Below the belt?

Procurement practitioners have been closely watching a dispute involving a Scottish council. Jack Hayward explains why and looks at the most recent developments in the case.

The Scottish procurement case of Sidey v Clackmannanshire case has been knocking around in one guise or another for some time. The Scottish Inner Court of session has now decided in favour of the Petitioner (Sidey; the complaining contractor) on a number of issues whilst rejecting others. The case will now go forward for a further hearing. Although as already mentioned there are various strands to the case, the issue which has always interested a large number of practitioners has been:

• The fact it relates to a below threshold procurement; and
• To what extent the possibility of cross-border interest applies.

Lord Brailsford has in an opinion on a Judicial Review application [2011] CSOH 194 indicated with regard to the first ground that dicta of the ECJ in ECAD v Torino [2008] ECR 1-03565 at paragraphs 20 and 21 confirms that below threshold contracts are not excluded from the scope of Community Law if they are of cross border interest.

The petitioner submitted that due to the value of the contract the fact that the tender documentation, such as the requirement to submit audited accounts in English and in UK Sterling; and the request for information from tenderers to whom United Kingdom employment law did not apply meant that the Council considered there could be cross border interest.

Sidey also referred to the Council’s Contract Standing Orders which state that the EC Treaty applies to all procurement activities, regardless of value, including contracts below the threshold at which EU advertising is required and including contracts which are exempt from applications of the EU Directive.

It was further submitted that the decision not to award the contract to the petitioners was expressly stated to have been made "in accordance with the Public Contracts (Scotland) Regulations 2006". Having regard to all these factors, it was submitted that there was plainly a cross-border interest in this contract.

The council’s position was that it was for the contracting authority to determine whether or not there is any cross-border interest, a proposition which was initially accepted by the petitioner. In this case no thought was given by the relevant employees of the respondents at the time the contract was entered into of any potential cross-border interest. Affidavits of two employees were produced to support the council’s argument. In any event the council contended, if any such employee had considered the issue of cross-border interest at the time the contract was entered into, they would have concluded that no such interest existed.

In his decision the judge noted that although the application of Community Law to below threshold procurements of cross border interest had been approved in an earlier hearing in the Inner Court of the Court of Session, no guidance had been provided as to how this should be done other than that authorities should ‘make an assessment’.

The judge chose to address the issue of assessment in the following way:

• Certain features in the tender documentation might be capable of being construed as suggestive of cross‑border interest in this contract;
• There were features in the respondents' Standing Orders which were clearly present because of the requirements of European Law;
• These features are not necessarily conclusive of an inference that there was an appreciation of potential for a cross-border interest in this contract;
• The presence of such features in the tender documentation and the Standing Orders are equally explicable by a draftsman inserting provisions from some style without sufficient consideration as to whether or not these conditions were required for the precise contract in issue.

The judge took the view that the attitude of the respondents' employees responsible for placing the contract was a more likely guide to whether or not there was any cross-border interest, albeit he accepted that such opinion has to be viewed cautiously given the potential for subjectivity on the part of those persons.

He further concluded that the respondents' relevant employees did not in fact consider the question of cross-border interest. It seemed to him that such employees’ familiarity both with the nature and scope of the contract in question and with the placing of contracts of this sort in general would mean they were likely to be aware whether or not a contract had the potential to generate any cross‑border interest.

He also took the rather odd view that failure to consider the issue was likely to be indicative of a lack of potential for cross‑border interest. This view was strengthened by a consideration of both the nature of the contract and the value in that:

• It was a contract for, in commercial terms, a relatively modest, contract price.
• It involved work of a fairly labour intensive nature in a relatively large number of local authority houses where it would be necessary to have local staff on the ground.

For the above reasons the judge did not find it surprising that the procurement officers responsible for the contract, whilst conceding that they did not consider the matter at the time of issuing the contract documents, did not consider that the contract would have generated cross-border interest.

Most Contract Standing Orders (CSO) contain reference to the Public Sector Directive 2004/18 (the PSD) either generically through reference to ‘European Regulations’ or specifically to the PCR 2006. They do not normally however address the matter of the underlying Treaty Principles which affect below threshold procurements and certain aspects of Part B procurements. On the basis of the above case, it would seem that in certain circumstances that a procuring officer does not need to be concerned about the issue at all.

However such an approach could nevertheless be flawed, particularly in areas such as IT or specialist equipment where there may well be substantial interest from suppliers in other member states in below threshold contracts. This is especially so in the current economic climate.

A more sensible approach would be to have a simple ‘tick box’ in the procurement approval process which confirms that the possibility of cross-border interest has been considered and assessed and either found applicable or not as the case may be.

Jack Hayward is a consultant procurement solicitor and editor of the Public Procurement Page. and can be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it..