Payment of undisputed invoices within 30 days by contracting authorities, contractors and subcontractors under reg.113 Public Contracts Regulations 2015

Reg. 113 of the Public Contracts Regulations 2015 (PCR2015) establishes rules for the payment of undisputed invoices within 30 days. Reg.113 clearly aims to shorten the delay in payments down the supply chain and, somehow,  comes to make up for the fact that reg.71 PCR2015 does not include some of the optional mechanisms in Art 71 of Directive 2014/24 to that effect, such as the possibility to create mechanisms of direct payment to subcontractors.

On the whole, reg.113(2) PCR2015 tries to achieve the goal of ensuring prompt payments down the supply chain by establishing that contracting authorities shall ensure that every public contract which they award contains suitable provisions to require: 

(a) that any payment due from the contracting authority to the contractor under the contract is to be made no later than the end of a period of 30 days from the date on which the relevant invoice is regarded as valid and undisputed;

(b) that any invoices for payment submitted by the contractor are considered and verified by the contracting authority in a timely fashion and that undue delay in doing so is not to be sufficient justification for failing to regard an invoice as valid and undisputed; and

(c) that any subcontract awarded by the contractor contains suitable provisions to impose, as between the parties to the subcontract (i)requirements to the same effect as those which sub-paragraphs (a) and (b) require to be imposed as between the parties to the public contract; and a requirement for the subcontractor to include in any subcontract which it in turn awards suitable provisions to impose, as between the parties to that subcontract, requirements to the same effect as those required by this sub-paragraph (c).

Where no such provisions exist, reg.113(6) PCR2015 determines that very similar terms will be implied in the relevant contracts.

Hence, the three main obligations that derive from reg.113(2) and (6) are: a duty to verify invoices in a timely fashion, a duty to pay within 30 days all invoices regarded as valid and undisputed (which is inexcusable in case of undue delay in the verification process), and a duty to include (or have implicitly included) those terms in all contracts and subcontracts.

Reg.113(7) PCR2015 requires contracting authorities to publish on the internet each year how they have performed on this including the proportion of invoices paid on time to their first tier suppliers /prime contractors.

There are several issues regarding reg.113 that deserve detailed comments (Pedro has focused on the impact of this rules on highly-complex contracts here).

(1) Need to coordinate Reg.113 PCR2015 and Directive 2011/7 on late payments

Directive 2011/7/EU on combating late payment in commercial transactions imposes specific obligations to ensure prompt payment in commercial transactions, both when payments are due to the main contractor, and when they are due between undertakings (in the case of subcontracts) [see Department for Business, Innovation and Skills, A Users Guide to the recast Late Payment Directive (October 2014)]. 

Those obligations clearly apply in concurrence to the specific rules of reg.113, as implicitly acknowledged in its paragraph (3), whereby reg.113(2) is without prejudice to any contractual or statutory provision under which any payment is to be made earlier than the time required by that paragraph. 

Under Art 4(3)(a)(i) Dir 2011/7, in commercial transactions where the debtor is a public authority, the period for payment cannot exceed 30 calendar days following the date of receipt by the debtor of the invoice or an equivalent request for payment. However, under Art 4(3)(a)(iv) Dir 2011/7, where a procedure of acceptance or verification, by which the conformity of the goods or services with the contract is to be ascertained, is provided for by statute or in the contract and if the debtor receives the invoice or the equivalent request for payment earlier or on the date on which such acceptance or verification takes place, the period for payment cannot exceed 30 calendar days after that date. 

In any case, under Art 4(5) Dir 2011/7, for such acceptance or verification procedure to be valid for these purposes, its maximum duration must not exceed 30 calendar days from receipt of the goods or services, unless otherwise expressly agreed in the contract and any tender documents and provided it is not grossly unfair to the creditor (Art 7 Dir 2011/7).

In view of all this, there are two risks derived from an approach of strict compliance with reg.113(2)(a) and (b) PCR2015 that could leave contracting authorities exposed to pay statutory damages, without the necessity of a reminder, in the form of statutory interest for late payment--ie simple interest for late payment at a rate which is equal to the sum of the reference rate and at least eight percentage points.

The first risk is that contracting authorities may incur in liability for late payment under Art 4(3)(a)(1) Dir 2011/7 if they do not pay invoices within 30 days from their date because they engage in non-contractual acceptance or verification processes. In my view, the scant provisions in reg.113(2)(b) and 113(6)(b) are insufficient to meet the requirement for such procedures to be considered statutory for the purposes of Art 4(3)(a)(iv) Dir 2011/7. Hence, unless they include a regulation (even if by reference) of those verification and acceptance procedures in the public contract, they are bound to pay within 30 days from invoice date.

The second risk is that, as a combined effect of Art 4(3)(a)(iv) and Art 4(5) Dir 2011/7, and unless otherwise expressly agreed in the contract and any tender documents and provided it is not grossly unfair to the creditor (Art 7 Dir 2011/7), the combined length of those verification and acceptance procedures and payment cannot exceed 60 days. Consequently, contracting authorities cannot in any case pay later than 60 days after receipt of the goods or services, regardless of any autonomous interpretation of the requirements in reg.113(2)(b).

Consequently, as interpreted in compliance with Dir 2011/7, reg.113 PCR2015 imposes payment dates that are potentially stricter than a simple reading of the provision could indicate. In fact, reg.113 does not create any obligation to pay any quicker than contracting authorities had to do under EU law in any case. 

The situation is different when it comes to payment obligations between contractors and sub-contractors, or further down the supply chain. In that regard, it is worth stressing that under Art 3(5) Dir 2011/7, contracts regarding commercial transactions between undertakings cannot specify payment periods beyond 60 days, unless otherwise expressly agreed in the contract and provided it is not grossly unfair to the creditor (Art 7 Dir 2011/7). In that regard, the virtuality of reg.113(2) and (6) PCR2015 is to enforce that limit and, probably, reduce it where the contracting authority pays in a shorter period.

(2) Formal exceptions for NHS and  schools' and academies' procurement

A second point that deserves comments concerns reg.113(1) PCR2015, which excludes contracts for the procurement of health care services for the purposes of the NHS within the meaning and scope of the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013; and contracts awarded by a contracting authority which is a maintained school or an Academy, from compliance with the requirements of the regulation.

In my view, and given the discussion above, this exclusion is perfectly useless, at least in relation to the NHS. Given that all contracting authorities [Art 2(2) Dir 2011/7] need to pay within the 30 calendar day limits set by Art 4(3) Dir 2011/7, the exclusion of reg.113(1) has no practical effect. Under Art 4(4) Dir 2011/7, the UK could have decided to apply for longer payment periods for health services and other commercial activities carried out by public entities. However, the Government decided not to do so [see Department for Business, Innovation and Skills, Directive 2011/7/EU on Combating Late Payment in Commercial Transactions. Government Response to Consultation (February 2013)]. Similar reasons apply to the exclusion for schools and academies.

Thus, it is unclear why reg.113(1) PCR2015 aims to create such an exclusion and, in my view, it is in any case ineffectual.

(3) Statutory Guidance Issued under Reg.113 --Standard Term Not Useful At All

Reg.113(4) PCR2015 establishes that contracting authorities shall have regard to any guidance issued by the Minister for the Cabinet Office; and reg.113(5) PCR2015 further determines that such guidance may, in particular, recommend model provisions, including provisions defining the circumstances in which an invoice is to be regarded as being, or as having become, valid and undisputed including, for example: (a) provisions deeming an invoice to have become valid and undisputed if not considered and verified in a timely manner; and (b) addressing what is to be considered, for that purpose, to be a timely manner in various circumstances. 

Such guidance has now been published and is available here. However, it simply provides a standard term on prompt payment that contracting authorities can include in their contracts. The standard terms simply provides the following (and a clause on sub-contracts):

1. Where the Contractor submits an invoice to the Authority [in accordance with paragraph [•]], the Authority will consider and verify that invoice in a timely fashion.
2. The Authority shall pay the Contractor any sums due under such an invoice no later than a period of 30 days from the date on which the Authority has determined that the invoice is valid and undisputed.
3. Where the Authority fails to comply with paragraph 1 and there is an undue delay in considering and verifying the invoice, the invoice shall be regarded as valid and undisputed for the purposes of paragraph (2) after a reasonable time has passed.

In my view, such a clause does not regulate the procedure for verification and acceptance to an acceptable standard in terms of Art 4(5) Dir 2011/7. In particular, the first paragraph is insufficient to consider that it sets out a "procedure of acceptance or verification by which the conformity of the goods or services with the contract is to be ascertained". Thus, contracting authorities will be well-advised to pay all their invoices within 30 days from their date in order to meet the requirements under Art 4(3) Dir 2011/7. Otherwise, they will have to start paying statutory damages in the form of statutory interest for late payment very soon and very often.

