UK High Court soon to rule on conflicts of interest under reg.24 PCR2015 (Art 24 Dir 2014/24) (Counted4 CIC v Sunderland City Council)

In its Judgment of 18 December 2015 in Counted4 Community Interest Company v Sunderland City Council [2015] EWHC 3898 (TCC) [*], Justice Carr decided the first request for the lift of the automatic suspension under regs. 95 and 96 of the Public Contracts Regulations 2015 (PCR2015) and decided to keep the suspension of the award until trial--thus departing from the general trend of lifts before the UK Courts. This aspect of the Judgment has been discussed abundantly (for example, see here), and whether it will actually reverse the generous approach of the UK courts to lifting the automatic Alcatel suspension remains unclear.

However, there is a second aspect of the case that I find more interesting. The case concerns the procurement of a services contract for substance misuse treatment and harm reduction services for substance users in Sunderland. Counted4 CIC is the incumbent supplier and has initially lost in its bid to renew the contract to Northumberland Tyne and Wear NHS Foundation Trust (NTW), which was the immediate previous provider before Counted4 CIC.

The primary claim of Counted4 CIC in its challenge of Sunderland CC 's decision to award the services contract to NTW is based on the alleged existence of a conflict of interest affecting one of the members of the evaluation team. In particular, Counted4 CIC challenges the participation of the person responsible for the administration of the current contract [Mr. S] in the evaluation of the new bids. The challenge is not made in abstracto, but based on the existence of a strained relationship between Counted4 CIC and the contract administrator [Mr. S], of which there seems to be sufficient (indiciary) proof on the file.

What I find interesting is the way in which Carr J frames the issue in the following terms:

[31] I am quite satisfied there is a serious issue to be tried on the conflict allegation. Regulation 24 is relatively new and there is no relevant authority on it to date. It provides :
"Conflicts of interest
24. (1) Contracting authorities shall take appropriate measures to effectively prevent, identify and remedy conflicts of interest arising in the conduct of procurement procedures so as to avoid any distortion of competition and to ensure equal treatment of all economic operators.
(2) For the purposes of paragraph (1), the concept of conflicts of interest shall at least cover any situation where relevant staff members have, directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement procedure."
[32] In my judgment, it is properly arguable that the Defendant failed effectively to prevent, identify and remedy conflicts of interest in allowing [Mr. S] to be on the evaluation panel. "Other personal interest" can be directly or indirectly held. The phrase is very broad on its face and is clearly intended to add to the other conflicts identified, namely financial and economic. The Defendant submits that it is designed primarily at financial interest. That cannot be said to be certainly the case. The Claimant's case that "other personal interest" means anything pertaining to the relevant individual is arguable. It is arguable that [Mr. S]'s personal interest in protecting his professional reputation and/or role at the Defendant by awarding a new contract to someone other than the Claimant might be perceived to compromise [Mr. S]'s impartiality and independence. The issues with [Mr. S] appear to have been grave. [Mr. D, the Claimant's Chief Executive] states the difficulties were beyond normal managerial issues. [Mr. S] often became emotional. It is said that his failings were recognised. It is also now apparent that the Claimant's complaints about [Mr. S] led to an internal investigation into [Mr. S]'s performance, though the results of that investigation have not hitherto been disclosed by the Defendant.

This will probably be the first time in which Article 24 of Directive 2014/24, as transposed in reg.24 PCR2015 is interpreted in the European Union as a whole. Without disagreeing with this approach in principle, I think that the broad terms in which Carr J foresees a possible interpretation of the provision may not necessarily be the most straightforward (ie 'other personal interests' could relate to family, sentimental or equivalent situations, rather than professional concerns)--or, at least, it seems obvious that there will certainly be opposing views and an interest in adopting a narrow interpretation of the provision. Consequently, a referral to the Court of Justice of the European Union for a preliminary interpretation may well be warranted (if not on on this first instance, certainly on appeal).

Additionally, given that the case concerns procurement 'at the edges' of NHS procurement activity, it will be interesting to compare the decision in Counted4 Community Interest Company v Sunderland City Council in this judicial setting, with that recently adopted by the sector regulator Monitor in a recent case involving allegations of conflict of interest against members of the evaluation team; see its Investigation into New Devon CCG’s commissioning of community services for adults with complex care needs in eastern Devon: final report [Case CCD01/15, decided on 26 August 2015]. This is something that we will do at this event organised at the University of Bristol Law School on 23 June 2016, so do come along if you are interested on these issues (registration is free).

[*] I am grateful to P Somalis for bringing this case to my attention.

Revocation, amendments, savings, transitional provisions and temporary exceptions under regs.115 to 122 Public Contracts Regulations 2015

Regs.115 to 122 of the Public Contracts Regulations 2015 (PCR2015) contain rules on revocation, amendments, savings, transitional provisions and temporary exceptions. These rules are intended to maintain the effects of procurements carried out under pre-2015 rules and to establish the delayed entry into force of the 2015 rules in certain areas (Pedro has a similar view).


Reg.116 revokes the 2006 Public Contracts Regulations (PCR2006) and provides that the consequential and miscellaneous amendments set out in Schedule 6 PCR2015 have effect. Given the difference in scope of coverage of concession contracts between the PCR2006 and the PCR2015, reg.117 PCR2015 establishes a general saving in respect of certain concession contracts and determines that nothing in the PCR2015 affects public works or services concession contracts within the meaning of the PCR2006, or procedures for the award of such contracts. 

Reg.118 establishes a general transitional provision and saving where procurement procedures commenced before 26th February 2015, and reg.119 PCR2015 establishes an equivalent transitional provision and saving where utilities procurement procedure commenced before 26th February 2015.

On its part, and as mentioned in relation to regs.77 and 113 PCR2015, reg.12o PCR2015 establishes a temporary exemption and saving for certain NHS procurements, whereby nothing in the PCR2015 affects (a) any contract award procedure that relates to the procurement of health care services for the purposes of the NHS within the meaning and scope of the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013, and is commenced before 18th April 2016; or (b) any contract awarded as a result of such a procedure.

Reg.121 PCR2015 establishes a delayed entry into force of certain obligations concerning eProcurement and the use of electronic means of communication. During such transitory period prior to the full commencement of reg.22(1) to (7) PCR2015--ie, the period between 26th February 2015 and 17th October 2018--contracting authorities may choose between the following means of communication: electronic means in accordance with reg.22 PCR2015; post or other suitable carrier; fax; or a combination of those means. That choice is available for all communication and information exchange in respect of which both the following criteria are met: (a)the use of electronic means would, in accordance with reg.22(1) to (5), have been required if those provisions had been in force; and (b) the use of electronic means is not required by any other provision of the PCR2015 that is in force.

Finally, reg.122 PCR2015 establishes special rules concerning compliance with reg.113 PCR2015 whereby, in relation to any financial year ending before 1st April 2016, a contracting authority may comply with reg.113(7) as if sub-paragraph (b) referred to the total amount of interest actually paid instead of the total amount of liability accrued.

General provisions applicable to Part 4 under reg.114 Public Contracts Regulations 2015

Reg.114 of the Public Contracts Regulations 2015 (PCR2015) closes its Part 4 and sets two general provisions (see Pedro's brief comments here). Before looking at them in detail, it is worth reminding that Part 4 (regs. 105 to 114 PCR2015): (a) expands (both ex ante and ex post) transparency obligations domestically by requiring publications in Contracts Finder and, in particular, creates transparency obligations for below EU-threshold contracts (regs.110 and 112PCR2015); (b) restricts the use of PQQs (either prohibiting them for below threshold contracts, or limiting them to a standardised PQQ); and (c) reinforces some obligations to pay promptly.

Reg.114(2) PCR2015 establishes that nothing in Part 4 requires a contracting authority to disclose any information if it considers that the disclosure would be contrary to the security interests of the United Kingdom. There is not much to say about this, other than stressing the need to interpret this provision in very narrow terms and subject it to a strict proportionality analysis--ultimately based on the case law concerned with Art 36 TFEU and its functional equivalents when it comes to derogating from internal market freedoms on the basis of public interest and security concerns.

