Set-Aside (Contract Annulment)

Set-aside is the procurement remedy that overturns an award decision. Where interim measures or automatic suspension temporarily freeze the situation, set-aside permanently removes the unlawful decision. It is the decisive outcome that a pre-contractual challenge is working toward.

What is Set-Aside (Contract Annulment)?

Set-aside is the term used in the UK Public Contracts Regulations and retained under the Procurement Act 2023. In EU member states, the equivalent concept is referred to as "annulment" or "cancellation" of the award decision. Article 2(1)(b) of the Remedies Directive (2007/66/EC) requires all member states to ensure that review bodies have the power to set aside or cause the setting aside of decisions taken unlawfully.

A set-aside order voids the award decision. Its practical consequences depend on the circumstances:

• The contracting authority may be ordered to re-evaluate all bids correctly, applying the published criteria as they should have been applied.
• The authority may be required to re-open the competition to all original tenderers or, in more serious cases, to restart the procurement from the beginning.
• In some cases, the authority is free to reach the same conclusion on re-evaluation, provided it does so lawfully.

Set-aside operates before contract signature. Once the contract is signed, the remedy of set-aside is no longer available (the contract exists as a legally binding instrument), and the challenger must instead seek declaration of ineffectiveness or damages.

Set-aside can be partial: a review body might set aside only the scoring of one criterion and order a re-evaluation of that element, leaving the rest of the decision intact. Or it might set aside the entire award decision, requiring a full re-run.

Why Set-Aside Matters for Bidders

Set-aside is why the standstill period matters. The entire architecture of the remedies framework, from the Alcatel period to the automatic suspension, exists to keep set-aside available long enough for a review body to examine the case. If a contract is signed before a challenger can act, the set-aside remedy disappears.

For a bidder who genuinely believes they were the best-value tenderer and that the evaluation was flawed, a successful set-aside followed by a correct re-evaluation is the most satisfying outcome. They do not just receive compensation: they may actually win the contract.

Example

A Norwegian municipality evaluates a social services contract. The winning supplier scores 85 on quality. The runner-up challenges, arguing that one of its quality sub-components was scored using an unpublished methodology that contradicted the procurement documents. The relevant procurement appeals body (KOFA) sets aside the award decision. On re-evaluation using the correct published methodology, the runner-up's quality score rises to 89 and they win the contract.

Frequently Asked Questions

Is set-aside guaranteed if an error is found?

No. Review bodies have discretion in how they frame the remedy. If the error is minor and would not have affected the outcome even if corrected, the review body may decline to grant set-aside and award only damages instead. The challenger generally needs to show both that the authority acted unlawfully and that the breach materially affected the result.

Can set-aside be obtained after the contract is signed?

The set-aside of the award decision (as opposed to the contract itself) is a pre-contractual remedy. After the contract is signed, the relevant remedy is declaration of ineffectiveness, which is more restrictive in its grounds and conditions. However, in some jurisdictions, a court may simultaneously declare the award decision void and the resulting contract ineffective if proceedings were brought within the applicable time limits.

Does the winning supplier have a right to be heard in set-aside proceedings?

Yes. The winning supplier (the "interested third party") has legitimate interests in the contract and is typically entitled to be joined to or notified of the review proceedings. Many European jurisdictions allow the winning supplier to intervene to oppose set-aside, and they may claim damages from the contracting authority if the set-aside is granted and they lose the contract as a result.