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Public projects and procurement

Procurement challenges

 

We regularly advise clients on bringing and defending challenges to procurement awards under the Public Contracts Regulations 2015 (the Regulations).

We act for both contracting authorities, advising them on how to avoid challenges and defending them if they do arise, and for unsuccessful bidders who wish to challenge award decisions where they believe errors have been made or processes have not been conducted in accordance with the law.

Although we deal with issuing court proceedings where necessary, we are often able to achieve excellent results for our clients without the need for formal legal action.

“Standout practice group, which is regularly involved in high-profile cases. Offers broad commercial litigation capabilities, alongside expertise in procurement challenges.”

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FAQ’s – Procurement Challenges

First, check whether the tender involved is regulated by the Regulations:

  • Only contracts tendered by public bodies are subject to the Regulations. This includes central government authorities,
    local authorities and other public bodies such as universities and NHS Trusts. Tenders run by private companies are
    not covered and cannot be challenged under the Regulations.

Next, check the value of the contract:

  • Most parts of the Regulations only apply to contracts which are above a certain threshold in value approximately
    £118,000 for central government authorities; £181,000 for local authorities and other public bodies where the contract
    is for the supply of goods or most types of services, or £4.5 million of public work contracts)

However, even if most of the Regulations do not apply to the contract because it is below the threshold, there may still be
some scope for challenge (particularly if there is the potential for these to be cross-EU border interest in the contract), as all
tenders conducted by public bodies must be conducted in accordance with general EU principles of transparency, equal
treatment, non-discrimination and proportionality.

There are all sorts of reasons why a tender outcome may be susceptible to challenge. The main categories of challenge
are:

There is a problem with the way the tender was designed

  • The tender might impose requirements or award marks in a way which favours the incumbent supplier over
    other suppliers.
  • The tender documents might contain a mistake.

 

There is a problem with the way the tender submissions were evaluated.

  • Wrongly excluded a bidder at the selection stage, perhaps because it
    determined that it did not pass mandatory questions or because its offer was considered to be abnormally
    low.
  • Favoured one bidder over another in its scoring, by awarding more
    marks for similar answer.
  • Not have applied the award criteria correctly.
  • Changed the award criteria or weightings after bids have been
    submitted.
  • Made mathematical errors in calculating or weighting the scores.

 

The contracting authority failed to comply with the procedural requirements imposed by the Regulations.

  • Failed to advertise a contract which should have been advertised.
  • Failed to provide the required debrief information as set out in the Regulations.
  • Entered into a contract with the winning bidder before the standstill period had
    expired.
  • Awarded a call-off contract under a framework agreement to a company which
    was not on the framework.

Sometimes it is possible to resolve a challenge via correspondence between parties. If that is not possible, then the next step is to issue court proceedings. However, the Regulations impose very tight timescales, so the scope for negotiation by correspondence is limited. Often very quick decisions need to be taken on whether the merits and value of the claim justify issuing proceedings, which is an expensive step.

For claims valued at £200,000 or more, which many procurement claims will be, the court fee for starting the proceedings is £10,000.

Unsuccessful bidders are often very disappointed to have lost a tender the may have spent many hours working on.
It is important for contracting authorities to identify quickly those challenges where the bidder has raised a genuine complaint about the procurement award and those challenges which are unjustified. If a mistake has been made during the tender process, this can often be rectified without the need to abandon the whole tender. In other cases, where the challenge is wrong or misconceived, the contracting authority will need to persuade the unsuccessful bidder why this is so or, failing that, be prepared to defend their award if they are sued.

A common challenge for unsuccessful bidders is obtaining the information they need to work out whether the bids have been marked correctly. Most of the relevant information will be held by the contracting authority.

The Regulations require contracting authorities to publish an Award Notification Letter providing some information to unsuccessful tenderers but often this is insufficient.
There is often a tension between the interests of the unsuccessful bidder, who wants disclosure of all available information about the way their tender was marked, and the contracting authority, who want to avoid being involved in what they see as a pointless disclosure exercise where a disappointed bidder is ‘fishing’ for information which might support a challenge.

