The Scottish Government

Consultation on the approach to implementation of the EU Remedies Directive

Analysis of the responses to the consultation

February 2009

CONSULTATION ON THE APPROACH TO IMPLEMENTATION OF THE EU REMEDIES DIRECTIVE (DIRECTIVE 2007/66/EC)

ANALYSIS OF THE RESPONSES TO THE CONSULTATION

JANUARY 2009

Introduction

The Scottish Government published the above consultation paper - in which it sought views on its approach to implementation of the EU Remedies Directive - on 4 August 2008. The consultation paper set out the background to the new Directive and sought feedback on the optional elements: http://www.scotland.gov.uk/Publications/2008/08/04093512/0. Responses were requested by 31 October 2008.

We received a total of fifteen responses to the consultation, nine of which were submitted by public sector procurement organisations. Non-confidential responses were published in full on the Scottish Government's website on 28 November: http://www.scotland.gov.uk/Publications/2008/11/28120833/0.

We have analysed the responses in detail and will now consider all the available evidence before finalising our proposals for implementation. We will be working closely with UK Government colleagues to ensure that, insofar as possible, a similar approach is adopted throughout the UK. We intend to seek comments on the amending legislation in a second consultation exercise later in 2009.

Analysis

Article 1(5): Scope and Applicability of Review Procedures

Article 1(5): Member States may require applicants to seek review with the contacting authority first. This would result in the suspension of the award of the contract for 10 or 15 days (depending on the means of communication used) after the contracting authority's reply, to preserve the applicant's opportunity to bring court proceedings if it remained dissatisfied with the outcome of the review.

Respondents in favour of implementing this provision believed that such a requirement would encourage parties to resolve disputes quickly and without the need for costly litigation. It would also enable contracting authorities to investigate a complaint at the earliest opportunity.

Although supportive of implementation, CBI Scotland warned that an economic operator may feel intimidated from requesting such a review, particularly if they feel that have already been treated unfairly in the evaluation process. It would be important to ensure that applicants who remained unsatisfied with the review

undertaken by the contracting authority had recourse to an effective, accessible and independent review body.

Maclay, Murray and Spens commented that any such review would have to be meaningful and serious and suggested that it should be independent from the procurement officer or team alleged to have committed the breach of the procurement rules. Guidance on the appropriate procedures for reviews would be necessary, should Article 1(5) be implemented. Maclay, Murray and Spens also commented on the timing of the review. In their view, delay caused by a review could be regarded by the Scottish Courts as weighing in the contracting authority's favour in any subsequent interim interdict proceedings. The Scottish case Lightways [1] (Contractors) Limited v North Ayrshire Council demonstrated that bidders sometimes faced significant hurdles in persuading courts to suspend contract awards pending a challenge.

Dundas & Wilson suggested that the provision could be implemented by way of a statutory notice to be served on the contracting authority before the expiry of the 10-day mandatory standstill period - the notice requiring that the contract award process be suspended for a further 10 or 15 days. Although this would work for aggrieved bidders who have received "Alcatel" letters, it would not work for other aggrieved third parties.

Other respondents did not favour implementation of the provision. The Crown and Procurator Fiscal Service commented that an initial review by the contracting authority could add significantly to the timetable for awarding contracts and might lead to frivolous review requests. Other respondents questioned the format and scope of this initial review and the status of its findings, particularly in relation to any subsequent legal challenge by a supplier. The Tayside Procurement Consortium commented that the delay caused by such a review could have commercial consequences in terms of tender pricing. Traprain Consultants said that a complainant could approach the contracting authority in any event and that the element of compulsion would not justify the additional delay.

A further respondent commented that existing debrief provisions allow an economic operator sufficient time in which to prepare a prima facie case for an interim interdict to prevent the award of the contact to another supplier. The same respondent suggested that if Article 1(5) is implemented, provision should be made for the 10 or 15 day period to be waived if the applicant confirmed that it would not bring Court proceedings.

Article 1: Review Procedures - Means of Communication

Article 1 allows Member States to decide on the appropriate means of communication to be used for an application for review by the contracting authority.

The majority of respondents agreed that an application for review by the contracting authority should be made by electronic means or fax, thereby cutting down on lost time.

McGrigors commented that electronic communication should be mandatory where both parties have access to such means but that provision should be made for the rare situation where either or both parties do not have access to e-mail.

Highland Council agreed that electronic communication would be preferable and suggested that it may be helpful to state that the "postal rule" [2] will apply to these communications.

