Links I Liked [Public Procurement]

1. Why is so much ICT procurement not appearing on ContractsFinder? SpendMatters reports on some research carried out by Innopsis on this topic. The smoking gun - which I agree with - is framework agreements. As argued here before, framework agreements are a black hole in what concerns contract data.

2. MOD publishes a refreshed SME policy.

3. The Public Contracts Regulations 2015 has been amended by the Public Procurement (Amendments, Repeals and Revocations) 2016. Great to see the that section 1 no longer refers to the Europe 2012 strategy, but one has to wonder - again - why the rush to ge tthe PCR2015 out the door in February last year.

4. Slovenia reforms its public procurement law, right before the deadline to transpose Directive 2014/24/EU.

5. Not all is good in Bulgarian public procurement. Further examples here.

Public Contracts Regulations 2015 - Game over for the daily commentary

Game over. The two scribes can finally lay down their pens - nay, keyboards - after finally concluding the daily commentary on the Public Contracts Regulations. It took Albert and I a little over 6 months to go through the 122 Regulations one by one, little by little. We concluded it today with a light volley for the match point.

You can find Albert's post mortem here. I suspect he's as happy to see the back of the drudgery of a daily commentary as I am. About time we finished this crazy project (right on the day before I go on vacation for a week, no less.)

As for my own post mortem, I am really glad we soldiered on to the end and managed to see the end of this particular project. Writing daily about a set topic is hard but, at the same time, rewarding. My original idea for this blog was to publish a couple of entries a week and I could not forecast doing these many in little over 6 months...But the work paid off. From a standing start in January to the end of August this blog is up to 550 unique visitors/month, a fine number for such a niche topic like public procurement. On a related note, the Public Procurement Podcast is doing quite well too, with around 150-200 unique visitors and 200+ subscribers to the podcast.

But as we close a chapter, another one opens. The output of this crazy idea of ours is about 50-70,000 words on the Public Contracts Regulation 2015. Although the current blogs look nice in our blogs, they probably could provide users with more added value. We have plans we intend to implement going forward but are not in a position to do so...just yet. In the meantime, if you have any ideas hit either of us on the commentary boxes.

Albert wants to write less about procurement in the near future and I cannot blame him. As for me, I want to write about more procurement stuff that is not related with the Regulations. There's a nice backlog of blogpost ideas on my Simplenote, waiting for me. Oh, and there will be more about legal education, startups and competition law.

Now, if you excuse me, I will be getting some sun tan over the next week or so.

Public Contracts Regulations 2015 - Part 5

Part 5 - REVOCATIONS, CONSEQUENTIAL AMENDMENTS, SAVINGS AND TRANSITIONAL PROVISIONS

Albert suggested that perhaps it would be better to finish off this season of procurement tennis with a general analysis of Part 5 (paragraphs 115 - 122) instead of going article by article and I agree with his view. Therefore this is "the end", the final entry for the #pubcontregs2015...

Part 5 starts with yet another typo, again providing a clear indication of how rushed the regulations were back in February. Regulation 115 epigraph reads "Interpretation of Part 6" which is non-existent, whereas its Paragraph 1 mentions that "[i]n this part [...]." This is simply a typo, but one which could have been avoided.

Most of the Regulations in Part 5 deal with the transition between previous Regulations and the current Public Contracts Regulations 2015 and do not warrant significant comment. Regulation 117 clarifies that nothing in this Regulations affects public works concessions as defined in the 2006 Regulations (although Regulation 116 revokes the 2006 Regulations tout court...)

Regulation 120 provides a temporary exemption for certain NHS procurements until April 18th 2016. This exemption covers procurement of healthcare services for the NHS within the meaning and scope of the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013. From April 2016 onwards, the Public Contracts Regulations 2015 apply instead except whereas there are specific exclusions.

Regulation 121 offers contracting authorities some flexibility on how to organise their procurement procedures until October 2018 when all procedures are to be done electronically. It is not clear to me if it applies only before each of the situations described in Regulation 1(a) to (c) occurs (ie, in the "transitional period") or if it applies after electronic procurement is supposed to be mandatory under each of those sub-paragraphs. I suspect only the first is compatible with Article 90(2) of Directive 2014/24/EU.

