EU Procurement A presentation by Graeme Palmer, Associate, Burness LLP 24 March 2009 Click here to visit Burness LLP website

EU Procurement What is EU Procurement? Why and when is it relevant in the context of construction contracts? What are the possible consequences when it goes wrong?

What is EU Procurement? Rationale for regulating the procurement practices of public bodies and utilities across EU member states EU Procurement rules comprise: -EU Directives -Implementing regulations in member states -Case law of the European Court of Justice -Principles derived from the EU Treaty

What is EU Procurement? Principles of the EU Treaty -Non-discrimination -Equal treatment -Transparency -Proportionality

What is EU Procurement? Directive and Regulations set out detailed rules and procedures to be followed by public bodies and utilities in procuring works, goods and services The Directive has been clarified in a number of areas by decisions of the European Court of Justice Even where the Directive or Regulations do not apply in full to a proposed contract, the procurement of that contract must comply with the principles derived from the EU Treaty

When is EU Procurement relevant? When a contracting authority seeks to procure works, goods or services Joint ventures involving public sector bodies When a utility seeks to procure works, goods or services which are to be used in relation to the utility activities When a private or third sector body receives public funding a condition of which obliges that body to comply with EU Procurement rules

When is EU Procurement relevant? Above threshold and below threshold procurement Threshold for works - £3,497,313 Threshold for services - £90,319 (central government) and £139,893 (for other public bodies) Procedures under EU procurement rules -open-competitive dialogue -restricted-negotiated Specification of selection and award criteria and weighting

When is EU Procurement relevant? When a private sector body is bidding for a contract from a public sector organisation or utility When a private sector body has won a works concession contract and has to advertise sub-contracts in OJEU Contracts with a value below the threshold or which are not subject to the full requirements of the directives - contracts which may have a cross-border interest must be subject to a degree of advertising which enables them to be opened up to competition ( C-324/98 Telaustria)

When is EU Procurement relevant? Material amendments to an existing contract during the term of the contract can constitute the award of a new contract (Case C-454/06 pressetext) A material amendment is one which: -Introduces conditions which, if they had been part of the initial award procedure, would have allowed for the admission of bidders other than those initially admitted or allowed for the acceptance of another bid -Extends the scope of the contract as originally tendered by encompassing services not originally covered -Changes the economic balance of the contract in favour of the contractor in a manner not provided for in the terms of the initial contract

When is EU Procurement relevant? When a contracting authority enters into a Development Agreement? Case C-220/05 - Jean Auroux and Others v Commune de Roanne The public procurement rules apply where one contracting authority entrusts another contracting authority with executing works, regardless of whether or not the first contracting authority is, or will become, the owner of all or part of the works, and irrespective of the fact that sub- contracts will be tendered

Why is EU Procurement relevant? Regulation 47(1) of The Public Contracts (Scotland) Regulations The obligation on a contracting authority to comply with the provisions of these Regulations…. and with any enforceable Community obligation in respect of a public contract…. is a duty owed to an economic operator.

Why is EU Procurement relevant? Regulation 47(6) -A breach of duty owed in accordance with paragraph (1)… shall be actionable by any economic operator which, in consequence, suffers, or risks suffering, loss or damage and those proceedings shall be brought in the Sheriff Court, the Court of Session, or, in England and Wales and Northern Ireland, the High Court.

Why is EU Procurement relevant? Remedies Directive (Directive 2007/66/EC) -Final date for implementation in national legislation – 19 December To address the issue of the direct award of contracts where these contracts have not been advertised as required in terms of the procurement directive.

Why is EU Procurement relevant? Remedies Directive (contd) Ineffectiveness: national courts to make a contract ineffective where -a contracting authority has awarded a contract directly to a provider which ought to have been advertised in OJEU -the contracting authority has: not complied with the requirements of the standstill period, which has deprived the tenderer of the opportunity to pursue pre-contractual remedies; and, has acted in breach of the procurement directive where that breach has affected the chance of the tenderer applying for a review to obtain the contract.

