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By | OUT-LAW.COM 16th May 2006 07:02

Public procurement: Better rights for rejected bidders

Remedying Remedies Directives

The losing bidder who suspects foul play in the award of a public procurement contract has too few effective remedies and too little time to exercise them if he's to stand a chance of winning a contract. But the European Commission plans to make changes.

It put forward a proposal last week to improve the national review procedures that businesses can use when they consider that a public authority has awarded a contract unfairly.

The proposed directive would require public authorities to wait a certain number of days, known as a 'standstill period', before concluding a public contract following the announcement of its award. This would give rejected bidders the opportunity to start an effective and swift review procedure at a time when any unfair decisions could still be corrected.

It would apply not only to contracts awarded following a tender procedure, but also to contracts awarded directly to a single bidder, which under EU law are allowed only exceptionally and under very restrictive conditions.

The introduction of these new rights for rejected bidders would create stronger incentives for EU businesses to bid for contracts anywhere in the EU, according to the commission. Providing clear and effective procedures for seeking redress is crucial to making sure contracts ultimately go to the company which has made the best offer, and therefore to building confidence among businesses and the public that public procurement procedures are fair.

Internal Market and Services commissioner Charlie McCreevy said: "Businesses who bid for public contracts – and taxpayers who ultimately finance them – need to be confident that they are awarded fairly. So if a public authority does make an unfair decision, businesses need to have the opportunity to challenge the decision while it can still be corrected, no matter where in the EU the public authority is based."

Problems with existing EU law on public procurement remedies

The current Remedies Directives require member states to ensure that review procedures are available to anyone who has an interest in obtaining a given public contract and may have been affected by an unfair decision taken by an awarding authority.

The review procedures must be effective and rapid, and must go through national courts and/or administrative bodies. In all member states, available remedies must include the possibility of taking interim measures (such as suspension of the award procedure in question), the setting aside of unlawful decisions, and of discriminatory specifications in the invitation to tender, and the compensation of injured parties.

However, consultations carried out by the commission identified areas where the existing Remedies Directives do not always achieve their objectives, such as the lack of effective remedies against illegal direct awards of public contracts, i.e. public contracts awarded in a non-transparent and non-competitive manner to a single bidder; and the rapid conclusion of a public contract (known as the 'race to signature'), which deprives businesses of the opportunity to bring remedies actions effectively.

So the commission is now proposing a new directive, amending the current Remedies Directives, to improve the situation.

How the proposed directive would improve rejected bidders' rights

The proposed directive aims mainly to introduce a 'standstill period' for public contracts covered by the EU public procurement directives. This would mean that awarding authorities would be obliged to suspend the conclusion of a public contract for a short period of time after the communication of the award decision, in order to allow bidders to bring review procedures in the most effective manner.

The directive also specifies the details of the standstill obligation, such as its scope, consequences and enforcement, the time span (in principle, 10 calendar days) and permissible exceptions (for example, in cases of extreme urgency).

See: Text of the proposal and more information on remedies in EU public procurement law

Copyright © 2006, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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