Grounds for ineffectiveness under reg.99 Public Contracts Regulations 2015

Reg.99 of the Public Contracts Regulations 2015 (PCR2015) establishes the grounds for ineffectiveness of contracts already entered into by the time the Court determines whether there was a breach of the duty owed under regs.89 and 90 PCR2015. As reg.99(1) clearly states, there are three grounds for ineffectiveness, which map those foreseen in Art 2d of Directive 89/665, as amended by Directive 2007/66 (consolidated version available here). As Pedro points out, benefiting from them may not be as simple as it seems.

First ground: lack of prior publication
Under reg.99(3) PCR2015, the first ground applies where the contract has been awarded without prior publication of a required contract notice. That is, in all instances were the award of the contract without prior publication was not allowed under the rules of Part 2 PCR2015--which mainly boils down to cases of improper use of the negotiated procedure without prior publication in cases not covered by reg.32 PCR2015.

This first ineffectiveness ground can be disapplied under reg.99(3) and (4) PCR2015 where a set of cumulative conditions are met, which amount to prove that the contracting authority erred in good faith in the assessment of the possibility to award the contract without prior publication and, in any case, gave transparency to its intention to award the contract (ie created equivalent transparency of the award of the contract). These conditions are: (a) the contracting authority considered the award of the contract without prior publication of a contract notice to be permitted by Part 2; (b) the contracting authority has had published in the Official Journal a voluntary transparency notice expressing its intention to enter into the contract [with the requirements of reg.99(4), of which the justification of the decision of the contracting authority to award the contract without prior publication of a contract notice is especially important]; and (c) the contract has not been entered into before the end of a period of at least 10 days beginning with the day after the date on which the voluntary transparency notice was published in the Official Journal [ie there has been a standstill period equivalent to that required by reg.87 PCR2015].

One of the key issues in the application of the exception in reg.99(3) PCR2015 is the assessment of the discretion/diligence of the contracting authority in its assessment of the possibility to award the contract without prior publication in order to meet the condition in reg.99(3)(a) PCR2015. This was discussed in Fastweb, C-19/13, EU:C:2014:2194, where the CJEU rejected the lenient approach recommended by AG Bot (who proposed a stringent test whereby recourse to the exception would only be declined if "the contracting authority has deliberately and intentionally infringed the rules on advertising and competitive procedure", which I criticised here) and established a clear duty of diligent assessment of the possibility to award without prior notice by the contracting authority (see paras 46-52, particularly 50, where the CJEU stressed that "the review body is under a duty to determine whether, when the contracting authority took the decision to award a contract by means of a negotiated procedure without prior publication of a contract notice, it acted diligently and whether it could legitimately hold that the conditions laid down in [Art 32 of Directive 2014/24/reg.32 PCR2015] were in fact satisfied"; emphasis added) [for discussion, see A Brown, "When will publication of a voluntary ex ante transparency notice provide protection against the remedy of contract ineffectiveness? Case C-19/13 Ministero dell'Interno v Fastweb SpA" (2015) 24(1) Public Procurement Law Review NA10-16]. 

Consequently, it seems clear to me that the interpretation of the conditions for the exception to the first ground of ineffectiveness to apply needs to be restrictive and ultimately rely on objective tests [see R Caranta, "Remedies in EU Public Contract Law: The Proceduralisation of EU Public Procurement Legislation" (2015) 8(1) Review of European Administrative Law 75, 83-84].

Second ground: contract entered into in violation of suspension obligation
As foreseen in reg.99(5)(a) PCR2015, the second ineffectiveness ground applies where the contracting authority has entered into the contract in violation of an existing suspension of its contract-making powers under: (i) reg.87 PCR2015 (the standstill period), (ii) reg.95 PCR2015 (contract-making suspended by challenge to award), or (iii) reg.96(1)(b) PCR2015 (interim order). 

In any of theses cases, under reg.99(5) PCR2015, three additional cumulative conditions need to be met for the ineffectiveness ground to apply: (1) there must also have been a breach of the duty owed to the economic operator in accordance with reg.89 or 90 PCR2015 in respect of obligations other than those imposed by reg.87 (the standstill period) and Chapter 6 of Part 3 PCR2015 (ie mainly, regs.95 and 96) [the 'additional breach']; (2) the breach of the existing suspension of the contracting authority's contract-making powers has deprived the economic operator of the possibility of starting proceedings in respect of that additional breach, or pursuing them to a proper conclusion, before the contract was entered into; and (3) that additional breach has affected the chances of the economic operator obtaining the contract. 

This set of additional breaches boils down to clarifying that a mere infringement of the suspension obligation does not trigger the ineffectiveness of the contract if the contracting authority complied scrupulously with the rules governing the tender. However, this does not mean that the contracting authority can take a free pass and disregard suspension obligations, nor that it cannot face other consequences derived from the infringement of the suspension obligation, such as a shortening of the duration of the contract and/or the payment of a financial penalty as required buy reg.102(2)(b) and (3) PCR2015 (commented in due course). Those can also be coupled with the payment of damages to the aggrieved tenderer, although they will probably be unlikely or reduced if it cannot prove that its chances of having obtained the contract were affected (which could ultimately reduce the incentive to claim under this ground, of course). Hence, the inapplication of the ground of ineffectiveness to the mere infringement of the suspension obligation does not come without consequences and contracting authorities need to take compliance with it seriously.

Third ground: framework agreements and dynamic purchasing systems
As established in reg.99(6) PCR2015, this last ground applies where all the following conditions are met: (a) the contract is based on a framework agreement or was awarded under a dynamic purchasing system; (b) the contract was awarded in breach of any requirement imposed by: (i) reg.33(11) PCR2015 (award of contracts based on framework agreements through re-opening of competition), or (ii) reg.34(21) to (24) PCR2015 (award of contracts under dynamic purchasing systems); and (c) the estimated value of the contract is equal to or greater than the relevant threshold mentioned in reg.5 PCR2015. This ground is relatively straightforward in theoretical terms but, practically, the problem for its application derives from the opacity or delayed transparency of the decisions to award contracts within framework agreements or under a dynamic purchasing system (see here). Thus, it may have limited practical relevance, unless economic operators involved in these schemes have access to the required information and keep the contracting authority under close scrutiny.

Reg.99(7) PCR2015 establishes an exception to this third ineffectiveness ground that is parallel to that in reg.99(3) and (4) [see above], whereby it does not apply if all the following are met: (a) the contracting authority considered the award of the contract to be in accordance with reg.33(11) PCR2015 or reg.34(21) to (24) PCR2015; (b) the contracting authority has, despite reg.86(5)(c) PCR2015, voluntarily complied with the requirements set out in regulation 86(1) to (4) (regarding notices of decisions to award a contract); and (c) the contract has not been entered into before the end of the standstill period. Given that it shares the basic elements of the exception to the first ground, an equally restrictive interpretation is required.