A network of papers on competition in public procurement: What a summer

If anyone has followed my SSRN account over the summer, they could not be blamed for thinking that I have been uploading quite a number of relatively similar papers on the interaction of competition and public procurement rules, and particularly the interpretation of Article 18(1) of Directive 2014/24. Given that this is something I explore in detail in Public Procurement and the EU Competition Rules, 2nd end (Oxford, Hart, 2015) 195-237 (generously made freely available by Hart Publishing here), the reader may wonder what else was there to say about this.

It is true that some of these papers touch upon connected issues and even have some overlapping sections. This could indeed lead readers to think that the papers are a simple iteration of the same ideas and, consequently, there is no point in reading them. This post explains how these papers interact and relate to each other--and it will hopefully clarify that I have not simply engaged in a massive exercise of self-plagiarism (or at least not willingly!). The papers address different specific issues or have different overall aims, which I hope makes them interesting to different scholars and practitioners for different reasons.

(1) The paper with a more general view is 'Competition Law and Public Procurement', which explores two of the areas in which antitrust prohibitions and public procurement law interact. This forms part of a larger project led by Dr Jonathan Galloway of the Newcastle Law School, which researches the way in which antitrust law (ie arts 101 and 102 TFEU) has developed through its interaction with other sets of economic law rules, both in the public and private law sphere. Thus, the paper provides an overview of the areas where the antitrust rules and EU public procurement law overlap, and zooms in to propose that the principle of competition in Art 18(1) of Dir 2014/24 may serve as a transmission belt to bring competition considerations and analysis to the public procurement sphere.

(2) With a similar general approach, I have updated 'Public Procurement and Competition: Some Challenges Arising from Recent Developments in EU Public Procurement Law' (originally drafted in 2013), to be included in Professor Chris Bovis' Research Handbook on European Public Procurement (Edward Elgar, forthcoming). This paper aims to map some of the challenges for a better integration of competition and public procurement rules that remain after the adoption of Dir 2014/24, and pays attention to issues related to eProcurement and the need of further professionalization of procurement. The paper points at research questions that may lead to further research, so it will hopefully be relevant to academics and postgraduate students looking for not so trodden paths to further our knowledge in this area of EU economic law.

(3) The most recent paper 'A Deformed Principle of Competition? – The Subjective Drafting of Article 18(1) of Directive 2014/24' provides a contextual analysis of the legislative process that led to the adoption of Dir 2014/24. Again, this paper forms part of a larger project led by Dr Grith Skovgaard Ølykke and myself that explores broader issues of the EU legislative process and the interaction of the EU Institutions involved, using the 2011-2014 EU public procurement reform as a case study. From this perspective, the paper focuses on the EU legislative process that led to the consolidation of the principle of competition in Art 18(1) of Dir 2014/24, as well as the modifications that its drafting suffered as a consequence of the negotiations between the Member States at the Council and the further amendment proposals by the European Parliament in preparation of the trialogue with the European Commission. This is, on its whole, a 'law and political science' paper--which is a methodological approach that we are trying to embrace as part of the project.

(4) Following this approach of assessing the interaction between law and policy, 'Truly Competitive Public Procurement as a Europe 2020 Lever: What Role for the Principle of Competition in Moderating Horizontal Policies?' tackles the implications of the principle of competition for the pursuit of horizontal policies as part of the broader Europe 2020 strategy. The paper takes the view that the principle of competition in Art 18(1) of Dir 2014/24 is the main tool in the post-2014 procurement toolkit and the moderating factor in the implementation of any horizontal (green, social, innovation) policies under the new rules — that is, that competition remains the main consideration in public procurement and that the pursuit any horizontal policies, including those aimed at delivering the Europe 2020 strategy, need to respect the requirements of undistorted competitive tendering. This is part of a broader discussion on the position and role of public procurement in the Europe 2020 strategy with Dr Richard Craven, Dr Sylvia de Mars and Dr Rike Kraemer at the forthcoming UACES conference.

(5) Finally, adopting a different perspective, 'Assessing Public Administration’s Intention in EU Economic Law: Chasing Ghosts or Dressing Windows?' looks at public procurement and State aid rules as two examples of areas of EU economic law subjected to interpretative and enforcement difficulties due to the introduction, sometimes veiled, of subjective elements in their main prohibitions. The paper explores the main thesis that such intentional elements need to be ‘objectified’, so that EU economic law can be enforced against the public administration to an adequate standard of legal certainty. Thus, the paper does not delve into the substantive implications of the principle of competition in Art 18(1) of Dir 2014/24, but on the technical aspects implied in its apparent requirement of assessing the intention of contracting authorities whose procurement activities are covered by the EU rules.

Overall, in my view, the papers offer quite a complementary set of perspectives on the general issue of the interaction between competition law and public procurement (1, 2), the way in which this interaction is fleshed out in the EU legislative process (3), the way in which diverging and conflicting policy goals can be balanced-out in a pro-competitive way (4) and the broader implications of the development of EU administrative law issues within these fields of EU economic law (5). Their common theme or common denominator is the permanent main focus on the principle of competition consolidated in Art 18(1) of Dir 2014/24. However, when taken as a whole, that is solely the conduit for the exploration of broader issues. Thus, I hope they will still be relevant for interested readers. From now on, I will focus on different issues. Enough of this topic, at least for the summer!

Yet another paper on the principle of competition in the 2014 public procurement Directive

I have uploaded a new paper on SSRN: 'A Deformed Principle of Competition? – The Subjective Drafting of Article 18(1) of Directive 2014/24', forthcoming in GS Ølykke & A Sanchez-Graells (eds), Reformation or Deformation of the EU Public Procurement Rules in 2014 (Cheltenham, Edward Elgar Publishing, 2016). Available at SSRN: http://ssrn.com/abstract=2642971. 

The paper focuses on the EU legislative process that led to the consolidation of the principle of competition in Article 18(1) of Directive 2014/24, as well as the modifications that its drafting suffered as a consequence of the negotiations between the Member States at the Council and the further amendment proposals by the European Parliament in preparation of the trialogue with the European Commission. As detailed in the abstract:

In its 2011 Proposal for a new Directive on public procurement, the European Commission included the consolidation of the general principles of procurement. For the first time, in addition to the ‘classic’ triad of equality, non-discrimination and transparency, it expressly included the principle of competition amongst such general principles. In the 2011 Proposal, the Commission referred to an objective concept of restriction of competition, which would be proscribed by the future Directive. Successive negotiations allowed the Council and the European Parliament to alter the drafting of this provision. The final text in Article 18(1) of the 2014 Directive thus contains a different version of the principle of competition. In this final version, both a subjective element and a presumption of distortion of competition are included, which could diminish the effectiveness of the principle. Moreover, both deviations from the initial proposal by the Commission are difficult to reconcile with the existing case law of the Court of Justice of the European Union (CJEU).

This paper traces the legislative evolution of the principle of competition in public procurement and looks for explanations for the alteration of its initial drafting. Looking to the future, it considers whether the CJEU will stand by the new drafting and limit the principle as desired by the Council and the Parliament or, conversely, it will promote a functional approach along the lines of the objective conception initially proposed by the Commission. This paper proposes that the second option is preferable and, in any case, more likely in view of the CJEU's treatment of similar issues in other areas of EU public procurement law (such as the classical anti-circumvention provisions), as well as EU economic law more generally (and, remarkably, competition law and the granting of State aid).

The paper is part of a larger project where Dr Grith Skovgaard Ølykke and myself will be editing a book that explores broader issues of the EU legislative process and the interaction of the EU Institutions involved, using the 2011-2014 EU public procurement reform as a case study. We are thrilled to have a long list of excellent young and raising scholars contributing to the book. Stay tuned for further developments.

Publication of information on Contracts Finder about contracts awarded under Reg. 112 Public Contracts Regulations 2015

Reg.112 of the Public Contracts Regulations 2015 (PCR2015) imposes obligations to publish information on Contracts Finder about the award of contracts below EU thresholds. Such obligation is triggered every time a public contract is awarded [reg.112(1)], which imposes an ex post transparency obligation for contracts not exempted under reg.109, even if no ex ante transparency was required by reg.110 PCR2015.

The content of the publication obligation is functionally equivalent to the obligation under reg.108 PCR2015 for contracts above EU thesholds and, consequently, it does not deserve further comments (Pedro concurs), except for the fact that the publication needs to specify whether the contractor is an SME or VCSE, that is a non-governmental organisation that is value-driven and which principally reinvests its surpluses to further social, environmental or cultural objectives. 

