The two main impact risks for above threshold public contracts under the Public Contracts Regulations 2015 are automatic suspension (before the contract is awarded), and ineffectiveness - or cancellation - of the contract after award. Thanks to the relatively low cost and ease of bringing automatic suspension claims, this is in many ways now the default approach for a disgruntled supplier to stop a disputed award process.
The ineffectiveness remedy was controversial when introduced, requiring the court to make an order (under regulation 98) to prospectively cancel - or, alternatively, shorten - a contract where one of the grounds for ineffectiveness is met. The court must not make such an order where there are 'overriding reasons' not to do so.
Until the case of Lightways (Contractors) Limited v Inverclyde Council, no court in the UK had declared a contract or framework call off as ineffective. There was case law from across the EU, but many buyers may have taken comfort from a lack of successful claims in the UK, perhaps driven in part by strong government policy and the legal arguments to justify a lesser sanction.
There are only limited grounds under the regulations for cancellation, which are
1. No OJEU contract notice was issued where one was required (an 'illegal direct award')
2. A mistake in the standstill provisions as well as an earlier breach of the regulations; and/or
3. A mistake in an above threshold framework call off.
Cancellation cannot apply to below threshold contracts or, broadly, to social and other services contracts let under the light touch regime (except in relation to framework call offs).
An ineffectiveness claim can be brought up to six months after the contract has been awarded in breach of the regulations, although this can be reduced to either of 10 or 30 days by issuing either a Voluntary Transparency Notice or contract award notice after the award has taken place. A voluntary standstill period on a framework call off removes the ineffectiveness risk after the standstill period has expired.
The impact of a cancellation claim is very significant, typically resulting in no contract being in place, a damages claim from the successful challenger, civil financial penalties being paid by the authority, as well as a likely breach of contract claim from the contractor originally appointed to deliver the contract.
Public purchasers will want to note the 'gateways' into a possible ineffectiveness claim, and pay particular attention to managing standstill issues and framework call offs to ensure that these comply with the regulations and the rules attaching to any particular framework. We see framework call offs as being a particular future risk area in light of this decision, so care is needed to ensure that buyers follow the exact process set out and consider using a voluntary standstill period for strategically important call offs.
Buyers can use the regulations creatively to reduce the timescales for cancellation claims, but this needs to be balanced with the risk of flushing out challenges that otherwise may not be brought.