Maclay Murray and Spens LLP
1. INTRODUCTION
Maclay Murray & Spens LLP welcomes this opportunity to give its views on the Scottish Procurement Directorate's ( SPD) approach to the implementation in Scotland of Directive 2007/66/EC (the "New Directive"), amending the previous public procurement Remedies Directives (89/665/EEC and 92/12/EEC). The comments have been prepared by our European, Competition and Regulatory team who have extensive experience of advising clients, both in the public and the private sector, on the application of EU procurement rules. While many of the features introduced by the New Directive are mandatory, there is nevertheless scope for the SPD to exercise discretion in relation to certain aspects which will have a great impact on public procurement processes. We therefore consider this to be a very important consultation.
2. GENERAL
Although noting that a standstill period has been in operation in Scotland at least 4 since the entry into force of the 2006 Regulations, we welcome the harmonisation of the standstill rules which the New Directive brings about. We also welcome the introduction of the additional remedy of ineffectiveness, available also after an illegal contract has been entered into. These two features of the new remedies system will greatly increase aggrieved bidders' ability, in practice, to challenge serious breaches of the public procurement rules. Appropriately implemented, they are furthermore likely to achieve this without placing undue additional burdens on bona fide public purchasers.
Our comments below in relation to the implementation of the New Directive in Scotland are caveated by an over-arching consideration that the new rules should, insofar as possible, be uniform throughout the UK, in order not to create an over-complicated, dual legal framework for suppliers operating on both sides of the border. We therefore urge that the SPD works closely with the Office of Government Commerce ( OGC) throughout the implementation process to ensure uniformity. Our comments in this consultation response are materially the same as in our response to the OGC's parallel consultation.
3. COMMENTS ON PARTICULAR CONSULTATION ISSUES
Below are our comments in relation to the SPD's specific consultation questions. Where a particular question is not answered, we agree with the SPD's analysis or have no comment.
3.1 Box 1: Review Procedures
The Scottish Government seeks views on whether to implement the above provision [ i.e. Article 1(5) of the Directive], including any perceived arguments for or against implementation.
On balance, we are in favour of using the option to implement Article 1.5. If potential conflicts can be resolved between the aggrieved tenderer and the contracting authority, this is to be preferred to the costly proposition of court proceedings. As such, this proposal has the potential of reducing costs on both sides. That is, however, only the case where the review undertaken by the contracting authority is meaningful and serious. It may be advisable to prescribe that such a review, therefore, should be independent from the procurement officer or team alleged to have committed the breach of the procurement rules. If not, the review risks having the effect of simply delaying the inevitable resort to the courts. We would welcome SPD guidance on the appropriate procedure for reviews, should Article 1.5 be implemented.
There may also be an issue of timing in respect of this proposal. If, for example, a review by the contracting authority is sought on the last day of the 10-day standstill period, the delay in the award of the contract would be extended by at least a further 10 days (or more if the contracting authority allows appropriate time to handle the review request). This may hamper legitimate procurement procedures if requests for review are brought frivolously. It should be considered if and how this can be prevented.
As regards the timing of the review, it is possible that the delay incurred in the award which would result from the review could be regarded by the Scottish Courts as weighing in the contracting authority's favour in any subsequent interim interdict proceedings. The recent Scottish case Lightways (Contractors) Limited v North Ayrshire Council5 demonstrates that bidders sometimes face significant hurdles in persuading courts to suspend contract awards pending a challenge.
3.2 Box 3: Review Procedures - Notification
The Scottish Government invites feedback on the relevance of article 1(4) if the option conferred by article 1(5) is exercised.
It may be appropriate for the requirement in Article 1.4 to continue to apply, where a review has been sought in terms of Article 1.5 and has been partly successful, for instance where the contracting authority has proposed a remedy which the complainant considers inadequate.
In any event, the requirement continues to be appropriate in cases where a tenderer wishes to challenge a procurement process before it reaches the award stage. This rule already applies under the current remedies rules.
3.3 Box 5: Standstill - Means of Communication
The Scottish Government anticipates that it will be rare that fax or electronic communication will not be practicable where the bidders are serious contenders for an 'over the threshold' contract, so for practical purposes the shorter period is expected as the norm. We are seeking stakeholder confirmation of this view.
It is advisable that the Regulations continue to require the most rapid means of communication in this respect. It will be extremely rare that communication by email or fax is not possible in a procurement exercise, so the minimum 10-day period should be the norm.
3.4 Box 6: Standstill - Minimum timescales
The Scottish Government invites comments on whether these minima are satisfactory, or alternatively whether a longer minimum period is preferable.
Our view is that these minimum periods are satisfactory. Especially, if Article 1.5 (see above) is implemented, the cumulative delay which could result from these two provisions should be kept to the minimum allowed by the New Directive.
3.5 Box 8: Standstill Derogations
The Scottish Government seeks feedback from stakeholders as to the extent to which i) and ii) above should be implemented.
A standstill period could be beneficial in borderline cases, where the contracting authority has taken the view that the contract in question was not subject to the requirement to advertise in the OJEU for whatever reason, but where potential suppliers may want to challenge that decision upon finding out about the award. However, on balance, we believe that it would be beneficial to implement the derogation in Article 2b(a). In more clear-cut cases - i.e. the majority - of contracts falling outside the OJEU requirement, the introduction of a standstill period would further blur the distinction between contracts inside and outside the scope of the 2006 Regulations. It is not, in our view, advisable or desirable to develop extensive "quasi-Directive" requirements for the latter category.
