Update. Procurement. Has Pandora s box been opened? Issue 02. Bringing procurement challenges out of time. Autumn 2015

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1 Issue 02 Autumn 2015 Procurement Update Has Pandora s box been opened? Bringing procurement challenges out of time Case-law update Republic of Ireland 3 England 6 European Courts 13 Other developments Republic of Ireland 17 Northern Ireland 20 Other news Northern Ireland office 22 Bidder workshops 23 Eversheds podcasts 23

2 Introduction The Eversheds Procurement Update aims to provide a comprehensive and concise summary of important developments in procurement law and practice which are relevant to the public and private sectors and to utilities in Ireland and Northern Ireland. Procurement disputes continue to keep the Courts busy. A potentially significant decision of the High Court in Dublin seems to have improved the prospects of disappointed bidders who seek to bring legal challenges outside the usual 30 day limitation period. As a result of the latest case, awarding authorities in Ireland can now be less certain that their procurement decisions are beyond reproach once the 30 day period expires. Elsewhere, automatic suspension and material change issues have been tested again before the English Courts, and the Supreme Court may have finally put an end to the Edenred litigation (although an appeal to the European Court may still be possible). In Luxembourg, the Courts have grappled with service concessions, reliance on third party resources and conflicts of interest. The immediate difficulties created by the Irish Supreme Court decision in OCS One Complete Solutions Ltd -v- Dublin Airport Authority plc appear to have been addressed by new legislation in the Republic of Ireland, which enables the Courts to lift automatic suspensions upon application by awarding entities. We are very pleased to announce the opening of a new office in Belfast, our eleventh office in the UK and our second on the island of Ireland. Located on Donegall Square West, in central Belfast, the office will focus strongly on public sector and procurement work in Northern Ireland and offer our clients in Northern Ireland a unique blend of international legal experience and local expertise. If we can be of any assistance in relation to procurement or tendering issues, please do not hesitate to contact us. Peter Curran Partner and Head of Procurement Ireland (Dublin) (Belfast) petercurran@eversheds.ie 2

3 Case-law update Republic of Ireland Bringing procurement challenges out of time: Pandora s box opened? Is it safe for an authority to rely on the 30 day statutory limitation period in Ireland? On 15 June 2015, the Irish High Court provided another potentially significant procurement decision in the case of Forum Connemara Ltd. -v- Galway County Local Community Development Committee. The Court heard a preliminary application to strike out the legal proceedings on the grounds that they were commenced under an incorrect provision of the Rules of the Superior Courts and after a delay of several months. The Court s approach to the issue of delay is particularly noteworthy. Galway County Local Community Development Committee (the Committee ), a statutory body, made a decision on 30 September 2014 to treat all of County Galway as a single lot for the purposes of a tender for a contract to distribute more than 1m of Government funds. From that date, Forum Connemara objected to both the decision itself and the manner in which it was made by a sub-group of the Committee. It argued that it made little sense for funds to be centrally distributed in Galway and that local distribution mechanisms were necessary in the west of the County, but its objections to the Committee were in vain. Forum Connemara subsequently tendered for the contract to distribute the funds following the issue of an invitation to tender on 20 October It was notified that it was unsuccessful in March 2015, which prompted it to commence legal action in the High Court challenging the decision of 30 September 2014 to award the contract by way of a single lot. The Committee sought to strike out the action on the ground that the statutory limitation period for challenging procurement decisions (generally 30 3

4 Case law update days) had long expired. Under Irish procurement law, procurement challenges must generally be brought within 30 days of the challenger being notified of a decision or within 30 days of the date the challenger knew or ought to have known of the infringement, although the Court has a discretion to extend this limitation period where it considers that there is good reason to do so. The Court accepted that this was a case in which the claim was brought well out of time. However, it considered that there were good reasons to allow the litigation to proceed. The Court clearly had sympathy for Forum Connemara s predicament and did not criticise it for failing to bring proceedings within 30 days of the decision on 30 September It took into account that Forum Connemara was a communitybased organisation, which had a genuine fear of incurring significant legal costs in the High Court. In taking a such an approach, the Court was aware that it could be accused of opening a Pandora s Box in which all manner of miseries will now be visited on contracting authorities in the form of challenges to their decisions. However, it sought to distinguish the case on its facts, judging that it was unique and presenting characteristics which were unlikely to be present together in many (if any) other procurement cases. The Court pointed to the following in particular: 1. There were governance issues arising in relation to the making of the decision on 30 September which the Court considered were unlikely to present in other procurement cases. 2. It was alleged that Forum Connemara received assurances from central Government that the funds would be distributed on a different basis from that decided upon on 30 September, which gave rise to arguments as to legitimate expectation. 3. The Court found that the case gave rise to genuine public and political concern in Galway, to an extent which was not common in procurement cases. 4. The contract concerned the disbursement of limited funds to vulnerable persons and the need for the affected public to buy into the grant or refusal of funds was an important consideration. All of these factors, when present together, persuaded the Court that there was good reason to allow Forum Connemara s challenge to the decision of 30 September to proceed despite that challenge being initiated months later and only after Forum Connemara had been unsuccessful in the competition. There is undoubtedly a balancing exercise to be conducted between the need for speed in procurement cases and the need to protect fair procedures. In this particular case, the latter appears to have taken precedence. The Court was at pains to explain that the circumstances of this case were entirely unique, however it does seem inevitable that the decision will be relied upon in the future by unsuccessful bidders who do not commence their procurement litigation within the standard 30 day limitation period. This will result in significant uncertainty for awarding authorities who may have previously considered they were relatively safe once the 30 day period expired. Another interesting aspect of the case was that the Court considered that the decision made on 30 September regarding the nature of the contract to be procured was a decision taken by the authority in the course of a contract award procedure. The Court found that this was so, even though the decision was made before the competition actually commenced. The practical implication of this was that Forum Connemara ought to have commenced its challenge under Order 84A rather than Order 84 of the Supreme Court Rules, but the Court refused to strike out the case for having been initiated under the wrong procedure. It is noteworthy that the Court was willing to consider that the limitation period may have started running either from 30 September (when the decision was made) or from 20 October (when the invitation to tender issued), although it was not necessary for it to determine which of these dates was the correct starting point, as in both instances the legal action was commenced well beyond the standard 30 day limitation period. It is not particularly clear why the Court considered that time might have started running from 20 October when the decision under challenge (and therefore the alleged infringement) was made known to Forum Connemara on 30 September. This is an important decision in the Irish procurement context. It seems that, despite the endeavours of the Court to distinguish it on its own facts, this case is bound to lead to considerable uncertainty among awarding authorities as to when potential claims can be safely judged out of time. Pandora s Box may well have been opened and it will be interesting to observe the extent to which disappointed bidders seek to exploit the uncertainty going forward. 4