If nothing else, this will provide a wealth of data to assess to what extent public contracts are actually channeled through these preferred organisations. However, the sole thought that fundamental details of every single contract, including the contractor's name, will be made available online is quite scary, particularly in sectors with oligopolistic structure. Hence, once more, it is worth stressing that contracting authorities need to be very careful and manage information. 

Reg. 112(3) allows them to do so by allowing exceptions to the obligation to publish where where release of certain information would impede law enforcement or would otherwise be contrary to the public interest, would prejudice the legitimate commercial interests of a particular economic operator, whether public or private, or might prejudice fair competition between economic operators [for discussion, see A Sanchez Graells, "The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives" (November 2013) University of Leicester School of Law Research Paper No. 13-11].

Assessing suitability etc under Reg. 111 Public Contracts Regulations 2015

Reg. 111 of the Public Contracts Regulations 2015 (PCR2015) imposes a significant restriction in the assessment of suitability of tenderers and bidders for contracts below EU thresholds by prohibiting contracting authorities from including a pre-qualification stage in their procurement [reg.111(1)]. 

For these purposes, “pre-qualification stage” means a stage in the procurement process during which the contracting authority assesses the suitability of candidates to perform a public contract for the purpose of reducing the number of candidates to a smaller number who are to proceed to a later stage of the process [reg.111(4)]--ie, no PQQs or, as the Crown Commercial Service has summarised it, 'in practical terms ... PQQs used as part of a pre-qualification stage are not permitted' (which goes well beyond the use of a standardised PQQ for above threshold procurement under reg.107 PCR2015). 

This creates significant legal uncertainty in contracting authorities tendering relatively small contracts, which are now left with the problem of ensuring that their contractors are qualified without knowing exactly how to go about it [see Pedro's views on this here]. And the main effect of such uncertainty is that they will have a very strong incentive to rely on contractors they know and have dealt with in the past, so that they are not negatively affected by the prohibition on the use of PQQs. The end result may well be to significantly close local markets to entry by SMEs and larger companies without a previous track record with a given contracting authority. Consequently, this provision needs to be strongly criticised.

Moreover, the actual implications and limitations derived from the no-PQQ rule are far from clear and reg.111(5) indicates that, in any event, contracting authorities may ask candidates to answer suitability assessment questions only if each such question is relevant to the subject-matter of the procurement; and proportionate. Reg.111(6) tries to clarify that “suitability assessment question” means a question which relates to information or evidence which the contracting authority requires for the purpose of assessing whether candidates meet requirements or minimum standards of suitability, capability, legal status or financial standing. 

Thus, the puzzle is served and the practical discussion of whether (small, tiny) PQQs can be used but they need to be labelled SAQs keeps most procurement practitioners on the edge. Unfortunately, the guidance published by the Cabinet Office does not solve this practical problem. And this is particularly troublesome because the Mistery Shopper scheme applies to reportable deviations from the prohibition of using PQQs or the eventual disproportionate use of SAQs. The comments made in relation to reg.107 PCR2015 apply.

Good decision on non-disclosure of confidential information in public procurement, despite use of Freedom of Information Act

Helen Prandy of Procurement Portal has blogged about an interesting case regarding the always difficult balance between transparency and the protection of confidential information / business secrets in a public procurement environment. These are issues that have popped up repeatedly in the commentary of the Public Contracts Regulations 2015 (PCR2015) [see eg regs.21, 53, 55, 79, 83, 84, 86,  108, 112] and have significant practical relevance.

The case is Sally Ballan v Information Commissioner EA/2015/0021, where the First Tier Tribunal, General Regulatory Chamber (Information Rights) (FTT) decided against the appellant and confirmed the previous Information Commissioner (ICO)'s decision not to allow disclosure of a successful bid in a procurement process for the delivery of a “Leisure Management System”. This is interesting because the claim for access to information was not based on public procurement rules, but on the possibility of filing 'freedom of information requests' under the Freedom of Information Act 2000 (FOIA). In her post 'Commercial Interests: where does the balance lie under FOIA?', Helen Prady offers more background.

From a procurement transparency perspective, it is interesting to highlight the interpretation of s.43(2) FOIA upheld by the FTT, which allows public authorities to deny disclosure under an information request on the basis that the '[i]nformation is exempt ... if its disclosure under this Act would, or would be likely to, prejudice the commercial interests of any person (including the public authority holding it)'. 

This is functionally very close to the possibilities foreseen under public procurement rules to withhold information where its release would prejudice the legitimate commercial interests of a particular economic operator, whether public or private. Even if s.43(2) FOIA does not include an explicit reference to disclosure of information that 'might prejudice fair competition between economic operators' (as public procurement rules do), it should be stressed that the interpretation and construction of this section of the FOIA is broad, and that it must encompass those sort of considerations under the public interest test [as further developed by Paul Gibbons of FOIMan here].  

Indeed, in the interpretation of s.43(2) FOIA by the FTT in Sally Ballan v Information Commissioner, this is particularly clear in paras [25(c), emphasis added] and [29], whereby

The ICO sets out factors tending towards public interest in not disclosing the information as: (c) There is a public interest in maintaining an efficient competitive market for leisure management systems. If the commercial secrets of one market entity were revealed, its competitive position would be eroded and the whole market would be less competitive. As the Court of Appeal put it in Veolia ES Nottinghamshire Ltd v Nottinghamshire County Council and others [2012] P.T.S.R. 185 at [111], a company’s confidential information is often “the life blood of an enterprise”. The ICO argued that this is particularly so in an industry such as the provision of leisure management systems because such systems are a complex amalgam of technologies, customer support networks, and user interfaces, which involve elements individual to particular companies. Those individual elements drive competition to the benefit of public authorities and consumers.

In terms of factors tending towards public interest in not disclosing the information, we accept and adopt all points made by the ICO in paragraph 25 above. An additional factor would include an interest in not disclosing any information to the extent that it contained trade secrets of the relevant tenderers.

Remarkably, the approach followed by the FTT under s.43(2) FOIA is convergent with that recently stressed by the General Court in European Dynamics Luxembourg and Others v Commission, T-536/11, EU:T:2015:476 (see here), which seems to indicate a clear trend towards a rationalisation of the transparency requirements in a public procurement setting in the right direction. For further discussion of the arguments in favour of such limitation of transparency in the public procurement setting, see A Sanchez-Graells, The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives (University of Leicester School of Law Research Paper No. 13-11, 2013).

Publication of contract opportunities on Contracts Finder under Reg.110 Public Contracts Regulations 2015

Reg.110 of the Public Contracts Regulations 2015 (PCR2015) creates an obligation to publish contract opportunities on Contracts Finder that extends to almost all contracts of a value higher than £10,000 or £25,000, except NHS and education-related contracts (see reg.109 for coverage of obligation and Pedro's remarks here).

Reg.110(5)(a) clarifies that a contracting authority advertises an opportunity if it does anything to put the opportunity in the public domain or bring the opportunity to the attention of economic operators generally or to any class or description of economic operators which is potentially open-ended, with a view to receiving responses from economic operators who wish to be considered for the award of the contract. 

Reg.110(5)(b) builds on the clarification and adds that, accordingly, a contracting authority does not advertise an opportunity where it makes the opportunity available only to a number of particular economic operators who have been selected for that purpose (whether ad hoc or by virtue of their membership of some closed category such as a framework agreement), regardless of how it draws the opportunity to the attention of those economic operators.  

This seems odd, as the drafting of the provision seems to leave it entirely to the discretion of the contracting authority to decide whether to create an open competition through the advertisement of the contract opportunity, or to resort to a limited competition with a pre-determined group of economic operators [along the same lines, see here, although it is clear that reg.112 requires contract award information to be posted on Contracts Finder, regardless of whether the below-threshold contract was initially advertised there or not, so the discretion is only on ex ante publication].

From the perspective of regulating contracts awarded below EU thresholds in a way that ensure competition leading to value for money, this seems to allow contracting authorities a large degree of discretion to continue with less than fully transparent procurement practices based on lists of preferred suppliers or similar arrangements [for discussion, see L Butler, 'Below threshold and Annex II B service contracts in the United Kingdom: A common law approach', in R Caranta and D Dragos (eds) Outside the EU Procurement Directives—Inside the Treaties?, vol. 4 European Procurement Law Series (Copenhagen, DJØF, 2012) 283,295 ff]. 

In my view, this may fall short from ensuring that procurement is truly competitive and that SMEs actually have access to public contracts, and the system should be refined to determine when the contracting authority can avoid the obligation to publish a contract opportunity. Moreover, in case a specific procurement is of cross-border interest, and despite the fact that it remains below EU thresholds, an absolute absence of ex ante transparency could result in an infringement of EU law (as discussed in more detail regarding reg.114 PCR2015).