As regards contracts to be awarded to the only tenderer showing an interest, i.e. as described in Article 2b(b), we strongly support the implementation of the derogation from the standstill requirement. In cases where potential tenderers have already been given the chance to bid and decided against it, it would make little sense to hamper the conclusion of the contract.
3.6 Box 10: Time Limits for Applying for Review
The Scottish Government seeks feedback on the appropriate length of time limits and, related to this, on whether further clarification or amendment on the subject of 'prompt review' is required.
We are of the view that it would be unhelpful if the word "promptly" in the Scottish Regulations could be interpreted in such a way as to shorten the 10-day standstill period following the notice of intention to award a contract. This would be confusing and reduce legal certainty. On the other hand, where grounds for a challenge arise at an earlier stage of the procurement process, it would be beneficial to maintain the requirement to complain "promptly", in order not to hamper the process. These two interests can maybe be reconciled by explaining in the implementing instrument that action taken within the standstill period is deemed to have been taken "promptly".
3.7 Box 11: Ineffectiveness - Retrospective or Prospective Cancellation
The Scottish Government seeks views on whether implementing regulations should provide for retrospective cancellation or prospective cancellation of contractual obligations. In particular, views are sought on whether existing common law principles are sufficient to address potential unfairness that might arise when contractual obligations are cancelled by the courts.
Our view is that retrospective cancellation would be overly complicated in many cases. Restitution of each party's contribution will often be impossible, for instance in service or works contracts. Prospective cancellation is a more appropriate remedy and less likely to cause unnecessary and undesirable disruption to the carrying out by the public body of its functions. Given the possibility of alternative penalties (see Box 15), this option is to be preferred. Furthermore, alternative penalties may be preferable where a contract cannot easily be frustrated without great disturbance to some public function.
A separate issue is the status, in voided or frustrated contracts (as the case may be), of clauses relating to the survival of certain rights and obligations after termination, e.g. regarding confidentiality or sums due. This will need further consideration at a later stage.
3.8 Box 12: Ability for Courts Not to Apply Ineffectiveness
The Scottish Government expects to implement this option, as it will allow the court flexibility in the application of this provision. Feedback is welcome either to confirm the Scottish Government's view or to flag up any substantial reasons not to implement it.
We are in favour of this option. As mentioned at Box 11 above, alternative penalties may be preferable where a contract cannot easily be frustrated without great disturbance to some public function.
3.9 Box 15: Alternative Penalties to be Effective, Proportionate and Dissuasive
The Scottish Government seeks comments on how best to achieve this, and how much discretion the court should have.
We are supportive of the introduction of the alternative remedies of shortening of duration and fines. We believe that the range within which fines can be imposed should be set out, with a maximum fine defined in the Regulations. The factors to take into account when setting fines ought to be specified: for instance should the value of the contract; the gravity of the infringement; the effect of the infringement and/or the contracting authority's good/bad faith or negligence be of relevance? Such factors should be specified as guidance to the courts. Taking account of such factors, the courts should, in our view, however have a broad margin of discretion in their setting of appropriate fines.
3.10 Box 16: Ineffectiveness or Alternative Penalties: should the court have discretion
The Scottish Government seeks comments on whether the courts should be able to choose between ineffectiveness and alternative penalties, in cases identified in article 2e ( i.e. where there has been a relevant remedy-oriented procedural breach but not a breach of the relevant Procurement Directive).
We are in favour of implementing the option of giving courts the discretion whether to apply ineffectiveness, shortening of duration or fines as an appropriate remedy. We further believe courts should be competent to combine these remedies in appropriate cases.
3.11 Box 17: Ineffectiveness - Time Limits
The Scottish Government assumes that limits of the kind described above at i) and ii) should be imposed (but welcomes comments on this), in which case we also seek comments on whether they should be the minimum periods of 30 days and 6 months respectively allowed by the directive, or longer periods (and if so, what those longer periods should be).
As regards the minimum 6-month long-stop, we are of the view that 6 months is a satisfactory limit. However, it may be beneficial to introduce a subjective element of knowledge: in some cases, a potential supplier may only find out about an illegal direct award to a competitor months after the event. A 6-month limit could perhaps be qualified, for example by a prevailing 30-day limit counting from the day the challenging party was made aware of the grounds for a challenge. In order to reduce uncertainty and avoid undesirable outcomes in practice however, the use of such a subjective element could perhaps be restricted to cases where the contracting authority has acted in bad faith.
3.12 Box 18: Review Procedures
The Scottish Government seeks comments on the effectiveness of the review procedures currently available to suppliers. In particular, we would welcome feedback on potential barriers to use of the above procedures and any ways in which the formal and/or informal review procedures could be improved.
The recent Lightways decision may have been greeted with surprise by some. The ruling creates some uncertainty as to what a bidder alleging a breach of the procurement rules must show in order to receive interim, or other, relief by the Scottish courts. We nevertheless see a slow change in the culture of enforcement of the Scottish procurement rules. As regards the Single Point of Enquiry, we have used this on behalf of clients and found it to be a reasonably effective facility which, on that occasion, appeared to yield favourable results for our clients.