18 February 2010 | David Gollancz and Victoria Ross

Can public buyers opt into procurement regulations ‘by accident’?

UPDATE: This verdict was overturned on appeal in March 2010. The full judgement can be read by clicking here.

The Case

Clackmannanshire Council (the Council) issued a contract notice in early 2009 for the replacement of kitchens and bathrooms in council houses. The advertised value of £2.5 million was below the threshold set out in the procurement regulations, although the restricted procedure was to be used.

Four contractors submitted tenders, including Sidey Limited (Sidey) and Pyramid Joinery and Construction Limited (Pyramid). On 19 June 2009, the Council decided to award the contract to Pyramid and sent notification to Sidey by fax. However, the notification was sent to the wrong fax number and 10 days later, after Sidey asked, the Council said the firm had been unsuccessful.

On 2 July 2009, within the 10-day standstill, the Council wrote to Pyramid to accept its offer, but did not tell Sidey.

Sidey wrote to the Council to appeal its decision as the information provided revealed errors in the Council’s evaluation. The Council confirmed it had stopped the contract award pending investigation, which found Sidey’s was the best tender and should have been awarded the contract.

Sidey asked the Court to set aside the contract, or suspend and reduce the duration of the deal. Notably, these remedies were at that point not available in UK law. Unusually, the Council did not oppose the application – but Pyramid did.

The Court recognised the contract was below threshold and need not be subject to the regulations. But the Court held that, as the Council had voluntarily chosen to follow the processes under the Regulations, they applied to the award of the contract and the standstill period should have been observed. Because of the late notification to Sidey, the 10 days had not elapsed before entering into the contract.

Although the contract was below threshold, and the UK transposition of the directive not yet in force, the judge held he was required to interpret the regulations in accordance with the directive. As the contract had been entered into prior to the end of the standstill period, the Council’s decision to award the contract to Pyramid could be set aside.

What this means

This seems to be a radical decision, suggesting that contracting authorities can opt in – possibly inadvertently – to the regulations by saying they will follow one of the procedures. It suggests too the Court should apply the provisions of a directive long before the date for transposition. It is understood the judgment is under appeal.

The case emphasises the importance to contracting authorities of ensuring unsuccessful bidders are properly notified of the award decision, so the standstill period is effectively started. Authorities should also ensure, where non-regulated contracts are advertised, the fact the advertisement is non-mandatory is clearly stated.

Unsuccessful bidders should ensure they find out why from contracting authorities. This may allow them to determine whether the authority erred in its evaluation and whether there is any basis on which to challenge its decision.

* By David Gollancz, partner, and Victoria Ross, solicitor, Field Fisher Waterhouse