Public procurement in UK (England and Wales): overview
A Q&A guide to public procurement law in UK (England and Wales).
The country-specific Q&A gives a high level overview of applicable legislation, recent trends, use of the four EU procurement procedures, review procedures, remedies, transparency, contracts outside the scope of Consolidated Public Service Directive and proposals for reform.
This Q&A is part of the PLC multi-jurisdictional guide to public procurement. For a full list of jurisdictional Public Procurement Q&As visit www.practicallaw.com/publicprocurement-mjg.
The Public Contracts Regulations 2006 and the Utilities Contracts Regulations 2006 (2006 Regulations) are the principal pieces of legislation that regulate procurement in England, Wales and Northern Ireland. This legislation has been amended a number of times including by the:
Public Contracts (Amendment) Regulations 2009 and the Utilities Contracts (Amendment) Regulations 2009, which implemented Directive 2007/66 amending Council Directives 89/665/EEC and 92/13/EEC with regard to improving the effectiveness of review procedures concerning the award of public contracts (Remedies Directive).
Public Procurement (Miscellaneous Amendments) Regulations 2011, which principally amended the standard limitation period provisions that apply to a claim for breach of the 2006 Regulations.
The 2006 Regulations transpose Directive 2004/17/EU coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors (Utilities Directive) and Directive 2004/18/EU on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (Consolidated Public Sector Directive) into the UK law.
Scotland has its own separate legislation, which is substantially the same as that which applies in the rest of the UK.
Defence procurement is regulated separately under the Defence and Security Public Contracts Regulations 2011. This legislation applies to the whole of the UK.
Any references to Regulations in this article are references to the Public Contracts Regulations 2006 alone.
In 2012, there were 16 reported cases in the UK courts that dealt with the breach of procurement law obligations, whether under national legislation or the general Treaty on the Functioning of the European Union (TFEU) principles. This is a disproportionately small number when compared against the amount of procurement litigation that takes place in most other EU jurisdictions. However, it still represents an increase when compared against the number of procurement law claims that used to reach the courts before the implementation of the Remedies Directive in December 2009.
An interesting feature of the UK procurement litigation landscape is that more than three years after the implementation of the more robust remedies regime that the Remedies Directive introduced, key aspects of the new regime have yet to be tested fully, while some of those that have been tested, seem not to have led to the drastic changes that might have been expected. For example, so far, there has been only one reported claim for a declaration of ineffectiveness (which essentially provides for the cancellation of a contract), and that was rejected by the court. Also, the overwhelming majority of reported contracting authority applications for the lifting of the automatic suspension of tender processes (for which the legislation provides where there is a challenge to the award decision of a contract before its conclusion) has been granted by the courts. As a result, contracting authorities have been able to conclude contracts despite such challenges so that if a challenge proves successful the only remedy available is that of damages.
In 2012, there were three reported applications for the lifting of automatic suspensions all of which were granted. At the same time, there appears to have been at least one unreported application for the lifting of an automatic suspension in Northern Ireland, which was rejected by the court. During the same period, there were no reported applications for an ineffectiveness order. However, there has been a case in Northern Ireland where the contract had yet to be concluded and the court granted an order setting aside the contract award decision. This is noteworthy given that the grant of an order setting aside an award decision is still relatively rare in the context of procurement litigation in the UK.
As regards transparency, the UK government has implemented a number of initiatives to promote transparency in the award of public contracts by central government. For example, since January 2011, all new central government contracts valued over GB£10,000 are published in full, and central government departments must publish their estimated and actual procurement timescales for procurements above this value (see Question 12). Central government departments must also identify those new contracts that have been awarded to small and medium-sized enterprises (SMEs).
Use of procurement procedures
Ever since the introduction of the competitive dialogue procedure in January 2006, this procedure has displaced the negotiated procedure as the procedure of choice for the award of major fully regulated public contracts. This remained the case during 2012.
There have been no reported cases involving a challenge to the contracting authority's choice of a procurement procedure.