More importantly, reg.114(1) PCR2015 declares that a material failure to comply with any requirement of Part 4 does not, of itself, affect the validity of a public contract that has been entered into. This creates uncertainty as to the consequences of such a breach, particularly because the remedies in Part 3 are not available for breaches of duties under Part 4 (see reg.98 PCR2105, and comments here). 

However, at least where the contract is of cross-border interest, it is quite clear that reg.114(1) PCR2015 would be contrary to the case law of the CJEU, at least in relation to infringements relating to reg.110 PCR2015 if they resulted in excessively diminished levels of ex ante transparency. In that regard, it is worth stressing that contracts covered by reg.110 can be of cross-border interest despite not meeting the value thresholds of reg.5 PCR2015.

In those cases, a consolidated body of case law of the CJEU  (mainly, Telaustria and Telefonadress, C-324/98, EU:C:2000:669; and Coname, C-231/03, EU:C:2005:487) has imposed certain obligations derived from the general principles of EU law (now consolidated in reg.18 PCR2015). Amongst those obligations, there is a relatively undefined requirement to ensure a 'sufficient degree of advertising', or ex ante transparency [for discussion, see C Risvig Hansen, Contracts Not Covered or Not Fully Covered by the Public Sector Directive (Copenhagen, DJØF, 2012) 121-160 (cross-border interest) and 161-186 (transparency)]. 

In its most recent formulation, the CJEU has reiterated that 'the principles of equal treatment and of non-discrimination on grounds of nationality impose, particularly on the contracting authority, a duty of transparency, consisting in the duty to ensure, for the benefit of any potential tenderer, a degree of publicity sufficient to enable the award procedure to be opened up to competition and the impartiality of that procedure to be reviewed, without necessarily implying an obligation to call for tenders' (Comune di Ancona, C-388/12, EU:C:2013:734, para 46). Thus, infringements of rules requiring ex ante disclosure of contract opportunities can imply breaches of EU law--provided there is a cross-border interest for the contract.

Thus, it is not clear at all that reg.114(1) PCR2015 suffices to actually create a legal situation whereby 'a material failure to comply with any requirement of Part 4 [PCR2015] does not, of itself, affect the validity of a public contract that has been entered into', so contracting authorities should not disregard the importance of compliance therewith.

Payment of undisputed invoices within 30 days by contracting authorities, contractors and subcontractors under reg.113 Public Contracts Regulations 2015

Reg. 113 of the Public Contracts Regulations 2015 (PCR2015) establishes rules for the payment of undisputed invoices within 30 days. Reg.113 clearly aims to shorten the delay in payments down the supply chain and, somehow,  comes to make up for the fact that reg.71 PCR2015 does not include some of the optional mechanisms in Art 71 of Directive 2014/24 to that effect, such as the possibility to create mechanisms of direct payment to subcontractors.

On the whole, reg.113(2) PCR2015 tries to achieve the goal of ensuring prompt payments down the supply chain by establishing that contracting authorities shall ensure that every public contract which they award contains suitable provisions to require: 

(a) that any payment due from the contracting authority to the contractor under the contract is to be made no later than the end of a period of 30 days from the date on which the relevant invoice is regarded as valid and undisputed;

(b) that any invoices for payment submitted by the contractor are considered and verified by the contracting authority in a timely fashion and that undue delay in doing so is not to be sufficient justification for failing to regard an invoice as valid and undisputed; and

(c) that any subcontract awarded by the contractor contains suitable provisions to impose, as between the parties to the subcontract (i)requirements to the same effect as those which sub-paragraphs (a) and (b) require to be imposed as between the parties to the public contract; and a requirement for the subcontractor to include in any subcontract which it in turn awards suitable provisions to impose, as between the parties to that subcontract, requirements to the same effect as those required by this sub-paragraph (c).

Where no such provisions exist, reg.113(6) PCR2015 determines that very similar terms will be implied in the relevant contracts.

Hence, the three main obligations that derive from reg.113(2) and (6) are: a duty to verify invoices in a timely fashion, a duty to pay within 30 days all invoices regarded as valid and undisputed (which is inexcusable in case of undue delay in the verification process), and a duty to include (or have implicitly included) those terms in all contracts and subcontracts.

Reg.113(7) PCR2015 requires contracting authorities to publish on the internet each year how they have performed on this including the proportion of invoices paid on time to their first tier suppliers /prime contractors.

There are several issues regarding reg.113 that deserve detailed comments (Pedro has focused on the impact of this rules on highly-complex contracts here).


(1) Need to coordinate Reg.113 PCR2015 and Directive 2011/7 on late payments
Directive 2011/7/EU on combating late payment in commercial transactions imposes specific obligations to ensure prompt payment in commercial transactions, both when payments are due to the main contractor, and when they are due between undertakings (in the case of subcontracts) [see Department for Business, Innovation and Skills, A Users Guide to the recast Late Payment Directive (October 2014)]. 

Those obligations clearly apply in concurrence to the specific rules of reg.113, as implicitly acknowledged in its paragraph (3), whereby reg.113(2) is without prejudice to any contractual or statutory provision under which any payment is to be made earlier than the time required by that paragraph. 

Under Art 4(3)(a)(i) Dir 2011/7, in commercial transactions where the debtor is a public authority, the period for payment cannot exceed 30 calendar days following the date of receipt by the debtor of the invoice or an equivalent request for payment. However, under Art 4(3)(a)(iv) Dir 2011/7, where a procedure of acceptance or verification, by which the conformity of the goods or services with the contract is to be ascertained, is provided for by statute or in the contract and if the debtor receives the invoice or the equivalent request for payment earlier or on the date on which such acceptance or verification takes place, the period for payment cannot exceed 30 calendar days after that date. 

In any case, under Art 4(5) Dir 2011/7, for such acceptance or verification procedure to be valid for these purposes, its maximum duration must not exceed 30 calendar days from receipt of the goods or services, unless otherwise expressly agreed in the contract and any tender documents and provided it is not grossly unfair to the creditor (Art 7 Dir 2011/7).

In view of all this, there are two risks derived from an approach of strict compliance with reg.113(2)(a) and (b) PCR2015 that could leave contracting authorities exposed to pay statutory damages, without the necessity of a reminder, in the form of statutory interest for late payment--ie simple interest for late payment at a rate which is equal to the sum of the reference rate and at least eight percentage points.

The first risk is that contracting authorities may incur in liability for late payment under Art 4(3)(a)(1) Dir 2011/7 if they do not pay invoices within 30 days from their date because they engage in non-contractual acceptance or verification processes. In my view, the scant provisions in reg.113(2)(b) and 113(6)(b) are insufficient to meet the requirement for such procedures to be considered statutory for the purposes of Art 4(3)(a)(iv) Dir 2011/7. Hence, unless they include a regulation (even if by reference) of those verification and acceptance procedures in the public contract, they are bound to pay within 30 days from invoice date.

The second risk is that, as a combined effect of Art 4(3)(a)(iv) and Art 4(5) Dir 2011/7, and unless otherwise expressly agreed in the contract and any tender documents and provided it is not grossly unfair to the creditor (Art 7 Dir 2011/7), the combined length of those verification and acceptance procedures and payment cannot exceed 60 days. Consequently, contracting authorities cannot in any case pay later than 60 days after receipt of the goods or services, regardless of any autonomous interpretation of the requirements in reg.113(2)(b).

Consequently, as interpreted in compliance with Dir 2011/7, reg.113 PCR2015 imposes payment dates that are potentially stricter than a simple reading of the provision could indicate. In fact, reg.113 does not create any obligation to pay any quicker than contracting authorities had to do under EU law in any case. 

The situation is different when it comes to payment obligations between contractors and sub-contractors, or further down the supply chain. In that regard, it is worth stressing that under Art 3(5) Dir 2011/7, contracts regarding commercial transactions between undertakings cannot specify payment periods beyond 60 days, unless otherwise expressly agreed in the contract and provided it is not grossly unfair to the creditor (Art 7 Dir 2011/7). In that regard, the virtuality of reg.113(2) and (6) PCR2015 is to enforce that limit and, probably, reduce it where the contracting authority pays in a shorter period.