Advanced Procurement for Universities and Colleges (APUC) commented that electronic communication is widely used by suppliers, including Small and Medium Sized Enterprises (SMEs) and that issues around non-receipt of e-mail and fax occur infrequently.

Traprain Consultants commented that electronic means of communication should be permissible but not compulsory, as applicants may prefer the certainty provided by a letter sent by recorded delivery.

Dundas & Wilson suggested that a single number of calendar days should be set, regardless of the means of communication (to the extent that this would be permitted by the Directive).

Article 1(4): Review Procedures - Notification

The Scottish Regulations currently require an economic operator wishing to bring Court proceedings to inform the contracting authority of the alleged infringement and of its intention to bring proceedings. The consultation sought feedback on the relevance of this provision if the option in Article 1(5) is exercised, requiring economic operators to seek review with the contracting authority before bringing Court proceedings.

The majority of respondents considered that this provision should continue to apply. It was suggested that, if the option in Article 1(5) is exercised, the notification requirement in Article 1(4) should take effect at the end of that initial review process (i.e. on the last day of the 10/15 day suspension period). This would increase certainty for contracting authorities and give them time to prepare for the court proceedings.

Maclay, Murray and Spens stated that the requirement in Article 1(4) should continue to apply where a review by the contracting authority has been only partly successful, for example where the contracting authority has proposed a remedy which the complainant considers inadequate.

The Tayside Procurement Consortium suggested that the terms of the notification to a contracting authority should not preclude an economic operator from relying on alternative or additional grounds in its court application.

Other respondents considered that the requirement for an economic operator to seek review with the contracting authority should supersede the requirement in Article 1(4), making the current provision redundant.

Article 2a: Standstill - Means of Communication

It will be necessary to amend the existing provisions in the Scottish Regulations to allow for a longer standstill period (15 days) where information about the award of a contract is provided other than by fax or electronic communication. The Regulations already require the most rapid means of communication practicable to be used. The consultation sought confirmation that in most circumstances, fax or electronic communication will be practicable and that the shorter period (10 days) can be regarded as the norm.

All who responded on this point agreed that electronic communication or fax and therefore the shorter period should be regarded as the norm. McGrigors stated that provision should still be made for the rare situation where either party (or both) does not have access to electronic communication.

Article 2a: Standstill - Minimum Timescales

The majority of respondents agreed that the minimum timescales for the standstill period (10 days where the contract award decision is sent by fax or electronic means, 15 days where it is sent by post) are satisfactory.

CBI Scotland commented that further guidance may be required on the issue of "working days" and "calendar days", bank holidays and similar such periods. The Tayside Procurement Consortium agreed that clarification of exactly how to count the days would be desirable. CBI Scotland also suggested that the introduction of a maximum timescale for the standstill period should be considered.

The Scottish Environmental Services Association commented that in some circumstances, the proposed minima may not be of sufficient length to enable potential complainants to gather all the necessary information to submit a formal challenge. This could be the case with more complicated waste management contracts, where non-price elements could be the principle determinant for scoring the contract award criteria.

Article 2a: Standstill - Precise Statement

Article 2a includes a new requirement for contracting authorities to provide each candidate with a precise statement of the exact standstill period that will apply.

In its response, NHS National Services Scotland suggested that a consistent "precise statement" should be developed for use by the Scottish Public Sector.

Article 2b: Derogations from the Standstill Period

Article 2b provides optional derogations from the standstill period where an OJEU contract notice is not required or where there is only one tenderer and no other candidates are concerned.

Opinion on whether the derogations should be implemented was divided. A number of respondents considered that both derogations should be implemented. McGrigors stated that it is sensible for both derogations to be fully transposed into national law as this reflects current practice. Maclay Murray and Spens agreed. In their view, the introduction of a standstill period where an OJEU notice is not required would further blur the distinction between contracts inside and outside the scope of the 2006 Regulations. They believe that in situations where there is only one tenderer, it would make little sense to hamper the conclusion of the contract. Dundas & Wilson commented that both derogations should be implemented using the same wording as in the Directive.

Other respondents commented that the standstill period should apply in one or both of the two situations described in the Directive. Both East Ayrshire Council and the Tayside Procurement Consortium commented that Part B services - where an OJEU contract notice is not required - should not be exempt from the standstill period. This view was also expressed by Highland Council, which stated that suppliers of Part A and Part B services should be treated equally. CBI Scotland stated that even where no OJEU notice is required, EC Treaty principles of transparency and non-discrimination apply and for this reason, the standstill period should apply. The Scottish Environmental Services Association endorsed this latter point.