In general terms, the publication regime in reg.110 PCR2015 is fundamentally equivalent to that mandated by reg.106 PCR2015 for contracts above thresholds and is subjected to the same guidance. When contracting authorities publish contract opportunities through Contracts Finder, they must also provide electronic access to the tender documents in terms equivalent to the requirements of reg.22 PCR2015 [reg.110(12) and ff].

Interestingly, one of the particular requirements of this obligation to publish is that the contracting authority needs to determine the time by which any interested supplier must respond if it wishes to be considered [reg.110(8)(a)], and the time shall be such as to allow the economic operators a sufficient but not disproportionate period of time within which to respond [reg.110(9)]. 

In the guidance, it is clarified that the time period must be sufficient to enable interested suppliers to respond to the opportunity and proportionate to the value of the procurement. In more detail, it is indicated that where the contracting authority is seeking a tender response, it is recommended that the minimum time required to submit a tender response is 10 working days.

Thank you for putting me on SSRN top 500 authors in the last 12 months

I finish the week with the fantastic news that all of you have managed to put me in the top 500 SSRN authors by downloads for the last 12 months (and almost in the top 2,000 overall). I am really honouored and humbled by this and would like to send out a big thank you.

This is a great boost of motivation to continue blogging and publishing scholarly articles, and I hope that the future pieces will continue to attract your attention.

Thank you again for reading my scholarship.

Best wishes,
Albert

New paper on intersection of competition law and public procurement

During the Spring of 2014, Dr Jonathan Galloway and Dr Francesco De Cecco of the Newcastle Law School organised a seminar series on ‘The Intersections of Antitrust: Competition Law and…’ and I was fortunate to be invited to present my views on the interaction between competiton law and public procurement. A condensed re-run of the presentations will take place in London on 15 September 2015 in a joint LSE/Newcastle event.

This seminar series is now turning into an edited collection to be published by Oxford University Press. I have uploaded my contribution on SSRN, which abstract is as follows:

The interaction between competition law and public procurement has been gaining visibility in recent years. This paper claims that these two bodies of EU economic law mainly intersect at two points, or in two different dimensions.

Firstly, they touch each other at the need to tackle anticompetitive practices (or bid rigging) in public tenders. This has attracted significant attention in terms of the enforcement priorities of competition authorities and led to recent regulatory developments in the 2014 EU public procurement Directives aimed at increasing the sanctions for bid riggers.

Secondly, competition and public procurement cross again at the need to avoid publicly-created distortions of competition as a result of the exercise of buying power by the public sector, or the creation of regulatory barriers to access to public procurement markets. This second intersection has been less explored and the development of regulatory solutions has been poor in both the fields of EU competition law and EU public procurement law. Moreover, the protection of the ‘public mission’ implicit in the public procurement activity led the CJEU to deform the concept of undertaking in a way that can distort EU antitrust enforcement beyond public procurement markets.

This paper assesses these issues and stresses the possibilities for a better integration of competition considerations in public procurement through the principle of competition of the 2014 Directives. 

Full details of the paper are: A Sanchez-Graells, 'Competition Law and Public Procurement', in J Galloway (ed), Intersections of Antitrust: Policy and Regulations (Oxford, OUP, 2016).

Scope of Chapter 8 under Reg. 109 Public Contracts Regulations 2015

Reg.109 of the Public Contract Regulations 2015 (PCR2015) defines the scope of application of Chapter 8, which creates transparency and bureaucratic obligations parallel to those in Chapter 7 (regs.106 to 108) for contracts below EU thresholds--ie imposes the use of Contracts Finder and bans the use of PQQs in the procurement of contracts covered by reg.109 PCR2015. As Pedro stressed, the 'chapter is particularly important as it constitutes the first time contracts below-thresholds are subject to regulations'.

According to reg.109(1) PCR2015, Chapter 8 applies to procurements by contracting authorities with respect to public contracts where Part 2 PCR2015 does not apply because the estimated value of the procurement is less than the relevant threshold mentioned in reg.5. Interestingly, reg.109(4) includes an anti-circumvention provision identical to that in reg.6(5) and 6(6) PCR2015, whereby a procurement shall not be subdivided with the effect of preventing it from falling within the scope of Chapter 8, unless justified by objective reasons.

There are several exceptions to the obligation to comply with regs.110 to 112. First, the procurement of contracts that would not have been covered by Part 2 even if the estimated value of the procurement had been equal to or greater than the relevant threshold in reg.5 can be carried out without compliance with Chapter 8 [reg.109(2)(a)]. Second, the exemption also covers low value contracts: ie contracts of an estimated value net of VAT of less than £10,000, where the contracting authority is a central government authority [reg.109(2)(b)]; and contracts of an estimated value net of VAT of less than £25,000, where the contracting authority is either a sub-central contracting authority [reg.109(2)(c)]. Reg.109(3) clarifies how to calculate the value of the contracts.

Thirdly, there are exceptions concerning the NHS, which cover contracts tendered by an NHS Trust of an estimated value net of VAT of less than £25,000 [reg.109(2)(c)], as well as all of the procurement of health care services for the purposes of the NHS within the meaning and scope of the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013 [reg.109(2)(d)] (see comments to reg.105).

Finally, reg.109(5) sets a fourth and partial exception from the obligation to comply with Chapter 8, so that regs. 110 and 112 requiring publications in Contracts Finder do not apply where the contracting authority is a maintained school or an Academy. However, their procurement is bound by the ban on the use of PQQs for de minimis contracts under reg.111.

Publication of information on Contracts Finder about contracts awarded under Reg. 108 Public Contracts Regulations 2015

Reg.108 of the Public Contracts Regulations 2015 (PCR2015) expands the obligations of domestic publication on Contracts Finder of reg.106 to contract award notices. Following a very similar structure, reg.108(1) requires contracting authorities to have a contract award notice published on Contracts Finder within a reasonable time [reg.108(4)], where: (a) they send a contract award notice (see reg.50 and reg.75(3) PCR2015) to the EU Publications Office for publication; or (b) award a contract based on a framework agreement.

This last situation is odd because it imposes a requirement of transparency that goes beyond the standard of the EU rules, which the UK (Eng & Wales) legislator consciously decided to limit to its minimum expression in reg.50 PCR2015. It is worth reminding that Reg.50(4) PCR2015 adjusts the requirements for the publication of contract award notices to the working of framework agreements, and determines that contracting authorities shall not be bound to send a notice of the results of the procurement procedure for each contract based on such an agreement, and that this is meant to simplify the operation of the framework agreement once it is in place.  

Now, with the requirement of reg.108(1)(b) PCR2015, the rules go to the opposite extreme and impose a level of 'domestic' transparency in the award of contracts within framework agreements that can create a very dangerous excess of transparency (see discussion here). More importantly, this also creates a ridiculous inconsistency in the level of publication at EU and domestic level. Bearing in mind that all these notices are published online and in English, it is really hard to understand what would be the actual point of imposing different publication requirements when it comes to the OJEU and Contracts Finder. In any case, it would be very positive for the Cabinet Office to develop soon the mechanism of automatic feed from the OJEU that reg.108(7) and (8) foresee [in the same terms as reg.106(4) and (5)], so that these incongruities get resolved at an operational level (Pedro agrees).

Focusing on the content of these notices, reg.108(2) PCR2015 determines that the contracting authority shall cause at least the following information to be published on Contracts Finder: the name of the contractor; the date on which the contract was entered into;and the value of the contract. This deviates from reg.50(2) PCR2015, whereby the contract notices sent to the OJEU need to contain the information set out in part D of Annex 5 to Directive 2014/24. As mentioned in relation to reg.106 PCR2015, this apparent limitation of the volume of information that needs to be disclosed does not make sense, at least for contracts above EU value thresholds.

More interestingly, reg.108(3) PCR2015 stresses that the contracting authority may withhold information from publication where its release would impede law enforcement or would otherwise be contrary to the public interest, would prejudice the legitimate commercial interests of a particular economic operator, whether public or private, or might prejudice fair competition between economic operators. In my view, this should exclude almost automatically any publication of contract notices under reg.108(1)(b), unless they are disclosed in a manner that ensures delayed and grouped (quarterly) reporting of the intra-framework award/call-off decisions, along the lines of what Art 50(3) Dir 2014/24 and reg.50(5) PCR2015 establish for dynamic purchasing systems. In my view, this would not be incompatible with the requirement of reg.108(4), whereby contracting authorities shall comply with the obligation to publish notices within a reasonable time [reg.108(4), see below].  

