Public procurement law regulates the process by which public organisations enter into contracts for goods, works and services. The Public Contracts (Scotland) Regulations 2006 ("the Regulations") give effect in Scots law to the European Commission's Consolidated Directive on Public Procurement (2004/18/EC). Public procurement law effects a wide range of organisations in the public sector and businesses in the private sector.
The Regulations generally apply when the procuring body satisfies the wide definition of being a "contracting authority"; the contract being put out to tender is either for public works, services or supplies; and the estimated value of the contract, which cannot be deliberately split into smaller contracts, equals or exceeds the relevant financial threshold. Although below threshold contracts are, on the face of it, not caught by the Regulations, there is case law which supports the argument that where the contract is of "certain interest" to suppliers located in other EU member states, contracting authorities must still procure them in line with the general principles outlined below – colloquially known as the cross border interest argument.
The growing body of case law emphasises the importance of the contracting authority abiding by the principles of non-discrimination, equal treatment, transparency, proportionality and mutual recognition throughout the procurement process when seeking to identify the most economically advantageous tender. These abstract principles can often prove difficult to define in practice.
Where the preconditions are satisfied a contracting authority must normally advertise the contract by notice in the Official Journal of the European Union ("OJEU"). The contracting authority has the option to follow a number of procedures, depending on the circumstances, to award a contract: the open procedure, the restricted procedure, the negotiated procedure or through competitive dialogue.
Under the Regulations the contracting authority must circulate the reasons for its decision to award a contract to the winning bidder, the scores and the relative characteristics and advantages of the winning bidder in an award decision notice. The contracting authority must elect to allow a standstill period of either 10 or 15 days between the date the notification is sent to unsuccessful bidders and the proposed date for entering into the contract. It is during this period that an unsuccessful bidder must act. Challenges can be raised by bidders on grounds which fall under the umbrella allegation that the contracting authority has failed to carry out the procurement process in compliance with the Regulations. An action can be raised in either the appropriate Sheriff Court or at the Court of Session.
In terms of remedies, once legal proceedings challenging the contract award have been served the contracting authority is automatically suspended from entering into a contract with the winning bidder. It is then the contracting authority which must apply to the court to set aside the automatic suspension.
When presented with such an application the Court is obliged to consider what harm the unsuccessful bidder will suffer if the suspension is recalled, as well as the position of the contracting authority and the successful bidder, if the suspension were to continue. Where there is a compelling case and a consideration of the parties' positions favours the unsuccessful bidder, the Court should be persuaded to continue the automatic suspension until a substantive hearing. This may have the result that the contracting authority will abandon the tendering process rather than become embroiled in the Court action.
The Court has the power ultimately to order that the decision to award the contract be set aside, to amend any document and to award damages to a bidder which has suffered a loss as a consequence of a breach of the Regulations.
In general, once the contract has been entered into, an unsuccessful bidder will be left with the remedy of seeking damages for loss of chance and/or loss of profit. It is possible to seek an ineffectiveness order, effectively bringing the contract to an end; however this is only available in limited circumstances. To date there has been no reported case of a Scottish Court granting such an order.
The information contained in this article is given for general information only and does not constitute legal advice on any specific matter.