NHS National Services Scotland suggested that the standstill period should apply where competitions have resulted in a single tenderer. Traprain Consultants commented that a competition which results in a single tender could still be challenged, for example on the grounds that the selection criteria in a restricted procedure were discriminatory. However, Highland Council argued that in such circumstances, a standstill period would not be helpful to either party. In its experience, it is unlikely that any other candidate who submitted an expression of interest but who was not still involved in the competition at this stage would wish to challenge the award decision.

A further respondent stated that neither derogation should be implemented.

Article 2b: Standstill Derogations - DPS/Frameworks

Where call-off contracts are awarded under Dynamic Purchasing Systems (DPS) or framework agreements, the following rules would apply:

· Above threshold call-offs: Member States can decide to waive the standstill period. However, this would mean that ineffectiveness would apply if there had been a breach of the existing mini-competition rules.

· Below threshold call-offs: Member States can decide to waive the standstill period without ineffectiveness being made available.

The majority of respondents agreed that both of the above derogations should be implemented.

McGrigors commented that both derogations should be implemented in order to maintain the existing position whereby the standstill period applies when framework agreements are put in place or when DPS are established, but not during subsequent call-offs or mini-competitions. APUC recommended that a consistent approach should be adopted in relation to above and below threshold call-offs. Dundas & Wilson commented that both derogations should be implemented using the same wording as in the Directive.

However, CBI Scotland commented that the standstill period should apply to above threshold call-offs, increasing the transparency of such call-offs and ensuring that they were used only in appropriate circumstances.

Article 2c: Time Limits for Applying for Review

Article 2c states that applicants must have at least 10 or 15 days (depending on the means of communication used) within which to commence court proceedings. Member States may establish longer time limits. The Scottish Regulations currently require the review to be brought "promptly" and in any event within 3 months unless the court considers that there is a good reason for extending the period. A minimalist approach would be to amend the Regulations to make clear that "promptly" can never means less than 10/15 days.

The Scottish Environmental Services Association commented that the current 3 month time limit achieves a suitable balance between enabling aggrieved parties to bring a legitimate challenge and providing certainty for the winning contractor. CBI Scotland considered that there may be instances where the 3 month limit needs to be extended, particularly if the parties have entered into a process of arbitration. Aggrieved parties would not be encouraged to participate in an arbitration process if in the event that this was unsuccessful, they found that their access to the court had been timed out. CBI Scotland also said that the term "promptly" is not helpful in terms of legal certainty and should be dropped in favour of a simple 3 month time limit.

Highland Council considered that as long as it is clear that the absolute limit for a review to be brought is 3 months, there should be no further requirement to define what "promptly" means. Maclay Murray and Spens commented that it would be unhelpful if "promptly" could be interpreted in such as way as to shorten the 10-day standstill period following the notice of intention to award a contract. On the other hand, where grounds for a challenge arise at an earlier stage, it would be beneficial to maintain the requirement to complain "promptly" in order not to hamper the process. In their view, these two interests could be reconciled by explaining in the implementing instrument that action taken within the standstill period is deemed to have been taken "promptly".

Traprain Consultants suggested that the current 3 month limit could be reduced to, or towards, the Directive's minima. They expressed concern that the effect of the new regime will be to create uncertainty in the placing of important and time-critical contracts and the more this can be restricted, the better.

McGrigors commented on the need to ensure that any initial review by the contracting authority (if Article 1(5) is implemented) is completed before the minimum time limits for applying to court start to run.

Article 2d: Ineffectiveness - Retrospective or Prospective Cancellation

Under the new Directive, contracts must be considered ineffective in any of the following cases:

i) There is failure to publish a contract notice in the OJEU where this is required by the relevant Public Procurement Directive;

ii) There is failure to comply with the rules on review procedures i.e:

· The suspension of the contract awarding process required by Article 1(5) when a review is sought with the contracting authority (if such a requirement is imposed);

· The requirement that the contract cannot be concluded before a court has made its decision on interim measures or on review; or

· The standstill requirement.

