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PART 3: CONSULTATION QUESTIONS
Introduction
3.1 This section of the consultation document seeks feedback on the draft regulations and on a number of outstanding questions relating to implementation of the Directive. The consultation questions address the following topics:
Question 1: Request for feedback on the draft regulations
Question 2: Policy on the application of the standstill derogations
Question 3: Duration of the standstill period where communication is by post
Question 4: Restricting applications under the Scottish Regulations to the Scottish Courts
Question 5: Court discretion not to grant interim measures
Question 6: Transitional policy for migrating to the new rules
Question 7: Transitional policy in respect of illegal direct awards
Question 8: Transitional policy in respect of contracts awarded under a framework or Dynamic Purchasing System
Question 9: Legal effect of ineffectiveness
Question 10: Policy on call-off contracts where a framework agreement is declared ineffective
Question 11: Policy on the application of the standstill requirements to Dynamic Purchasing Systems
Question 12: Policy on the application of ineffectiveness to Dynamic Purchasing Systems
Question 13: Policy on limiting certain communications to tenderers and candidates concerned
Question 14: Draft Regulatory Impact Assessment
Draft Regulations
3.2 In order to implement the Directive, we have:
(i) amended regulation 32 governing information to be provided to suppliers about contract award procedures and the standstill period;
(ii) made revisions to Part 9 of the Regulations governing applications to the Court by amending regulation 47 and introducing a new regulation 48 on ineffectiveness.
All amendments and additions are marked in the draft regulations 32, 47 and 48 at Annex A.
3.3 The requirements of the new Directive are complex, and the implementing Scottish Regulations need to reflect that complexity. As previously stated, we are conscious of the need to present the changes to the Scottish Regulations in the most straightforward way possible, to help contracting authorities to make the necessary changes to their procedures and to aid suppliers' understanding on the new remedies available to them. We have tried to ensure that the amendments to regulation 32 and revisions to Part 9 of the regulations are drafted in a manner consistent with the style and structure of the 2006 Regulations. We have also modernised some of the wording, for example replacing "shall" with "must".
3.4 Where we are still considering drafting options, words and phrases appear in the draft regulations in square brackets. We would particularly welcome feedback in respect of the bracketed words or phrases.
Question 1: The Scottish Government seeks general comments on any aspect of the draft regulations 32, 47 and 48.
Specific provisions in the draft regulations
Regulation 32(6) and 32(7)
3.5 Article 2b of the new Directive allows Member States to provide that the standstill period does not apply: where an OJEU contract notice is not required; to contracts awarded under a framework agreement or Dynamic Purchasing System; and where there is only one tenderer and no other candidates are concerned. We propose to implement all three derogations from the standstill period.
3.6 We need to consider whether, even though the standstill period will not apply in these situations, contracting authorities should still be required to provide information about contract award procedures to participants (consistent with Article 41, Directive 2004/18/ EC). The approach taken in the accompanying draft regulations is as follows:
(i) where the only participant is the successful contractor, neither the standstill period nor the requirement to provide information will apply (draft regulation 32(6)(a));
(ii) where a contract is awarded under a framework agreement or Dynamic Purchasing System, neither the standstill period nor the requirement to provide information will apply (draft regulation 32(6)(b));
(iii) where an OJEU contract notice is not required, the standstill period will not apply but the contracting authority must provide information about the contract award procedures to participants (draft regulation 32(7)(a));
(iv) where there are participants, but none of whom are "concerned" within the meaning of Article 2a and draft regulation 32(16), the standstill period will not apply. However, the contracting authority must provide information about the contract award procedures to all participants (draft regulation 32(7)(b)).
3.7 We would be grateful for stakeholder's views on the above approach.
Question 2: The Scottish Government seeks stakeholders' views on the approach taken in regulation 32(6) and 32(7).
Regulation 32(16)(c)
3.8 Article 2a(2) of the new Directive allows Member States to choose the standstill period to be applied if the award decision is sent by post - either at least 15 calendar days with effect from the day following the date on which the contract award decision is sent to the tenderers or candidates concerned or at least 10 calendar days with effect from the day following the date of the receipt of the contract award decision. In our view, it would be difficult for contracting authorities to calculate the standstill period from the date(s) of receipt with any accuracy. To ensure legal certainty, we believe that it would be preferable to specify a standstill period of 15 calendar days where communication with at least one economic operator is by post. We would be grateful for stakeholders' views on this approach.
