The final version of changes to the Remedies Rules was published on 12 November (http://www.opsi.gov.uk/si/si2009/pdf/uksi_20092992_en.pdf).

These are the weapons that disgruntled bidders can deploy where they believe an authority has broken the EU Procurement Rules when awarding a contract. Very similar changes will apply to the Utilities Rules.

Those of you who have been to our workshops on the changes will be wondering whether the final version is different from the draft published earlier this year. There are a few tweaks from the earlier version, but they are mostly fairly minor.

The new Remedies Rules will apply only to procurements started after 20 December - i.e. procurements where the authority has placed an advert or sought expressions of interest before that date.

We will deal with the changes in three main groups:

• new 'ineffectiveness' rules, which mean contracts awarded in breach of the Rules can be 'torn up' in some circumstances
• unsuccessful bidders' rights to a debrief have been beefed up slightly
• changes to the standstill rules and limitation periods for challenges

This is the change rightly grabbing the most attention, and you do need to understand the implications, whether you are at an authority or a bidder.

Until now, if a contract is signed, then it stands, even if it has been awarded in breach of the Procurement Rules, and in such cases bidders can only sue for damages.

When the changes come in, if a bidder applies to court, and the court finds the authority has broken the Rules in one of three specified ways (set out in new Reg 47K), then the court must declare the contract 'ineffective' (i.e. tear it up), unless there are overriding public interest reasons.

• Ineffectiveness: Ground One - applies where an authority should have advertised a contract in OJEU, but did not.

Examples could include an authority deliberately ignoring an advertising obligation, or mistakenly extending an existing contract where there is no right to do so, mistakenly thinking a contract was below the thresholds, or a Part B contract (which does not need to advertised), or mistakenly thinking one of the exceptions (such as sole possible provider) applies.

In these circumstances, an authority can protect itself from an 'ineffectiveness' claim by placing a voluntary transparency notice in OJEU telling the market it is going to sign up, and inviting anyone who thinks that the contract should be advertised in OJEU the chance to complain within 10 days.

The final Regs note that the Commission has not yet determined what such transparency notices should say. Meanwhile, the Regs say such a notice should include the name and contact details of the authority; a short description of the contract; a short description of the reasons why the authority has decided to award the contract without an OJEU notice; the name and contact details of the person to whom the contract will be awarded.

Our advice would be that, in certain borderline cases where an authority is not sure whether it needs to advertise in OJEU or not, using one of these notices is a good idea, to flush out the main risk of challenge.

• Ineffectiveness: Ground Two - applies where an authority signs a contract in breach of the standstill provisions, and has also breached the Rules in some other, substantive, way. Where a bidder can show its rights to proper redress have been affected, the court must declare the contract 'ineffective'.
• Ineffectiveness: Ground Three - applies where an authority calls off under a framework (through a mini-competition only), and the call-off was valued over the advertising thresholds, and the mini-competition procedure was flawed in some way.

In those circumstances, the Court must declare the call-off 'ineffective' unless the authority has run a voluntary standstill period under new Reg 47K(7). This is essentially a voluntary 'Alcatel' procedure for that call-off. There is, of course, no obligation to run a standstill period for framework call-offs generally, so this is strictly a voluntary, tactical decision. But we would imagine most authorities would now do so on most major call-offs.

General interest grounds
If a disgruntled bidder proves one of the three 'grounds', then the court must 'tear the contract up' unless there are overriding general interest grounds under new Reg 47L.

It seems quite clear that general costs to the authority through delay and hassle cannot be counted here, except in very exceptional circumstances. So we are looking really at arguments around severe disruption to public services and public health, for example We have described these to some of you as 'tear-jerker' grounds.

Where the Court decides to apply the general interest discretion not to tear a contract up, it must still fine the authority, and/or shorten the contract. Fines are described below. Shortening the contract is still fairly messy, and will leave the authority with a very unhappy winning bidder, with many of the same grounds for complaint as if the contract has actually been 'torn up'.

What if the contract is declared 'ineffective'?
Essentially, it is 'torn up'. But only prospectively - from the date of the judgment (or the date specified in the judgment). So it exists and is valid up until then. Think of it as being married and then divorced, rather than being married and having the marriage annulled.

The consequences are potentially very messy: the winning bidder may well have already started performing the contract and - particularly on major projects - may have already invested substantial sums. If it then finds the contract has been 'torn up' through no fault of its own it will be unhappy to say the least, and will want redress from the authority. In those circumstances, the court will have discretion over who pays what to whom, for work already done, and potentially for loss of profit. This is a legal mess - very uncertain and very expensive.