5 Case law update No injunction granted where illegal direct awards alleged In Word Perfect Translation Services Limited v The Commissioner of an Garda Síochána, Word Perfect sought an injunction restraining the Commissioner from procuring interpretation services pursuant to a Department of Justice and Equality Framework Agreement which had expired. The injunction was sought pending the outcome of judicial review proceedings concerning a decision made by the Commissioner to award interpretation services to certain preferred bidders and to the exclusion of Word Perfect. In considering the application for the injunction, the Court decided firstly that the usual Campus Oil principles were applicable, rather than the principles set out in the recent case of OCS v Dublin Airport Authority plc (previously covered in the Spring edition of our Procurement Update). The Court held that the OCS case was distinguishable from Word Perfect application because OCS concerned a challenge to the award of a contract before it became operative and it therefore resulted in an automatic suspension of the appointment being challenged. That was not the case in Word Perfect, where the challenge was to the illegal direct award of contracts and no automatic suspension was in effect. After applying Campus Oil, the Court concluded that Word Perfect had not satisfied the test for obtaining an injunction and its application was refused. The Court found that, in reality, the relief sought was a final remedy and that Word Perfect had not met the requirements for this. It also found that damages would be an adequate remedy for Word Perfect. While noting that there may be some difficulty in establishing damages with precision, it would not be impossible to do so. The Court also considered the balance of convenience and found that it favoured not granting any injunction. The Court determined that Word Perfect had been guilty of delay, as it had been aware of the matters complained of since January

6 Case law update England Material changes to contracts The English Supreme court has finally resolved the long-running procurement dispute in Edenred (Group UK) Limited-v-Her Majesty s Treasury and Others and has provided useful guidance on the issue of material change. Edenred challenged a decision by HM Treasury to award a contract for the administration of childcare accounts to an existing service provider instead of putting the contract out to tender. HMT had decided to use NS&I (a government department) to administer the provision of a tax-free childcare scheme. There was no contract entered into between HMT and NS&I, only a memorandum of understanding which was not legally binding. NS&I would service the requirement through an outsourcing agreement it had previously awarded to Atos UK. Edenred was unsuccessful in the High Court in arguing that this arrangement involved the conclusion of a public service contract which had not been put out to tender or, alternatively, the changes required to the Atos contract to allow the MOU services to be performed constituted a material variation of that contract. The High Court considered that the MOU between HMT and NS&I was not a public services contract governed by the Regulations as it was not legally binding and made in writing with a person who had a distinct legal personality from the contracting authority. The High Court also noted that no material variation to the contract between NS&I and Atos arose. All the services required to administer the provision of the scheme were within the scope of the contract notice for the original tender which Atos had won. Edenred appealed the High Court decision, unsuccessfully. The Court of Appeal confirmed that the MoU was not a contract under domestic English law. It stated that..[t]he substance and reality are the MoU is a classic example of the distribution of public work between different departments or entities within central government. In this case the distribution is pursuant to arrangements between parts of central government that have a particularly close relationship with one another. On the second issue of material change, the Court of Appeal also agreed with the High Court. Citing the well-known Pressetext case as the basis of its argument, Edenred contended that the scope of the outsourcing contract with Atos was extended considerably by the new arrangement which would alter the overall nature of the contract and that additional bidders would have been attracted to the original competition for the Atos contract had they been aware it was capable of being extended in this way. The substance and reality are the MoU is a classic example of the distribution of public work between different departments or entities within central government. 6