Question 3: The Scottish Government seeks stakeholders' comments on regulation 32(16)(c) as drafted.
Regulation 47(6)
3.9 The 2006 Regulations provide that proceedings can be brought in the Sheriff Court, the Court of Session, or in England and Wales and Northern Ireland, the High Court. The UK Regulations provide that proceedings can be brought in the High Court only and not in the Scottish Courts. To ensure consistency with the UK Regulations, we believe that it would be appropriate to restrict applications under the Scottish Regulations to the Scottish Courts, although we would be grateful for stakeholders' views on this.
Question 4: The Scottish Government seeks stakeholders' comments on regulation 47(6) as drafted.
Court discretion not to grant interim measures
3.10 Draft regulation 47(10) expressly implements Article 2(4) of the Directive, which allows a court to decline to grant interim measures in certain circumstances. Article 2(4) is not a new provision and, historically, it has been considered that the common law test of balance of convenience takes into account the considerations listed in Article 2(4). For clarity, it is proposed to expressly implement Article 2(4), taking into account the requirement in Article 1(1) that decisions taken by contracting authorities must be reviewed effectively and, in particular, as rapidly as possible.
Question 5: The Scottish Government seeks stakeholders' views on whether the existing approach of leaving the courts' discretion not to grant interim measures to the common law is preferable to expressly implementing article 2(4).
Transitional policy
3.11 The new Directive requires the new rules to be implemented by 20 December 2009, but does not explicitly address transitional issues. For example, the Directive does not state whether the new rules should be applied to all existing contracts and procurements in progress as of 20 December or whether it is appropriate to have a phased migration to the new rules.
3.12 The Scottish Government and OGC believe that the new rules should apply only to new procurement processes beginning after 20 December 2009. A similar approach was adopted in regulation 49 of the Public Contracts (Scotland) Regulations 2006 5 when Directive 2004/18/ EC was transposed. We would be grateful for stakeholders' views on this approach.
3.13 OGC has confirmed informally with the European Commission that this would be an acceptable approach. It would also seem to be consistent with the approach taken by the European Court of Justice in case C-337/98 (Commission v France) to the interpretation of Directive 93/38/ EEC (the former Utilities Procurement Directive which similarly did not address explicitly whether it was intended to apply to procurement processes that had already begun before the time by which the Directive was required to be transposed).
3.14 We believe that the alternative - applying the new rules to all existing contracts or procurements as of 20 December - would be problematic. Such an approach would cause the parties involved to be subject to the new penalties without having had sufficient opportunity to protect themselves from the risks involved.
Question 6: The Scottish Government seeks stakeholders' comments on the suggested transitional policy.
3.15 The transitional policy in respect of illegal direct awards is slightly less straightforward because, as they are not advertised, it is more difficult to pinpoint the date the procurement started. We think that it would be preferable to employ a similar approach to the one used in regulation 49(2)(c): the new rules would apply where the contracting authority contacted economic operators after 20 December 2009 in order to seek expressions of interest. OGC has confirmed informally with the European Commission that this would be an acceptable approach.
Question 7: The Scottish Government seeks stakeholders' comments on suitable transitional provisions in respect of illegal direct awards.
3.16 It is also necessary to consider what approach should be adopted in respect of framework agreements and dynamic purchasing systems. One option would be to employ a similar approach to the one used in regulation 49(3): call-off contracts would be governed by the same rules applying to the framework agreement itself. The alternative would mean that the existing rules would apply to an existing framework agreement and the new rules to any contracts awarded under the framework agreement after 20 December 2009.
Question 8: The Scottish Government seeks stakeholders' comments on suitable transitional provisions in respect of contracts awarded under a framework agreement or Dynamic Purchasing System
3.17 We have not included draft transitional provisions in Annex A. These provisions will be worked up following evaluation of the responses to the above consultation questions.
Legal effect of ineffectiveness
3.18 Part 2 explains why it is proposed that prospective, and not retrospective, ineffectiveness will be implemented. Article 2d(2) requires Member States to provide for the consequences of ineffectiveness in national law. It must therefore be clear to contracting authorities, economic operators and the courts what the legal effect of an order for ineffectiveness will be.