But only where:

· The infringement has deprived the tenderer of the opportunity to pursue pre-contractual remedies;

· Such an infringement is combined with a breach of the relevant Procurement Directive, where that breach has affected the chances of the tenderer obtaining the contract.

iii) For contracts based on a DPS or framework agreement, ineffectiveness will apply where:

· The contracting authority has chosen not to observe the standstill period (assuming that the derogation in Article 2b is exercised); and

· There is an infringement of the rules on mini-competitions as laid down in the Procurement Directives for above threshold call-offs (below-thresholds call-offs are exempt from ineffectiveness).

The consultation sought views on whether implementing regulations should provide for retrospective cancellation or prospective cancellation of contractual obligations. Views were also sought on whether existing common law principles are sufficient to address potential unfairness that might arise when contractual obligations are cancelled by the courts.

The majority of respondents (67%) favoured prospective cancellation of contractual obligations. Three respondents believed that the implementing regulations should give the court discretion to apply prospective or retrospective cancellation. A further respondent favoured retrospective cancellation.

NHS National Services Scotland noted that significant obligations may already have been discharged under a contract awarded without competition; it is likely that fewer obligations would have been discharged under a contract deemed ineffective because of a breach of the rules on review procedures. They considered the existing common law of unjust enrichment to be appropriate and commented that implementation of the Directive may lead to suppliers requiring indemnities from contracting authorities to cover losses arising as a result of contract cancellations.

CBI Scotland commented that retrospective cancellation could provide difficult to execute and could service to hinder large projects that might require construction to be underway or significant numbers of employees to be transferred via TUPE while details of the cancellation were resolved. Prospective cancellation would be preferable but its operation would require careful consideration. For example, shortening the terms of large and complex contracts such as Private Finance Initiatives would destabilise the financial arrangements on which they were founded and prove very difficult to re-negotiate.

Maclay, Murray and Spens commented that retrospective cancellation would be overly complicated in many cases. Restitution of each party's contribution will often be impossible, for instance in service or works contracts. They considered prospective cancellation to be a more appropriate remedy and less likely to cause unnecessary and undesirable disruption to the carrying out by the public body of its functions. Further consideration would need to be given to the status of clauses relating to the survival of certain rights and obligations after termination, for example regarding confidentiality or sums due.

The Scottish Environmental Services Association stated that it would be extremely difficult to resolve the retrospective cancellation of a contract where the construction of physical assets had already begun or where large numbers of staff had already been transferred through TUPE. Further consideration would need to be given to the practical operation of prospective cancellation in circumstances where a long-term PFI contract had been used to underpin the financing of new infrastructure. In the case of residual waste infrastructure, which requires a guaranteed input waste stream to be economically viable, the cancellation of the authority's obligation to deliver waste to the facility would jeopardise the entire project. This additional risk would require the introduction of suitable compensation mechanisms for contractors.

Dundas & Wilson favoured prospective cancellation provided the Courts were offered a sufficient degree of discretion to adopt a balanced and flexible approach to deal with the varied facts and circumstances of each case. They considered that contractors who are or should have been aware that they have awarded a contract in breach of the procurement rules should not be able to profit under the contract. They noted that the new rules would be likely to result in the development of contractual protections (warranties and indemnities) being demanded by successful bidders. Dundas & Wilson further noted that similar issues have been considered in the context of PFI and the Local Government (Contracts) Act 1997, which considers the position of a contractor in the event that a court rules that the public authority has acted ultra vires in awarding the contract.

A further respondent also favoured prospective cancellation. In its view, retrospective cancellation would cause great uncertainty for contracting authorities and suppliers and could have grave implications for the delivery of certain services, for example social care services.

Highland Council considered that ineffectiveness should be applied both prospectively and retrospectively in line with current common law principles. To do otherwise, would add further bureaucracy. The Tayside Procurement Consortium considered that where successful bidders have acted in good faith, prospective ineffectiveness should apply. However, where successful bidders have acted in bad faith, retrospective ineffectiveness should be applied by the court on application. Traprain Consultants commented that retrospective cancellation should be available to the courts where there is evidence of collusion on the part of the successful bidder in the breach of the Regulations; prospective cancellation should otherwise be applied.

McGrigors favoured retrospective cancellation, stating that it would serve to simplify the concept of ineffectiveness. In their view, the threat of a court ordering the unwinding of a contract already awarded (similar to the procedure for voidable contracts under domestic Scottish law) would help to ensure strict compliance with the procurement rules. A statutory penalty for ineffectiveness would import certainty into the procurement process and would avoid the need for the Court to determine in each case the level of fine which should be imposed or the appropriate duration a contract should be restricted to. McGrigors further noted that the law relating to unjust enrichment is complex and has given rise to lengthy and uncertain litigation. They advised that the Scottish Government should consider incorporating an appropriate statutory provision into national implementing legislation in order to provide legal certainty.