7 Case law update Rejecting these arguments, the Court of Appeal held that the change provisions in the Atos contract were sufficiently clear and precise as to encompass the amendments proposed by NS&I. It noted that the Atos contract had to be interpreted against its factual background, including the published contract notice and the CPV (common procurement vocabulary) codes referred to therein. The contract was to include the provision of operational services for B2B services that NS&I was providing at the date of the contract notice and future B2B services that NS&I would agree to provide to other central government departments and local authorities. The Court held that [t]he proposed amendments to the Atos contract in respect of the provision of outsourced services for NS&I to fulfil its obligations to HMRC under the MoU fall clearly and squarely within the scope of what was anticipated and intended to fall within the contractual change provisions in the Atos contract. The amendments relate to new B2B services for central government, which will be implemented by the outsourced services which were the very subject of the contract notice and the original Atos contract. The Court also rejected the contention that other bidders would have tendered for the contract had they known of the possibility of such an extension. A determined applicant appealed to the Supreme Court, which issued its decision on 1 July The Supreme Court dismissed the appeal. In doing so, it made a number of interesting decisions: The Court considered that it was appropriate to test the validity of the proposed (i.e. future) amendment to the Atos contract by reference to the Public Contracts Regulations This is of interest given that Regulation 118(5) states that nothing in the new Regulations affects contracts awarded before 26 February Two aspects of Regulation 72 were considered relevant: - Regulation 72(1)(e) codifies the principles established in the Pressetext case. Edenred argued that the modification of the Atos contract amounted to a considerable extension of its scope to encompass services not initially covered. The Court ruled that the extension was within the scope of what was originally advertised, and that the contract was still within the estimated contract value range specified in the OJ notice. - In considering the application of Regulation 72(1)(a), the Court also decided that the Atos contract did include clear, precise and unequivocal review provisions which entitled the authority to extend the contract in the manner now envisaged. It held that the contract contemplated the extension of B2B services to other public bodies within the scope of the OJ notice and provided for restrictions on Atos profit margin and the allocation of risk in those circumstances. These restrictions were judged to be sufficiently clear and precise as to meet the test in Regulation 72(1)(a). Finally, the Court dismissed the argument that the memorandum of agreement between HMT and NS&I constituted a public contract. The case is particularly interesting because of its analysis of the statutory test for material change and the emphasis the Court placed on the wording of the original contract notice and the relevant contract provisions. The decision is likely to encourage awarding authorities to define the scope of the contract they are procuring in the broadest possible terms, as this could later help to justify amendments that are proposed. 7

8 Case law update Automatic suspensions Two recent cases in England on the lifting of the automatic suspension make for interesting reading, as each produced a different result for the awarding authorities who sought to have the injunction on their contract awards removed. In Solent NHS Trust -v- Hampshire County Council, the English High Court lifted the automatic suspension, allowing Hampshire County Council to proceed with the award of a new contract for adult substance misuse recovery services following a challenge by the incumbent, Solent NHS Trust. This result is consistent with most of the English High Court decisions in recent years in relation to automatic suspensions. Solent was placed second in the tender competition and alleged errors in the scoring of the tenders. The High Court approached the case for lifting the suspension by applying the American Cyanamid test usually applied by English Courts in dealing with such cases. With only limited written evidence of the scoring issues before it, the Court felt that it was unable to assess the relative strengths and weaknesses of the arguments and concluded that there was a serious issue to be tried. The High Court also concluded that damages would be an adequate remedy for the claimant in the event that the suspension was lifted. The Court was unimpressed by Solent s arguments that staff transfers triggered under TUPE as a result of the lifting of the suspension would cause damage Solent s ability to service other contracts. As to the balance of convenience, the Court was persuaded that there were good reasons to lift the suspension in this case. The contract concerned the provision of services to vulnerable persons with drug and alcohol addictions. The effect of a significantly delayed contract which plans to bring greater integration and improvements to the services for these people will be harmful and detrimental to them It would be unfortunate not to say tragic if even one person died or suffered unavoidable serious physical or mental deterioration as a result of unavoidable delays in the provision of the improvements planned by the new contract I do not think that the court should take risks with people s lives and health the integrated and improved service to be provided under the new contract has a better chance of better outcomes and it would be wrong to risk service users not having the benefit of those improvements as soon as possible. A second recent case, Bristol Missing Link Ltd -v- Bristol City Council is an example of one of the less common breed of cases in which the English High Court decided to leave an automatic suspension in place. This case concerned a challenge to the award of a significant contract for domestic violence and abuse support services in Bristol. Bristol Missing Link (BML), the incumbent service provider, The High Court approached the case for lifting the suspension by applying the American Cyanamid test usually applied by English Courts in dealing with such cases. 8