(2) Formal exceptions for NHS and  schools' and academies' procurement
A second point that deserves comments concerns reg.113(1) PCR2015, which excludes contracts for the procurement of health care services for the purposes of the NHS within the meaning and scope of the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013; and contracts awarded by a contracting authority which is a maintained school or an Academy, from compliance with the requirements of the regulation.

In my view, and given the discussion above, this exclusion is perfectly useless, at least in relation to the NHS. Given that all contracting authorities [Art 2(2) Dir 2011/7] need to pay within the 30 calendar day limits set by Art 4(3) Dir 2011/7, the exclusion of reg.113(1) has no practical effect. Under Art 4(4) Dir 2011/7, the UK could have decided to apply for longer payment periods for health services and other commercial activities carried out by public entities. However, the Government decided not to do so [see Department for Business, Innovation and Skills, Directive 2011/7/EU on Combating Late Payment in Commercial Transactions. Government Response to Consultation (February 2013)]. Similar reasons apply to the exclusion for schools and academies.

Thus, it is unclear why reg.113(1) PCR2015 aims to create such an exclusion and, in my view, it is in any case ineffectual.

(3) Statutory Guidance Issued under Reg.113 --Standard Term Not Useful At All
Reg.113(4) PCR2015 establishes that contracting authorities shall have regard to any guidance issued by the Minister for the Cabinet Office; and reg.113(5) PCR2015 further determines that such guidance may, in particular, recommend model provisions, including provisions defining the circumstances in which an invoice is to be regarded as being, or as having become, valid and undisputed including, for example: (a) provisions deeming an invoice to have become valid and undisputed if not considered and verified in a timely manner; and (b) addressing what is to be considered, for that purpose, to be a timely manner in various circumstances. 

Such guidance has now been published and is available here. However, it simply provides a standard term on prompt payment that contracting authorities can include in their contracts. The standard terms simply provides the following (and a clause on sub-contracts):
1. Where the Contractor submits an invoice to the Authority [in accordance with paragraph [•]], the Authority will consider and verify that invoice in a timely fashion.
2. The Authority shall pay the Contractor any sums due under such an invoice no later than a period of 30 days from the date on which the Authority has determined that the invoice is valid and undisputed.
3. Where the Authority fails to comply with paragraph 1 and there is an undue delay in considering and verifying the invoice, the invoice shall be regarded as valid and undisputed for the purposes of paragraph (2) after a reasonable time has passed.
In my view, such a clause does not regulate the procedure for verification and acceptance to an acceptable standard in terms of Art 4(5) Dir 2011/7. In particular, the first paragraph is insufficient to consider that it sets out a "procedure of acceptance or verification by which the conformity of the goods or services with the contract is to be ascertained". Thus, contracting authorities will be well-advised to pay all their invoices within 30 days from their date in order to meet the requirements under Art 4(3) Dir 2011/7. Otherwise, they will have to start paying statutory damages in the form of statutory interest for late payment very soon and very often.

Publication of information on Contracts Finder about contracts awarded under Reg. 112 Public Contracts Regulations 2015

Reg.112 of the Public Contracts Regulations 2015 (PCR2015) imposes obligations to publish information on Contracts Finder about the award of contracts below EU thresholds. Such obligation is triggered every time a public contract is awarded [reg.112(1)], which imposes an ex post transparency obligation for contracts not exempted under reg.109, even if no ex ante transparency was required by reg.110 PCR2015.

The content of the publication obligation is functionally equivalent to the obligation under reg.108 PCR2015 for contracts above EU thesholds and, consequently, it does not deserve further comments (Pedro concurs), except for the fact that the publication needs to specify whether the contractor is an SME or VCSE, that is a non-governmental organisation that is value-driven and which principally reinvests its surpluses to further social, environmental or cultural objectives. 

If nothing else, this will provide a wealth of data to assess to what extent public contracts are actually channeled through these preferred organisations. However, the sole thought that fundamental details of every single contract, including the contractor's name, will be made available online is quite scary, particularly in sectors with oligopolistic structure. Hence, once more, it is worth stressing that contracting authorities need to be very careful and manage information. 

Reg. 112(3) allows them to do so by allowing exceptions to the obligation to publish where where release of certain information would impede law enforcement or would otherwise be contrary to the public interest, would prejudice the legitimate commercial interests of a particular economic operator, whether public or private, or might prejudice fair competition between economic operators [for discussion, see A Sanchez Graells, "The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives" (November 2013) University of Leicester School of Law Research Paper No. 13-11].

Assessing suitability etc under Reg. 111 Public Contracts Regulations 2015

Reg. 111 of the Public Contracts Regulations 2015 (PCR2015) imposes a significant restriction in the assessment of suitability of tenderers and bidders for contracts below EU thresholds by prohibiting contracting authorities from including a pre-qualification stage in their procurement [reg.111(1)]. 

For these purposes, “pre-qualification stage” means a stage in the procurement process during which the contracting authority assesses the suitability of candidates to perform a public contract for the purpose of reducing the number of candidates to a smaller number who are to proceed to a later stage of the process [reg.111(4)]--ie, no PQQs or, as the Crown Commercial Service has summarised it, 'in practical terms ... PQQs used as part of a pre-qualification stage are not permitted' (which goes well beyond the use of a standardised PQQ for above threshold procurement under reg.107 PCR2015). 

This creates significant legal uncertainty in contracting authorities tendering relatively small contracts, which are now left with the problem of ensuring that their contractors are qualified without knowing exactly how to go about it [see Pedro's views on this here]. And the main effect of such uncertainty is that they will have a very strong incentive to rely on contractors they know and have dealt with in the past, so that they are not negatively affected by the prohibition on the use of PQQs. The end result may well be to significantly close local markets to entry by SMEs and larger companies without a previous track record with a given contracting authority. Consequently, this provision needs to be strongly criticised.

Moreover, the actual implications and limitations derived from the no-PQQ rule are far from clear and reg.111(5) indicates that, in any event, contracting authorities may ask candidates to answer suitability assessment questions only if each such question is relevant to the subject-matter of the procurement; and proportionate. Reg.111(6) tries to clarify that “suitability assessment question” means a question which relates to information or evidence which the contracting authority requires for the purpose of assessing whether candidates meet requirements or minimum standards of suitability, capability, legal status or financial standing. 

Thus, the puzzle is served and the practical discussion of whether (small, tiny) PQQs can be used but they need to be labelled SAQs keeps most procurement practitioners on the edge. Unfortunately, the guidance published by the Cabinet Office does not solve this practical problem. And this is particularly troublesome because the Mistery Shopper scheme applies to reportable deviations from the prohibition of using PQQs or the eventual disproportionate use of SAQs. The comments made in relation to reg.107 PCR2015 apply.

Publication of contract opportunities on Contracts Finder under Reg.110 Public Contracts Regulations 2015

Reg.110 of the Public Contracts Regulations 2015 (PCR2015) creates an obligation to publish contract opportunities on Contracts Finder that extends to almost all contracts of a value higher than £10,000 or £25,000, except NHS and education-related contracts (see reg.109 for coverage of obligation and Pedro's remarks here).

Reg.110(5)(a) clarifies that a contracting authority advertises an opportunity if it does anything to put the opportunity in the public domain or bring the opportunity to the attention of economic operators generally or to any class or description of economic operators which is potentially open-ended, with a view to receiving responses from economic operators who wish to be considered for the award of the contract. 

Reg.110(5)(b) builds on the clarification and adds that, accordingly, a contracting authority does not advertise an opportunity where it makes the opportunity available only to a number of particular economic operators who have been selected for that purpose (whether ad hoc or by virtue of their membership of some closed category such as a framework agreement), regardless of how it draws the opportunity to the attention of those economic operators.  

This seems odd, as the drafting of the provision seems to leave it entirely to the discretion of the contracting authority to decide whether to create an open competition through the advertisement of the contract opportunity, or to resort to a limited competition with a pre-determined group of economic operators [along the same lines, see here, although it is clear that reg.112 requires contract award information to be posted on Contracts Finder, regardless of whether the below-threshold contract was initially advertised there or not, so the discretion is only on ex ante publication].

