every three years thereafter [art 83(3) dir 2014/24]. The Commission will then use such country reports to update its implementation reports (see here).

Moreover, Member States shall ensure that information and guidance on the interpretation and application of EU public procurement law is available free of charge to assist contracting authorities and economic operators, in particular SMEs, in correctly applying the Union public procurement rules; and that support is available to contracting authorities with regard to planning and carrying out procurement procedures [art 83(4) dir 2014/24]. Member States shall also designate a point of reference for cooperation with the Commission as regards the application of public procurement legislation [art 83(5) dir 2014/24]. In England, this is fundamentally done by the Crown Commercial Service (CCS).

In order to enable the Member State to discharge such obligations, Dir 2014/24 imposes documentary obligations that trickle down to contracting authorities and that the PCR2015 replicate. Additionally to the obligations on retention of contractual documents [reg.83 PCR2015], reg.84 creates  reporting obligations for contracting authorities.

Under reg.84(1) PCR2015, contracting authorities need to draw up a written individual report for every contract or framework agreement covered by Part 2 PCR2015, and every time a dynamic purchasing system is established [for a practical guide to the content of such report's, see Bevan Brittan's byte size procurement update 19 here]. Such a report is however not required in respect of contracts based on framework agreements where these are concluded in accordance with regulation 33(7) or (8)(a) PCR2015 [reg.84(2)].

The report needs to have specific contents depending on the type of contract awarded [reg.84(1)], but contracting authorities can avoid repetition and refer to the contract award notice to the extent that such notice contains the required information [reg.84(3)]. These reports need to be made available to the European Commission upon request [reg.84(4)], as well as to the to the Cabinet Office or to such other body as the Cabinet Office may direct in connection with any functions which that body exercises for the purposes of Article 83 of Dir 2014/24 [reg.84(5) and see above]. 

Moreover, reg.84(6) PCR2015 imposes additional reporting obligations to the Cabinet Office, for the purpose of enabling the Cabinet Office to provide the Commission with information. Hence, beyond the contents of the report as per reg.84(1) PCR2015, contracting authorities need to be able to provide "such other information as the Cabinet Office may from time to time request" [reg.84(6)], which potentially creates a heavier reporting burden than that strictly derived from the rules in Dir 2014/24.

In that regard, though, it is important to stress that reg.84(7) to (9) PCR2015 transpose the general documentary requirements foreseen in Art 84(2) Dir 2014/24, whereby contracting authorities shall document the progress of all procurement procedures, whether or not those are conducted by electronic means. To that end, they shall ensure that they keep sufficient documentation to justify decisions taken in all stages of the procurement procedure, such as documentation on communications with economic operators and internal deliberations, preparation of the procurement documents, dialogue or negotiation if any, selection and award of the contract. The documentation shall be kept for a period of at least three years from the date of award of the contract. Consequently, diligent contracting authorities should not have difficulties in providing detailed reports on any matters arising from a well-documented procurement procedure.

It may be worth stressing that contracting authorities will need to protect confidential information as per reg.21 PCR2015, which will probably solely require them to make sure that the Cabinet Office, any other other body as the Cabinet Office may direct in connection with any functions which that body exercises for the purposes of Article 83 of Dir 2014/24 [and the European Commission] have procedures in place to guarantee the confidentiality of the sensitive parts of the reports.

Monday, 6 July 2015

Retention of contract copies under Reg. 83 Public Contracts Regulations 2015

Reg.83 of the Public Contracts Regulations 2015 (PCR2015) establishes rules on retention of contract copies aimed at complying with the documentary requirements of Article 83(6) of Directive 2014/24. According to these rules, contracting authorities shall, at least for the duration of the contract, keep copies of all concluded contracts with a value equal to or greater than 1,000,000 EUR in the case of public supply contracts or public service contracts; and 10,000,000 EUR in the case of public works contracts [reg.83(1)]. 
 
It is important to point out that the counter-value of those thresholds should be determined according to the Communication from the Commission on corresponding values of the thresholds of Directives 2004/17/EC, 2004/18/EC and 2009/81/EC of the European Parliament and of the Council [2013] OJ C 366/1, which sets them at £833,400 and £8,334,000 respectively.Given the great divergence in current value, it would probably be a good idea for the Commission to update its Communication sooner rather than later. 
 
In any case, the rule in reg.83(1) PCR2015 could have clarified that the relevant value for these purposes is to be determined, for example, at the moment of signature. However, given that the contract can be modified and that the value at signature rule is by mo means the only option, it may be a good idea for contracting authorities to retain copies of all concluded contracts in any case.

Reg.83(2) PCR2015 determines that contracting authorities shall grant access to those contracts, but access to specific documents or items of information may be denied to the extent and on the conditions provided for in the applicable EU or national rules on access to documents and data protection. This opens a can of worms regarding the obligations to disclose concluded contracts under freedom of information requests or any other transparency rules. 
 
My personal opinion has always been that disclosing concluded contracts in full is a bad idea due to the transparency it creates (see here for discussion). Hence, I would promote a careful assessment of the effects of disclosing this information and would strengthen the obligation of contracting authorities to comply by analogy with their duty to protect confidential and competition sensitive information under regs.21 and 86 PCR2015.