9 Case law update alleged that the scoring of the tenders was unlawful. The Court made a number of interesting observations. Firstly, it addressed the issue of discovery in procurement cases. The Court was critical of the Council for relying on certain documents in its application in circumstances where early discovery had been denied to BML. The Court stated that the contracting authority ought not to refuse requests to provide documents relating, say, to the evaluation of the successful tenderer s bid, or the bid itself, but then, on the application to lift the suspension, provide for the first time evidence about the process or the successful bid in support of its case. That approach is at least potentially unfair, because it is relying on potentially controversial material which the unsuccessful tenderer has had no proper opportunity to consider. Secondly, the Court affirmed the American Cyanamid test as the correct one for determining whether an automatic suspension should be lifted, an issue which has been raised in a number of recent English cases. Coulson J noted, approvingly, that in procurement cases, unless the claimant s case is extremely weak, the parties will often agree that the first part of this test whether there is a serious issue to be tried or not is satisfied, thus saving the Courts the task of assessing the underlying merits of the claim. He pointed out that the threshold for this test is a low one; where there are clear issues arising out of individual scores, it will be difficult for the Court to conclude that there is no serious issue to be tried if it is called upon to address this part of the test. Indeed, the Court found that in this case the claimant s case was neither obviously weak, nor obviously strong which pointed to there being a serious issue to be tried. The Court considered the two substantive points raised by the claimants. The first was that the moderation exercise undertaken by the Council resulted in the initial scores of individual evaluators being adjusted and reduced to below the score awarded by all or a clear majority of the evaluators. The Council had not offered any detailed explanation for this in correspondence I do not think that the court should take risks with people s lives and health. 9

10 Case law update with BML. The second element of the claim focused on the individual scores awarded for sub-criteria. BML complained that it was repeatedly awarded a score of 3, which is the maximum that could be awarded unless the tenderer could show that it was adding value and exceeding the contract specification. BML maintained that, for 6 out of the 11 sub-criteria, it was awarded a score of 3, when its tender plainly exceeded the contract specification for each item, and should therefore have been awarded at least a score of 4. On both of these points the Court found that there was a serious issue to be tried and the failure of the Council to explain its position fully either in correspondence or in its pleadings helped the Court to reach this conclusion. The Court also found that damages would not be an adequate remedy for BML in this case. BML was not a profitmaking organisation; it included no amount for profit in its tender. Since damages in cases of this kind usually reflect the unsuccessful tenderer s loss of profit, it means that, if the suspension was lifted, BML would have no claim for anything other than nominal damages, which would not be an adequate remedy for it. The Court also accepted that the lifting of the suspension would have other catastrophic consequences for BML the work done for the Council by BML, in respect of women who have suffered from domestic violence and abuse, amounted to just over a third of its total turnover. Without this contract, BML will be harmed; it will also have a significant adverse impact on the vulnerable women in Bristol who depend on its services. The Court accepted that BML would suffer reputational damage as a result of its inability to do its core work in its only market rather than its failure to win the contract per se (which would not be a relevant factor). In contrast, the Court found that no service users would be prejudiced by a delay in the new contract being awarded and damages would be an adequate remedy for the Council if the suspension was not lifted and BML s claim turns out to be ill-founded. The Court also found that on the balance of convenience, the suspension should be maintained. If the suspension was lifted, that would effectively be the end of BML s claim. Thus, if BML as later proved right and the procurement process was not properly operated, it would have been deprived for all time of a significant legal right. This, coupled with the Court s view that the new contract will not provide services which are significantly better than those currently provided by BML, was sufficient to defeat the application to have the suspension lifted. According to the Court, the Solent case referred to above (in which the suspension was lifted) was distinguishable from the Bristol case in three important ways: (i) Solent bid on the basis of a 5% profit margin; (ii) in Bristol, there would be significant consequences if the suspension was lifted (eg damage to reputation) which would not arise in Solent; and (iii) (most importantly) the contract to be awarded in Bristol did not offer considerable advantages over BML s existing contract, unlike in Solent where the new contract did offer considerable advantages over the existing one. According to the Court, the Solent case (in which the suspension was lifted) was distinguishable from the Bristol case in three important ways. 10

11 Case law update Challenging service concession awards Unsuccesful bidder argued that award of concession amounted to breach of statutory duty. A local authority and a private leisure services provider have, following mediation, settled a claim for breach of statutory duty under EU law in relation to the procurement of a services concession contract worth approximately 120,000,000. Wealdon Leisure Limited alleged that the winning tender, being approximately 20% cheaper than its own proposal, was abnormally low, unsustainable and non-compliant. It also alleged that the Council had permitted the appointed provider to make significant changes to its pricing submission after the final tenders were opened. Wealdon alleged that the local authority had breached its obligations under Article 56 of the EU Treaty (freedom to provide services), which constituted a breach of statutory duty by virtue of section 2 of the European Communities Act Services concession contracts are outside the scope of the Public Contracts Regulations 2006 (and their recent replacement, the Public Contracts Regulations 2015) and therefore no claim could be brought under that legislation. It is clear from previous case law that disputes over contract awards which are partly or fully outside the scope of the procurement legislation can be challenged by means of an application for judicial review. This case was unusual as it was brought as a claim for breach of statutory duty under Article 56 of the Treaty and section 2 of the 1972 Act, and not by way of judicial review. Although the case settled before trial and we do not have a court decision, it is still important as it supports the view that a claim for breach of statutory duty is possible in relation to a contract award by a public body which falls outside the scope of the procurement regulations. There may well be a significant advantage in basing a claim on these grounds. Breach of statutory duty claims can be brought within six years, which is much longer than either the standard 30 day limitation period for claims under the procurement legislation or the three month period applicable in judicial review. This means that the risk period for contracting authorities is potentially much longer. Also, damages are generally available as a remedy for breach of statutory duty, whereas they are not in judicial review cases. Potential challengers who have missed the narrower three month window for challenging contract award decisions under judicial review or who aim to claim damages may therefore wish to give consideration to bringing a claim for breach of statutory duty. 11

