EU Procurement: Remedies Directive
Below is an article written by Allan Donovan on the subject of EU Procurement Remedies Directive.
So implementation of the EU remedies directive is getting nearer by the day and I predict, well, if not quite a riot then certainly an amount of chaos and confusion!
Such a prediction may at first blush seem rather pessimistic, especially given that implementation of the directive into UK law is not required until just before Christmas 2009 (actually, the 20th December 2009). That should at least provide all those involved in public procurement with an opportunity to ask Santa for a guide to the new remedies, as well as the chance for some light bedtime reading over the festive period.
Hopefully, public procurement activity will also be taking a festive break. All new legislation takes time to settle in and bed down and there is no reason to suspect that these new provisions will be any different. None of that, however, should disguise the fact that some serious work and preparation needs to be done well ahead of the implementation date.
Waiting for the directive to be implemented should not be an excuse for local authorities to be idle. We know, for example, that the biggest change for the UK will concern the remedies available for breach of the procurement regulations where contracts are awarded directly, without competition. The EC stall has been clearly set out in this regard as the direct award of contracts is seen as "the most serious breach of Community law".
It is this feature of the directive that has so far attracted the most commentary and attention which is, perhaps, unsurprising as it has the potential to cause colossal upheaval for errant local authorities. Once the directive is implemented, UK courts will be able to declare that a concluded contract is "ineffective" in certain circumstances, one of which will be following a direct award without competition, where that is a breach of the procurement regulations.
The consequence of a finding of ineffectiveness is to be applied at national level. Member states may provide for the retroactive cancellation of all contractual obligations or they may choose to limit the scope of cancellation to those obligations yet to be performed. If they opt for the latter, however, then Member states must provide for other additional penalties that must be "effective, proportionate and dissuasive" These "alternative penalties" must be the imposition of fines on the local authority or the shortening of the duration of the contract. Interestingly, it is stated that the award of damages does not constitute "an appropriate penalty" for the purposes of that part of the directive.
As for the chaos and confusion; well, whereas most legal and procurement personnel within local authorities may be fairly au fait with the EU procurement regime and will have little difficulty adapting to life with the new remedies, the same, arguably, may not be said for the many other officers who have responsibility for procurement.
Whilst there may be an alarming number of local authority officers with procurement responsibilities who are blissfully unaware of the legal obligations they are under (sometimes, genuinely innocently), the authorities by and large have, hitherto, got away with it! The new landscape, however, will present completely new and unprecedented scenarios.
The reasons why so many procurement exercises are blundered into are myriad but empirical observations expose certain recurring themes; lack of planning and lack of training being the main culprits! Put simply, many local authority officers need to be educated in this area and that is something that will become even more apparent once the directive is in force.
The familiar plaintive cry following direct awards that "we had to implement the system or risk losing central government funding" or "we have to have a contract tomorrow afternoon because the matter is urgent", (usually a euphemism for "we've been sitting on this project for the past six months and left everything until the last minute"), will cut no ice at European level. And with national courts overseeing the enforcement of the provisions of the directive such as ineffectiveness the repercussions could be something of a shock to the system.
So, depending upon the circumstances we may have situations where contracting authorities are prohibited from concluding a contract until an application for interim measures or a review has been concluded. Variable time limits for the standstill period depending upon which method of communication is being used. Where a contract has been awarded "illegally" and is subsequently declared "ineffective" all of the contractual obligations may be cancelled retroactively. Alternatively, only future obligations may be cancelled but in that case the duration of the contract may also be shortened or fines may be imposed upon the authority. Then again, the court may decide that even though a contract has been awarded illegally and should, therefore, be declared ineffective, it should be allowed to stand due to "overriding reasons relating to a general interest". If they reach that decision though, the alternative remedies of shortening of the term or fines on the authority will have to be applied instead. An interesting point to note in this regard is that "economic interests directly linked to the contract concerned" will not be considered as "overriding reasons relating to a general interest". So costs resulting from the delay in the execution of the contract, the need to launch another procurement exercise, or a change of the service provider will not be a reason for allowing an "illegal" contract to stand.
It will be obvious from the above that officers with procurement responsibilities who are allowed to carry on as if the procurement regulations do not apply to them will simply be adding to and compounding the costs and delays associated with such irregularities; hence the urgent need for education.
The risk of chaos and confusion lies further with the interpretation of the directive with so many mandatory obligations placed upon member states being dependent upon the election of various discretionary options. However, it should be remembered that this represents a view taken from the directive itself that is yet to be interpreted and implemented. Additionally, as stated above, all new legislation takes time to settle in and bed down. With that in mind, no doubt, the European Parliament and Council have set the Commission a deadline of December 2012 by which to review the implementation and effectiveness of the directive.
Now then, back to that list for Santa..........
Allan J. Donovan © 2008
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