Things are changing in the world of public procurement. Developments in the law are shifting the balance of power towards bidders and away from contracting authorities.

The recently implemented Remedies Directive and today's decision from the Court of Justice in Uniplex v NHS Business Services Authority are the two reasons for this change in the landscape of public procurement challenges.

Tenderers have been reluctant to challenge the decisions of public authorities and utilities. This is changing. There are now more effective remedies for breaches of the rules, which are easier to enforce. There is also, at last, certainty for tenderers on when challenges can be brought.

The Court of Justice decision has clarified that a tenderer has three months from the date it knew, or ought to have known, about an infringement of the procurement rules to issue a claim.

The changes to the law mean a challenge might potentially be started months after a decision has been made. Public bodies and utilities would be wise to seek fresh legal advice on how to manage, practically and contractually, the risk of challenge to a procurement process.

Remedies Directive

The Public Contracts (Amendment) Regulations 2009 and the Utilities Contracts (Amendment) Regulations 2009 came into force on 20 December 2009. They apply to procurements commenced after that date and mark a significant change from the previous position, where aggrieved bidders were restricted to damages once a contract has been awarded in breach of the rules.

The Courts now have the power to declare a contract "ineffective", if it has been awarded in breach of certain fundamental EU public procurement rules. The Court must make a declaration of ineffectiveness where, in summary:

• the contract has been awarded without prior publication of a contract notice when one was required; or
• the contract has been awarded without the correct standstill provisions being applied, and the public body has breached a substantive duty (as opposed to a remedies related duty).

Where the Court makes a declaration of ineffectiveness, it must also order the contracting authority to pay a fine and may also award damages to the challenging tenderer.

The amending regulations have also significantly changed when information must be provided to unsuccessful bidders. The position now is that when a contracting authority announces its award decision, it must send a "standstill letter" to any bidders remaining in the procurement which sets out:

• the full reasons for the award decision, including the characteristics and relative advantage of the successful tender; and
• a precise statement of when the standstill period is expected to end.

This is a fundamental change to the content of the "standstill letter", and one which public bodies must get to grips with quickly, or risk challenges for breach of the standstill provisions.

The act of serving a claim form within the 10 day standstill period will trigger an automatic suspension of the procurement process. The contracting authority must then not conclude the contract until the Court has disposed of the claim which has been issued.

Uniplex v NHS Business Services Authority Case C-406/08

Before the Court of Justice's decision in Uniplex, any challenge to a procurement had to be commenced "promptly" and in any event within three months of the date of the alleged infringement of the procurement rules. This limitation period began to run even if a tenderer did not know that the infringement of the rules had taken place.

If a tenderer found out about a contracting authority's infringement more than three months after it had occurred (which is quite likely in any significant procurement exercise), any claim was by that stage out of time. In order for a claim to be allowed, the tenderer had to persuade the Court to exercise its discretion to extend the limitation period. Understandably, many challenges were not made because potential claimants did not want to take the risk of failing to persuade a court to exercise its discretion and so being landed with a huge bill for the other side's costs.

Firstly, the Court of Justice has held that the primary requirement in UK law that a claim be brought "promptly" does not comply with European Community law requirements of clarity, precision and predictability.

Secondly, as regards the date from which time should begin to run, the Court has held that the law must be interpreted to mean that the three month period only starts to run from the date the claimant knew, or ought to have known, of the infringement of the public procurement rules.

Contracting authorities are already under a duty to disclose all relevant information which will enable a tenderer to assert its rights. This requirement will need to be carefully adhered to moving forward. Failing to provide all information at the relevant stage in the procurement process (usually in the standstill letter at contract award) could lead to challenges being brought later when a tenderer does have this "knowledge".

Conclusion

This judgment in Uniplex, together with the implementation of the Remedies Directive, is a double whammy for contracting authorities. There is now the potential for concluded contracts to be declared ineffective and challenges could potentially be brought long after a procurement has been concluded.

On the other hand, aggrieved tenderers now know that they have three months from the date they know, or ought to know, about an infringement of the rules to bring a claim. They also have a wider armoury of remedies, which are easier to deploy, at their disposal.

 

If you would like any further information about any of the issues within the Alert please get in touch with your usual Osborne Clarke contact or Catherine Wolfenden.

 

These materials are provided for general purposes only. Osborne Clarke does not accept liability for the contents of these materials and legal advice should be taken in respect of a particular matter.