12 Case law update Documenting the evaluation process The English High Court s decision on specific early disclosure in Geodesign Barriers Ltd -v- Environment Agency serves as a warning to contracting authorities regarding the failure to properly record and document the evaluation process and the scoring of tenders. Geodesign Barriers Ltd (GBL) challenged the Environment Agency s (EA) award of a contract for the supply of a temporary flood barrier system, alleging that the preferred tenderer s system did not comply with the mandatory performance specification set out in the tender documents. GBL was ranked sixth in the competition. GBL sought specific disclosure of certain information relating to the other tenderers. On its face, GBL s substantive case seemed weak as it would ultimately have to demonstrate that the EA had erred in not recognising that the preferred tenderer s design failed to comply with the required performance specification. GBL would also have to show that the other four tenderers ranked above it were also non-compliant. The Court initially considered that this would be a tall order. However, the Court s attitude to the case seemed to change when it considered the distinct lack of information retained by the EA concerning the tender evaluation process. The Court expressed surprise at EA s contention that it had few, if any, documents relating to the tender evaluation process or the assessment of compliance with the mandatory performance specification. The Court described the documents voluntarily offered by the EA to Geodesign as something of a rag-bag, comprising summary score sheets, skeletal manuscript notes and documents created after the evaluation had taken place. The Court was critical that no minutes of meetings or any other contemporaneous notes were kept of the decision to reject the Geodesign tender for failing to meet the mandatory requirements. Describing this omission as extraordinary, the Court considered that the absence of such reports gave rise to serious questions as to whether there had been a clear and transparent procurement process. The judge noted that the fact that [Geodesign s] claim cannot be described as strong on the face of the pleadings is balanced out by the fact that the evaluation process on the documents looks, to put it neutrally, questionable. The Court ordered that the few s that did exist providing guidance to evaluators and the bid documents of higher ranking tenderers to be disclosed within a confidentiality ring comprising of Geodesign s lawyers and a technical expert. The Northern Ireland and English Courts have been critical of awarding authorities who claim not to have made or kept contemporaneous notes of their decision-making processes. Any initial sympathy a Court may have for an authority s case may well diminish if documentation evidencing a clear, robust process does not exist. Nevertheless, many awarding authorities persist in not documenting their procedures properly, often believing that higher risks attach to documenting the decisionmaking process. It will be interesting to observe if practices change in the future as under the Public Contracts Regulations 2015 and Directive 2014/24/EU there is now a statutory requirement to document all procurement decisions that are made. 12

13 Case law update European Courts Who should prove whether evaluators have a conflict of interest? Unsuccessful bidders sometimes seek to allege that evaluators were biased against them or had a conflict of interest which favoured another tenderer. Ultimately it remains a question of national law as to what bias means and what the legal effects of a finding of bias are. In evigilo (Case C-538/13) the European Court has provided guidance on how alleged conflicts of interest are to be dealt with in the context of procurement challenges. The contracting authority employed university experts to draw up tender documents and evaluate tender responses. In its tender submission, the successful bidder referred to a number of experts from the same university as being part of its team. evigilo challenged the award, alleging that the evaluators were biased towards the successful bidder because of the professional relationship they had with the experts engaged by that bidder. Interestingly, the Court held that the contracting authority is required to determine whether any conflicts of interests exist and to take appropriate measures in order to prevent and detect conflicts of interests and remedy them. It would be incompatible with that active role for the challenger to bear the burden of proving, in the context of the appeal proceedings, that the experts appointed by the authority were in fact biased, particularly given that tenderers generally do not have access to evidence which proves such bias. According to the Court, if an unsuccessful tenderer presents objective evidence calling into question the impartiality of one of the contracting authority s experts, it is for that authority to examine all the relevant circumstances having led to the adoption of the decision relating to the award of the contract in order 13

14 Case law update to prevent and detect conflicts of interests and remedy them, including, where appropriate, requesting the parties to provide certain information and evidence. In this particular case, the connections between the experts appointed by the authority and the specialists of the undertakings awarded the contract (and in particular, the fact that those persons work together in the same university, belong to the same research group or have relationships of employer and employee within that university) if proved to be true, would constitute such objective evidence. Ultimately it remains a question of national law as to what bias means and what the legal effects of a finding of bias are. It is for national law to determine whether, and if so to what extent, the Courts must take into account the fact that possible bias on the part of the experts had no effect on the decision to award the contract. It is worth noting that subsequent to the initiation of these proceedings Directive 2014/24/EU on public procurement has come into force, Article 24 of which requires contracting authorities to effectively prevent, identify and remedy conflicts of interest. This judgment will provide some guidance on how Article 24 may be interpreted in the future. Amending technical specifications The European Court has given a preliminary ruling on a reference from a Romanian court regarding the use of references to branded products in the technical specifications of a tender. In SC Enterprise (Case C-278/14), the contracting authority rejected a bidder on the basis that the product it offered was not equivalent to a particular branded product (an Intel processor) specified in the tender documentation. This was despite the fact that the product offered was in fact superior to the product referred to in the tender documents. The authority reached its conclusion after finding out that the branded products it had specified were no longer in production or supported by their manufacturer, although they were still commercially available; having established this, the authority judged the unsuccessful bidder s tendered product by reference to a different Intel product, whose performance was superior to that of the processor offered by the bidder. The authority reached its conclusion after finding out that the branded products it had specified were no longer in production or supported by their manufacturer, although they were still commercially available. The Court considered that the relevant question was whether a contracting authority which has defined a technical specification by reference to a branded product may, where that product is no longer in production, modify that specification by referring to a comparable product of the same brand which is now in production but which has different characteristics. Unsurprisingly, the Court held that it could not. 14