From the perspective of regulating contracts awarded below EU thresholds in a way that ensure competition leading to value for money, this seems to allow contracting authorities a large degree of discretion to continue with less than fully transparent procurement practices based on lists of preferred suppliers or similar arrangements [for discussion, see L Butler, 'Below threshold and Annex II B service contracts in the United Kingdom: A common law approach', in R Caranta and D Dragos (eds) Outside the EU Procurement Directives—Inside the Treaties?, vol. 4 European Procurement Law Series (Copenhagen, DJØF, 2012) 283,295 ff]. 

In my view, this may fall short from ensuring that procurement is truly competitive and that SMEs actually have access to public contracts, and the system should be refined to determine when the contracting authority can avoid the obligation to publish a contract opportunity. Moreover, in case a specific procurement is of cross-border interest, and despite the fact that it remains below EU thresholds, an absolute absence of ex ante transparency could result in an infringement of EU law (as discussed in more detail regarding reg.114 PCR2015).

In general terms, the publication regime in reg.110 PCR2015 is fundamentally equivalent to that mandated by reg.106 PCR2015 for contracts above thresholds and is subjected to the same guidance. When contracting authorities publish contract opportunities through Contracts Finder, they must also provide electronic access to the tender documents in terms equivalent to the requirements of reg.22 PCR2015 [reg.110(12) and ff].

Interestingly, one of the particular requirements of this obligation to publish is that the contracting authority needs to determine the time by which any interested supplier must respond if it wishes to be considered [reg.110(8)(a)], and the time shall be such as to allow the economic operators a sufficient but not disproportionate period of time within which to respond [reg.110(9)]. 

In the guidance, it is clarified that the time period must be sufficient to enable interested suppliers to respond to the opportunity and proportionate to the value of the procurement. In more detail, it is indicated that where the contracting authority is seeking a tender response, it is recommended that the minimum time required to submit a tender response is 10 working days.

Scope of Chapter 8 under Reg. 109 Public Contracts Regulations 2015

Reg.109 of the Public Contract Regulations 2015 (PCR2015) defines the scope of application of Chapter 8, which creates transparency and bureaucratic obligations parallel to those in Chapter 7 (regs.106 to 108) for contracts below EU thresholds--ie imposes the use of Contracts Finder and bans the use of PQQs in the procurement of contracts covered by reg.109 PCR2015. As Pedro stressed, the 'chapter is particularly important as it constitutes the first time contracts below-thresholds are subject to regulations'.

According to reg.109(1) PCR2015, Chapter 8 applies to procurements by contracting authorities with respect to public contracts where Part 2 PCR2015 does not apply because the estimated value of the procurement is less than the relevant threshold mentioned in reg.5. Interestingly, reg.109(4) includes an anti-circumvention provision identical to that in reg.6(5) and 6(6) PCR2015, whereby a procurement shall not be subdivided with the effect of preventing it from falling within the scope of Chapter 8, unless justified by objective reasons.

There are several exceptions to the obligation to comply with regs.110 to 112. First, the procurement of contracts that would not have been covered by Part 2 even if the estimated value of the procurement had been equal to or greater than the relevant threshold in reg.5 can be carried out without compliance with Chapter 8 [reg.109(2)(a)]. Second, the exemption also covers low value contracts: ie contracts of an estimated value net of VAT of less than £10,000, where the contracting authority is a central government authority [reg.109(2)(b)]; and contracts of an estimated value net of VAT of less than £25,000, where the contracting authority is either a sub-central contracting authority [reg.109(2)(c)]. Reg.109(3) clarifies how to calculate the value of the contracts.

Thirdly, there are exceptions concerning the NHS, which cover contracts tendered by an NHS Trust of an estimated value net of VAT of less than £25,000 [reg.109(2)(c)], as well as all of the procurement of health care services for the purposes of the NHS within the meaning and scope of the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013 [reg.109(2)(d)] (see comments to reg.105).

Finally, reg.109(5) sets a fourth and partial exception from the obligation to comply with Chapter 8, so that regs. 110 and 112 requiring publications in Contracts Finder do not apply where the contracting authority is a maintained school or an Academy. However, their procurement is bound by the ban on the use of PQQs for de minimis contracts under reg.111.

Publication of information on Contracts Finder about contracts awarded under Reg. 108 Public Contracts Regulations 2015

Reg.108 of the Public Contracts Regulations 2015 (PCR2015) expands the obligations of domestic publication on Contracts Finder of reg.106 to contract award notices. Following a very similar structure, reg.108(1) requires contracting authorities to have a contract award notice published on Contracts Finder within a reasonable time [reg.108(4)], where: (a) they send a contract award notice (see reg.50 and reg.75(3) PCR2015) to the EU Publications Office for publication; or (b) award a contract based on a framework agreement.

This last situation is odd because it imposes a requirement of transparency that goes beyond the standard of the EU rules, which the UK (Eng & Wales) legislator consciously decided to limit to its minimum expression in reg.50 PCR2015. It is worth reminding that Reg.50(4) PCR2015 adjusts the requirements for the publication of contract award notices to the working of framework agreements, and determines that contracting authorities shall not be bound to send a notice of the results of the procurement procedure for each contract based on such an agreement, and that this is meant to simplify the operation of the framework agreement once it is in place.  

Now, with the requirement of reg.108(1)(b) PCR2015, the rules go to the opposite extreme and impose a level of 'domestic' transparency in the award of contracts within framework agreements that can create a very dangerous excess of transparency (see discussion here). More importantly, this also creates a ridiculous inconsistency in the level of publication at EU and domestic level. Bearing in mind that all these notices are published online and in English, it is really hard to understand what would be the actual point of imposing different publication requirements when it comes to the OJEU and Contracts Finder. In any case, it would be very positive for the Cabinet Office to develop soon the mechanism of automatic feed from the OJEU that reg.108(7) and (8) foresee [in the same terms as reg.106(4) and (5)], so that these incongruities get resolved at an operational level (Pedro agrees).

Focusing on the content of these notices, reg.108(2) PCR2015 determines that the contracting authority shall cause at least the following information to be published on Contracts Finder: the name of the contractor; the date on which the contract was entered into;and the value of the contract. This deviates from reg.50(2) PCR2015, whereby the contract notices sent to the OJEU need to contain the information set out in part D of Annex 5 to Directive 2014/24. As mentioned in relation to reg.106 PCR2015, this apparent limitation of the volume of information that needs to be disclosed does not make sense, at least for contracts above EU value thresholds.

More interestingly, reg.108(3) PCR2015 stresses that the contracting authority may withhold information from publication where its release would impede law enforcement or would otherwise be contrary to the public interest, would prejudice the legitimate commercial interests of a particular economic operator, whether public or private, or might prejudice fair competition between economic operators. In my view, this should exclude almost automatically any publication of contract notices under reg.108(1)(b), unless they are disclosed in a manner that ensures delayed and grouped (quarterly) reporting of the intra-framework award/call-off decisions, along the lines of what Art 50(3) Dir 2014/24 and reg.50(5) PCR2015 establish for dynamic purchasing systems. In my view, this would not be incompatible with the requirement of reg.108(4), whereby contracting authorities shall comply with the obligation to publish notices within a reasonable time [reg.108(4), see below].  

In that regard, reg.108(5) further clarifies that, where a contracting authority sends, or intends to send, a contract award notice to the EU Publications Office for publication, it shall not cause the information to be published on Contracts Finder earlier than the time at which the contracting authority becomes entitled to publish the notice at national level in accordance with reg.52(3) and (4). Finally, reg.108(6) requires contracting authorities to have regard to any guidance issued by the Minister for the Cabinet Office on the form and manner in which the information is to be published on Contracts Finder; and what is a reasonable time. Such guidance is available here. Interestingly, it has clarified that "the information [should] be published no later than 90 calendar days after the contract award date".

Qualitative selection under Reg.107 Public Contracts Regulations 2015

Reg.107 of the Public Contracts Regulations 2015 (PCR2015) establishes specific rules that contracting authorities need to comply with when they carry out qualitative selection activities, that is, when they select economic operators to participate in procurement procedures; and decide whether to exclude economic operators from such participation (see regs.57 to 65 PCR2015). 

