Update: new remedies directive: OGC launches second consultation

26 June 2009

Roger Bickerstaff, Peter Elliott, Hazel Grant

The 2007 Remedies Directive gives bidders significantly improved remedies, in particular in terms of being able to set aside award decisions, although Member States have considerable flexibility in implementation in a number of key areas.  In the UK, the Office of Government Commerce (OGC) has published the results of its first consultation exercise and launched its second and final consultation on implementation in the UK. 

Current position and the new Remedies Directive

Under the existing remedies regime (implemented in the UK by the Public Contracts Regulations 2006 and Utilities Contracts Regulations 2006), bidders’ remedies in the UK can consist of damages and/or injunctive relief. 

In many countries, including the UK, a contract cannot be set aside once it has been entered into.  As a result, the 2006 Regulations introduced the concept of a minimum 10 day “standstill” period in which contracting authorities would have to let bidders know of the proposed award decision and provide a degree of additional information.  Bidders can then seek an injunction in the standstill period, before the contract is entered into. 

This approach, however, only applies to full, competed procurements.  It does not cover single tender contracts, contracts placed under frameworks or partially regulated contracts such as low value contracts, concessions and Part B services contracts, and does not provide effective remedies for failures to comply with the standstill requirements where they apply.

The position is similar in large parts of the EU.  As a result, the new remedies directive[1] (the Directive), which is to be implemented into national law by 20 December 2009, sets out a number of major new changes.  In broad terms:

  • courts will no longer be restricted to awarding compensation as remedy to an improperly concluded contract and, with certain carve outs and (usually) a six month time limit, contracts may be set aside even once entered into;

  • where a contracting authority has carried out an appropriate notification and “standstill” exercise, the set aside right can be avoided;

  • fines or the shortening of contract terms may be used to penalise contracting authorities for a remedies-oriented procedural breach (e.g. breach of the standstill period) or in other situations where a contracting authority can argue against in a contract being set aside (e.g., major public interest situations).

Member States have considerable flexibility in a number of areas including when set aside would apply, how it applies and a number of significant procedural points.

Consultation process

The OGC is carrying out a two-stage consultation process on the implementation of the Directive.   On 30 April 2009 the OGC launched the second consultation and published the results of the first consultation and its policy decisions coming out of that process.

The OGC’s policy decisions coming out of the first consultation are, in summary:

  • The UK will implement the derogations so that there is no mandatory standstill for contracts where: (i) where no OJEU notice is required; (ii) where there is only one bidder; or (iii) where the contract is ‘called-off’ from a framework agreement (public sector only) or a dynamic purchasing system.

  • Where a contract is declared ineffective, this will lead to prospective (rather than retrospective) cancellation, coupled with alternative penalties.

  • Where there has been a breach of the new notice/procedural requirements alone, the UK will offer alternative penalties (contract shortening or fines), rather than making the contract ineffective. 

Although the OGC has formed its view on many of the key policy issues, it is now consulting on the proposed text of the draft Regulations and a number of significant issues, including in particular the transitional arrangements to the new rules, what do with call-off contracts under an ineffective framework and certain arrangements in relation to dynamic purchasing systems.

The second consultation process will be open until 24 July 2009 and more information on all of the above can be found by clicking here.

Fewer than 50 organisations responded to the first consultation, and if this is the case in the second consultation it offers organisations the real prospect of the OGC giving their views serious consideration.  Stakeholders are invited not only to offer their views but also their reasons for coming to that view.  Judging by the OGC’s comments in the first consultation, views which are not supported by cogent reasoning are likely to be ignored.

[1] Directive 2007/66/EC