15 Case law update It is notable that the value of the contract was below the financial thresholds required for the application of Directive 2004/18, and the Court considered that the fundamental principles of equality, non-discrimination and transparency provided in the EU Treaty would only apply if the contract had a crossborder interest. That was a matter for the national court to determine but the Court decided to provide a ruling to assist the national court if it were to find that the contract was of cross-border interest. The Court also strongly hinted at the presence of a cross border interest in this case because the contract concerned the supply of computing systems and equipment with the reference processor being that of an international brand (a relatively low threshold one might have thought). The obligation of transparency is, in particular, intended to preclude any risk of arbitrariness on the part of the contracting authority. That objective would not be achieved if the authority were able to disregard the conditions it had itself imposed in the tender documents. Consequently, the principle of equal treatment and the obligation of transparency prohibit the contracting authority from rejecting a tender which satisfies the requirements of the invitation to tender, on grounds which are not set out in the published tender specifications. Meaning of a service concession On 21 May 2015, the European Court handed down a ruling on a preliminary reference from a Finnish court on the meaning of service concessions under Directive 2004/18. The Court (Kansanelakeleitos, Case C-269/14) considered the definition of a service concession in Directive 2004/18: a contract of the same type as a service contract except for the fact that the consideration for the provision of services consists either solely in the right to exploit the service or in that right together with payment. The Court held that in order to decide whether a contract is in fact a service concession it must be established that the service provider takes all or at least a significant share of the risk of operating the service from the contracting authority. This risk is to be understood as the risk of exposure to the variable market conditions such as the risk of competition, supply and demand fluctuations, bad debts or the risk of liability for harm or damage caused by inadequate provision of the service. The Court stated that when the agreed method of remuneration is the right for the service provider to exploit the service it is providing, that method of remuneration means that the provider takes the risk of operating the services in question. In this case, the Court observed that the service providers were exposed to the risk of non-payment and that they were also responsible for the management of the contracts with their individual staff. However, the Court stated that it was for the national court to assess whether there has been a sufficient transfer of risk faced by the contracting authority to meet the standard required to satisfy the definition of a service concession in the Directive. 15

16 Case law update Proving availability of third party resources It is well established in European law that tenderers can rely on the resources of third parties when tendering for public contracts, provided that they establish that those resources are actually available to them. Directive 2004/18 states that economic operators must be able to prove this, although it does not specify any particular method for to demonstrate this proof. A Latvian authority stipulated in its tender documents that winning tenderers had to prove they had resources available by entering into a co-operation or partnership agreement before the public contract was awarded. Advocate General Wathelet recently took the view that such a stipulation is unlawful in the case of Ostas Celtnieks (Case C-234/14). AG Wathelet opined that the Directive does not specify any method for showing proof and stipulating only one method for proving the availability of resources was in breach of the proportionality principle. The procurement rules are aimed at opening up competition as far as possible and such a stipulation would limit the number of operators who will be able to bid on the contract. The AG considered that tenderers must be allowed to choose the method of cooperation with other undertakings they seek to rely upon. The AG also considered that a stipulation in the tender documents that the winning tenderer and the third parties upon which it relies must agree to joint and several responsibility in their co-operation or partnership agreement would dissuade operators from getting involved in such arrangements. This view is particularly interesting given that the new Directive 2014/24 expressly permits authorities to require joint liability for the contract. A Latvian authority stipulated in its tender documents that winning tenderers had to prove they had resources available by entering into a co-operation or partnership agreement before the public contract was awarded. 16