Why is EU Procurement relevant? Remedies Directive (contd) An organisation which wishes to avail itself of the new remedies must make an application within 30 days of the publication of a contract award notice or, if no such contract award notice is published in OJEU, within six months of the date of the contract being concluded.

Possible consequences when things go wrong Where the contracting authority fails to adequately specify minimum requirements and award criteria in the contract notice and contract documents. Excluded bidder was awarded £109, for loss of profits over three years – due to lack of clarity in contract notice and specifications, changes in personnel and lack of relevant experience of personnel assessing the bids Aquatron Marine v Strathclyde Fire Board ([2007] ScotCS CSOH_185)

Possible consequences when things go wrong Where the contracting authority uses qualification criteria as award criteria, where there is undue discretion given to panel members in scoring bids and where there is inadequate de-briefing. The case (which was an action for interim interdict) also raised the issue of equality of treatment when bidding against an incumbent when issues of TUPE would apply. Lightways (Contractors) Ltd v North Ayrshire Council [2008] CSOH 91

Possible consequences when things go wrong McLaughlin & Harvey Limited v Department of Finance & Personnel, judgment on remedies, 30 October 2008 ([2008] NIQB 122) High Court of Justice in Northern Ireland set aside a framework agreement which had been entered into between the Department and five construction companies The court ruled that the Department had breached the procurement rules by failing to disclose in advance certain elements of the award criteria applied in assessing tenders

EU Procurement A presentation by Graeme Palmer, Associate, Burness LLP (Direct Dial: ) 24 March 2009

Procurement and Community Benefits A presentation by Colin Clelland, Director, Burness LLP 24 March 2009

Introductory Comments Challenges of EU Procurement Rules Focus on practical solutions

EU Procurement Law Relevant Cases -EU Commission v Ireland (1988) -Gebroeders Beentjes v The State (Netherlands) (C3187) -Nord-Pas-de-Calais Region (C22J98) – Commission v The French Republic -Insalud (C – Contse SA v Insalud (2005)) -EU Commission v Italy [1991]

EU Procurement Law (Contd) All very confusing but broad themes are -the need for procedural fairness -application of equal treatment principle -prohibition of conditions which have a discriminatory effect

Use of Contract Conditions Not to be discriminatory Effectiveness of Contract Conditions -Is there a loss to recover? -Do you really want to terminate? Alternative strategies

The role of community benefits in EU Procurement The EU Social Communication The Consolidated Directive Social Issues in Purchasing – OGC Scottish Government Consultation Paper – Community Benefits in Public Procurement

Social Communication … any contracting authority is free, when defining the goods or services it intends to buy, to choose goods, services or works which correspond to its concerns as regards social policy… provided that such choice does not result in restricted access to the contract…to the detriment of tenderers from other Member States

OGCs Social Note A core requirement can be defined as an essential part of the contract and this should be reflected in the specifications and the conditions of contract… It is possible for social issues to be a core requirement provided that it is central to the subject of a procurement.

Scottish Government Consultation Paper The inclusion of Targeted Recruitment and Training (TR + T) or other community benefit requirements in the award process introduces the need for a new skill evaluating bidders tenders in response to these requirements.

Core requirement – part of the subject of the contract Core requirement cannot be discriminatory Secondary requirements -Relate to social issues not part of the core requirements but which the procurer wants to see delivered Ability to meet core requirements but not secondary requirements can influence the award of the contract Core and Secondary Requirements

Payment for success -Incentivisation -Abatement from payment otherwise due -Termination as a last resort Using Community Benefits as Core Requirement

Framework Agreements Framework agreements with performance measured against key performance indicators How to use KPIs -the carrot or the stick Use of Work Allocation System to reward success

Procurement and Community Benefits A presentation by Colin Clelland, Director, Burness LLP (Direct Dial: ) 24 March 2009