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By | OUT-LAW.COM 25th June 2007 11:07

MEPs give rejected bidders on public contracts new rights

In national law in three years

The European Parliament has voted to give businesses new powers to challenge public procurement decisions when they consider that a public authority has awarded a contract unfairly. National laws are expected to change within three years.

The European Commission proposed the Directive (pdf) last year, which seeks to improve the national review procedures that businesses can use to challenge an award. Its first reading in Parliament was approved this week.

Internal Market and Services Commissioner, Charlie McCreevy, welcomed the Parliament's support.

"Effective procedures for seeking review are essential in making sure public contracts ultimately go to the company that has made the best offer," he said. "I believe that by strengthening national review procedures in line with this directive, businesses will have stronger incentives to bid for contracts anywhere in the EU."

How the Directive would improve bidders' rights

According to the proposed Directive, contracting authorities would need to wait for at least 10 days after deciding who has won the public contract before the contract can actually be signed. This 'standstill period' is designed to give bidders time to examine the decision and to assess whether it is appropriate to initiate a review procedure. If this standstill period has not been respected, the Directive requires national courts under certain conditions to set aside a signed contract, by rendering the contract 'ineffective'.

The Directive also seeks to combat illegal direct awards of public contracts, which is the most serious infringement of EU procurement law. National courts will also be able to render these public contracts ineffective if they have been illegally awarded without transparency and prior to competitive tendering. In these cases the contract will need to be tendered again, this time according to the appropriate rules.

National courts may decide that these contracts remain in force only if required by overriding reasons relating to a general interest. In those cases, alternative penalties must be applied instead. These alternative penalties must be effective, proportionate and dissuasive, and may entail the shortening of the duration of the contract or the imposition of fines on the contracting authority.

For contracts based on framework agreements and dynamic purchasing systems, where speed and efficiency are an essential part of their success, the Directive provides for a specific review mechanism. For these types of contracts, member states may choose to replace the standstill obligation by a post-contractual review procedure.

The Directive is expected to be formally adopted by the Council and published in the EU's Official Journal later this year. EU member states will then have 24 months to implement it in their national laws.

Objectives of the review of the Remedies Directives

The review of the Remedies Directives, which was based on extensive consultations with contracting authorities and businesses, seeks to strengthen legal review procedures in the area of public procurement.

Effective procedures for seeking redress are essential in making sure that public contracts ultimately go to the company that has made the best offer. Such procedures will also help make businesses and citizens more confident that public procurement procedures are being conducted in a fair and competitive manner throughout the EU.

Public procurement is a cornerstone of the internal market and accounts for some 16 per cent of EU GDP. The Commission hopes that the Directive will stimulate a further opening up of public procurement markets, providing stronger incentives for businesses to bid for public contracts in EU Member States.

Copyright © 2007, OUT-LAW.com

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

Related link

More information about the Directive

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