17 Other developments Republic of Ireland Automatic suspensions can be lifted New legislation seeks to plug gaps in the law. Until recently, under Irish procurement law, the award of a contract could be automatically suspended by the commencement of legal action against a contracting authority in relation to the tender process and the authority could not apply to the Courts to have that suspension lifted pending a final determination of the case. This position was confirmed by the Supreme Court in July 2014 in the case of OCS One Complete Solutions Ltd. -v- Dublin Airport Authority plc. As reported in our Spring edition of the Eversheds Procurement Update, this resulted in an unsatisfactory state of affairs; many contract awards were delayed and in some cases, tender processes were abandoned completely. The Government has now sought to rectify the situation by amending the legislation in this area, permitting automatic suspensions to be lifted in certain circumstances. The European Communities (Public Authorities Contracts) (Review Procedures) (Amendment) Regulations 2015 and the European Communities (Award of Contracts by Utility Undertakings) (Review Procedures) (Amendment) Regulations 2015 were both made on 30 April The latter instrument modifies the current legislation that was the subject of critical review in the Supreme Court. The key points are as follows: The new Regulations apply to legal proceedings commenced before or after 30 April 2015; they therefore apply to award procedures that are currently suspended. In considering whether to lift the suspension and allow a contract to be concluded, notwithstanding any on-going legal proceedings, it appears that the Court is to consider whether it would have been appropriate to grant an injunction restraining the conclusion of the contract (in the absence of any automatic suspension applying). Only if it would not have been appropriate to grant an injunction in those circumstances may the Court order the suspension to be lifted, thereby permitting the contracting authority to conclude the contract. The Courts may order the suspension to be lifted subject to specified conditions. Although the new Regulations are not the model of clarity which one might have hoped for, Irish procurement law appears to be falling into line with the UK and other EU jurisdictions, although the first case to test the Regulations in practice is now eagerly awaited. It remains to be seen whether the new Regulations will trigger a wave of applications to the Courts in respect of award procedures that were suspended. It will also be interesting to observe how the standard rules on injunctive relief (including the law on crossundertakings) will apply in this new context. 17

18 Other developments New lobbying law in Ireland The Regulation of Lobbying Act 2015 was signed into law in March 2015 and came into effect on 1 September. The Act provides for a web-based Register of Lobbying to make information available to the public on the identity of those communicating with designated public officials on specific policy, legislative matters or prospective decisions. The Act is not limited to professional lobbyists who communicate on behalf of their clients. Any organisation or body which represents its own interests or the interests of its members or clients before Government may be affected by this new legislation. What is lobbying? A person carries on lobbying activities if that person makes, manages or directs the making of a relevant communication with a designated public official (including TDs, MEPs, members of local authorities and other public servants prescribed by the Minister for Public Expenditure and Reform) in relation to a relevant matter. A relevant matter is any matter relating to the initiation, development or modification of a public policy or programme, the preparation or amendment of an enactment or the award of any grant, loan, financial support, contract or other agreement. There are a number of exceptions, including requesting factual information or providing factual information in response to a request, and communications requested by a public service body and published by it. Obligations on lobbyists Persons engaged in lobbying must register with the Standards in Public Office Commission and provide returns to the Commission every four months. Any entity that has engaged in any lobbying activities between 1 September and 31 December 2015 must register with the Commission by 21 January Quarterly returns must include various information, including the details of clients, the public official to whom communications were directed, the subject matter of the communications and results they were intended to secure. This information will ordinarily be made public by the Commission on a website. However, it will be possible for a lobbyist to apply to have the publication of the information delayed in certain circumstances. In order that lobbyists may become familiar with the registration and return requirements, the website ( was available for a trial period from 1 May 2015 to 31 August The information entered during the trial period will not be available to the public. Various offences arise under the Act. In particular, any failure to register with the Commission or provide returns on a quarterly basis or any provision of false or misleading information will result in an offence, punishable by fines and/or imprisonment. Conclusion The Act is likely to affect a large number of representative organisations and other bodies who may advocate for policy change as part of their business. It could also affect economic operators who engage with local and central government in relation to the award of public contracts, including as part of market consultation exercises. Given the wide ranging nature of the Act, it is strongly advised that private sector organisations seek legal advice regarding their obligations under the Act. 18

19 Other developments Public service spend and tendering analysis The Office of Government Procurement has released a Public Service Spend and Tendering Analysis for 2013 (available at This report is the first to provide data from across the public service on how public funds are expended on goods and services in Ireland. While not a complete dataset, the OGP is confident that the information is representative of public service spend and that the collection and reporting methodology is robust. 66% of public procurement expenditure is directly with SMEs Key findings of the report include: 93% of public procurement expenditure is with businesses in the Republic of Ireland 66% of public procurement expenditure is directly with SMEs for expenditure outside of the Republic of Ireland a higher percentage of the spend (78%) is with SMEs 74% of tender notices are below threshold Construction and civil works account for 50% of the total estimated contract values published by public sector bodies The recording of contract awards is low at 18% 19

20 Other developments Northern Ireland Crown Commercial Service Procurement Policy Notes Already in 2015, the Crown Commercial Service has produced the same number of Procurement Policy Notes as it issued in the whole of This is unsurprising given the introduction of the Public Contracts Regulations 2015 in February. For convenience, we have listed below the Procurement Policy Notes issued so far in These are all available on the Crown Commercial Service website. EU statistics on public procurement annual return for calendar years 2013 and 2014 Acceptance of unstructured electronic invoices by central government authorities Assisting with procurement investigations Tax arrangements of appointees Open standards for technology Sustainable skills development through major projects Prompt payment and performance reporting Taking account of suppliers past performance Reforms to make public procurement more accessible to SMEs Public Contracts Regulations 2015 Implementing Energy Efficiency Directive Article 6: further information A number of stand-alone guidance notes have also been issued. These provide useful information on the following: Brief guide to the EU Public Contracts Directive New light touch regime for health, social, education and certain other service contracts Dynamic purchasing systems Awarding contracts Standstill period Amendments to contracts during their term Guidance for completion of forms and notices before SIMAP forms are available Framework agreements 20

