Stiffer penalties on the cards for breaches of procurement rules

November 25, 2009

New public procurement remedies rules will come into force next month aimed at improving the effectiveness of appeals over the award of public contracts.

The Public Contracts (Amendment) 2009 Regulations, which will come into force on 20 December, implement the New Remedies Directive (directive 2007/66/EC).

They bolster the available options for legal reviews of breaches of laws governing the award of public contracts and increase the remedies available.

The most notable changes introduced by the Regulations include:

the introduction of a new penalty of ineffectiveness, which will enable the courts to strike down contracts that have been awarded in serious breach of the procurement rules;
the introduction of two new penalties – civil financial penalties and contract shortening – which a court can use as an alternative to ineffectiveness if it considers that there are important public interest reasons why the contract should continue;
the automatic suspension of a contract award procedure whenever legal proceedings are started in respect of a contract award decision.

There are some, largely procedural changes to the standstill rules, but failure to follow these changes can trigger the more serious penalties contained in the new rules.

The rule changes only affect new procurement processes that start on or after 20 December 2009. Procurement processes that began before then will still be subject to the 2006 rules on standstill and enforcement.

The Office of Government Commerce has produced an ‘Explanatory Memorandum’ describing what the changes to the new Regulations will mean. The OGC has also said that it will publish guidance on the practical implication of the Amendment Regulations.