Reg.107 PCR2015 mainly imposes the use of a standardised pre-qualification questionnaire (PQQ) and, failing that, an obligation to notify any 'reportable deviation' from the standard PQQ to the Mystery Shopper service within 30 days of publication of the PQQ (see brief comments here & here). 

Such obligation derives from reg.107(1) PCR2015, whereby contracting authorities shall have regard to any guidance issued by the Minister for the Cabinet Office in relation to the qualitative selection of economic operators. Such guidance is available here, and it includes the standardised PQQ. Pedro discusses in more detail what 'having regard' may possibly mean.

The content of the standardised PQQ is very relevant because, under reg.107(4) where a contracting authority conducts a procurement in a way which represents a 'reportable deviation' from the guidance, it must send to the Cabinet Office a report explaining the deviation. For that purpose, something is a reportable deviation only if it falls within criteria laid down for that purpose in guidance issued under this regulation [reg.107(5)].

This provision has been criticised for increasing the administrative burden of contracting authorities as a result of the obligation to report deviations from the standardised PQQ, as well as the legal uncertainty and the lack of substantive definition of what a 'reportable deviation' is creates and its likely impact in future litigation [for extended discussion, see L Butler, 'Exclusion, Qualification and Selection Under the UK Public Contracts Regulations 2015: The Copy-Out Copycat', to be published in M Burgi and M Trybus (eds), Exclusion, Qualification and Selection in Public Procurement (DJØF, 2016)].

Publication of information on Contracts Finder where contract notices are used under reg.106 Public Contracts Regulations 2015

Reg.106 of the Public Contracts Regulations 2015 (PCR2015) imposes obligations to publish information on Contracts Finder where contract notices are used. The rules in this regulation are aimed at ensuring transparency through the domestic contract opportunities portal as soon as possible after publication in the Official Journal of the European Union or a reasonable period after they sent notice to the EU Publications Office (see Pedro's comments here). 

Under reg.106(1), a contracting authority that has sent a contract notice to the EU Publications Office must have relevant information published on Contracts Finder within 24 hours of the time when the contracting authority becomes entitled to publish the notice at national level in accordance with reg.52(3) and (4) PCR2015.

Interestingly, while the contract notices sent for EU publication need to have the content of part C of Annex 5 to Directive 2014/24 (reg.49 PCR2015); reg.106(2) simply establishes that the information to be published on Contracts Finder shall include at least the following: (a) the internet address at which the procurement documents are accessible; (b) the time by which any interested economic operator must respond if it wishes to be considered; (c) how and to whom such an economic operator is to respond; and (d) any other requirements for participating in the procurement. 

This information is much more limited than that required by reg.49 and creates an illusion of simplification by allowing contracting authorities to reduce the amount of information in the domestic publication. In my view, this does not make much sense, as there is no added cost of republishing all the information that had been sent to the OJEU. The logic of this apparent simplification becomes apparent once reg.110 PCR2015 extends the obligation to publish to contracts below the EU thresholds in reg.5 PCR2015. Nonetheless, there seems to be no good reason to restrict the information published on Contracts Finder where the notices refer to above EU thresholds contracts.

As required by reg.106(3) PCR2015, in complying with this publication requirement, contracting authorities shall have regard to any guidance issued by the Minister for the Cabinet Office in relation to the form and manner in which information is to be published on Contracts Finder. Such guidance is available here.

Reg.106(4) and (5) PCR2015 create space for future developments whereby contracting authorities would comply automatically with the requirements to publish in Contracts Finder if the Cabinet Office makes arrangements whereby
the information referred in reg.106(2) would, without further action by contracting authorities, be extracted and published on Contracts Finder following the publication of contract notices by the EU Publications Office. In those circumstances, contracting authorities would be deemed to have complied with reg.106(1) by virtue of sending the contract notice to the EU Publications Office for publication in accordance with reg.51.  

However, such automatic system would only have those effects if the guidance issued by the Minister for the Cabinet Office in relation to the form and manner in which information is to be published on Contracts Finder so confirms. Unfortunately, that is not the case under the current guidance of February 2015. Hence, reg.106(4) and (5) do not, for now, alter the obligations under the first three paragraphs of reg.106 PCR2015.

Scope of Chapter 7 under reg.105 Public Contracts Regulations 2015

Reg.105 of the Public Contracts Regulations 2015 (PCR2015) defines the scope of application of the rules in Chapter 7 of Part 4, which concern certain obligations to publish information on Contracts Finder where contract notices are used (reg.106) and about contracts awarded (reg.108), as well as specific rules for qualitative selection that result in the need to use a standardised pre-qualification questionnaire (PQQ) or report any deviations (reg.107 PCR2015). 

Reg.105 PCR105 is really straight forward and determines that Chapter 7 applies to procurements within the scope of Part 2 (ie procurement covered by reg.3 and mixed procurement covered by reg.4, both subject to the value thresholds established by reference in reg.5), with two exceptions: (a) the whole Chapter 7 does not apply to the procurement of health care services for the purposes of the NHS within the meaning and scope of the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013; and (b) regs. 106 and 108 do not apply where the contracting authority is a maintained school or an Academy (reg.107 on standardised PQQs does, though).

Regarding NHS procurement, it is interesting to stress that this is the second relevant exclusion from the general rules of the PCR2015, together with the possibility to reserve contracts under reg.77(6) PCR2015. There is third one regarding the requirements of prompt payment under reg.113 PCR2015, and reg.120 PCR2015 delays to the maximum possible extent the entry into force of the PCR2015 in relation to NHS procurement generally. All of this comes to maintain the isolation of NHS procurement rules and creates some issues of consistency of the procurement system that need regulatory reform (see Pedro's comments here, my own comments here and here, an interesting report here, and an interesting discussion on what NHS procurement can learn from defence procurement, here).

Injunctions against the Crown under reg.104 Public Contracts Regulations 2015

Reg.104 of the Public Contracts Regulations 2015 (PCR2015) determines that in proceedings against the Crown, the Court has power to grant an injunction despite s.21 of the Crown Proceedings Act 1947. This is another unfathomable jigsaw for the continental lawyer... (Pedro did not blink, though). What I can make of reg.104 PCR2015 is the following.

S.21 of the Crown Proceedings Act establishes restrictions on the nature of relief (or remedy) that can be sought in civil procedures against the Crown--ie against the public sector, with the exception of local authorities, which are not part of the Crown(*). Given that public procurement challenges based on the remedies foreseen in the PCR2015 are of a civil nature, ultimately based on tort law (see my tentative comments concerning reg.89 PCR2015, which do not apply to actions for judicial review against those same decisions), s.21(1) of the Crown Proceedings Act would be relevant and prevent the Court from granting an injunction or making an order for specific performance against the Crown [see P Cane, Administrative Law, 5th edn, Clarendon Law Series (Oxford, OUP, 2011) 339; for discussion, see MH Matthews, "Injunctions, interim relief and proceedings against Crown servants" (1988) 8 (1) Oxford Journal of Legal Studies 154-68]

In that case, a compensation for loss or damage would be the only available remedy, which would infringe EU law (and, in particular, Directive 89/665, as amended by Directive 2007/66, available here). Consequently, in order to comply with the obligation to provide all remedies foreseen in EU procurement rules, reg.104 PCR2015 reduces the immunity of the Crown in these proceedings.

By disapplying s.21 of the Crown Proceedings Act in public procurement challenges, reg.104 PCR2015 allows for the Court to give effect to reg.96 PCR2015 (interim orders). The question that remains beyond my understanding of English public and private law is whether a combined effect of reg.104 PCR2015 (allowing for injunctions against the Crown) and reg.96(6) PCR2015 (clarifying that the content of reg.96 does not prejudice any other powers of the Court regarding interim orders) actually opens up the door to orders for interim remedies different from those listed in reg.96(1) PCR2015 (for a list of the theoretically possible, see here), or not. 