21 Other developments Time limits in judicial review Challenges to tender procedures can be brought under the Procurement Regulations or, in some cases, by way of judicial review. While legal challenges under the Regulations must generally be brought within 30 days of the date from which an economic operator knew or ought to have known of the procurement breach, the current statutory rules governing proceedings for judicial review in Northern Ireland state that these must be brought promptly and in any event within three months from the date of the decision which is to be reviewed. The Department of Justice in Northern Ireland is proposing to amend the time limits for judicial review proceedings, removing the requirement for proceedings to be brought promptly under Order 53, Rule 4 (1) of the Rules of the Court of Judicature (Northern Ireland) The proposed amendment to the rules would leave in place the time limit of three months from the date of the decision which is to be reviewed. The Department cites the findings of the European Court of Justice in the public procurement case of Uniplex (United Kingdom) Ltd v NHS Business Services Authority (C-406/08) (2010), namely that the requirement to bring proceedings promptly infringed the principles of certainty and effectiveness in European law. Uniplex has been applied by the courts in Northern Ireland with the effect that the promptitude requirement is now not applied in practice in judicial review challenges on European Union law grounds. This means that the time limits required in judicial reviews (or those parts of them) that raise domestic grounds of challenge are currently different from those that raise EU grounds. Consultation on the Draft Utilities and Concessions Regulations The UK Government has now published the draft utilities regulations and draft concessions regulations to transpose the remaining EU Procurement Directives. As with the consultation period for the Public Contracts Regulations 2015, consultation is open for four weeks and responses must be received by 18 September The utilities and concessions consultations are being conducted in parallel. The consultation documents and draft regulations indicate that the Government intends to implement the new Utilities Regulations and new Concessions Regulations on 18 April 2016, the final date permitted in the EU Procurement Directives for bringing the new law into force. The consultation documents also re-emphasise that the Government has already consulted on generic matters applicable to all three EU Procurement Directives as part of consulting on the Public Contracts Regulations 2015 and that the adopted approach has been copied through where appropriate. Consequently, the consultation seek comments on drafting and a limited number of specific questions only. The Department is also seeking views on whether shorter time limits should be introduced for judicial review in procurement cases, to bring the judicial review system into line with the Procurement Regulations in those specific circumstances. The closing date for responses to the consultation is 14 September It is worth noting that Ireland removed the general requirement for applications for judicial review in that jurisdiction to be brought promptly in 2011, following the judgment of the European Court in European Commission v Ireland (C-456/08). 21

22 Other news Northern Ireland office We are pleased to announc the opening of our new office in Belfast to service business and public sector clients in Northern Ireland. This is Eversheds eleventh office in the UK and its second on the island of Ireland. The new Eversheds office will be based in central Belfast and the office will focus on public sector and procurement work in Northern Ireland, among other practice areas. Speaking about the new Belfast office, Head of Procurement Peter Curran, said: This increases the Eversheds footprint on the island of Ireland and in the UK, enabling us to service our clients in Northern Ireland and open up opportunities for them internationally through our 55 offices in 28 countries. We aim to build on the strong relationships we already have with clients in the province and to establish many new connections, offering them a unique blend of international legal experience and local expertise. Eversheds is a law firm that sets the standards for others to follow. Over the years we have led the way in changing the face of legal services and providing a service that meets the needs of contemporary businesses. Throughout Ireland and the UK, Eversheds works closely with many public and private sector organisations and we look forward to serving our clients in Northern Ireland in unique and innovative ways. Alan Murphy, Managing Partner of Eversheds in Ireland and Chairman of Eversheds International Contact Details: Peter Curran Partner Eversheds Scottish Provident Building 7 Donegall Sq. West Belfast BT1 6JH (Dublin) (Belfast) petercurran@eversheds.ie 22

23 Other news Bidder workshops As a result of the success of our bidder events in May and June, Eversheds plans to run additional workshops in September/ October These events, held in Dublin and Belfast, are aimed at helping bidders to gain competitive advantage through a better understanding of the legal aspects of procurement. We cover the tendering process from start to finish and provide practical tips for every stage. For further information on these events and to book one of the limited places, please contact Rosemarie Pollard at rosemariepollard@eversheds.ie or your usual Eversheds contact. Eversheds podcasts on the new public procurement rules We are delighted to be able to provide our clients with free of charge access to two podcasts on the Public Contracts Regulations The podcasts were recorded by Totis Kotsonis, Partner, in March 2015 and they are accredited with up to 2 CPD points. To obtain access to the podcasts and further details about CPD credits, please contact Rosemarie Pollard at rosemariepollard@eversheds.ie. 23

24 Contacts For more information on any aspect of procurement law in Ireland or the UK, please contact: Peter Curran Partner (Dublin) (Belfast) petercurran@eversheds.ie Totis Kotsonis Partner (London) totiskotsonis@eversheds.com Angelyn Rowan Senior Associate angelynrowan@eversheds.ie Aisling Garry Solicitor aislinggarry@eversheds.ie Anna McGrath Solicitor annamcgrath@eversheds.ie Suzanne Farrell Solicitor suzannefarrell@eversheds.ie Eversheds Procurement team comprises over 30 lawyers in the UK and Ireland. We are the only procurement practice which covers all jurisdictions Northern Ireland, Scotland, England and Wales. 24