In that regard, reg.108(5) further clarifies that, where a contracting authority sends, or intends to send, a contract award notice to the EU Publications Office for publication, it shall not cause the information to be published on Contracts Finder earlier than the time at which the contracting authority becomes entitled to publish the notice at national level in accordance with reg.52(3) and (4). Finally, reg.108(6) requires contracting authorities to have regard to any guidance issued by the Minister for the Cabinet Office on the form and manner in which the information is to be published on Contracts Finder; and what is a reasonable time. Such guidance is available here. Interestingly, it has clarified that "the information [should] be published no later than 90 calendar days after the contract award date".

Qualitative selection under Reg.107 Public Contracts Regulations 2015

Reg.107 of the Public Contracts Regulations 2015 (PCR2015) establishes specific rules that contracting authorities need to comply with when they carry out qualitative selection activities, that is, when they select economic operators to participate in procurement procedures; and decide whether to exclude economic operators from such participation (see regs.57 to 65 PCR2015). 

Reg.107 PCR2015 mainly imposes the use of a standardised pre-qualification questionnaire (PQQ) and, failing that, an obligation to notify any 'reportable deviation' from the standard PQQ to the Mystery Shopper service within 30 days of publication of the PQQ (see brief comments here & here). 

Such obligation derives from reg.107(1) PCR2015, whereby contracting authorities shall have regard to any guidance issued by the Minister for the Cabinet Office in relation to the qualitative selection of economic operators. Such guidance is available here, and it includes the standardised PQQ. Pedro discusses in more detail what 'having regard' may possibly mean.

The content of the standardised PQQ is very relevant because, under reg.107(4) where a contracting authority conducts a procurement in a way which represents a 'reportable deviation' from the guidance, it must send to the Cabinet Office a report explaining the deviation. For that purpose, something is a reportable deviation only if it falls within criteria laid down for that purpose in guidance issued under this regulation [reg.107(5)].

This provision has been criticised for increasing the administrative burden of contracting authorities as a result of the obligation to report deviations from the standardised PQQ, as well as the legal uncertainty and the lack of substantive definition of what a 'reportable deviation' is creates and its likely impact in future litigation [for extended discussion, see L Butler, 'Exclusion, Qualification and Selection Under the UK Public Contracts Regulations 2015: The Copy-Out Copycat', to be published in M Burgi and M Trybus (eds), Exclusion, Qualification and Selection in Public Procurement (DJØF, 2016)].

Concerted withdrawal of bids for legal aid work: a cartel in public procurement. Could it be justified?

I just found out yesterday (thanks @Detig) about the London Criminal Courts Solicitors' Association (LCCSA) campaign to boycott on-going legal aid reforms (ie cuts to legal aid). In a nutshell, the LCCSA is asking its members to exchange information about their willingness to withdraw the bids they submitted to the Legal aid crime tender 2015. 

The LCCSA intends to use the information to inform their ongoing engagement with the Ministry of Justice (ie, put pressure and stop the cuts). Generally, this could be seen as a worthwhile act of protest against a policy that will deepen inequality in access to justice. However, the way they are implementing it is deeply concerning from a competition and public procurement perspective.

Similarly to past action from the Bar (see @AngusMacCulloch's good piece here), this is a textbook cartel (see also @PublicProcure additional remarks here). Independent firms are exchanging confidential commercial information in a way that is not required by their activity in the market. This is prohibited by the relevant UK and EU rules, as interpreted by the Court of Justice of the EU (CJEU) in several cases. Most recently, in MasterCard (C-382/12, EU:C:2014:2201, para 62), the CJEU stressed that

Without prejudice to the right of economic operators to adapt themselves intelligently, but independently, to the existing or anticipated conduct of their competitors (see judgments in Suiker Unie and Others v Commission, 40/73 to 48/73, 50/73, 54/73 to 56/73, 111/73, 113/73 and 114/73, EU:C:1975:174, paragraph 174; Ahlström Osakeyhtiö and Others v Commission, C‑89/85, C‑104/85, C‑114/85, C‑116/85, C‑117/85 and C‑125/85 to C‑129/85, EU:C:1993:120, paragraph 71; and Asnef-Equifax and Administración del Estado, C‑238/05, EU:C:2006:734, paragraph 53 and the case-law cited), Article [101 TFEU] catches all forms of cooperation and of collusion between undertakings, including by means of a collective structure or a common body, such as an association, which are calculated to produce the results which that provision aims to suppress (see, to that effect, judgments in Nederlandse Vereniging voor de fruit en groentenimporthandel and Frubo v Commission, 71/74, EU:C:1975:61, paragraph 30; van Landewyck and Others v Commission, 209/78 to 215/78 and 218/78, EU:C:1980:248, paragraph 88; and Eurofer v Commission, C‑179/99 P, EU:C:2003:525, paragraph 23).

Regarding the prohibition to exchange information in itself, in Asnef-Equifax (C-238/05, EU:C:2006:734, paras 51-52), the Court very clearly stressed that

According to the case-law on agreements on the exchange of information, such agreements are incompatible with the rules on competition if they reduce or remove the degree of uncertainty as to the operation of the market in question with the result that competition between undertakings is restricted (John Deere v Commission, paragraph 90, and Case C-194/99 P Thyssen Stahl v Commission [2003] ECR I-10821, paragraph 81).

In effect, it is inherent in the Treaty provisions on competition that every economic operator must determine autonomously the policy which it intends to pursue on the common market. Thus, according to that case-law, such a requirement of autonomy precludes any direct or indirect contact between economic operators of such a kind as either to influence the conduct on the market of an actual or potential competitor or to reveal to such a competitor the conduct which an operator has decided to follow itself or contemplates adopting on the market, where the object or effect of those contacts is to give rise to conditions of competition which do not correspond to the normal conditions of the market in question, taking into account the nature of the products or the services provided, the size and number of the undertakings and also the volume of the market (see Commission v Anic Partecipazioni, paragraphs 116 and 117, as well as the case-law cited).

Thus, there is no doubt that LCCSA's activity is in contravention of the applicable competition law provisions. It is true that the LCCSA is trying to create some safeguards on the circulation of that information.  According to their 'invitation to indicate a willingness to de-tender':

This information will be held on a confidential basis, with responses sent to and collated by one named solicitor member of the LCCSA committee who will not disclose the names of the firms submitting information to anyone including officers and any other committee members of the LCCSA unless and until that firm’s consent has been obtained for their name to be released to the LCCSA officers and committee.
The solicitor holding the information (who is from a firm not submitting any tender) would be able to provide to the President and the Vice President of the LCCSA committee the number of responses received, the numbers bidding, the numbers not bidding, the numbers indicating a willingness to refuse an offer if made or withdrawing a bid and the areas involved. 

However, these safeguards are insufficient to ensure that (with the consent of the participating firms), the information will not end up in the hands of their competitors. Moreover, the aim of the exchange of information is to boycott the Legal aid crime tender 2015, which in my view is a clear anti-competitive agreement prohibited because its object is to restrict or distort competition, so the actual effects of the exchange of information need not be proved. 

Moreover, it is taking place in a public procurement scenario, which can have further implications in terms of future debarment of these firms if found guilty [for discussion, see here and A Sanchez Graells, "Exclusion, Qualitative Selection and Short-listing in the New Public Sector Procurement Directive 2014/24" in F Lichere, R Caranta and S Treumer (ed) Novelties in the 2014 Directive on Public Procurement, vol. 6 European Procurement Law Series, (Copenhagen, Djøf Publishing, 2014)].

Photograph: Sean Smith for the Guardian Sean Smith/Guardian

Could it be justified?

Despite the clear prohibition of the conduct in which LCCSA has engaged, given that it pursues a declared worthwhile objective and, in any case, could be seen as a manifestation of (informal) collective labour action and/or a right to demonstrate against the government, it is relevant to assess whether the invitation to indicate a willingness to de-tender campaign could be justified.

In my view, the possibility to justify it under Art 101(3) TFEU is very slim, if there is any. As stressed in Asnef-Equifax (para 65),

The applicability of the exemption provided for in Article [101(3) TFEU is subject to the four cumulative conditions laid down in that provision. First, the arrangement concerned must contribute to improving the production or distribution of the goods or services in question, or to promoting technical or economic progress; secondly, consumers must be allowed a fair share of the resulting benefit; thirdly, it must not impose any non-essential restrictions on the participating undertakings; and, fourthly, it must not afford them the possibility of eliminating competition in respect of a substantial part of the products or services in question (see, to that effect, Joined Cases 43/82 and 63/82 VBVB and VBBB v Commission [1984] ECR 19, paragraph 61, as well as Remia and Others v Commission, paragraph 38).  

And the application of the second condition requires that 'objective economic advantages might be such as to offset the disadvantages of such a possible restriction' (para 67), which is a very difficult test to apply in this case, particularly in view of the undertain outcome of LCCSA's campaign and the ensuing regulatory response by the Ministry of Justice, if any.

