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last updated: 16th April 2015

For procurements that are found to have broken the EU procurement regulations the courts have the power to rule the contract to be ineffective (has no legal effect).

If a contract is found to be ineffective by the courts

  • It may be cancelled prospectively (which means that any unfulfilled part of the contract is cancelled
  • A civil financial penalty (a fine) will be levied and it will be ‘effective, proportionate and dissuasive"
  • The contractor that looses the awarded contract which is cancelled would be entitled to damages, and
  • The complainant taking and winning the challenge would be entitled to damages
     

The court may, however, save the contract from ineffectiveness and where this happens it may choose to

  • Shorten the contract period and / or
  • Levy a civil financial penalty (a fine) which will be ‘effective, proportionate and dissuasive"
  • The contractor that has its contract shortened would be entitled to damages, and
  • The complainant taking and winning the challenge would be entitled to damages
     

How can ineffectiveness arise?

  1. There is a failure to advertise the procurement (an illegal direct award)
  2. There are combined breaches of the procurement rules (mixing up selection and award criteria etc) and the review procedural rules (the standstill period)
  3. An above threshold call-off from a multi-supplier framework is not managed properly (no mini-competition where one was required or the mini-competition incorrectly applied)
     

How long does the risk of ineffectiveness apply?
A procurement is at risk of a challenge of ineffectiveness for up to 6 months from the date of award or the date on which the complainant should have know about the award

This period can be shortened to 30 days by correctly applying the standstill period between the award decision and the contract is awarded. If no competition was advertised or held, the contracting authority would need to show that it had considered advertising the requirement and the reasons why it did not do so and it can publish a Voluntary Ex Ante Transparency (VEAT) Notice and allow at least 10 days from the publication of the notice and signing the contract.

The potential penalties of a contract that falls foul of ineffectiveness are severe. If you have any concerns regarding the possibility of a contract running this risk, the institution should seek legal advice and endeavour to minimise this happening.
 
OGC has published detailed Guidance on Remedies and Ineffectiveness

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