That's it.

 

Public Contracts Regulations 2015 - Regulation 114

Regulation 114 - General provisions applicable to Part 4

Regulation 114 assures that the underlying validity of a public contract is not affected by a "material failure" to comply with requirements set in this Part 4.

The second paragraph restates something that should be obvious and logic: nothing on Part 4 should be interpreted as demanding a disclosure of information considered by the contracting authority as being contrary to the security interests of the UK. One has to wonder how generous will be the interpretation by contracting authorities of this security exception to avoid compliance with some of the more onerous requirements of Part 4.

Public Contracts Regulations 2015 - Regulation 113

Regulation 113 - Payment of undisputed invoices within 30 days by contracting authorities, contractors and subcontractors

This Regulation establishes that valid and undisputed invoices should be paid within 30 days of their date by contracting authorities, contractors and subcontractors. This obligation should be included in the main contract and filters down through contractors and subcontractors on a "back-to-back" basis (paragraph 2). The Regulation goes further than just demanding explicit clauses to be included as in their absence, the 30 day payment obligation is to be considered as an implied term of contract (paragraph 6), in part defeating the purposes of the grandstanding claims in paragraph 2 that the obligation has to be explicitly included in the contract.

As usual, the obligation created by this Regulation may be subject to guidance by the Minister for the Cabinet Office, covering for example what constitutes a valid and undisputed invoice. Contracting authorities shall have regard for such guidance but there is no explicit consequence if they do not do so.

Not all contracting authorities are covered by the obligation on this Regulation however. Neither the procurement of health care servcies for the NHS under National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013(1) nor maintained schools or academies are subject to it.

Paragraph 7 imposes a heavy reporting obligation on contracting authorities, who have to publish "on the internet" information about its compliance with the obligation. The reporting obligation is clear cut, and in consequence compliance should be 100% but paragraph 7 is really looking to "name and shame" by forcing the disclosure of the proportion of invoices which were paid within 30 days and also the interest costs and payments incurred by non-compliance with the payment deadline. Although I have reservations about the underlying obligation* and consider the reporting obligations onerous, in terms of ensuring compliance, ensuring failure becomes public will increase the likelihood of compliance.

In my view the reporting obligation of paragraph 7 only covers the contracting authority and does not extend to contractors or subcontractors (and rightly so).

*It should be up to the market to determine how and when payments are due. Yes, I know the plight of sub-contractors all too well. Plus, depending on how the "valid and undisputed" elements will be developed in practice may have an impact in liability on complex contracts. There is also the possibility that contractors on large contracts will adopt a cautious approach of challenging invoices from sub-contractors either to maintain the current practice of delaying payments (easing their own cashflow) or to avoid liability risks.

Public Contracts Regulations 2015 - Regulation 112

Regulation 112 - Publication of information on Contracts Finder about contracts awarded

Regulation 112 caps Chapter 8 with a set of rules on how contracting authorities are to publish contract award information on Contracts Finder. As we are talking about below-thresholds contracts, the obligation this is a purely national obligation. As for the information that needs to be uploaded, it is fairly similar to what is required in Regulation 108 with a significant addition. Under Regulation 112, contracting authorities have to disclose if the contractor is an SME or VCSE.

There is no confusion on what constitutes an SME as paragraph 4 refers to the definitions on Commission Recommendation of 6 May 2003. As for what constitutes a VCSE, this is the first time I encounter this acronym which apparently stands for "voluntary, community and social enterprise". Paragraph 4 defines VCSE as "a non-governmental organisation that is value-driven and which principally reinvests its surpluses to further social, environmental or cultural objectives." Would it not be simpler to just refer to third-sector organisations? Or charities (although this is a more restricted definition)?

The usual restrictions on disclosing information (impeding law enforcement, affecting legitimate commercial interests or fair competition) which we have seen before are applicable here as well. 

Finally, guidance issued by the Minister for the Cabinet Office shall be regarded but there is no obligation to provide explanations or reports to the Minister in case it is not followed.

Public Contracts Regulations 2015 - Regulation 111

Regulation 111 - Assessing suitability etc

A contracting authority shall not include a pre-qualification stage in a procurement.

