New Law Threatens Signed Contracts

Until recently, once a contract was signed it could not be overturned for a breach of the EU procurement rules. This will no longer be the case when new law comes into force this December. There are three main areas where this law is likely to cause problems for housing associations, local authorities and other bodies subject to the EU procurement rules (known as "contracting authorities"). These are where:

a contract is not advertised via OJEU but should have been. This is a particular concern for development agreements following the Roanne case. Roanne said that development agreements with a total value over the EU tendering threshold need to be tendered via OJEU where the contracting authority has significant control over the development; the contract award procedure has not been followed properly. The new Regulations specify what feedback has to be given to each tenderer. This includes detailed feedback on why they were unsuccessful. There must then be a standstill period of at least 10 days (or longer if this feedback is not given by email or fax) before the contract is signed; the requirements for running mini-competitions under a framework agreement not followed correctly. This applies to contracts valued over the EU tendering threshold which are awarded through a mini-competition. The contract can be set aside where there are problems with feedback and the contracting authority does not use a standstill period. Contracting authorities need to ensure they follow these new procedures when running a mini-competition to call off works or services from a buying club. In each of these cases the contract can be set aside for "ineffectiveness". (See below). The new law is brought in by the Public Contracts (Amendment) Regulations 2009. These implement the EU Remedies Directive 2007. The Regulations say they apply to all procurements started after 20 December, although the European Commission has suggested they should be applied to all steps taken in any OJEU procurement after that date. A contractor that wants to challenge a contract (either because it was not advertised via OJEU, because the tenderer did not follow the feedback procedure, or for irregularities in a...