05 January 2016 #Public Procurement
Those involved in public tenders will be familiar with the requirement that a mandatory ten day “standstill period” must follow all contract awards, during which the contracting authority is not allowed to enter into a contract with the successful bidder. The purpose of the standstill period is to enable unsuccessful bidders to review and digest the award notification letter and any other debrief materials provided by the contracting authority, and determine whether they have any grounds on which to challenge the outcome of the tender.
If an unsuccessful bidder issues court proceedings within the ten day standstill period, an automatic suspension comes into place which prevents the contracting authority from entering into the contract until the claim is concluded or the earlier lifting of the suspension by the Court.
However, the Public Contracts Regulations 2015 provide that there is an overall limitation period for procurement challenges of 30 days, which runs from the date on which the unsuccessful bidder knew there had been a breach of the Regulations.
In the recent Court of Appeal case of Energy Solutions EU Ltd v Nuclear Decommissioning Authority (which was in fact brought under the now-superseded Public Contracts Regulations 2006, but the provisions relating to standstill and limitation are the same in both sets of Regulations), the NDA sought to argue that a bidder whose challenge was brought within the 30 day limitation period provided for by the Regulations, but after the expiry of the ten day standstill period, should not be permitted to recover damages. The crux of NDA’s position was that if bidders do not issue proceedings within the standstill period, but wait until after the contracting authority has entered into the contract, they put the contracting authority at risk of having to pay both the successful bidder for performing the contract, and damages to the unsuccessful bidder if the claim is successful. Unsuccessful bidders should, NDA said, be obliged to mitigate their losses by issuing proceedings within the standstill period, so as to ensure that the automatic suspension comes into place.
The Court did not accept NDA’s arguments. The High Court judge who initially heard NDA’s application stated that it is “an inevitable consequence that authorities who do not comply with the rules are at risk of being penalised … for better or worse this is now a feature of the procurement law landscape.” The Court of Appeal agreed, noting that there is nothing in the Regulations to suggest that a bidder should be deprived of damages simply because they have failed to invoke a potential remedy. Taking advantage of the automatic suspension is an option for unsuccessful bidders, but it is not mandatory and is not a pre-condition to the availability of damages.
Given that the Regulations already impose a very short deadline of 30 days for bringing legal action, it is good news for bidders (who may not always wish to prevent the contract from being concluded with another bidder, if they are satisfied with the remedy of damages) that NDA’s attempt to shorten it even further was not upheld. Nonetheless, an unsuccessful bidder who suspects that the public authority may not have followed proper processes should always take urgent legal advice before the standstill period expires to ensure that its position is protected. Meanwhile, contracting authorities who are concerned about the financial risk of damages claims brought after the expiry of the standstill period may wish to consider delaying entering into the contract until the 30 day limitation period has also expired.