Regulation 111 bars contracting authorities from using pre-qualification stages in the procurement of some contracts covered by Chapter 8. This constitutes a remarkable change in practice as many contracting authorities routinely use detailed pre-qualification questionnaires (and stages) to weed out candidates before tenders are submitted. It is no coincidence the UK is the Member State where the restricted procedure is used more often in Europe in relative, if not absolute terms. Paragraph 4 defines pre-qualification stage as (i) the assessment of candidates suitability to perform the contract or (i) process of reducing the number of candidates in the procedure.

This Regulation makes do with the different thresholds for different types of contract (works, goods/services and social) as it is applicable to any contract with a value below the current financial thresholds for goods and services. Therefore it is applicable only in contracts with a value under £111,676 (central government contracting authority) or £172,514 (sub-central contracting authority), irrespective of its nature (paragraphs 2 and 3). In consequence, for works and social contracts between the aforementioned values and their respective thresholds  (£4,322,012 and £625,050 respectively) contracting authorities are free to use pre-qualification stages and associated questionnaires.

Even without a pre-qualification stage, suitability questions may be asked if relevant to the subject-matter of the procurement and proportionate (paragraph 5). Without two stages in the procedure this implies that said questions are going to be answered by all economic operators at what constitutes the tendering stage.

As with some previous regulations, contracting authorities shall "have regard" for all guidance produced by the Minister for the Cabinet Office. In case the contracting authority does not do so, that may constitute a "reportable deviation", a concept the Regulation leaves unexplained. Any "reportable deviations" are to be reported to the Cabinet Office. Once more, there appears to be no consequences if the contracting authority does not report said deviation to the Cabinet Office. All bark and no teeth.

There are rumours flying around that contracting authorities are not taking the opportunity to revise and update their practices accordingly and are just taking the same questions that would go into the pre-qualification questionnaire and calling it a day. Naturally that this goes against the Regulation objective as well as the proportionality principle. For contracting authorities wishing to know how they can improve their below threshold practices and get rid of the pre-qualification stage, check the work I have done with the Simplified Open Procedure on the Publications tab.

Personally, I am not surprised by how contracting authorities reacted to these new rules (carrying on as normal, that is) and it shows the limitations of legal mechanisms not backed up by clear guidance and, crucially, good review mechanisms. There is some guidance out already, but very basic. And as for review mechanisms, the use of judicial review in the UK is still the exception more than the rule, and looking to how Regulation 89 is drafted it appears that the whole of Chapter 6 only applies to contracts covered by Part 2. In consequence, what remedies are available for aggrieved bidders for contracts below thresholds?

The practical reaction to this Regulation also highlights how the law maker does not understand the "job to be done" of pre-qualification stages in the UK: they exist to filter/weed out candidates at the start as a means to reduce the workload further down the procurement procedure. They are also a risk management - nay, reduction - exercise by getting rid of economic operators as soon as possible before they become too involved in a procedure. That is why contracting authorities are still including the same suitability questions in the tender stage.

Although I usually prefer legislation to guidance, this is an area where more detailed guidance would actually be helpful for contracting authorities. Furthermore, this chapter should have been more ambitious and have a similar Regulation for the tender stage, imposing at least similar obligations in terms of proportionality between questions asked and the contract. It is not rocket science to simplify procurement procedures and tender stages (fewer questions, clearly worded questions, reasonable word limits, proper contract summary with the information suppliers need for a go/no go decision), but the Regulations should have given a nudge in that area as well. Missed opportunity.

Public Contracts Regulations 2015 - Regulations 110

Regulation 110 - Publication of contract opportunities on Contracts Finder

This Regulation establishes the obligation for contracting authorities to publish contract award opportunities on Contracts Finder, in addition to any other advertising means they may find appropriate. If the contracting authority does indeed use any other advertising means, the required information has to go on Contracts Finder within 24 hours of said publication (paragraph 3). Note that this regulation applies to any contract award opportunity (paragraph 6) and not to a more restricted definition such as contract notice. In consequence, even prospective information which would be considered as a prior information notice had it been covered by Part 2, is deemed an opportunity for the purposes of this Regulation (paragraph 7).  