Helpfully, though, the Regs do allow for 'pre-nuptial agreements'. Under Reg 47M(5), the authority and winning bidder can set out in writing what will happen if a contract is 'declared ineffective', and in most cases the court will have to follow that, unless the 'pre-nup' cuts across the whole principles of the Rules.

We would strongly encourage authorities and bidders to consider putting together wording for such 'pre-nuptial' agreements, to protect their position. We know many authorities - and more sophisticated bidders - are already starting to do so.

Fines
For the first time, the changes mean that an authority can be fined for breaching the Rules. This applies where:

• a court declares a contract 'ineffective'
• decides not to do so because of the 'public interest' discretion
• an authority has breached the standstill procedures, but has not broken the Rules in any other substantive way

We do not know how substantial such fines will be, but they must be high enough to dissuade, and take into account the authority's behaviour and the seriousness of the breach.

The first authority to be fined will be famous - or rather, infamous.

Ineffectiveness: Frameworks
Frameworks are slightly fiddly.

There was some debate about the position of a framework set up under the 'old' law, but where call-offs are made from that framework after the law changes. Thankfully, it is clear that the old law will continue to apply to such call-offs.

The changes are now also clear that, where a framework is 'declared ineffective' under the new Rules, then call-offs already made under that framework will stand, unless the court says otherwise.

Under the changes, authorities will have to notify applicants of their exclusion from the tender process, at whatever stage that happens.

Strictly speaking, there was arguably only a duty under the old law to do so for bidders excluded at the end of the award process, and not at prequalification (PQQ) stage or earlier parts of the award stage. (In practice, it was always best practice - and common courtesy - to inform excluded bidders anyway).

The changes also beef up slightly what excluded companies need to be told, and states they should be told as quickly as possible. The information obligation depends on a new distinction between 'candidates' and 'tenderers'.

'Candidates' - essentially those knocked out at PQQ stage and not invited to tender - must be told why they were unsuccessful.

'Tenderers' - those who actually submitted an offer - must be told their score, the winning bidder's score, and the 'characteristics and relative advantages of the successful tender' - basically, why the winning bid was better than theirs.

Standstill rules
Since 2006, authorities and bidders have been used to a 10 day standstill period between contract award and the contract actually being signed.

This implements the famous 'Alcatel' decision, and is to allow disgruntled bidders a final chance to object before the contract is signed. The new Rules change the existing position only very slightly.

The 10 day period is extended to 15 days from the 'relevant sending date' when the 'Alcatel' letter is not sent electronically. There are also detailed rules on when the relevant sending date is calculated. They also clarify that, where the standstill period is not a working day, the standstill period is extended to midnight at the end of the next working day.

As well as all the existing material an Alcatel letter must include, they must now also incorporate an explanation of the standstill rules, and when the standstill period on that contract actually expires.

The changes also clarify that a 'grumpy letter' from a disgruntled bidder is not in itself enough to extend the legal standstill period and prevent the authority signing the contract. To do so, a bidder must actually go to court, issue proceedings, and serve them. Again, there are detailed descriptions of what this actually means - important if you are being sued.

The Rules also introduce a voluntary standstill procedure to ward off Ground One or Ground Three ineffectiveness claims.

Limitation periods
Bidders wanting to bring a claim must do so within the limitation period. Under the old rules, there was also a requirement that they had sent a 'letter before action' to the authority. This has now gone.

There are two limitation periods. The existing one is largely unchanged. Generally, a bidder wanting to bring a claim must do so 'promptly and in any event within three months' of the breach. The changes clarify that 'promptly' can never mean less than 10-15 days.

There is a new limitation period, which applies specifically where a bidder brings an 'ineffectiveness' claim. There is a six-month long-stop period that is shortened to 30 days where the authority has published an award notice, or where they have notified the losing bidders of their exclusion, and given proper reasons.

What do you need to do?
If you are working for an authority:

• think about the consequences of 'ineffectiveness'/having your contracts 'torn up', and protect yourself by working up pre-nuptial wording for inclusion in your contract documents
• consider using 'voluntary transparency notices' to ward off 'ineffectiveness' claims, where you are not advertising a contract in OJEU, and there is some doubt over whether this is correct
• consider using voluntary standstill periods to ward off ineffectiveness claims on major framework call-offs.
• work in all the other procedural detail, including extra debriefing obligations and (slight) amendments to Alcatel letters.

If you are working for a bidder:

• consider the extra leverage the change to the Rules provides, and decide, in appropriate cases, to apply gentle pressure where you believe your rights under the Rules have been broken.
• work up 'pre-nuptial' wording to protect yourself as much as possible against cases where you win the contract, commit expense, and then find that (through no fault of your own) the contract is 'torn up'.

If you want to discuss any of this in more detail, please contact: Peter Andrews T: 08700 865035 E: peter.andrews@shoosmiths.co.uk