Article 2d(3): Ability for Courts Not To Apply Ineffectiveness

There is an option for national law to allow the court to decide not to render a contract ineffective, if the court finds that there are good reasons for the effect of the contract to be maintained.

The majority of respondents agreed that the Scottish Government should implement this option. McGrigors commented that it makes sense for the Court to be able to determine cases which merit flexibility when deciding whether or not to make a declaration of ineffectiveness. For example, there will be types of services contracts where ineffectiveness alone will not be capable of providing a sufficient remedy. Maclay Murray and Spens commented that alternative penalties may be preferable where a contract cannot easily be frustrated without great disturbance to some public function.

Traprain Consultants noted that the circumstances in which a challenge can be made will vary greatly and discretion is required to prevent a formalistic approach leading to injustice to innocent parties. The Scottish Environmental Services Association commented that in cases where public sector value for money could be undermined, the courts should be granted discretion to apply common sense.

Dundas & Wilson commented that some guidance around the potential grounds for the exercise of the courts' discretion, for example a public interest test or overriding reasons in the public interest, would be welcomed.

Article 2e: Infringements of this Directive and Alternative or Additional Penalties

Article 2e requires that two further remedies are available in certain circumstances (either instead of a declaration of ineffectiveness or as an additional remedy):

· imposition of fines on the contracting authority; or

· shortening of the duration of the contract.

The new Directive requires that these further remedies are "effective, proportionate and dissuasive". The consultation sought views on whether the court should have discretion to decide which penalty to apply and the appropriate size of any fine or length of time by which a contract should be shortened.

NHS National Services Scotland commented that the court should have discretion to decide which penalty should apply. McGrigors agreed, commenting that the most appropriate sanction will vary according to the facts of each case and in particular the seriousness of the infringement, the behaviour of the contracting authority and the extent to which the contract remains in force. In their view, the diversity of circumstances involved in individual contracts would make the task of proscribing different fine levels and contract durations in national implementing legislation unduly restrictive. McGrigors recommended that the Scottish Government should consider issuing a non-binding guidance document demonstrating the appropriate level of fines and contract durations applicable in a variety of circumstances.

CBI Scotland noted that "effective, proportionate and dissuasive" penalties would vary according to the contract in question. The courts would, for example, have to take account of the practical difficulties and implications of unravelling a complex PFI deal. In its view, ineffectiveness should apply only to the most serious breaches of the Directive.

NHS Lothian commented that the implementing regulations should state the alternative remedies and specify appropriate limits. APUC suggested that there should be a distinction between penalties for minor and major infringements. Maclay Murray and Spens recommended that the range within which fines can be imposed should be set out, with a maximum fine defined in the Regulations. The factors to take into account when setting fines should also be set out, for example the value of the contract, the gravity and effect of the infringement and whether the contracting authority acted in good or bad faith or was negligent. Within these parameters, the courts should have a broad margin of discretion in setting fines.

The Tayside Procurement Consortium considered that the prospect of damages to an aggrieved bidder and the supplier who has been awarded the contract, together with court costs, is an effective and sufficiently dissuasive remedy. In its view, the availability of punitive fines in addition would be disproportionate, particularly as the cost would have to be met by the public purse. It considered that a punitive penalty would be appropriate only where the court found that the contracting authority had wilfully breached the rules.

Two further respondents commented on this issue. One commented that either a fine or the shortening of the contract should be available to the court and not both. There should be provision for a small maximum fine for procedural breaches. If used in addition to prospective ineffectiveness, a fine should be no greater than the loss of profit incurred by the applicant. The same respondent suggested that there should be a tariff of fines for different breaches and that the court should be allowed to reflect the seriousness of breaches through the award of damages. The other respondent suggested that fines for minor infringements should be fixed at a percentage of the value of the contract, subject to a maximum amount.

Article 2e: Ineffectiveness or Alternative Penalties - should the court have discretion?

The consultation sought views on whether the courts should be able to choose between ineffectiveness and alternative penalties in cases where there has been a relevant remedy-oriented procedural breach but not a breach of the relevant Procurement Directive.