Given that reg.104 PCR2015 was needed to allow for interim injunctions to be adopted by the Court despite the existence of reg.96 [or was it?; for general discussion of the possibility to obtain interim measures in procurement challenges in the UK, see P Henty, "Remedies Directive implemented into UK law" (2010) 19(3) Public Procurement Law Review NA115-24; and M Trybus, "An Overview of the United Kingdom Public Procurement Review and Remedies System with an Emphasis on England and Wales", in S Treumer and F Lichere (eds), Enforcement of the EU Public Procurement Rules (Copenhagen, DJØF, 2011) 201, 214], I would guess that no other interim orders are allowed (or indeed appropriate, with the exception of interim declarations). However, this is an area where I most likely stand to be corrected…
_________________

(*) I am thankful to my colleague Prof Cosmo Graham for the clarification and for discussion on what is and is not part of the Crown, which is not susceptible of an easy answer... I am also thankful to him for pointing me in the direction of Part 25 of the CPR Rules and Practice Directions and discussing the implications of the different types of interim orders.

Ineffectiveness etc. in relation to specific contracts based on a framework agreement under reg.103 Public Contracts Regulations 2015

Reg.103 of the Public Contracts Regulations 2015 (PCR2015) establishes rules on ineffectiveness and shortening of duration in relation to specific contracts based on a framework agreement. This regulation alters the rules of regs.99 to 102 in relation to specific contracts based on a framework agreement. However, most of the comments made in relation to those regulations apply here as well (see Pedro's comments here).

Reg.103(1) PCR2015 determines the scope of application of these special rules and clarifies that  the “specific contracts” it covers are those which are based on the terms of a framework agreement; and were entered into before a declaration of ineffectiveness (if any) was made in respect of the framework agreement on which they are based. The need for these special rules derives from reg.103(2) PCR2015, which determines that a specific contract is not to be considered to be ineffective merely because a declaration of ineffectiveness has been made in respect of the framework agreement. 

Ineffectiveness of 'relevant' specific contracts
In that case, following reg.103(3), where a declaration of ineffectiveness has been made in respect of the framework agreement, the Court must make a separate declaration of ineffectiveness in respect of each relevant specific contract. Therefore, regs.103(2) and (3) clearly decouples the (in)effectiveness of contracts awarded within a framework agreement before the declaration of its ineffectiveness from the ineffectiveness of the latter itself. 

For these purposes, a specific contract is relevant only if a claim for a declaration of ineffectiveness in respect of that specific contract has been made within the time limits mentioned in reg.93 PCR2015 as applicable to the circumstances of the specific contract; regardless of whether the claim was made at the same time as any claim for a declaration of ineffectiveness of the framework agreement [reg.103(4) PCR2015]. 

This is bound to limit the issue of ineffectiveness of specific contracts within the framework to those that are actually litigious, and is in line with the option for a restriction of the consequences of a declaration of ineffectiveness only for the future, or ex nunc, under reg.101(1) PCR2015. 

General interests excluding ineffectiveness of 'relevant' specific contracts
When determining whether a relevant specific contract should be declared ineffective on top of the ineffectiveness of the framework agreement it is based on, reg.100 PCR2015 (general interest grounds for not making a declaration of ineffectiveness) applies insofar as the overriding reasons relate specifically to the circumstances of the specific contract [reg.103(5)].  

Ineffectiveness of (non-'relevant') specific contracts due to general grounds
Moreover, reg.103(6) coordinates the rule in reg.103(3) and (4) with those in reg.95 PCR2015, to the effect of preventing the contracting authority from entering into specific contracts based on a framework which effectiveness has been challenged. That obligation is implicit and, consequently, where a claim form has been issued in respect of a contracting authority’s decision to award the framework agreement, the contracting authority has become aware that the claim form has been issued and that it relates to that decision, and a/any specific contract(s) have not been entered in, the contracting authority is required to refrain from entering into any such specific contracts based on the litigious framework agreement--and, failing that, it will be considered to have infringed the requirements of reg.95 PCR2015 and the Court will be able to declare the ineffectiveness of any such specific contracts. The same applies in relation to interim measures altering or restoring such suspension of the contract-making powers of the contracting authority.
In terms of reg.103(6)(b), thus, the regulation not prejudice the making of a declaration of ineffectiveness in relation to a specific contract in accordance with other provisions on the basis of the second ground of ineffectiveness set out in reg.99(5), where (i) the relevant breach of the kind mentioned in reg.99(5)(a) is entering into the specific contract in breach of regs.95 or 96(1)(b) PCR2015, and the relevant 'additional' breach of the kind mentioned in reg.99(5)(b) relates specifically to the award of the specific contract and the procedure relating to that award, rather than to the award of the framework agreement and the procedure relating to it. Further to this, and even if the clarification is quite circular and unnecessary, under reg.103(6)(a), the third ground of ineffectiveness set out in reg.99(6) and (7) also applies to the entering into of specific contracts based on a framework agreement.
No other grounds for ineffectiveness of specific contracts
Reg.103(7) PCR2015 limits the possibilities to declare the ineffectiveness of a specific contract based on a framework agreement other than in accordance with reg.103(3) (separate declaration of ineffectiveness in respect of each relevant specific contract) or on a basis mentioned in reg.103(6)--which, basically, comes to exclude the possibility of declaring the ineffectiveness under the first ground foreseen in reg.99 PCR2015. 
Effects derived from the ineffectiveness of specific contracts
According to reg.103(8) PCR2015, where a declaration of ineffectiveness is made in respect of a specific contract in accordance with reg.103(3), reg.101 (the consequences of ineffectiveness) applies, but reg.102(1) (requirement to impose a civil financial penalty) does not apply. This makes sense and avoids the imposition of excessive penalties when the ineffectiveness of a relevant specific contract derives from or comes in addition to the ineffectiveness of the framework agreement it is based on--which will already have triggered the imposition of penalties under reg.102 PCR2015.  
A contrario, where the ineffectiveness of a (non-'relevant') specific contract derives from other grounds, as foreseen in reg.103(6) PCR2015, the full remedies foreseen in reg.98 are available and regs.101 and 102 need to be applied strictly.

Reg.103(9) foresees that, where the Court refrains from making a declaration of ineffectiveness which would otherwise have been required on the basis of general interest grounds, the Court must order that the duration of the contract be shortened to the extent specified in the order.
The extent by which the duration of the contract is to be shortened is the maximum extent, if any, which the Court considers to be possible having regard to what is required by the overriding reasons of general interest [reg.103(10)]. For these purposes, “duration of the contract” refers only to its prospective duration as from the time when the Court makes the order [reg.103(11) PCR2015].  
It is interesting to note that these considerations are not exactly parallel to those derived from shortening of contracts which ineffectiveness is excluded by general interest grounds under reg.102(2)(a) and (3) PCR2015, where the limits to the shortening of the contract derived from the general interest grounds are not expressly referred to. However, in my view, there is no reason not to apply these rules analogously to that case.

Penalties in addition to, or instead of, ineffectiveness under reg.102 Public Contracts Regulations 2015

Reg.102 of the Public Contracts Regulations 2015 (PCR2015) determines the penalties that the Court must impose in addition to, or instead of, the ineffectiveness of a contract awarded in violation of any of the grounds set out in reg.99 PCR2015, which are fundamentally limited to a shortening of the duration of the contract and/or the payment of civil financial penalties by the contracting authority (see Pedro's remarks here). It is important to stress that the Court has no discretion to decide not to impose any of these penalties, given that reg.98(2)(b) PCR2015 requires it to impose some penalty when the conditions of reg.102 are met--which cover two different cases.

Firstly, the Court must impose the payment of civil penalties where it declares the ineffectiveness of the contract [reg.102(1) PCR2015].

Secondly, the Court must impose penalties even if it does not declare the ineffectiveness of the contract because either (a) it is satisfied that any of the grounds for ineffectiveness applies but does not make a declaration of ineffectiveness because reg.100 requires it not to do so; or (b) the Court is satisfied that the contract has been entered into in breach of any requirement imposed by regs.87, 95 or 96(1)(b) and does not make a declaration of ineffectiveness, whether because none was sought or because the Court is not satisfied that any of the grounds for ineffectiveness applies [reg.102(2) PCR2015]. 