Before the amendment of the Regulations in December 2009, an aggrieved party had to notify the awarding body of the alleged breach and its intention to start court proceedings before doing so. However, this is no longer necessary. Instead, once proceedings have commenced with the issue of a claim form there is a requirement to serve the claim form on the awarding body within seven days of the date of issue. The claim form must be issued within the limitation period (although the period of seven days within which it must also be served on the awarding body may fall outside that period).
A breach of duty under the Regulations is actionable by any person which:
Is a national of an EU or European Economic Area (EEA) member state, or a state which is signatory to the World Trade Organization Agreement on Government Procurement (GPA).
As a consequence of that breach, suffers or risk suffering loss or damage.
Bringing a claim in the courts is not subject to any special conditions. The question of standing is a separate matter, and is for the court to consider once the claim has been made (see Question 7).
Proceedings for a breach of the Regulations (other than for a claim for an order of ineffectiveness; see below) must be started within 30 days beginning with the date when the economic operator first knew or ought to have known that grounds for starting the proceedings had arisen.
The court may extend the 30-day limitation period where it considers that there is a good reason for doing so. Such extension cannot be greater than three months after the date when the economic operator first knew or ought to have known that grounds for starting the proceedings had arisen.
Transitional provisions require that in cases where the date of actual or constructive knowledge is before 1 October 2011, the limitation period is three months from the date of knowledge. This period may be extended by the court at its discretion where it considers that there is a good reason for it to do so.
The legislation does not define what constitutes knowledge, but case law indicates that the requisite level of knowledge is "a knowledge of facts which apparently clearly indicate, though they need not absolutely prove, an infringement".
Special time limits apply when the claimant is seeking an order of ineffectiveness. In that case, the limitation period is six months starting from the day after the date on which the contract was entered into.
An alternative shorter limitation period of 30 days applies when seeking an ineffectiveness order in either of the following cases:
Where the contracting authority voluntarily publishes a contract award notice in line with the Regulations including by complying with the requirement to include on that notice a justification for the contracting authority's decision to award the contract without prior publication of a contract notice.
In this case, the 30-day limitation period starts on the day after the date on which the contract award notice was published.
Where the contracting authority has informed the economic operator of the conclusion of the contract and provided a summary of the reasons for the award decision.
In this case, the 30-day period starts on the day after the date on which the economic operator was informed of the conclusion of the contract or, if later, was given a summary of the reasons for the award decision.
The right to seek an order for ineffectiveness is lost in the event that the contracting authority publishes voluntarily a contract notice (voluntary transparency notice) advertising the intention to award the contract and setting out, among other things, the reasons why it considered it justified to award that contract without prior publication of a contract notice and provided that a ten-day waiting period has expired, that period running from the day after the date of the publication of the voluntary transparency notice in the Official Journal.
Remedies where the contract has not been entered into. Where the court is satisfied that a contracting authority's decision or action has led to a breach and the contract has not yet been entered into it may do one or more of the following:
Order the setting aside of the decision or action concerned.
Order the contracting authority to amend any document.
Award damages to an economic operator which has suffered loss or damage as a consequence of the breach.
A disgruntled party can also seek an interim order suspending the procedure leading to the award of the contract or suspending the implementation of any decision or action taken by the contracting authority in the course of following such a procedure.
The legislation provides for the automatic suspension of a procedure (so that there is no need to make an interim order application) in cases where an economic operator challenges the award decision and the contract has yet to be concluded. However, the contracting authority can apply to the court and seek the lifting of the automatic suspension so that it can proceed to conclude the contract (see Question 2).
Remedies where the contract has been entered into. If the court were to lift the automatic suspension and the contract were to be concluded, the only remedy available to the claimant would be damages.
Where the court is satisfied that any of the grounds for ineffectiveness applies, the court must make a declaration for ineffectiveness other than where overriding reasons relating to a general interest require that the effects of the contract should be maintained.
