The EU Procurement Directives provide various exclusions and exemptions that are reflected in the UK Regulations.

The PCR 2015 contains exclusions for public contracts or design contests for telecommunications, land, broadcasting, arbitration or conciliation services, certain legal services, certain financial services, loans, employment, civil defence/protection and danger prevention services, public rail or metro transport services or political campaign services and where national security requires an exclusion.

As noted in the answer to question 3a above, the PCR 2015 also permits contracting authorities to employ the negotiated procedure without prior publication in certain circumstances. In brief, this is allowed in the following circumstances, as set out in Regulation 32:

• where no (suitable) tenders (or requests to participate) have been submitted in response to an open or restricted procedure, provided that the initial conditions of the contracts are not substantially altered;
• where the contract can only be performed by a particular economic operator because:
  • the procurement is for the creation or acquisition of a unique artistic work or performance;
  • competition is absent for technical reasons; or
  • the protection of exclusive rights (e.g. IP rights)

provided that, in respect of the second two sub-categories, no reasonable alternative exists, and the absence of competition is not the result of an artificial narrowing of the procurement's parameters;

• for reasons of extreme urgency brought about by events unforeseeable to the contracting authority, meaning the time limits of the open or restricted procedure cannot be complied with;
• in respect of supply contracts:
  • where the products involved are manufactured purely for research purposes;
  • for additional deliveries by the original supplier under a contract where a change of supplier would oblige the contracting authority to acquire supplies having technical characteristics which would result in incompatibility or disproportionate technical difficulties in operation and maintenance;
  • for supplies quoted and purchased on a commodity market;
  • for the purchase of supplies on particularly advantageous terms, from a supplier or liquidator in an insolvency situation; and
• in respect of works or services, for new works and services consisting of the repetition of similar works or services delivered under a previous contract concluded in the previous three years, provided that the works and services are in conformity with a basic project for which the original contract was awarded following a competitive procedure.

Where these circumstances apply, the contracting authority can essentially negotiate with a single supplier without any competition even though the contract would otherwise fall within the regulations.

The Utilities Sector Directive provides a procedure for the European Commission to withdraw the application of the Directive from sectors directly exposed to competition. The European Commission has made exemption rulings on the following utilities in England, Scotland and Wales: (i) electricity and gas supply; (ii) electricity generation; and (iii) exploitation of gas and oil.

The EU Procurement Directives and UK Regulations also do not apply to "in-house" arrangements, on the basis of the so-called Teckal exemption, established by the former European Court of Justice and which has now been codified in the EU and UK rules. The PCR 2015 provide that contracts can be directly awarded by contracting authorities so long as:

• the public body controls the service provider in question as if it was that public body's own department;
• the service provider carries out more than 80% of its activities with the contracting authority or other legal entities which are controlled by the contracting authority; and
• there is no direct private capital participation in the service provider, with the exception of non-controlling and non-blocking forms of participation which do not exert a decisive influence on the service provider.

There are three main potential consequences of an unlawful direct award (assuming that that direct award is challenged in court).

First, if the contract in question has not been entered into, when a claim form is issued and the contracting authority is on notice of this, the contracting authority "is required to refrain from entering into the contract". This is known as an "automatic suspension" to contract-making, and these continue until the court orders otherwise. The court may go on to lift the automatic suspension, allowing the contract to be entered into. Alternatively, after a substantive hearing, the court may order that the decision awarding the contract is set aside, or that the contracting authority amend any document relating to the procurement process.

Second, if the contract has already been entered into, the court must order a "declaration of ineffectiveness", unless there are "general interest" grounds for it not to do so. The consequences of a declaration of ineffectiveness are that the contract is to be considered prospectively (but not retrospectively) ineffective as from the time the declaration is made, meaning any obligations yet to be performed are not to be performed. The contracting authority can mitigate against the risk of a declaration of ineffectiveness being made against it if it considers that the direct award is lawful by publishing in the Official Journal of the EU a "voluntary ex ante transparency" (VEAT) notice prior to entering into the contract, and then refraining from entering the contract for at least 10 days after the date of publication of the notice. Where a court makes a declaration of ineffectiveness in these circumstances, it must also order that the contracting authority pay a civil financial penalty to the Cabinet Office. Where a court does not order a declaration of ineffectiveness, but considers that the direct award gave it grounds to do so, it must order that the duration of the contract be shortened and/or that the contracting authority pay a civil financial penalty to the Cabinet Office.

Third, whether or not the contract has been entered into, and regardless of whether the court orders a declaration of ineffectiveness, the court may order that the contracting authority pay damages to any economic operator which has suffered loss or damage as a result of the direct award. However, in the recent decision of Nuclear Decommissioning Authority v Energy Solutions EU Ltd^[1] the Supreme Court confirmed that such damages may only be awarded by the courts if they satisfy the "Francovich criteria" (i.e. that (1) the rule of law infringed must be intended to confer rights of individuals, (2) the breach must be sufficiently serious, and (3) there must be a direct causal link between the breach of the obligation and the damage sustained by the injured party).

[1] [2017] UKSC 34