The majority of respondents agreed that the courts should have discretion in this respect. McGrigors commented that the court should be able to determine whether ineffectiveness or an alternative penalty should apply in cases not automatically meriting a finding of ineffectiveness. Highland Council agreed on this point, commenting that it would be unwise to consider any restriction to the courts' discretion without knowing how the new Directive will operate in practice. Maclay Murray and Spens said that they are in favour of implementing the option of giving courts the discretion whether to apply ineffectiveness, shortening of duration or fines as an appropriate remedy. They added that the courts should be competent to combine these remedies in appropriate cases.

Article 2f: Ineffectiveness - Time Limits

The Directive provides that Member States may require that an application to the court - for review of matters which could result in a finding of ineffectiveness - is made within certain time limits. Member States may require that such an application is brought:

i) Within a certain time period (which must not be less than 30 days) from the day after the date on which either:

· The contract award notice is published, for contracts that are justified as not needing prior publication in the OJEU; or

· The authority informs the candidates of the conclusion of the contract with the reasons required by the existing procurement rules.

ii) And in any event, within a period of at least 6 months from the day after that on which the contract was awarded.

The majority of respondents agreed that the minimum time limits as outlined in the Directive should be implemented. McGrigors commented that requiring applicants to bring proceedings within 6 months would deliver certainty to both the contracting authority and the successful tenderer by ensuring that after this period a contract cannot be annulled. The winding up of contractual obligations that have been in place for a longer period of time would be expensive and could contribute to delay.

Maclay Murray and Spens suggested that it may be beneficial to introduce a subjective element of knowledge given that a potential supplier may only find out about an illegal direct award to a competitor months after the event. For example, the 6 month limit could be qualified by a prevailing 30 day limit counting from the day the challenging party was made aware of the grounds for a challenge. In order to reduce uncertainty and avoid undesirable outcomes in practice however, the use of such a subjective element could perhaps be restricted to cases where the contracting authority has acted in bad faith.

Traprain Consultants commented that the 6 month period may be appropriate where the contracting authority has wilfully failed to notify anyone but is a very long period in any other case. They suggested that the 6 month period should apply only where the contracting authority has failed to publish a contract award notice in the OJEU or to inform candidates of the conclusion of the contract.

Additional question: review procedures

The consultation paper sought comments on the effectiveness of the review procedures currently available in Scotland to suppliers.

NHS National Services Scotland commented that the Single Point of Enquiry (SPoE) operated by SPD has proved to be a useful additional review point. They noted that the SPoE is not a point of appeal and that this should not be changed by implementation of the Remedies Directive.

McGrigors commented that the current formal review procedures available under domestic law are insufficient and unfit for purpose. In practice, the Sheriff Court is not used as a forum for procurement disputes as it does not possess the necessary detailed and specialist knowledge of procurement law. Litigation in the Court of Session is unnecessarily lengthy, resulting in delay to contract awards and causing parties to incur substantial legal fees. These factors explain why relatively few cases reach court. McGrigors noted that "We are aware of many cases where prima facie breaches have been ignored due to the costs of litigating, the only method to effectively exercise remedies. Also, commercial suppliers remain fearful that commencement of action will affect their standing with contracting authorities resulting in an ongoing loss of business. This matter must be addressed urgently by Government if there is ever to be an effective and properly policed remedies regime."

McGrigors suggested that proceedings should be removed from the Sheriff Court and that the Government should consider the establishment of specialised procurement tribunals with a route of appeal to the Court of Session. This would allow decisions to be taken by procurement experts and would reduce the timeframe for consideration of cases. A quicker process, which would not require parties to instruct professional lawyers, would reduce the cost to both parties. A tribunal, similar to those operating in other EU Member States, could adopt a more hands on and inquisitorial approach to issues put before it for consideration.

CBI Scotland said that suppliers should continue to have the option of bringing a case in the Sheriff Court or the Court of Session. However, the track record of procurement cases that have been brought to court is not particularly satisfactory. CBI Scotland expressed concern about the outcome in the Lightways (Contractors) Ltd v North Ayrshire Council [3] case, in which the court held that the balance of convenience was not with the pursuer and declined to make an interim order suspending the contract award decision, even though the court was satisfied that there was an arguable case on three out of four grounds of challenge. A further case - Aquatron Marine v Strathclyde Fire Board [4] - took 3½ years to reach the Court of Session. CBI Scotland commented that, despite being successful, the pursuer

reportedly said that he would never have embarked on the case had he known at the outset how long and expensive the process would become.

