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New Remedies Directive: a glimpse of the future?

Published: 23rd November 2009

Currently, there is a lot of interest in the implementation of the new Remedies Directive (which must be completed by the end of 2009). In particular, 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. There has been a glimpse of how this might work in a recent case from Scotland.

In D.R. Plumbing & Heating Services Limited v Aberdeen City Council [2009], the Court of Session endorsed the principle established by the European Court of Justice in the Alcatel case 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 Procurement Rules.

Aberdeen City 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 were one of six contractors to submit a tender but were notified that they had been unsuccessful. Instead, the Council selected Gas Call Services Ltd as the successful party; a contractor whose tender price was significantly greater than the Pursuer's and whose evaluation score placed them third overall.

The Pursuer 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 on two grounds. Firstly, in the Council's view the style of pricing was "unusual" and secondly, the tender price submitted by the Pursuer 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.

Accordingly, the award was challenged; 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 Council argued that under the relevant regulations the only remedy available to the Pursuer 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.

The court concluded that 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. The Pursuer was granted interim orders (1) to suspend the implementation of the decision by the Council to award the contract, and (2) suspend and set aside the purported contract.

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 damages will be the only available remedy if they do not observe the standstill period.