3.19 The closest parallel to prospective ineffectiveness in Scots common law is the doctrine of frustration. Frustration has effect that the parties to a contract are released from future performance of their obligations, but the contract is not wholly invalidated and pre-existing obligations are still binding on the parties. In order to give as much certainty as possible, draft regulation 48(2) sets out the legal effect of an order for ineffectiveness, without reference to the frustration doctrine. Draft regulation 48(10)(b) recognises that the courts may wish to make orders as to the future position of the parties, and draft regulation 48(11) recognises that the parties may have agreed pre-ineffectiveness terms e.g. in the local Government context where "relevant discharge terms" enjoy a special status under the Local Government (Contracts) Act 1997.
Question 9: The Scottish Government seeks stakeholders' comments on the approach taken in regulation 48.
Policy on call-off contracts where a framework agreement is ineffective
3.20 It is necessary to consider the treatment of any "live" 6 call-off contracts if a framework agreement (or Dynamic Purchasing System) is declared ineffective. Following discussion with colleagues in OGC, we believe that there are three possible options:
i) One option would be to protect any live call-off contracts from challenges arising purely from the ineffectiveness of the framework. This could be considered as consistent with prospective ineffectiveness on the basis that only contractual rights and obligations following a declaration of ineffectiveness are avoided. However, following informal discussion with the European Commission suggests that, in the Commission's view, call-off contracts should share the same legal fate as the framework agreement. This option is therefore unlikely to be acceptable without substantial arguments to support it.
ii) A second option would be to provide that a declaration of ineffectiveness in respect of the framework agreement would trigger the automatic (prospective) ineffectiveness of any live call-off contracts. We have reservations about the appropriateness of this option, not least because of the potential impact on third parties' interests. Further, it would be inconsistent with the general principle that a declaration of ineffectiveness has to be made by the Court and that the Court should have discretion to order that the contract be maintained where there are overriding reasons relating to a general interest. However, this option appears to be consistent with the European Commission's view that call-off contracts should share the same legal fate as the framework agreement.
iii) A mid-way option would be to provide that call-off contracts in this situation should be treated in the same way as "freestanding" contracts. This would mean that:
a. a call-off contract would be ineffective only if a specific declaration of ineffectiveness is made in respect of it;
b. the Court would consider individual call-off contracts and would have discretion to maintain call-off contracts in circumstances where there are overriding reasons relating to a general interest but not where such reasons do not exist.
c. if declared ineffective, contractual rights and obligations under the call-off contract would be (prospectively) avoided.
Informal soundings at EU level helpfully suggest that this option might be consistent, or at least not inconsistent, with the European Commission's view that call-off contracts should share the same legal fate as the framework agreement.
3.21 It should be noted that, as the Directive itself does not address how call-off contracts should be treated in these circumstances, any attempt by the Scottish Regulations to fill the gap might create a false perception of certainty where none exists, as it will remain open to the European Court of Justice to decide how the Directive should apply in these circumstances.
3.22 We would be grateful for stakeholders' views on the above options and any other potential options. Pending the outcome of the consultation, we have not included any specific provisions in the draft regulations addressing the position of call-off contracts if the framework agreement is declared effective.
Question 10: The Scottish Government seeks stakeholders' comments on the treatment of live call-off contracts if a framework agreement is declared ineffective.
Policy on the application of standstill and ineffectiveness to Dynamic Purchasing Systems
3.23 It is also necessary to consider how the new rules will apply to Dynamic Purchasing Systems. Article 1 of the new Directive brings both frameworks and Dynamic Purchasing Systems within the definition of 'contracts' for the purposes of the remedies rules. The draft regulations therefore provide for the application of the standstill period to Dynamic Purchasing Systems as follows:
(i) Regulation 32 requires a contracting authority to inform any economic operator which has applied to join a Dynamic Purchasing System of its decision in relation to the establishment of the Dynamic Purchasing System and, unless an exception applies, to apply the relevant standstill period. Further standstill periods are not required as and when new economic operators join the Dynamic Purchasing System.
(ii) Regulation 48(9) provides that, when awarding an above-threshold contract under a Dynamic Purchasing System, a contracting authority can avoid ineffectiveness by following the voluntary transparency provisions, including application of the relevant standstill period.
3.24 We would be grateful for stakeholders' views on our approach to implementing the standstill requirements in respect of Dynamic Purchasing Systems. OGC also expects to clarify the position with the European Commission.
Question 11: The Scottish Government seeks stakeholders' views on its approach to implementing the standstill requirements in respect of Dynamic Purchasing Systems and the perceived usefulness of a standstill period each time a new supplier joins a Dynamic Purchasing System.