Paragraph 5 defines what constitutes an advertisement of an opportunity. Anything activity that puts the contract opportunity out on the public domain or that targets a class of economic operators (i.e., a trade journal, Linkedin group etc) constitutes an advertisement and triggers the obligation to advertise on Contracts Finder and needs to be advertised for a non-disproportionate period of time (paragraph 9). On the other hand, if the information is passed to only a number of economic operators which have been selected for that purpose, then no advertisement is carried out and there is no obligation to upload the information to Contracts Finder. The textbook example here are framework agreements, singled out explicitly in paragraph 5(b).

As for what information should go on Contracts Finder, paragraph 8 sets the following requirements:

(a)the time by which any interested economic operator must respond if it wishes to be considered;

(b)how and to whom such an economic operator is to respond; and

(c)any other requirements for participating in the procurement.

The advertisement obligation covers also free and unrestricted access to any relevant documents (paragraph 12 and 15) and the whole period of the opportunity, so details cannot be taken out of Contracts Finder before the deadline (paragraphs 10 and 11). There are some exceptions to paragraph 12's disclosure obligation on paragraphs 13 and 14, namely if "relevant reasons" as conceived by Regulation 53(3) and (4) are applicable.

 

Finally, as with some previous regulations, according to paragraph 16, contracting authorities "shall have regard to any guidance" which the Minister for the Cabinet Office may decide to issue. This "compliance" obligation only covers guidance related to the form and manner of the publication on Contracts Finder and the definition of what is a non-disproportionate period of time for the opportunity to stay available on the website. 

Public Contracts Regulations 2015 - Regulation 109

Regulation 109 - Scope of Chapter 8

This Regulation defines the scope of Chapter 8 which applies to contracts with a value below the thresholds of Regulation 5. This chapter is particularly important as it constitutes the first time contracts below-thresholds are subject to regulations. As such, the rules contained within Chapter 8 are purely national.

Most of the Regulation deals with exceptions to the coverage rules as not all contracts excluded from application of Part 2 are subject to Chapter 8. Contracts that would not be covered for reasons other than value are not included for example. Contracts with a value below £10,000 are also excluded.

There are also exceptions dependant on the contracting authority and the contract value. As such, contracts valued at less than £25,000 and awarded by the NHS or a sub-central contracting authority are not covered either. The NHS benefits from another derogation, as the procurement of health care services for the purposes of the NHS as defined by National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013(1) are excluded as well.

Finally, Regulations 110 and 112 are not applicable when the contracting authority is a maintained school or an Academy.

Public Contracts Regulations 2015 - Regulation 108

Regulation 108 - Publication of information on Contracts Finder about contracts awarded

This Regulation establishes the obligation for contracting authorities to publish on Contracts Finder certain information about contract awards. This obligations kicks in once the contract award notice has been sent to the EU Publications Office or a contract has been awarded under a framework agreement. According to paragraph 4, contracting authorities have to comply within a "reasonable time", whatever that may be.

Paragraph 2 defines what information is to be submitted to Contracts Finder (name of contractor, date and value) but paragraph 3 establishes exceptions to this rule. These exceptions are identical to the ones found on Regulation 50(6) for the information that is to be submitted to the EU Publications Office. Speaking of which, the contract award notice must not be published on Contracts Finder before it is entitled to do so under Regulations 52(3) and (4).

As with the previous two Regulations, any guidance produced by the Minister for the Cabinet Office shall be regarded by contracting authorities (paragraphs 6-8). Contrary to Regulation 107 there is no indication of consequences for the contracting authority in case it does not do so.

Similarly to the submission of the tender notice of Regulation 106, it is possible that an automatic system may be put in place to scrape the contract award data from the EU Publications Office, saving the contracting authority the duplicate work of doing it again for Contracts Finder. Mandatory e-procurement cannot come fast enough.

 

Public Contracts Regulations 2015 - Regulation 107

Regulation 107 - Qualitative selection

Regulation 107 creates the obligation in contracting authorities of having "regard" for any guidance on qualitative selection produced by the Minister for the Cabinet Office. It is noteworthy to point out that Regulation 107 states contracting authorities shall regard the guidance, but does not establish a clear cut obligation to follow it. It seems all the Regulation demands is for evidence the guidance was regarded, ie taken into account in the decision-making process, not that it is followed. It remains to be seen what consequences await contracting authorities who end up disregarding such guidance, as paragraph 4 and 5 only create an obligation to report to the Cabinet Office why the guidance was not followed. Under this system, it appears that every single instance of non-compliance will lead to the reporting obligation. Call me old fashioned, but I  prefer rules/regulations over guidance.