In these cases, the Court must order at least one, and may order both, of the following penalties: (a) that the duration of the contract be shortened to the extent specified in the order [in which case, “duration of the contract” refers only to its prospective duration as from the time when the Court makes the order; reg.102(16) PCR2015]; or/and (b) that the contracting authority pay a civil financial penalty. 

If the Court imposes the payment of a civil financial penalty in either of these cases, in determining its amount, the overriding consideration is that the penalties must be effective, proportionate and dissuasive [reg.102(4) PCR2015; for a comparative view of the level of such penalties in other EU jurisdictions, see the report recently published by the Commission on "Economic efficiency and legal effectiveness of review and remedies procedures for public contracts" (April 2015)]. 

Reg.102 PCR2015 establishes two additional general rules. Firstly, in determining the appropriate order, it is made explicit that the Court must take account of all the relevant factors, including the seriousness of the relevant breach of the duty owed in accordance with reg.89 or 90; the behaviour of the contracting authority; and, where the order is to be made without a declaration of ineffectiveness, the extent to which the contract remains in force [reg.102(5) PCR2015]. Moreover, it is also established that, where more than one economic operator starts proceedings in relation to the same contract, the determination of the  effective, proportionate and dissuasive character applies to the totality of penalties imposed in respect of the contract [reg.102(6) PCR2015; ie a sort of ne bis in idem].

Civil financial penalties
Reg.102(7) to (11) establishes specific the rules concerning the payment of civil financial penalties and, in particular, whom the penalties are payable to. This may be of interest to public lawyers. However, from a public procurement perspective, this does not deserve any further comments.

Contract shortening
More interestingly, reg.102(12) to (16) establish specific rules for the shortening of the contract that cannot be declared ineffective. The regime is quite similar to the rules governing the consequences of a declaration of ineffectiveness under reg.101 PCFR2015. In that regard, the Court may make any order that it thinks appropriate for addressing the consequences of the shortening of the duration of the contract [reg.102(12)] and such an order may, for example, address issues of restitution and compensation as between those parties to the contract who are parties to the proceedings so as to achieve an outcome which the Court considers to be just in all the circumstances [reg.102(13)].

Reg.102(14) foresees the possibility for the parties to have previously regulated contractually the consequences of an order shortening the contract and, consequently, reg.102(15) determines that, in those circumstances, the Court must not exercise its power to regulate the shortening of the contract in any way which is inconsistent with those provisions, unless and to the extent that the Court considers them incompatible with the primary order to shorten the contract. The same issue of (in)existence of compensation for loss or damage resulting from the shortening of the contract arises as in relation to effectiveness, so the comments made in relation to reg.101 PCR2015 to the effect of excluding any such compensation apply here as well.

Consequences of ineffectiveness under reg.101 Public Contracts Regulations 2015

Reg.101 of the Public Contracts Regulations 2015 (PCR2015) determines the consequences of the ineffectiveness of a contract declared under reg.99 PCR2015. According to reg.101(1) PCR2015, the declaration of ineffectiveness determines that the contract is to be considered to be prospectively, but not retrospectively, ineffective as from the time when the declaration is made and, accordingly, those obligations under the contract which at that time have yet to be performed are not to be performed.

This means that the effects of the declaration of ineffectiveness are ex nunc or from now on, which is a possibility allowed for under Art 2d(2) of Directive 89/665 as amended by Directive 2007/66 (here). In this case, though, the limitation of the effects of the ineffectiveness to the future triggers an obligation to impose additional penalties, which are dealt with by reg.102 PCR2015. Pedro concurs.

Given that such decision can be appealed and, consequently, the declaration of ineffectiveness can be stayed, reg.101(2) PCR2015 clarifies that, in case of exercise of any power under which the orders or decisions of the Court may be stayed, at the end of any period during which a declaration of ineffectiveness is stayed, the contract is to be considered to have been ineffective as from the time when the declaration had been made. Consequently, the practical effects of the declaration of ineffectiveness need to be adjusted to the time of the adoption of such declaration, even if that means that it gains some retrospective effectiveness upon confirmation (or lift of the stay).

In practical terms, reg.101(3) PCR2015 allows the Court making a declaration of ineffectiveness to make any appropriate order addressing the implications of the declaration of ineffectiveness and
any consequential matters arising from the ineffectiveness. Such order can be made at the same time of the decision on ineffectiveness, or at any time after doing so. Reg. 101(4) PCR2015 further clarifies that such an order may, for example, address issues of restitution and compensation as between those parties to the contract who are parties to the proceedings so as to achieve an outcome which the Court considers to be just in all the circumstances.

Reg.101(5) PCR2015 regulates the possibility that the contracting authority and the contractor may have self-regulated the consequences of a declaration of ineffectiveness. In that case, for the contractual regime to have effect, it is necessary that the parties to the contract have agreed before the declaration of ineffectiveness and by contract any provisions regulating their mutual rights and obligations in the event of such a declaration being made. That is, the contractual regime applicable to the ineffectiveness needs to pre-exist the declaration of ineffectiveness so as to avoid strategic behaviour between the parties. 

In any case, should there be a contractual regulation of the consequences of the declaration of ineffectiveness, reg.101(6) PCR2015 determines that the Court must not exercise its power to make an order under reg.101(3) in any way which is inconsistent with those provisions, unless and to the extent that the Court considers them incompatible with the requirements in reg.101(1) or (2)--that is, unless they restrict the future ineffectiveness of the contract, considered from the date of the declaration.

One of the issues that is likely to trigger more litigation concerns any sort of compensation for loss or damage derived from the ineffectiveness of the contract (either contractual, or as a result of an issue of compensation under a Court order)--which, in my view, would run contrary to the effectiveness of the remedies Directive and, consequently, should not be allowed [in similar terms, see J Arnould, "Damages for performing an illegal contract: the other side of the mirror - comments on the three recent judgments of the French Council of State" (2008) 17(6) Public Procurement Law Review NA274-281]. 

This was an unresolved issue in the CJEU Judgment in Commission v Germany, C-503/04, EU:C:2007:432, para 36: "even if it were to be accepted that the principles of legal certainty and of the protection of legitimate expectations, the principle pacta sunt servanda and the right to property could be used against the contracting authority by the other party to the contract in the event of rescission, Member States cannot rely thereon to justify the non-implementation of a judgment" declaring the ineffectiveness of a public contract (emphasis added). 
  
In my view, such compensation of damages should not be allowed because it would entail a payment derived from an infringement of EU law that actually benefits a party intimately involved in the infringement. Moreover, the grounds for ineffectiveness are extremely limited and the infringements that trigger ineffectiveness are clear-cut and easy to monitor by the contractor, so that it is impossible for it to seriously claim lack of knowledge of the infringement (bad faith) for the purposes of claiming compensation [in similar terms, see S Treumer, "Towards an obligation to terminate contracts concluded in breach of the E.C. Public procurement rules - the end of the status of concluded public contracts as sacred cows" (2007) 16(6) Public Procurement Law Review 371-386, 381: "if for example the contract party has been fully aware or should have been fully aware that the public procurement rules have been disregarded, this will presumably reduce the consideration given to the interest of the contract party in maintaining the contract. It might even lead to the exclusion of consideration to this interest of the contract party in cases where they have been fully aware of violation of the rules combined with very active participation in the violation". For a slightly different approach and a discussion of the standard of diligence required from a contractor considering claims in this setting, see MA Simovart, "The new Remedies Directive: would a diligent businessman enter into ineffective procurement contract?" (2009)].

General interest grounds for not making a declaration of ineffectiveness under reg.100 Public Contracts Regulations 2015

Reg.100 of the Public Contracts Regulations 2015 (PCR2015) transposes Art 2d(3) of Directive 89/665 as amended by Directive 2007/66 (here), and establishes the general interest grounds for not making a declaration of ineffectiveness that would otherwise derive from reg.99 PCR2015. Under reg.100(1) PCR2015, where the Court is satisfied that any of the grounds for ineffectiveness of reg.99 applies, it must not make a declaration of ineffectiveness if the contracting authority or another party to the proceedings submits such a request, and the Court is satisfied that overriding reasons relating to a general interest require that the effects of the contract should be maintained. Pedro discusses it here.