In CBI Scotland's view, the SPoE does not possess sufficient powers at the present time. Its powers should be enhanced to enable it to act as an effective arbitrator on procurement decisions and its decisions should be given some weight in any subsequent court action. It could, for example, be modelled on the Complaints Board for Public Procurement in Norway. An independent arbitration body would provide quicker and less expensive resolution of procurement disputes.

APUC commented that the Government should further promote the SPoE as an alternative to court action. The SPoE should, however, continue to operate on an informal basis and should not become a point of appeal. It would be helpful for the Government to publish information on the types of cases handled by the SPoE and any lessons learned.

Maclay, Murray and Spens commented that the Lightways decision creates some uncertainty as to what a bidder alleging a breach of the procurement rules must show in order to receive interim, or other, relief by the Scottish courts. They have nevertheless seen a slow change in the culture of enforcement of the Scottish procurement rules. In addition, they have used the SPoE on behalf of clients and found it to be a reasonably effective facility.

Dundas & Wilson commented that the time, costs and resources required to bring proceedings in the Sheriff Court or Court of Session act as a significant disincentive to aggrieved bidders challenging award decisions. They noted that no procurement challenge has been brought before a Sheriff Court in Scotland under the current 2006 Regulations. Dundas & Wilson commented that whilst the SPoE may be a useful way to identify common problems and generate a better understanding of the rules, it does not appear to provide any form of meaningful independent review function for disputes over individual tender processes. When the limitation periods for bringing claims are so strict, it is important that those using the enquiry system do not have their legal rights prejudiced.

A further respondent commented that current court proceedings involve considerable delay and this can create problems for existing suppliers or service providers. However, any other forum would be costly and difficult to set up.

Another respondent commented that the SPoE is not sufficiently independent. It should be developed to become a shared learning facility to improve contracting authorities' practice and reduce infringements.

Regulatory Impact Assessment

NHS National Services Scotland commented that implementation of the Directive may increase legal costs in contracting and may in practice create a period after signing when parties are reluctant to progress a contract for fear of it being cancelled. There may also be an initial increase in litigation, with test cases to explore the scope and extent of the new provisions, in which case there will be a cost implication for the public purse in defending such actions.

Traprain Consultants Ltd commented that parties will incur additional/new compliance costs. For example, bidders will need to undertake a period of due diligence if there is a risk of an ineffectiveness ruling. A further respondent commented that implementation could have a significant impact on costs to business, the third sector and the public sector. Contracting authorities will incur higher administrative costs, particularly if Article 1(5) is implemented and they are required to undertake an initial review. If the Court suspends a contract for an indeterminate time, a contracting authority will potentially incur costs if they have to continue to apply old contract rates. Contracting authorities will have higher litigation costs and costs resulting from a successful challenge will increase.

In McGrigors' view, the new Directive will not have a significant impact on costs for businesses, the third sector or the public sector provided the procurement rules are adhered to. This view was shared by APUC and the Tayside Procurement Consortium.

Further comments

McGrigors commented that the Scottish and UK Governments should cooperate to ensure a similar approach to the new Directive in all jurisdictions in the UK. This view was also expressed by Maclay Murray and Spens which stated that the new rules should, insofar as possible, be uniform throughout the UK in order not to create an over-complicated, dual legal framework for suppliers operating on bother sides of the border.

Highland Council commented that the Directive should be implemented to its fullest possible extent. Any measures that will encourage contracting authorities to fully and properly consider their contract award strategies prior to implementation should be supported. The courts should be given as much freedom as possible to use their expertise in determining applications.

Traprain Consultants Ltd stated that the application of ineffectiveness in certain circumstances, for example the delivery of critical affordable housing projects, could cause considerable delay and that in those circumstances, existing remedies were preferable. The risk of cancellation may mean that some public companies will not be able to take the value of a contract into their accounts until the maximum period for a challenge has expired.

Dundas and Wilson noted the low number of court cases brought in the UK. Although procurement challenges are generally on the increase, case law remains relatively underdeveloped. A further respondent commented that, to avoid vexatious claims, applicants to court should be required to provide sufficient evidence of breaches by contracting authorities.

[1] [2008] CSOH 91, 2008 S.L.T. 690; 2008 G.W.D. 22-357

[2] rule establishing that postal acceptances are effective on dispatch

[3] 20 June 2008, 2008 S.L.T 690

[4] [2007] CSOH 185