Paragraph 2 defines what constitutes qualitative selection as any process that leads to economic operators being selected to take part in procurement procedures or excluded from them, carried out in accordance with Regulations 57 to 65.

Paragraph 3 hints as to what kind of guidance the Minister for the Cabinet Office may issue: getting rid of questionnaires or burdensome, excessive or disproportionate questions and how the assessment is to be carried. This list is not exhaustive.

Public Contracts Regulations 2015 - Regulation 106

Regulation 106 - Publication of information on Contracts Finder where contract notices are used

We can find in this Regulation the rules applicable to the publication of information on the national portal Contracts Finder. According to paragraph 1, after a contract notice is sent to publication to the EU Publications Office, the contracting authority shall make the same information available on Contracts Finder within 24 hours of being eligible to do so. The drafting of this paragraph could be improved as on a first read the paragraph appears to imply that the information needs to be published on Contracts Finder within 24 hours of being remitted to the EU Publications Office, but that is not the case.

Paragraph 2 sets what contract notice information must be published on Contracts Finder, such as the web address where documents can be found, timescales, points of contact and other requirements.

Paragraphs 3 to 5 creates an obligation of compliance for further guidance which may be issued by the Minister for the Cabinet Office regarding this matter. One of the situations where such guidance may be forthcoming is on the possibility of the Cabinet Office automatically extracting the data from the EU Publications Office without any intervention by the contracting authority.

At the time of writing (August 2015) the only guidance I could find related with publication of information on Contracts Finder was The Guidance on the new transparency requirements for publishing on Contracts Finder which does not tackle the issue of scraping the contract notice information automatically from the EU Publications Office. Interestingly enough, said guidance claims not to be statutory but is still to be observed by force of paragraph 3.

Public Contracts Regulations 2015 - Regulation 105

Regulation 105 - Scope of Chapter 7

This Regulation establishes the scope of Chapter 7 (Regulations 105 - 108). These Regulations establish some assorted rules about publication of contract and award notices on Contracts Finder and how to deal with qualitative selection for contracts that are covered by Part 2 (ie, contracts covered by Directive 2014/24/EU). They constitute a set of national rules supplementing Part 2 which transposed Directive 2014/24/EU into England and Wales.

Paragraph 2 defines two exceptions to the scope of this Chapter. First, health care services procurement within the meanings of the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013 are excluded. Second, Regulations 106 and 108 are not applicable to maintained schools or Academies.

Personally, as the obligations contained within the chapter are mostly to do with reporting/disseminating data more than anything else, it is puzzling why the NHS and some schools would be excluded from this obligation.

The lack of reference to contracting authorities based in Wales and Northern Ireland, might imply that they are covered as well by this reporting obligations. However, devolved functions under the Welsh Assembly Act 2006 and the Northern Ireland Act 1998 are excluded as per Regulation 1 paragraph 8.

 

 

Public Contracts Regulations 2015 - Regulation 104

Regulation 104 - Injunctions against the Crown

This Regulation is straightforward and does not warrant much comment from a procurement point of view. It authorises the Court to grant an injunction against the Crown irrespective of section 21 of the Crown Proceedings Act 1947.

 

Public Contracts Regulations 2015 - Regulation 103

Regulation 103 - Ineffectiveness etc. in relation to specific contracts based on a framework agreement

This Regulation defines rules that are applicable only to contracts tendered via a framework agreement. As in other regulations, this one starts with a definition, in this case of "specific contract" - any contract based on a framework and entered into before a declaration of ineffectiveness was made in relation to the framework agreement itself.