For these purposes, the general interest grounds for not making the declaration of ineffectiveness should, in principle, not be of an economic nature. Where the reasons adduced to oppose the declaration of ineffectiveness are of an economic nature, the additional conditions of reg.100(2) to (4) PCR2015 need to be complied with. In that regard, it should be stressed that economic interests in the effectiveness of the contract may be considered as overriding reasons only if in exceptional circumstances ineffectiveness would lead to disproportionate consequences [reg.100(2)]; and, in any case, economic interests directly linked to the contract cannot constitute overriding reasons relating to a general interest [reg.100(3)]

Reg.100(4) PCR2015 clarifies that such economic interests directly linked to the contract include (a) the costs resulting from the delay in the execution of the contract; (b) the costs resulting from the commencement of a new procurement procedure; (c) the costs resulting from change of the economic operator performing the contract; and (d) the costs of legal obligations resulting from the ineffectiveness. Therefore, the scope for purely economic interests to be taken into account in order to bar ineffectiveness is rather limited although, to the best of my knowledge, there is no guiding case law that clarifies this provision [for general discussion of the practical application of this provision, see K Struckmann & P Hodal, "Private Enforcement of Contract Ineffectiveness: A Practitioner's Point of View" (2014) 1 European Procurement & Public Private Partnership Law Review 27-35].

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.

Remedies where the contract has been entered into under reg.98 Public Contracts Regulations 2015

As Pedro mentions, reg.98 of the Public Contracts Regulations 2015 (PCR2015) adopts a similar structure as reg.97 and determines the remedies available where the contract has been entered into. The list of remedies available where there has been a breach of the duty owed to an economic operator in accordance with regs.89 or 90 and the contract has been entered into differs from that in reg.97 in that it is both more prescriptive and more inclusive.

Under reg.98(2) PCR2015, the Court (a) must, if it is satisfied that any of the grounds for ineffectiveness of reg.99 PCR2015 applies, make a declaration of ineffectiveness in respect of the contract unless reg.100 PCR2015 requires the Court not to do so; (b) must, where required by reg.102 PCR2015, impose penalties in accordance with that regulation; (c) may award damages to an economic operator which has suffered loss or damage as a consequence of the breach, regardless of whether the Court also makes a declaration of ineffectiveness or imposes penalties; and (d) must not order any other remedies.

Reg.98(3) PCR2015 clarifies that paragraph (2)(d) is subject to reg.103(3) and (9) (additional relief in respect of specific contracts where a framework agreement is ineffective) and does not prejudice any power of the Court under reg.101(3) or 102(12) (orders which supplement a declaration of ineffectiveness or a contract-shortening order). 

The set of remedies available where the contract has been entered into is sufficiently complex as to require its specification in several regulations, particularly as the eventual ineffectiveness of the contract improperly awarded is concerned. In my view, other than the issue of ineffectiveness and its effects (commented later in relation to other regulations), the most controversial remedy under reg.98 PCR2015 concerns the award of a compensation for loss or damage. In that regard, the issues recently discussed in Energy Solutions EU Ltd v Nuclear Decommissioning Authority [2015] EWHC 73 (TCC) concerning the discretion of the Court (not) to grant damages are most relevant.

In that regard, it is worth reminding that, in its Judgment of 23 January 2015 in Energy Solutions v NDA, the High Court ruled on a preliminary issue in a public procurement dispute and held that the review court has no discretion (not) to grant damages for losses resulting from a breach of the public procurement rules. In my view, the Energy Solutions v NDA Judgment should be criticised at least for two reasons: firstly, because it misinterprets the EU rules on public procurement remedies and their link with the general principle of State liability for breaches of EU law; and secondly, because it creates an analytical framework based on the commercial decisions of disappointed bidders that would result in excessive (strategic) claims for damages. My arguments are fully developed here.

In my view, given that it is possible to challenge award decisions beyond the mandatory stand-still period and, consequently, after the contract has been awarded in conditions that make its declaration of ineffectiveness difficult [see comment to reg.99(5) PCR2015], the Court should overrule Energy Solutions v NDA and go back to an interpretation whereby a judgment of ‘reasonableness’ of the claim (and, significantly, of the time at which the proceedings are started) is conducted on a case by case basis and damages are by no means awarded automatically. 

Granted, this interpretative option creates legal uncertainty and may trigger further litigation at EU level. Consequently, in the long run, it would be preferable to amend the Public Contracts Regulations 2015 so that the standstill period and the time-limit to initiate actions coincide. In that case, I would expect the standstill to be extended, rather than the time-limit to be reduced. One way or the other, though, the system needs fixing in order to close the gaps that can now trigger excessive (strategic) litigation.

Remedies where the contract has not been entered into under reg.97 Public Contracts Regulations 2015

Reg.97 of the Public Contracts Regulations 2015 (PCR2015) lists the remedies that can be provided by the Court where the contract has not been entered into. However, this regulation does not prejudice any other powers of the Court--and, consequently, the available remedies can be broader if the claimant can resort to a different legal basis.

Under reg.97 PCR2015, where the contract has not yet been entered into and once the Court determines that a decision or action taken by a contracting authority was in breach of the duty owed in accordance with reg.89 or 90 PCR2015--ie that there has been a breach of the applicable rules and that the aggrieved party had active standing to claim for such breach; the Court may do one or more of the following: (a) order the setting aside of the decision or action concerned; (b) order the contracting authority to amend any document; (c) award damages to an economic operator which has suffered loss or damage as a consequence of the breach. Pedro focuses on the issue of damages in his comment.

This set of remedies is clearly tailored towards correcting the infringement--either by setting it aside or having it modified--and providing the claimant with sufficient compensation for the loss or damage suffered as a consequence of the breach. Of these remedies, the one that tends to trigger more difficulties is the compensation for loss or damage (further discussed tomorrow). 

However, an important point that can be easily overseen is that of the interconnection of the remedies. In my view, given that reg.97 is exclusively concerned with cases where there is no issue of ineffectiveness of a contract and its effects, as well as the possibility to exclude them (see comment to regs.98 and ff), the proper interpretation of reg.97(2) PCR2015 is that the Court must always grant either a remedy under reg.97(2)(a) and set aside the the decision or action concerned, or a remedy under reg.97(2)(b) and order the contracting authority to amend any document; and in either of the cases, where appropriate, it can additionally grant compensation for loss or damage. However, damages cannot be granted as a self-standing remedy under reg.97(2)(c) PCR2015 and claims exclusively for damages should be dismissed. 

The reason for this interpretation lies in the ancillary nature of the compensation for loss or damage under the EU system of public procurement remedies, which has never been intended as a main remedy (see arguments here). In that regard, given that the contract has not yet been entered into, if the Court can eg set aside the challenged award decision and make the contracting authority go back to the procedural moment prior to the relevant breach of the duty owed to the claimant, there may well not be any (relevant) loss or damage to be compensated--other than legal costs, possibly. Hence, a systemic interpretation of reg.97 PCR2015 should restrict the award of compensation for loss or damages to very exceptional cases because, in the absence of contractual completion, the situation should be relatively easy to correct and claimant's interests should be satisfied by retracting the tender to the moment prior to the infringement of the duty owed by the contracting authority.

A different (also difficult) claim would be for the economic operator to intend to have the award decision amended in its favor under reg.97(2)(b) PCR2015; for instance, where the claim is that the scores were improperly calculated and a proper application of the scoring rules should have resulted in such award. In these cases, the Court may well be reluctant to carry out any such sort of "amendment" of the document reflecting the award decision and rather refer the case back to the contracting authority for such recalculation. 

However, in my view, nothing should oppose a direct finding that a contract should have been awarded to claimant if the Court has all necessary information to determine ipso facto that such would be the clear (unique) result of a proper application of the rules. Either way, where the Court is able to determine which bidder should have been awarded the contract, it should take all appropriate steps to ensure that the remedy used creates that result.