UK: Public Procurement - Challenging Behaviour

Last Updated: 30 November 2007
Article by James Jamison

As well as setting out the processes by which public contracts above a certain value are awarded in England, Wales and Northern Ireland, the Public Contracts Regulations 2006 also provide a mechanism by which unsuccessful bidders can appeal against the decision. After all, the costs of making a public procurement bid can be substantial. SmartLaw outlines the appeals process and looks at how it worked in one recent case.

The Public Contracts Regulations 2006 implement European directives which have as their basis four key principles: equality of treatment, mutual recognition, proportionality and transparency. Contracting authorities must be mindful of these principles or they risk procedural challenges.

As soon as an award decision has been made the contracting authorities must notify all unsuccessful bidders of the successful partys identity, the criteria used in making the decision and the bidders own score with respect to the winner.

Time Stands Still

The contracting authority must then respect a standstill period of 10 days before formally entering into the contract. In English law a completed contract cannot, as a rule, be undone by a court. The standstill period allows unsuccessful bidders time to consider their position, gather any extra information they might require from the contracting authority and, if warranted, seek a remedy.

If, by the end of the second working day of the standstill period, the contracting authority has received a written request from an unsuccessful bidder seeking a detailed explanation of the decision, then the authority must provide an appropriate response at least three working days before the end of the standstill period (even if that requires the standstill period to be extended). If, however, the information request is received after the end of the second working day then the contracting authority has 15 days in which to respond and the standstill period is unaffected.

Where a bidder suffers, or risks suffering, loss because the contracting authority has breached the regulations, it may be able to take remedial action in the High Court. Any such application should be made promptly and must be made within three months of the date on which grounds for the proceedings first arose (unless the court can be convinced that there is a good reason for extending the deadline). Before making an application to the High Court the bidder must inform the contracting authority of its intention to do so, outlining the nature of the alleged breach. The court has the power to suspend the contracting procedure until the case is heard in full. And, once there has been a full hearing, it can also set aside the original decision of the contracting authority and/or order it to amend the documentation and/or award damages. However, if the contract has already been entered into, the court can only award damages; it cannot rescind the contract.

Uniform Mistake

The recent case of Lion Apparel Systems Limited v Firebuy Limited provides some direction on what the High Court looks at when examining applications of this kind. Firebuy Limited was a non-departmental public body responsible for the procurement of uniforms and protective clothing for fire- fighters. The contract in question was for the supply of uniforms for a period of 15 years. A negotiated procedure was used involving the submission of pre-qualification questionnaires, an invitation to negotiate and a negotiation phase. Lion Apparel Systems Limited was invited to negotiate but in the final reckoning was ranked third. After an oral debrief and an information request, Lion Apparel used the regulations to seek an interim order to halt the award of the contract until a trial could consider the full range of its concerns.

The court noted that in hearing any application under the regulations it will first seek to confirm that the fundamental public procurement principles (equal treatment, non-discrimination and transparency) have been followed, that the facts relied upon by the contracting authority are correct, and that there is no manifest error of assessment or misuse of power. The applicant needs to demonstrate to the court that it has a sufficiently strong case, that damages would be an inadequate remedy and that an interim order (suspending the contracting procedure) should be made on the balance of justice.

Lets consider these requirements more closely.

Strong case

In other words, it must be shown that the alleged breach of duty involves at least a serious issue that should be tried at a later trial. In the Firebuy case one of the grounds put forward by the applicant was that an unfair scoring method resulted in the bidders being treated unequally. The court found that the applicant had not done enough to show that its case in relation to scoring was sufficiently strong to succeed at trial.

Damages inadequate

If damages are not an adequate remedy for both the bidder and the contracting authority, then the court will exercise its discretion as to the granting of an interim order by reference to the balance of convenience or the balance of justice. In the Firebuy case the court found that damages would be an inadequate remedy, because there would be very real difficulties in quantifying the profits that might have been made by the applicant had it been awarded the contract.

Interim order

Before granting an interim order the court must consider the harm which would be done to the contracting authority (and others) if any injunction turned out to have been granted in error, as well as the harm which would be done to the bidder if, on the other hand, the decision not to grant an injunction subsequently proved erroneous. In this case the court regarded the applicants case as too weak to interrupt the contracting process and therefore declined to grant an interim order.

Had the applicant been ranked second the outcome might have been different; the contracting authority was found to have made assessment errors but the court found that even having taken these into account, and then having adjusted the standings accordingly, the applicant would still not have been the winning bidder.

The Firebuy case highlights some of the obstacles that can be encountered in attempting to challenge a deficient procurement process. Clearly it remains important for those involved in public procurement to be sure that the timings, tender requirements and contracting authority duties (equal treatment, non-discrimination and transparency) are properly followed. Only with these properly understood are bidders in a position to ensure that processes are conducted fairly and then, if necessary, to take full advantage of the avenues for redress available under the regulations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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