If a declaration of ineffectiveness is produced against the framework, contracts that have already been entered into are not affected automatically. The Regulation is very assertive in the way that the declarations of ineffectiveness may be produced.  There are only two ways to do so. As a first (paragraphs 3 to 5), the Court must declare  a claim must be brought against it within the time limits of Regulation 93 even if done so outside the action brought against the framework. This reference to the time limits of Regulation 93 is crucial as even in the most generous scenario, the action needs to be brought within 6 months of the contract being entered into. In a country with a tradition for longwinded contracts, this is an important limitation. Additionally, the exceptions of Regulation 100 also apply here, so there may be grounds to avoid declaring ineffective a contract tendered via a framework agreement.  Regulation 101 is also applicable (consequences of ineffectiveness) but there is no requirement to impose a financial penalty under Regulation 102(1), which makes sense assuming that the ineffectiveness of the framework agreement led to it.

Under this "ground for ineffectiveness" in case the Court decided no to declare the ineffectiveness of a specific contract due to the rules of paragraph 5, the contract may be shortened instead under paragraph s 9, 10 and 11. While paragraph 9 says "must be shortened" instead of "may be shortened", paragraph 10 leaves it to the discretion of the Court if contract is to shortened at all. According to this paragraph, the maximum extent that the contract may be shortened to depends on what the Court considers to be possible bearing into consideration the overriding reason that was used to forestall the declaration of ineffectiveness in the first place.

As an alternative possibility, this Regulation only allows for declarations of ineffectiveness against contracts specifically on the second (partially) and third grounds of ineffectiveness of Regulations 99, that is paragraphs (5)(6)(7).

Public Contracts Regulations 2015 - Regulation 102

Regulation 102 - Penalties in addition to, or instead of, ineffectiveness

Regulation 102 defines the situations whereby the Court may (or has to) apply penalties to the contracting authority for the breach of its duties which lead (or could have led) to a declaration of ineffectiveness. For the administrative civil lawyer in me, this Regulation reads like a small section on public sector liability which includes the penalties while guiding the Court on how to apply said penalties.

Paragraph 1 mandates the Court to determine the payment of a civil financial penalty to the contracting authority that has been subject to a declaration of ineffectiveness. This penalty of paragraph 1 constitutes a penalty in addition to ineffectiveness. Paragraphs 7 to 10 establish that the value of the penalty is to be paid to the Consolidated Fund, although the "route" of the payment depends on the contracting authority involved. The actual Consolidated Fund also depends on the authorities involved, as in Northern Ireland the payments are made into the Consolidated Fund of Northern Ireland. Wales, however, appears not to have a consolidated fund so it would seem that a Welsh contracting authority would have to send the civil financial penalty to the one operated by Central Government.

In what concerns penalties instead of ineffectiveness paragraphs 2 and 3 allows the Court to establish those in case that a declaration of ineffectiveness could not be produced due to Regulation 100 or in the situation whereby Regulations 87, 95 or 96(1)(b) have been breached and no declaration of ineffectiveness produced. If any of those two situations occur the Court must either order the shortening of the contract or a financial penalty and can even order both.

Both sets of penalties (in addition and in alternative to a declaration of ineffectiveness) are subject to constraints, namely that the penalty must be effective, proportionate and dissuasive (paragraph 4), with these limitations being applicable to all cases surrounding the same contract (paragraph 6). In consequence, paragraph 5 sets a number of parameters/factors that must be taken into account:

- seriousness of breach of duty (Regulation 89 or 90);

- behaviour by contracting authority;

- remaining duration of contract (in case the penalty is shortening its duration, as per paragraph 3).

Contract shortening is dealt with paragraphs 12 through 16. The Court may take any order to restore any imbalances created by the contract shortening. For example, it should deal with issues such as restitution and even compensation for the parties aggrieved (ie, contractor). It is not clear to me if this balancing out of competing interests also includes sub-contractors as the Regulation refers clearly on paragraph 13 to "parties to the contract." I see this issue coming about particularly on works contracts. By definition sub-contractors are not parties to the main contract, although in scenarios where direct payments are made, they may have a claim that they actually are.

Finally paragraphs 14 and 15 deal with situations whereby the parties have contractually agreed any provisions foreseeing the possibility of a contract shortening order being made. If this happens, the Court order must be limited to the objective it wanted to achieve vis the shortening of the contract.

Public Contracts Regulations 2015 - Regulation 101

Regulation 101 - The consequences of ineffectiveness

In Regulation 101 we can find the consequences of a declaration of ineffectiveness. Contrary to other jurisdictions where contracts are considered to be null and void from the start because the award decision was illegal, in England, Wales and Northern Ireland, ineffectiveness only produces effects for the future.

