Procurement Alert: Part B contracts and the standstill period requirement

The Northern Ireland High Court has set aside a contract award for Part B services and granted an injunction to restrain its implementation, even though such contracts are exempt from the standstill period obligation. The judge held that a standstill period is required for some Part B services contracts in exceptional circumstances under the general principles of EC law.

The facts

The case of Federal Security Services Ltd v Chief Constable for the Police Service of Northern Ireland [2009] NICh 3 concerned the award of a contract for security, guarding, driving and associated services for the Northern Ireland Police Service. These services are Part B services under the Public Contracts Regulations. Federal Security Services (FSS) held the existing contract and it was one of the two firms that were called for a clarification interview in the procurement for the new contract. However, the contract was awarded to the other bidder, RGS, without any standstill period between the award decision and the contract being entered into.

FSS brought proceedings to set aside the contract, alleging that the award procedure breached a number of the provisions in the EC procurement rules, including the requirement for a standstill period. They also sought an interim injunction restraining the Chief Constable from implementing the award, despite the fact that the Regulations state that if the contract has already been entered into, the court can only award damages.

Standstill obligation

Part B services contracts are exempt from the obligation under reg.32(3) of the Public Contracts Regulations, providing for a 10 day standstill period between notification of the contract award and the conclusion of the contract, to give a disappointed tenderer the opportunity to challenge the award. However, the judge ruled that, although there was no automatic standstill obligation, it could apply in “exceptional circumstances” under the general Community law principles of transparency, equal treatment and non-discrimination.

He concluded that that there were such exceptional circumstance in this case - these included:

• the contract was high value;
• it was of cross border interest;
• the Chief Constable was already aware of controversy over the procedure; and
• the Chief Constable’s advisers had recommended a voluntary standstill period.

Furthermore, the contract was already being provided adequately so a standstill would not delay its introduction.

The new Remedies Directive 2007/66, which must be implemented in the UK by 20 December 2009, also excludes Part B services contracts from its express standstill obligation, but the judge found that this did not bar the need for a standstill period under general EC law principles.

Interim injunction

The judge then considered whether the court had jurisdiction to grant an interim injunction. The Chief Constable argued that as the contract had been concluded, the court could only award damages under reg.47(9).

However, the judge considered that “contract” in reg.47(9) meant a contract which complied with the general principles of EC law. As the Police Service’s contract did not contain a standstill period, it breached the requirements of Community Law, and so was not a “contract” for the purposes of reg.47(9). The court therefore had jurisdiction to grant an injunction. In addition, damages would not be an adequate remedy as 70 per cent of FSS’s business in Northern Ireland was in this contract, and if it went ahead there would be a TUPE transfer of about 500 employees.

Implications

Part B services include health, education and legal services and so this decision is highly relevant for health bodies and local authorities. You can no longer automatically assume that you need not allow a standstill period when awarding such a contract; instead, you will need to consider for every contract whether there are any “exceptional circumstances” which would require you to have a standstill period, applying the principles of Community law.

The decision adds uncertainty to this area of procurement law and may be seen as a further narrowing of the distinction between the treatment of Part A and Part B services contracts. “Community law” is wider than the Directive, of course, and the judgment underlines the need to approach all procurement cases from a broader perspective than either the UK implementing Regulations or the Directive.