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Just VEAT it, VEAT it, VEAT it, VEAT it; no one wants to be defeated?

The use of voluntary ex-ante transparency ("VEAT") notices to protect a contracting authority from certain types of relief should a procurement process be found not to have been followed in breach of the PCR, is now under threat.

There has been a common belief that where a contracting authority determines that a full procurement process is not required, it can proceed by publishing a VEAT notice in the Official Journal of the European Union ("OJEU") and, provided no challenge is received within 10 days, it can then directly award the contract and will be protected from the risk of a declaration of ineffectiveness being ordered against it in the event a Court later determines that the award of the contract breaches the procurement rules.

The Advocate General's ("AG") opinion of 10 April 2014 in the case of Italian Interior Ministry v Fastweb SpA ("Fastweb") now brings serious doubts on this interpretation of the Directives.

The AG considered Directive 89/665 which has the objective of guaranteeing the existence of effective remedies for infringements of EU law and the amendments contained within Directive 2007/66 which sought to strengthen the national review procedures, especially in cases of an illegal direct award.

The AG noted that both these Directives require a review body to consider a contracting authority's decision in awarding the contract, and if the review body were to find a contracting authority had awarded the contract in breach of the publication requirements of a procurement process the contract may be considered ineffective.

The exceptions to the above rule are:

  • The contracting authority considers that the award of a contract without prior publication of a contract notice in the OJEU is permissible in accordance with Directive 2004/18.
  • The contracting authority has published in the OJEU a notice expressing its intention to conclude the contract (VEAT notice).
  • The contract has not been concluded before the expiry of a period of at least 10 calendar days with effect from the day following the date of the publication of this notice.

In the Fastweb case, the review body of the Italian courts found that the contract had been awarded as an illegal direct award because there had been no competition, but considered that a declaration of ineffectiveness could not be awarded and the Contract had to be maintained as the contracting authority had published a VEAT notice.

The AG also considered the application of the VEAT notice by the Italian Interior Ministry and held that, in view of the above exceptions, the use of a VEAT notice did not prevent a contract from being declared ineffective. The conditions within Directive 89/665 are the minimum conditions to be satisfied upon a review of a contract procedure and therefore does not preclude the harsher sanctions available under national legislation.

So what does this mean to you? The AG held that the three conditions outlined above are cumulative in nature and therefore should you issue a VEAT notice you must legitimately believe an award of the contract without prior publication of a contract notice in the OJEU is permissible. Then you must issue a VEAT notice and wait the requisite number of days in accordance with the timescales. If all three of these conditions are found by a review body to be met, the contract will not be ineffective and penalties or sanctions will not be implemented.

However, should it be found that any one of these conditions not have been met, the AG opined that, in the case of an error made in good faith, alternative penalties, as set out in Article 2e could be implemented; however, where the contracting authority has deliberately and voluntarily broken the rules it must be sanctioned and those sanctions may now include a declaration of ineffectiveness.

As this is an opinion from the AG, it does not provide definitive guidelines on the use of VEAT notices. However, until the European Court of Justice rules on this matter it would be prudent for contracting authorities to consider the guidelines provided by the AG when seeking to rely on VEAT notices.

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