A declaration for ineffectiveness is always accompanied by the payment of a fine, which must be effective, proportionate and dissuasive in view of all the relevant factors, including the seriousness of the breach and the behaviour of the contracting authority.
When making a declaration of ineffectiveness, the court may also make orders to address consequential matters such as restitution and compensation.
In cases where the court does not make a declaration of ineffectiveness, it must order that the duration of the contract be shortened or the payment of an effective, proportionate and dissuasive fine, or both. In determining what is most appropriate as an alternative remedy, the court will take into consideration the seriousness of the breach, the contracting authority's behaviour and the extent to which the contract remains in force.
In addition to an ineffectiveness order or the alternative penalties, the court can also award damages to an economic operator who has suffered loss or damages as a consequence of the breach.
A breach of procurement legislation does not give rise to criminal liability.
UK procurement legislation does not contain any obligations in relation to the publication of completed tender and contract documentation. However, the government has undertaken a number of initiatives to promote transparency in the award of central government contracts. In line with these initiatives, central government departments must now publish on a single website competitively tendered contracts over GB£10,000 (see Question 2). They must also publish the tender documents for these contracts. Where necessary, certain information may be redacted before publication in line with the provisions of the Freedom of Information Act 2000 (FOIA).
With regard to other public contracts and tender documentation, requests for the disclosure of the information which they contain can be made under the FOIA. The relevant public body will normally be required to disclose the relevant information unless an exemption (for example, concerning information provided in confidence or commercially sensitive information such as trade secrets) applies in which case disclosure of the relevant information will be in a redacted form, or in cases where it can be justified, this may lead to whole documents not being disclosed.
Contracts outside the scope of the Consolidated Public Sector Directive
National legislation does not regulate the award of contracts that are fully outside the scope of Directive 2004/18. As regards the award of contracts that are partly outside the scope of Directive 2004/18, the Regulations impose an explicit obligation on awarding bodies when awarding these contracts to treat economic operators equally and in a non-discriminatory way, and to act in a transparent way. Failure to comply with this obligation is actionable under the Regulations.
Normally, a breach of an obligation in relation to a partly-regulated contract will give rise to the remedies available under the Regulations described in Question 10 above. An order of ineffectiveness or the penalties which are available in addition to, or instead of, ineffectiveness might also be available in very specific circumstances.
Despite the fact that remedies are available under the Regulations for partly-regulated contracts, in certain circumstances (such as when the remedies available under judicial review are deemed more appropriate) the court may permit a challenge by means of a judicial review.
In cases where the contract award is fully outside the scope of Directive 2004/18, an aggrieved party may bring a challenge by means of a judicial review or proceedings for breach of statutory duty. Remedies available under judicial review include a declaration that due process has not been followed, an order prohibiting the awarding body to act unlawfully, a quashing order setting aside an unlawful decision or a mandatory order requiring the awarding body to act in a certain way. Damages may also be available in certain cases. An aggrieved party may also seek damages by bringing an action for breach of a statutory duty.
Qualified. England and Wales, 2003.
Areas of practice. Competition lawyer specialising in public procurement, state aid and sector and utility regulation.
Advising the Republic of Greece on how to ensure EU procurement law compliance in carrying out tender processes for the grant of public services concessions for the exploitation of 37 regional airports and how to address relevant state aid issues.
Advising OFWAT, the UK water services regulation authority, on the procurement law and state aid aspects of the Thames Tideway Tunnel project, the GB£3 billion infrastructure project to update London's sewerage system involving a 20-mile tunnel under the capital.
Qualified. England and Wales, 1994
Areas of practice. Public Procurement; competition/anti-trust; energy & infrastructure; utility regulation.
- Acting for the Department of Health on the procurement of major contracts to provide electronic staff records and pension scheme administration services for the NHS.
- Acting for the UK water regulator, OFWAT, on the Thames Tideway Tunnel, the infrastructure project to update London's sewerage system involving a 20-mile tunnel under the capital.
- Advising London Gateway, DP World's new container port, on tender processes relating to contracts for the construction and operation of the port.