A longer shot would be to try to apply the doctrine of the CJEU regarding infringements of EU law based on the exercise of fundamental rights--as discussed in Schmidberger (C-112/00, EU:C:2003:333, paras 80 and ff). In that situation, which concerned a restriction of free movement of goods and not a competition infringement (and this, in itself, creates significant uncertainty as to the possibility of extrapolating the argument without more), 

neither the freedom of expression nor the freedom of assembly ... appears to be absolute but must be viewed in relation to its social purpose. Consequently, the exercise of those rights may be restricted, provided that the restrictions in fact correspond to objectives of general interest and do not, taking account of the aim of the restrictions, constitute disproportionate and unacceptable interference, impairing the very substance of the rights guaranteed (see, to that effect, Case C-62/90 Commission v Germany [1992] ECR I-2575, paragraph 23, and Case C-404/92 P X v Commission [1994] ECR I-4737, paragraph 18).

In those circumstances, the interests involved must be weighed having regard to all the circumstances of the case in order to determine whether a fair balance was struck between those interests.

The competent authorities enjoy a wide margin of discretion in that regard. Nevertheless, it is necessary to determine whether the restrictions placed upon intra-Community trade are proportionate in the light of the legitimate objective pursued, namely, in the present case, the protection of fundamental rights.

In a case involving similar acts of demonstration (albeti with use of force) for the purpose of forcing engagement with negotiations (Laval un Partneri, C-341/05, EU:C:2007:809), the assessment of proportionality of the boycott was strict and the CJEU determined that EU law prevented 'a trade union ... from attempting, by means of collective action in the form of a blockade (‘blockad’) of sites ... to force a provider of services ... to enter into negotiations with it'. Thus, this potential justification also seems unlikely to cover LCCSA's campaign.

What then?

Given that LCCSA's 'invitation to indicate a willingness to de-tender' and, generally, its attempts to boycott the MoJ's Legal aid crime tender 2015 run against competition law and they cannot be justified or exempted from the prohibition, the association may want to desist from this course of action and think about more creative (legal) ways of opposing the policy of cuts in this area. Otherwise, their efforts will be in vain and their main goal of positively influencing a system that ensures access to justice will be further diminished in case the LCCSA is found in breach of competition law and forced to pay penalties.

Publication of information on Contracts Finder where contract notices are used under reg.106 Public Contracts Regulations 2015

Reg.106 of the Public Contracts Regulations 2015 (PCR2015) imposes obligations to publish information on Contracts Finder where contract notices are used. The rules in this regulation are aimed at ensuring transparency through the domestic contract opportunities portal as soon as possible after publication in the Official Journal of the European Union or a reasonable period after they sent notice to the EU Publications Office (see Pedro's comments here). 

Under reg.106(1), a contracting authority that has sent a contract notice to the EU Publications Office must have relevant information published on Contracts Finder within 24 hours of the time when the contracting authority becomes entitled to publish the notice at national level in accordance with reg.52(3) and (4) PCR2015.

Interestingly, while the contract notices sent for EU publication need to have the content of part C of Annex 5 to Directive 2014/24 (reg.49 PCR2015); reg.106(2) simply establishes that the information to be published on Contracts Finder shall include at least the following: (a) the internet address at which the procurement documents are accessible; (b) the time by which any interested economic operator must respond if it wishes to be considered; (c) how and to whom such an economic operator is to respond; and (d) any other requirements for participating in the procurement. 

This information is much more limited than that required by reg.49 and creates an illusion of simplification by allowing contracting authorities to reduce the amount of information in the domestic publication. In my view, this does not make much sense, as there is no added cost of republishing all the information that had been sent to the OJEU. The logic of this apparent simplification becomes apparent once reg.110 PCR2015 extends the obligation to publish to contracts below the EU thresholds in reg.5 PCR2015. Nonetheless, there seems to be no good reason to restrict the information published on Contracts Finder where the notices refer to above EU thresholds contracts.

As required by reg.106(3) PCR2015, in complying with this publication requirement, contracting authorities shall have regard to any guidance issued by the Minister for the Cabinet Office in relation to the form and manner in which information is to be published on Contracts Finder. Such guidance is available here.

Reg.106(4) and (5) PCR2015 create space for future developments whereby contracting authorities would comply automatically with the requirements to publish in Contracts Finder if the Cabinet Office makes arrangements whereby the information referred in reg.106(2) would, without further action by contracting authorities, be extracted and published on Contracts Finder following the publication of contract notices by the EU Publications Office. In those circumstances, contracting authorities would be deemed to have complied with reg.106(1) by virtue of sending the contract notice to the EU Publications Office for publication in accordance with reg.51.  

However, such automatic system would only have those effects if the guidance issued by the Minister for the Cabinet Office in relation to the form and manner in which information is to be published on Contracts Finder so confirms. Unfortunately, that is not the case under the current guidance of February 2015. Hence, reg.106(4) and (5) do not, for now, alter the obligations under the first three paragraphs of reg.106 PCR2015.

New Paper: Assessing Public Administration’s Intention in EU Economic Law: Chasing Ghosts or Dressing Windows?

I have uploaded a new paper on SSRN that explores the issue of the assessment of 'intention' for the purposes of enforcing EU economic law against the public administration.

The paper looks at public procurement and State aid rules as two examples of areas of EU economic law subjected to interpretative and enforcement difficulties due to the introduction, sometimes veiled, of subjective elements in their main prohibitions. The paper establishes parallels with other areas of EU economic law, such as antitrust and non-discrimination law, and seeks benchmarks to support the main thesis that such intentional elements need to be ‘objectified’, so that EU economic law can be enforced against the public administration to an adequate standard of legal certainty. This mirrors the development of the doctrine of abuse of EU law, where a similar ‘objectification’ in the assessment of subjective elements has taken place.

The paper draws on the case law of the Court of Justice of the European Union to support such ‘objectification’ of intentional elements in EU economic law, and highlights how the Court has been engaging in such interpretative strategy for quite a long time. It then goes on to explore the interplay between such an approach and more general protections against behaviour of a public administration in breach of EU law: ie the right to good administration in Article 41 of the Charter of Fundamental Rights of the European Union, and the doctrine of State liability for infringement of EU law. The paper concludes with the normative recommendation that EU economic law should be free from subjective elements in its main prohibitions.

 

The full reference is: A Sanchez-Graells, 'Assessing Public Administration’s Intention in EU Economic Law: Chasing Ghosts or Dressing Windows?' (August 7, 2015). Available at SSRN: http://ssrn.com/abstract=2641051.

Scope of Chapter 7 under reg.105 Public Contracts Regulations 2015

Reg.105 of the Public Contracts Regulations 2015 (PCR2015) defines the scope of application of the rules in Chapter 7 of Part 4, which concern certain obligations to publish information on Contracts Finder where contract notices are used (reg.106) and about contracts awarded (reg.108), as well as specific rules for qualitative selection that result in the need to use a standardised pre-qualification questionnaire (PQQ) or report any deviations (reg.107 PCR2015). 

Reg.105 PCR105 is really straight forward and determines that Chapter 7 applies to procurements within the scope of Part 2 (ie procurement covered by reg.3 and mixed procurement covered by reg.4, both subject to the value thresholds established by reference in reg.5), with two exceptions: (a) the whole Chapter 7 does not apply to the procurement of health care services for the purposes of the NHS within the meaning and scope of the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013; and (b) regs. 106 and 108 do not apply where the contracting authority is a maintained school or an Academy (reg.107 on standardised PQQs does, though).

Regarding NHS procurement, it is interesting to stress that this is the second relevant exclusion from the general rules of the PCR2015, together with the possibility to reserve contracts under reg.77(6) PCR2015. There is third one regarding the requirements of prompt payment under reg.113 PCR2015, and reg.120 PCR2015 delays to the maximum possible extent the entry into force of the PCR2015 in relation to NHS procurement generally. All of this comes to maintain the isolation of NHS procurement rules and creates some issues of consistency of the procurement system that need regulatory reform (see Pedro's comments here, my own comments here and here, an interesting report here, and an interesting discussion on what NHS procurement can learn from defence procurement, here).

Injunctions against the Crown under reg.104 Public Contracts Regulations 2015

Reg.104 of the Public Contracts Regulations 2015 (PCR2015) determines that in proceedings against the Crown, the Court has power to grant an injunction despite s.21 of the Crown Proceedings Act 1947. This is another unfathomable jigsaw for the continental lawyer... (Pedro did not blink, though). What I can make of reg.104 PCR2015 is the following.

