Duncan Osler, Partner, MacRoberts LLP
Currently, there is a lot of interest in the implementation of the new Remedies Directive. Following the publication of the OGC’s second consultation on the subject, there has been a great deal of discussion about the new possibility of having a contract declared ineffective and therefore void, even after it has been entered into.
If anyone is wondering how and why this is going to happen or taking comfort from the fact that the threat will not emerge until the new Remedies Directive comes into force at the end of 2009, they will be interested in a case on which we advised the Pursuer earlier this year.
In February 2009, in D.R. Plumbing & Heating Services Limited v Aberdeen City Council (unreported), the Court of Session endorsed the principle established by the European Court of Justice in Alcatel that a national court must, in all cases, be able to review and set aside award decisions on all public procurement contracts.
Most significantly, for the first time the Court of Session granted the Pursuer interim orders to set aside a purported concluded contract as a result of a breach of the EU public procurement rules, breaking new ground in the UK.
Aberdeen City Council (the Council) initiated a procurement for the provision of domestic central heating installations last year under the Public Contracts (Scotland) Regulations 2006 (which by and large are in the same terms as the corresponding Regulations in force in England and Wales). D.R. Plumbing & Heating Services (DRP) were one of six contractors to submit a tender but were notified on 26 November 2008 that they had been unsuccessful. Instead, the Council selected Gas Call Services Ltd as the successful party; a contractor whose tender price was £243,502.73 greater than DRP’s and whose evaluation score placed them third overall.
DRP took advantage of its rights under Regulation 32(4) and wrote to the Council requesting (1) the reasons why they were unsuccessful, and (2) the relative advantages and characteristics of the successful bidder.
It was subsequently revealed that the Council exercised their option of not appointing one of the two highest scoring contractors, including DRP on two grounds. Firstly, in the Council’s view the style of pricing was unusual and secondly, the tender price submitted by DRP was greater than the successful contractor’s price on the basis of a “re-measurement” exercise. This undisclosed re-measurement was carried out by the Council to determine an indicative value of an average installation. Moreover, it was only made known to DRP on 16 December 2008 that the Council had in fact allegedly entered into a contract with Gas Call Services Ltd on or around 27 November 2008.
Accordingly, DRP challenged the award of the contract arguing the procurement had been conducted in a non-transparent, unfair and discriminatory manner, and the contract had been awarded unlawfully during the mandatory standstill period.
The case largely focused on the interpretation of Regulation 47(8)(a) which allows a court by interim order to suspend the procedure leading to the award of the contract, or suspend the implementation of any decision or action taken by the contracting authority in the course of following such a procedure, and Regulation 47(9) which states:
“In proceedings under this regulation the Court shall not have power to order any remedy other than an award of damages in respect of a breach of the duty owed…if the contract in relation to which the breach occurred has been entered into.”
Essentially, the Council argued the only remedy available to DRP was damages as a contract had been entered into, and as such there was no procedure or implementation of a decision for the Court to suspend.
On the other hand, it was argued for DRP that the conclusion of the contract and the decision awarding the contract cannot coincide in time. The current Remedies Directive presupposes a gap in time and the Council could not rely on Regulation 47(9) in such a way as to seek to act in a manner which is contrary to EU Law. Otherwise, a contracting authority can evade the remedies which EU Law requires are available.
In an oral judgment on interim orders to be granted by the Court of Session, Lord Uist concluded that the arguments put forward on behalf of DRP were well founded. In his view, the Council did not take sufficient account of the decision of the European Court of Justice in Alcatel, subsequent case law or the provisions of the existing Remedies Directive. James Mure, acting for the Pursuer, had demonstrated a good arguable case and the balance of convenience was in favour of granting interim orders (1) to suspend the implementation of the decision by the Council to award the contract to Gas Call Services Ltd, and (2) suspend and set aside the purported contract between the Council and Gas Call Services Ltd.
In addition, in order to preserve DRP’s rights in relation to the procurement the judge concluded it was necessary to grant an interim interdict preventing the Council entering into any subsequent contract with Gas Call Services Ltd.
Lessons to be learned
This case highlights very clearly the importance of the intention behind the mandatory standstill period. Contract award must be delayed in order to give bidders time to understand whether or not any concerns they might have about the procurement process are well founded, and if so to permit them to exercise the statutory remedies of setting aside authorities’ decisions, including suspension of the contract award decision itself. It also provides a warning to public authorities that think that, for the time being, damages will be the only available remedy if they do not observe the standstill period. The new Remedies Directive may not yet be implemented in Scotland or the UK, but that does not mean that the courts will necessarily disregard the long-standing EU requirement under Alcatel for bidders remedies to be effective.
Duncan Osler is accredited as a specialist in public procurement law by The Law Society of Scotland.