The main rule above is excepted when the court has previously issued any staying orders before the final ineffectiveness decision has been produced. In that scenario the contract ineffectiveness is deemed to start at the earlier date (at least that is my interpretation of paragraph 2 but I am not 100% sure).

In addition to the declaration of ineffectiveness the Court may make any order to address the particular circumstances of a case or deal with the matters arising from the declaration. Paragraph 4 provides a non-exhaustive list of examples covering potential issues such as restitution or compensation as to achieve a just outcome.

The final two paragraphs of this regulation refer to the situation whereby contracting authority and contractor agreed on contractual provisions to deal with a potential declaration of ineffectiveness. If that is the case, the Court's ability to issue orders under paragraphs 3 and 4 is limited to the extent of those contractual provisions being incompatible with the objectives of the declaration of ineffectiveness.

Public Contracts Regulations 2015 - Regulation 100

Regulation 100 - General interest grounds for not making a declaration of ineffectiveness

Regulation 99 establishes a number of limited grounds whereby the court may declare the ineffectiveness of a contract. Regulation 100 establishes exceptions to those grounds effectively mandating the court not to declare ineffectiveness if there are overriding reasons owing to a general interest requiring the contract to be maintained (paragraph 1(a)(b)).

The rest of the Regulation is focused on helping the court establishing parameters to determine overriding reasons owing to a general interest. Paragraph 2 establishes that the economic interests in the effectiveness of the contract may be considered an overriding reason but only if in exceptional circumstances ineffectiveness lead to disproportionate consequences. We can argue therefore that the court will have to apply a proportionality test to measure both outcomes.

This limitation to the grounds for ineffectiveness is restricted by paragraphs 3 and 4 whereby it is established that economic interests directly linked to the contract do not constitute overriding reasons. Costs such as the delay on contract performance, starting a new procedure, changing contractors or legal costs incurred with the process are considered to be direct economic costs and as such not eligible defenses against the declaration of ineffectiveness. If on the one hand I expressed concerned on Regulation 99 regarding the very limited grounds for ineffectiveness, on the other hand it appears that the potential exceptions or defenses have been clearly restricted as well.

It therefore appears that it may be easier for a contracting authority trying to avoid a declaration of ineffectiveness to put the emphasis of its arguments on the effects upon the potential beneficiaries of what is being procured than the direct economic costs of correcting a mistake.

Public Contracts Regulations 2015 - Regulation 99

Regulation 99 - Grounds for ineffectiveness

Regulation 99 provides the three grounds for ineffectiveness that can be used to annul a contract already entered into. This is an exclusive list and only the grounds herewith contained can give rise to a declaration of ineffectiveness under Regulation 98.  The three ineffectiveness grounds are:

i) contract awarded without prior publication of notice when it was mandatory to do so;

ii) contract entered into in breach of Regulations 87, 95, 96(1)(b), 89 or 90

iii) contract with value above thresholds awarded via framework agreement or dynamic purchasing system in breach of Regulations 33(11) or 34(21) to (24)

As we will see the way the grounds for ineffectiveness are construed in this Regulation look like a veritable tough mudder for any disadvantaged economic operator. Having worked on both sides of the table with public and private clients I am torn on my opinion on the difficulties imposed in the pursuit of a declaration of ineffectiveness. On the one hand, there are huge transaction and opportunity costs for a contract to be annulled and having it re-tendered (from the start or the moment the decision that gave rise to the ineffectiveness occurred). On the other hand, reducing access to ineffectiveness provides an incentive to contracting authorities to misbehave as the alternative (damages) is less damning for their reputation and (eventually) cheaper. As one of the smartest persons I ever worked with (an engineer) once told me: "we could not care less about the damages [positive or negative interest], what we want is to keep our workforce and machinery busy. That's our core business." Harsh.

First ground: contract awarded without prior publication of notice when it was mandatory to do so;

This first ground applies in the situations where the the contracting authority awarded a contract without providing a prior publication notice. The textbook case example is if a negotiated procedure was used instead of an open/restricted procedure. This ground however does not extend to the situations whereby the contracting authority used the wrong procedure, say a competitive dialogue outside the situations set in Regulation 26. For these, only penalties and damages are available.