S.21 of the Crown Proceedings Act establishes restrictions on the nature of relief (or remedy) that can be sought in civil procedures against the Crown--ie against the public sector, with the exception of local authorities, which are not part of the Crown(*). Given that public procurement challenges based on the remedies foreseen in the PCR2015 are of a civil nature, ultimately based on tort law (see my tentative comments concerning reg.89 PCR2015, which do not apply to actions for judicial review against those same decisions), s.21(1) of the Crown Proceedings Act would be relevant and prevent the Court from granting an injunction or making an order for specific performance against the Crown [see P Cane, Administrative Law, 5th edn, Clarendon Law Series (Oxford, OUP, 2011) 339; for discussion, see MH Matthews, "Injunctions, interim relief and proceedings against Crown servants" (1988) 8 (1) Oxford Journal of Legal Studies 154-68]. 

In that case, a compensation for loss or damage would be the only available remedy, which would infringe EU law (and, in particular, Directive 89/665, as amended by Directive 2007/66, available here). Consequently, in order to comply with the obligation to provide all remedies foreseen in EU procurement rules, reg.104 PCR2015 reduces the immunity of the Crown in these proceedings.

By disapplying s.21 of the Crown Proceedings Act in public procurement challenges, reg.104 PCR2015 allows for the Court to give effect to reg.96 PCR2015 (interim orders). The question that remains beyond my understanding of English public and private law is whether a combined effect of reg.104 PCR2015 (allowing for injunctions against the Crown) and reg.96(6) PCR2015 (clarifying that the content of reg.96 does not prejudice any other powers of the Court regarding interim orders) actually opens up the door to orders for interim remedies different from those listed in reg.96(1) PCR2015 (for a list of the theoretically possible, see here), or not. 

Given that reg.104 PCR2015 was needed to allow for interim injunctions to be adopted by the Court despite the existence of reg.96 [or was it?; for general discussion of the possibility to obtain interim measures in procurement challenges in the UK, see P Henty, "Remedies Directive implemented into UK law" (2010) 19(3) Public Procurement Law Review NA115-24; and M Trybus, "An Overview of the United Kingdom Public Procurement Review and Remedies System with an Emphasis on England and Wales", in S Treumer and F Lichere (eds), Enforcement of the EU Public Procurement Rules (Copenhagen, DJØF, 2011) 201, 214], I would guess that no other interim orders are allowed (or indeed appropriate, with the exception of interim declarations). However, this is an area where I most likely stand to be corrected…
_________________

(*) I am thankful to my colleague Prof Cosmo Graham for the clarification and for discussion on what is and is not part of the Crown, which is not susceptible of an easy answer... I am also thankful to him for pointing me in the direction of Part 25 of the CPR Rules and Practice Directions and discussing the implications of the different types of interim orders.

Ineffectiveness etc. in relation to specific contracts based on a framework agreement under reg.103 Public Contracts Regulations 2015

Reg.103 of the Public Contracts Regulations 2015 (PCR2015) establishes rules on ineffectiveness and shortening of duration in relation to specific contracts based on a framework agreement. This regulation alters the rules of regs.99 to 102 in relation to specific contracts based on a framework agreement. However, most of the comments made in relation to those regulations apply here as well (see Pedro's comments here).

Reg.103(1) PCR2015 determines the scope of application of these special rules and clarifies that  the “specific contracts” it covers are those which are based on the terms of a framework agreement; and were entered into before a declaration of ineffectiveness (if any) was made in respect of the framework agreement on which they are based. The need for these special rules derives from reg.103(2) PCR2015, which determines that a specific contract is not to be considered to be ineffective merely because a declaration of ineffectiveness has been made in respect of the framework agreement. 

Ineffectiveness of 'relevant' specific contracts

In that case, following reg.103(3), where a declaration of ineffectiveness has been made in respect of the framework agreement, the Court must make a separate declaration of ineffectiveness in respect of each relevant specific contract. Therefore, regs.103(2) and (3) clearly decouples the (in)effectiveness of contracts awarded within a framework agreement before the declaration of its ineffectiveness from the ineffectiveness of the latter itself. 

For these purposes, a specific contract is relevant only if a claim for a declaration of ineffectiveness in respect of that specific contract has been made within the time limits mentioned in reg.93 PCR2015 as applicable to the circumstances of the specific contract; regardless of whether the claim was made at the same time as any claim for a declaration of ineffectiveness of the framework agreement [reg.103(4) PCR2015]. 

This is bound to limit the issue of ineffectiveness of specific contracts within the framework to those that are actually litigious, and is in line with the option for a restriction of the consequences of a declaration of ineffectiveness only for the future, or ex nunc, under reg.101(1) PCR2015. 

General interests excluding ineffectiveness of 'relevant' specific contracts

When determining whether a relevant specific contract should be declared ineffective on top of the ineffectiveness of the framework agreement it is based on, reg.100 PCR2015 (general interest grounds for not making a declaration of ineffectiveness) applies insofar as the overriding reasons relate specifically to the circumstances of the specific contract [reg.103(5)].  

Ineffectiveness of (non-'relevant') specific contracts due to general grounds

Moreover, reg.103(6) coordinates the rule in reg.103(3) and (4) with those in reg.95 PCR2015, to the effect of preventing the contracting authority from entering into specific contracts based on a framework which effectiveness has been challenged. That obligation is implicit and, consequently, where a claim form has been issued in respect of a contracting authority’s decision to award the framework agreement, the contracting authority has become aware that the claim form has been issued and that it relates to that decision, and a/any specific contract(s) have not been entered in, the contracting authority is required to refrain from entering into any such specific contracts based on the litigious framework agreement--and, failing that, it will be considered to have infringed the requirements of reg.95 PCR2015 and the Court will be able to declare the ineffectiveness of any such specific contracts. The same applies in relation to interim measures altering or restoring such suspension of the contract-making powers of the contracting authority.

In terms of reg.103(6)(b), thus, the regulation not prejudice the making of a declaration of ineffectiveness in relation to a specific contract in accordance with other provisions on the basis of the second ground of ineffectiveness set out in reg.99(5), where (i) the relevant breach of the kind mentioned in reg.99(5)(a) is entering into the specific contract in breach of regs.95 or 96(1)(b) PCR2015, and the relevant 'additional' breach of the kind mentioned in reg.99(5)(b) relates specifically to the award of the specific contract and the procedure relating to that award, rather than to the award of the framework agreement and the procedure relating to it. Further to this, and even if the clarification is quite circular and unnecessary, under reg.103(6)(a), the third ground of ineffectiveness set out in reg.99(6) and (7) also applies to the entering into of specific contracts based on a framework agreement.

No other grounds for ineffectiveness of specific contracts

Reg.103(7) PCR2015 limits the possibilities to declare the ineffectiveness of a specific contract based on a framework agreement other than in accordance with reg.103(3) (separate declaration of ineffectiveness in respect of each relevant specific contract) or on a basis mentioned in reg.103(6)--which, basically, comes to exclude the possibility of declaring the ineffectiveness under the first ground foreseen in reg.99 PCR2015. 

Effects derived from the ineffectiveness of specific contracts

According to reg.103(8) PCR2015, where a declaration of ineffectiveness is made in respect of a specific contract in accordance with reg.103(3), reg.101 (the consequences of ineffectiveness) applies, but reg.102(1) (requirement to impose a civil financial penalty) does not apply. This makes sense and avoids the imposition of excessive penalties when the ineffectiveness of a relevant specific contract derives from or comes in addition to the ineffectiveness of the framework agreement it is based on--which will already have triggered the imposition of penalties under reg.102 PCR2015.  

A contrario, where the ineffectiveness of a (non-'relevant') specific contract derives from other grounds, as foreseen in reg.103(6) PCR2015, the full remedies foreseen in reg.98 are available and regs.101 and 102 need to be applied strictly.

Reg.103(9) foresees that, where the Court refrains from making a declaration of ineffectiveness which would otherwise have been required on the basis of general interest grounds, the Court must order that the duration of the contract be shortened to the extent specified in the order. The extent by which the duration of the contract is to be shortened is the maximum extent, if any, which the Court considers to be possible having regard to what is required by the overriding reasons of general interest [reg.103(10)]. For these purposes, “duration of the contract” refers only to its prospective duration as from the time when the Court makes the order [reg.103(11) PCR2015].  

It is interesting to note that these considerations are not exactly parallel to those derived from shortening of contracts which ineffectiveness is excluded by general interest grounds under reg.102(2)(a) and (3) PCR2015, where the limits to the shortening of the contract derived from the general interest grounds are not expressly referred to. However, in my view, there is no reason not to apply these rules analogously to that case.

