UK: Tender Subject - Challenging Public Tender Procedures

Last Updated: 20 May 2008
Article by Douglas McLachlan

With new EU rules, companies are becoming keener to challenge the way public bodies choose suppliers.

Something new is happening in the realm of EU Public Procurement.

Public bodies have long been required under EU law to put certain contracts out to public tender by advertisement in the Official Journal of the European Union. They have done so for years, in conformity (or otherwise) with the applicable procurement rules. However, even when it appeared that the rules were not being followed, few suppliers challenged a contract award decision.

Those days, it seems, are over.

Increasingly, suppliers are challenging public bodies who award contracts in breach of the rules. This is because suppliers are more aware of their rights and remedies under the rules and these have recently been beefed up. Also, Freedom of Information legislation can make more information available to an aggrieved supplier that, until recently, could be kept secret.

A decision in favour of Alcatel, the telecoms equipment company, by the European Court of Justice (ECJ) was the turning point. One problem facing aggrieved suppliers is that once a contract has been entered into, an aggrieved supplier cannot have that decision overturned, though it can claim for damages. In Alcatel, the ECJ stipulated that EU Member States must implement review procedures so that a contract award decision can be suspended or annulled at a stage where an infringement of the Rules can be rectified. In practice this meant implementing a mandatory standstill period between the award announcement and commencement of the contract.

During this period, an aggrieved supplier can obtain an interim court order preventing the public body from entering into the contract pending further scrutiny by the court. In Scotland, proceedings can be raised in the Court of Session and sheriff courts.

The remedies available to suppliers are now set to increase following the new Remedies Directive. Member states must bring its terms into national law by November 2009. Aggrieved suppliers will then be able to challenge illegally concluded contracts in the courts, have them declared ineffective and demand re-tendering.

A serious deterrent to a supplier considering challenging a public body's decision is the risk of falling out with that authority. It makes little commercial sense to fall out with a potential customer. The first thing their lawyer should ask them is: do you really want to do this?

Nevertheless, more suppliers are willing to challenge. In some cases it's because the supplier feels that the public body isn't interested in running an open and fair procedure. The officials may be happy with the incumbent supplier and the whole procedure is viewed as unnecessary bureaucracy.

And it is bureaucratic. Many people assume that the Rules are designed to ensure that the contract is awarded to the best supplier; but that assumption is false. The rules simply ensure that public bodies operate a non-discriminatory, transparent procurement procedure. That the contract must be awarded to the most economically advantageous tender is essentially an afterthought. Also, the rules are complex and it's easy to trip up if you aren't careful.

The law says that the requirement to follow the rules is a positive duty owed to suppliers. If suppliers are more willing to challenge flawed procurement procedures then public bodies must take note or face expensive consequences.

Two recent cases can serve as cautionary tales.

In one, involving a tender by Aquatron for the maintenance of breathing apparatus, the Court of Session highlighted a series of failings by Strathclyde Fire Board in a tender process and awarded the company £122,149 in damages. Chief among Strathclyde Fire Board's failings was that it said it would evaluate the contract submissions one way, but did it another. In EU public procurement law, it pays to say what you mean, and to mean what you say. The judgement suggests that a change of procurement personnel midway through the process was probably responsible for the failings, not bad faith.

Similar failings by Belfast Library Board were identified by the High Court of Justice in Northern Ireland. An aggrieved supplier was able to obtain an interim injunction preventing the board from proceeding with a tender procedure because of ambiguities in the tender documentation. The principles of fairness and transparency enshrined in the rules meant that the award assessment criteria must be capable of being applied objectively and uniformly. That means there should be no material ambiguities that might otherwise cause suppliers to interpret the criteria in different ways.

The rise in challenges means that public bodies must devote more time, money (and training) to their procurement teams: because if they don't, it will cost them far more in the long run.

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