Can you pre-empt an unlawful direct contract award?

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Never have there been more direct contract awards than in the last nine months. If you are aware of an impending direct award and believe it is not justified (under Regulation 32 of the Public Contracts Regulations 2015 (PCR) can you stop it?  Most obviously this can arise under frameworks but in practice it could easily occur in a variety of settings.

The simple, and perhaps surprising, answer appears to be no.  Whether this is deliberate or a gap in the PCR is unclear.  Here’s our thinking.

In most procurement challenges, an economic operator has a cause of action once they “suffer or risk suffering loss or damage…” due to a breach of the PCR.  However, that right to challenge only arises in the context of a procurement process that has been initiated on the back of an OJEU Notice .

In the case of a direct award there will be no competition under the PCR.  For this reason regulation 93 provides that the time limit for bringing an ineffectiveness challenge is either within 30 days of any Contract Award Notice published by the contracting authority publicising the direct award or, where no such notice has been published, within six months of the day after the date on which a contract was actually entered into.

The one apparent exception to this would appear to be where pursuant to regulation 99(1) a contracting authority publishes a VEAT at least 10 days before a contract has been ‘entered into’. Logically, the function of that 10-day period must be to allow challengers to object and possibly bring a claim under the PCR.

So, in all other cases can an economic operator who is aware that a contract is about to be signed with a competitor on a direct basis, nonetheless still issue pre-emptive proceedings under PCR to suspend contract signature?

As the PCR currently stands, faced with a possibly unlawful direct award, an economic operator has no cause of action under those Regulations until the (unlawful) contract has actually been signed.  The fact that the economic operator may risk suffering loss or damage if the contract is signed is insufficient to give rise to a cause of action.  If an economic operator attempted to issue proceedings invoking a breach of the PCR before a contract had actually been concluded, this would be premature and would be liable to be struck out by the Court on the basis that there was no effective cause of action.

Judicial review would be unlikely to provide an alternative remedy, as from a public law point of view, until a contracting authority has actually finally decided to execute the relevant contract and it is signed and has legal effect, it will not have finally bound itself in a way that could be challenged.

On one analysis this seems odd and it is arguably a gap in the protection afforded by the PCR given the stark and highly costly consequences to the public purse of unlawful direct awards being made and then set aside on a retrospective basis.  An economic operator can complain after the horse has bolted, but cannot do anything to stop it bolting, even if it knows it will.

Also, a contracting authority can be pre-empted and barred from proceeding with a contract award if it has attempted to follow the correct procurement procedure, however there is absolutely no pre-emptive remedy available to economic operators to force a ‘pause’ where no required competition has taken place at all and a direct award has been made.

The counter argument to this is that many direct awards are made under regulation 32(2)(c) because of extreme urgency where there is a real overriding public interest in a public body being able to act decisively, and it would clearly be wrong in the majority of such cases for a private sector challenger to use legal proceedings to disrupt that process.  Instead, if an authority abuses that procedure the courts should reflect that misconduct in the level of any administrative sanction imposed as part of a declaration of ineffectiveness.

This suggests that another area for possible reform of the PCR post-Brexit would be to;

  1. Make it mandatory in all cases, other than those based on extreme urgency, to have to issue a VEAT 30 days before contract award thus eliminating the inevitable debate in such cases as to whether to do so or not
  2. To make it clear that the issuance of such a VEAT will trigger a 30-day limitation period for an ineffectiveness challenge

Such a reform would clarify the law and increase the pressure on contracting authorities to act with appropriate rigour when deciding to make direct awards whilst also tidying up the currently confused relationship between regulations 93(2) and 99(3) of the PCR in terms of the issuance of a VEAT and/or a CAN in such cases.


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