Penalties in addition to, or instead of, ineffectiveness under reg.102 Public Contracts Regulations 2015

Reg.102 of the Public Contracts Regulations 2015 (PCR2015) determines the penalties that the Court must impose in addition to, or instead of, the ineffectiveness of a contract awarded in violation of any of the grounds set out in reg.99 PCR2015, which are fundamentally limited to a shortening of the duration of the contract and/or the payment of civil financial penalties by the contracting authority (see Pedro's remarks here). It is important to stress that the Court has no discretion to decide not to impose any of these penalties, given that reg.98(2)(b) PCR2015 requires it to impose some penalty when the conditions of reg.102 are met--which cover two different cases.

Firstly, the Court must impose the payment of civil penalties where it declares the ineffectiveness of the contract [reg.102(1) PCR2015].

Secondly, the Court must impose penalties even if it does not declare the ineffectiveness of the contract because either (a) it is satisfied that any of the grounds for ineffectiveness applies but does not make a declaration of ineffectiveness because reg.100 requires it not to do so; or (b) the Court is satisfied that the contract has been entered into in breach of any requirement imposed by regs.87, 95 or 96(1)(b) and does not make a declaration of ineffectiveness, whether because none was sought or because the Court is not satisfied that any of the grounds for ineffectiveness applies [reg.102(2) PCR2015]. 

In these cases, the Court must order at least one, and may order both, of the following penalties: (a) that the duration of the contract be shortened to the extent specified in the order [in which case, “duration of the contract” refers only to its prospective duration as from the time when the Court makes the order; reg.102(16) PCR2015]; or/and (b) that the contracting authority pay a civil financial penalty. 

If the Court imposes the payment of a civil financial penalty in either of these cases, in determining its amount, the overriding consideration is that the penalties must be effective, proportionate and dissuasive [reg.102(4) PCR2015; for a comparative view of the level of such penalties in other EU jurisdictions, see the report recently published by the Commission on "Economic efficiency and legal effectiveness of review and remedies procedures for public contracts" (April 2015)]. 

Reg.102 PCR2015 establishes two additional general rules. Firstly, in determining the appropriate order, it is made explicit that the Court must take account of all the relevant factors, including the seriousness of the relevant breach of the duty owed in accordance with reg.89 or 90; the behaviour of the contracting authority; and, where the order is to be made without a declaration of ineffectiveness, the extent to which the contract remains in force [reg.102(5) PCR2015]. Moreover, it is also established that, where more than one economic operator starts proceedings in relation to the same contract, the determination of the  effective, proportionate and dissuasive character applies to the totality of penalties imposed in respect of the contract [reg.102(6) PCR2015; ie a sort of ne bis in idem].

Civil financial penalties

Reg.102(7) to (11) establishes specific the rules concerning the payment of civil financial penalties and, in particular, whom the penalties are payable to. This may be of interest to public lawyers. However, from a public procurement perspective, this does not deserve any further comments.

Contract shortening

More interestingly, reg.102(12) to (16) establish specific rules for the shortening of the contract that cannot be declared ineffective. The regime is quite similar to the rules governing the consequences of a declaration of ineffectiveness under reg.101 PCFR2015. In that regard, the Court may make any order that it thinks appropriate for addressing the consequences of the shortening of the duration of the contract [reg.102(12)] and such an order may, for example, address issues of restitution and compensation as between those parties to the contract who are parties to the proceedings so as to achieve an outcome which the Court considers to be just in all the circumstances [reg.102(13)].

Reg.102(14) foresees the possibility for the parties to have previously regulated contractually the consequences of an order shortening the contract and, consequently, reg.102(15) determines that, in those circumstances, the Court must not exercise its power to regulate the shortening of the contract in any way which is inconsistent with those provisions, unless and to the extent that the Court considers them incompatible with the primary order to shorten the contract. The same issue of (in)existence of compensation for loss or damage resulting from the shortening of the contract arises as in relation to effectiveness, so the comments made in relation to reg.101 PCR2015 to the effect of excluding any such compensation apply here as well.

Consequences of ineffectiveness under reg.101 Public Contracts Regulations 2015

Reg.101 of the Public Contracts Regulations 2015 (PCR2015) determines the consequences of the ineffectiveness of a contract declared under reg.99 PCR2015. According to reg.101(1) PCR2015, the declaration of ineffectiveness determines that the contract is to be considered to be prospectively, but not retrospectively, ineffective as from the time when the declaration is made and, accordingly, those obligations under the contract which at that time have yet to be performed are not to be performed.

This means that the effects of the declaration of ineffectiveness are ex nunc or from now on, which is a possibility allowed for under Art 2d(2) of Directive 89/665 as amended by Directive 2007/66 (here). In this case, though, the limitation of the effects of the ineffectiveness to the future triggers an obligation to impose additional penalties, which are dealt with by reg.102 PCR2015. Pedro concurs.

Given that such decision can be appealed and, consequently, the declaration of ineffectiveness can be stayed, reg.101(2) PCR2015 clarifies that, in case of exercise of any power under which the orders or decisions of the Court may be stayed, at the end of any period during which a declaration of ineffectiveness is stayed, the contract is to be considered to have been ineffective as from the time when the declaration had been made. Consequently, the practical effects of the declaration of ineffectiveness need to be adjusted to the time of the adoption of such declaration, even if that means that it gains some retrospective effectiveness upon confirmation (or lift of the stay).

In practical terms, reg.101(3) PCR2015 allows the Court making a declaration of ineffectiveness to make any appropriate order addressing the implications of the declaration of ineffectiveness and any consequential matters arising from the ineffectiveness. Such order can be made at the same time of the decision on ineffectiveness, or at any time after doing so. Reg. 101(4) PCR2015 further clarifies that such an order may, for example, address issues of restitution and compensation as between those parties to the contract who are parties to the proceedings so as to achieve an outcome which the Court considers to be just in all the circumstances.

Reg.101(5) PCR2015 regulates the possibility that the contracting authority and the contractor may have self-regulated the consequences of a declaration of ineffectiveness. In that case, for the contractual regime to have effect, it is necessary that the parties to the contract have agreed before the declaration of ineffectiveness and by contract any provisions regulating their mutual rights and obligations in the event of such a declaration being made. That is, the contractual regime applicable to the ineffectiveness needs to pre-exist the declaration of ineffectiveness so as to avoid strategic behaviour between the parties. 

In any case, should there be a contractual regulation of the consequences of the declaration of ineffectiveness, reg.101(6) PCR2015 determines that the Court must not exercise its power to make an order under reg.101(3) in any way which is inconsistent with those provisions, unless and to the extent that the Court considers them incompatible with the requirements in reg.101(1) or (2)--that is, unless they restrict the future ineffectiveness of the contract, considered from the date of the declaration.

One of the issues that is likely to trigger more litigation concerns any sort of compensation for loss or damage derived from the ineffectiveness of the contract (either contractual, or as a result of an issue of compensation under a Court order)--which, in my view, would run contrary to the effectiveness of the remedies Directive and, consequently, should not be allowed [in similar terms, see J Arnould, "Damages for performing an illegal contract: the other side of the mirror - comments on the three recent judgments of the French Council of State" (2008) 17(6) Public Procurement Law Review NA274-281]. 

This was an unresolved issue in the CJEU Judgment in Commission v Germany, C-503/04, EU:C:2007:432, para 36: "even if it were to be accepted that the principles of legal certainty and of the protection of legitimate expectations, the principle pacta sunt servanda and the right to property could be used against the contracting authority by the other party to the contract in the event of rescission, Member States cannot rely thereon to justify the non-implementation of a judgment" declaring the ineffectiveness of a public contract (emphasis added). 

  

In my view, such compensation of damages should not be allowed because it would entail a payment derived from an infringement of EU law that actually benefits a party intimately involved in the infringement. Moreover, the grounds for ineffectiveness are extremely limited and the infringements that trigger ineffectiveness are clear-cut and easy to monitor by the contractor, so that it is impossible for it to seriously claim lack of knowledge of the infringement (bad faith) for the purposes of claiming compensation [in similar terms, see S Treumer, "Towards an obligation to terminate contracts concluded in breach of the E.C. Public procurement rules - the end of the status of concluded public contracts as sacred cows" (2007) 16(6) Public Procurement Law Review 371-386, 381: "if for example the contract party has been fully aware or should have been fully aware that the public procurement rules have been disregarded, this will presumably reduce the consideration given to the interest of the contract party in maintaining the contract. It might even lead to the exclusion of consideration to this interest of the contract party in cases where they have been fully aware of violation of the rules combined with very active participation in the violation". For a slightly different approach and a discussion of the standard of diligence required from a contractor considering claims in this setting, see MA Simovart, "The new Remedies Directive: would a diligent businessman enter into ineffective procurement contract?" (2009)].