There is no ground for ineffectiveness either if the contracting authority considered the procedure to not warrant a contract notice but published a ex-post voluntary transparency notice in accordance with the requirements of paragraphs 3 and 4. As an additional requirement for excluding the possibility of ineffectiveness, the contracting authority must as well comply with a 10 day standstill period.

Second ground: contract entered into in breach of Regulations 87, 95, 96(1)(b), 89 or 90

The second ground is only applicable in case the cumulative requirements are met. The first requirement set in paragraph 5(a) is a breach of either Regulation 87 (standstill), Regulation 95 (contract-making suspended by challenge to award) or Regulation 96(1)(b) (interim order). For the breach of any of these Regulations to constitute a valid ground it must have deprived the economic operator of the possibility of starting proceedings or pursuing them before the contract has been entered into (paragraph 5(c)). In other words, not every violation of the aforementioned Regulations will give rise to

Additionally, as per paragraph 5(b) and (d) there must be a breach of the duty owed to the economic operator in accordance with Regulation 89 or 90, except standstill or any duty imposed by Chapter 6 (Regulations 88 - 104) and this breach must have affected the chances of the economic operator winning the contract. Again, not any violation of the duty will allow for a declaration of ineffectiveness, only when said breach affected the chances of the aggrieved economic operator. How do we interpret "chances" then? Must it be a clear chance? Or even a long shot will be enough?

Third ground: contract with value above thresholds awarded via framework agreement or dynamic purchasing system in breach of Regulations 33(11) or 34(21) to (24)

The third ground is only valid for contracts awarded under framework agreements or dynamic purchasing systems. As with the other two grounds, some limitations are applicable here, the first being that only actual contracts above the financial thresholds of Regulation 5 can be subject to ineffectiveness. This is a very substantial limitation as even if the framework agreement itself was subject to the rules of Part 2 (for being deemed valued above the financial thresholds) ineffectiveness will only apply if subsequent contracts have a value above the thresholds as well. Related with this issue I can think about another question: are framework themselves subject to the declaration of ineffectiveness? If there is a realm where this remedy would make sense is framework agreements as they tend to last for a long period and while they are in force it is not necessary for contracts to be performed (contrary to an awarded contract) so  declaration of ineffectiveness downsides are lower here. Interesting.

In addition to the requirements above, the contract awarded must have breached Regulation 33(11) and 34(21) to (24) whether it was awarded via a framework agreement or a dynamic purchasing system.

Finally, paragraph 7 establishes some cumulative restrictions to the application of the third ground. First the contracting authority must have considered that the award was in accordance with the provisions of Regulations 33(11) or 34(21) to (24). That it may have been wrong in its assessment appears to be irrelevant...

Second, that the contracting authority voluntarily complied with the requirements of Regulation 86(1) to (4) - notices of decisions to award a contract or conclude a framework agreement - and did not use any of the exemptions allowed for in Regulation 86(5).

Third, that the standstill period was respected.

 

Public Contracts Regulations 2015 - Regulation 98

Regulation 98 - Remedies where the contract has been entered into

This Regulation defines the remedies available to the Court after a contract has been entered into between the contracting authority and an economic operator where there was a breach of the duty owed by force of Regulations 89 and 90.

The Court is given only three different options to deal with: i) to declare the ineffectiveness of the contract; ii) to impose penalties; iii) award damages. As with Regulation 97 there is no indication here of preference or subsidiarity of some remedies above others.

For a declaration of ineffectiveness to be produced, any of the grounds for ineffectiveness set forth in Regulation 99 must be present and none of the exclusions of Regulation 100 is applicable.

In what concerns penalties, only those required by Regulation 102 can be imposed.

The Court is also able to award damages to an economic operator in consequence of the breach of Regulation 89 or 90 and eventually cumulatively to the declaration of ineffectiveness or penalties.

Finally, although paragraph 2 (d) technically limits the powers of the Court to the remedies mentioned in this Regulation, in the case of contracts tendered via a framework agreement, these are dealt by Regulations 101, 102 and 103 where specific remedies are provided for.