With only 10 days to decide whether to issue proceedings in order to prevent the contract award, a bidder needs to act very quickly to seek further information from the contracting authority.
Generally, the contracting authority is expected to disclose the key information needed by the bidder to understand why they have lost, which usually includes disclosing the scoring reports. A contracting authority who refuses this level of disclosure may find they are disallowed from using the same evidence in support of an application to lift the automatic stay imposed when proceedings are issued.It is always open to the unsuccessful tenderer to make a Freedom of Information Act request. However, the statutory timescales for responding to a FOI request mean that the response will usually be received after the deadline for issuing proceedings has expired.

If a tender has been wrongly awarded some or all of the following can be claimed for:
• Damages to compensate the unsuccessful bidders for the profits it would have made had it been awarded the
contract.
• Wasted tender costs.
• If the claim is issued within the standstill period, and the contract has not already been awarded, an order setting aside
the contracting authority’s decision to award the contract to the successful bidder.
• A declaration of ineffectiveness. Sometimes, even if the contract has already been awarded to someone else, the
courts have the power to declare the award the award ineffective i.e. it is treated as if it never happened.

However, this remedy is only available for very serious procedural breaches of the Regulations, including failing to advertise
a contract and entering into a contract before the expiry of the standstill period.

After the contracting authority has informed bidders of its decision, there must follow a ten-day “standstill period” during
which the contract cannot be awarded.

If an unsuccessful bidder issues court proceedings before the expiry of the standstill period, an automatic suspension comes
into place which prevents the contracting authority from awarding the contract, unless the parties agree that the suspension
will be lifted or the authority applies to court for an order lifting the suspension.

If an unsuccessful bidder is content to allow the contract to be awarded to another bidder and limit its claim to damages
only, there is a deadline of thirty days for issuing proceedings. This runs from the “date of knowledge”, which means the date
when the tenderer knew or strongly suspected that the contracting authority had committed a breach of the Regulations.

Often, the date of knowledge will be the date on which the tenderer received the decision notice. However, for some types
of breach the time limit will start running before the tender outcome has even been decided if, for example, it is believed
that the authority’s proposed scoring structure gives one bidder an unfair advantage, then the time limit will start to run from
the date the tender documents are published.

If the automatic suspension has come into place because proceedings have been issued but the contracting authority wants to award the contract anyway, it can apply to the court for an order that the suspension is lifted.
The court will apply a three- stage test when deciding whether the suspension should remain in place:

  1. Is there a serious issue to be tried? The unsuccessful bidder must show the court that there is a case for the local authority to answer. They do not have to show that they have a good case with strong prospects of success, but the court must be satisfied that they have an arguable claim which is not frivolous.
  2. Would damages be an adequate remedy for the unsuccessful bidder? Usually, the court will only uphold the suspension if the bidder can show that damages alone would not be an adequate remedy, for example because the bidder will suffer the loss of a large part of its workforce if the suspension is not maintained.
  3. In whose favour does the balance of convenience lie? The court will look at the prejudice the public body will suffer as a result of not being able to award the contract vs the prejudice
    the bidder will suffer if it is lifted. Contracting authorities may be able to persuade the court that the suspension should be lifted because otherwise vital services will be suspended until the case is resolved, which could take months or even years. Often, it is difficult for bidders to persuade the court that the suspension should be upheld when the above tests are applied, and in most of the reported cases the suspension has been lifted.

If the Court refuses to lift the suspension, it will generally make this conditional upon the bidder undertaking to compensate the contracting authority for any losses suffers if, at trial, the Court finds that the challenges are unjustified.

The short timescale involved in challenging procurement awards means that both contracting authorities and bidders need to be aware of their legal position in advance of the tender award so that unlawful awards can be challenged and unjustified challenges can be defended.

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