3.25 It is also necessary to consider how ineffectiveness should apply to Dynamic Purchasing Systems. Given that economic operators can seek to be admitted to a Dynamic Purchasing System throughout its lifetime, it is difficult to see why an aggrieved bidder would wish to render it ineffective rather than merely submitting a further indicative tender. Nonetheless, the draft regulations provide that ineffectiveness applies to the establishment of a Dynamic Purchasing System (which involves the open procedure) but does not apply to any subsequent admissions procedures. We would be grateful for stakeholders' views on this approach. OGC also expects to clarify the position with the European Commission.
Question 12: The Scottish Government seeks stakeholders' views on its approach to implementing the ineffectiveness provisions in respect of Dynamic Purchasing Systems and contracts awarded under Dynamic Purchasing Systems.
Policy on limiting certain communications to tenderers and candidates concerned
3.26 Currently, regulation 32(1) of the Public Contracts (Scotland) Regulations 2006 requires contracting authorities to inform all participants, including those eliminated at the selection stage, of the contract award decision. Article 2a of the new Directive is narrower, requiring information to be given only to tenderers and candidates concerned (candidates that have not been informed about their elimination).
3.27 We believe there are two possible options:
i) The scope of regulation 32(1) could be narrowed in line with the Directive, requiring information to be given only to "tenderers and candidates concerned". However, in staged decline situations this may lead to inconsistencies in the treatment of tenderers. For example, a tenderer excluded more than three months before the contract award decision would be "definitely excluded" and would therefore not receive the information whereas tenderers excluded less than three months before the contract award decision would still be "concerned". Generally, this option would deprive economic operators that are not "concerned" of information that they have been entitled to receive since the current Scottish Regulations came into force, and the summary of reasons and standstill explanation required by the new Directive.
(ii) The current scope of regulation 32(1) could be retained, requiring information to be sent to all economic operators. This might be seen as burdensome if a standstill exception applies and the contract is to be entered into immediately, taking into account that economic operators will be able to find out about the contract award decision at the later stage when a contract award notice is published in the Official Journal of the European Union.
3.28 A mid-way option of issuing information to tenderers concerned, but not candidates, is not considered attractive because there is no express requirement on a contracting authority to notify unsuccessful candidates when selection decisions are made, and accordingly it is quite possible that there will be candidates "concerned" at the point when the award decision is made. The approach taken in the accompanying draft regulations is based upon the Scottish Government's previously broader policy of issuing information to all economic operators. However, this is provided as an example only and is not intended to imply that that is our favoured approach.
Question 13: The Scottish Government seeks stakeholders' views on who should receive information relating to a contract award decision.
3.29 Article 2a requires contracting authorities to send a "summary of relevant reasons" to tenderers and candidates concerned. This requirement is replicated in Articles 2c and 2f1(a).
3.30 One interpretation is that these Articles require contracting authorities to provide a summary of the relevant reasons as well as detailed information when they announce the award decision. Alternatively, the effect may be to require contracting authorities to issue a summary of the relevant reasons when they announce the award decision and to provide more detailed reasons upon request.
3.31 We have prepared the draft regulations based on the second interpretation. OGC also expects to clarify the position with the European Commission.
Regulatory Impact Assessment
3.32 We sought comments in the first consultation on an initial Regulatory Impact Assessment ( RIA). Responses were mixed. Some respondents commented that the new Directive will not have a significant impact on the costs for businesses, the third sector or the public sector. Other respondents commented that the new Directive may lead to an increase in legal and compliance costs for contracting authorities and suppliers, increased litigation and higher costs for contracting authorities resulting from a successful challenge.
3.33 These comments have been taken into account in the preparation of the draft Regulatory Impact Assessment ( RIA) attached at Annex B. On balance, we believe that the new Directive will not have a significant impact on costs to businesses, the third sector or to the public sector. However, we would welcome comments on the draft RIA.
Question 14: The Scottish Government seeks stakeholders' comments on the draft RIA at Annex B.
Conclusion
3.34 We acknowledge that many of the issues described in this document are complex. However, we urge stakeholders to give careful consideration to these issues, to review the draft regulations and to respond to the questions posed.
3.35 We would like to thank you for your interest and look forward to receiving your feedback.
Scottish Procurement Directorate
Procurement Policy and Development
June 2009
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