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
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
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
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
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
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 Ł122,149 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
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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There has been a steady stream of decisions emanating from the Court of Session on procurement challenges in the last couple of years, one of which was the application by the Scottish Ministers to have the automatic suspension of the award of the contract for the Northern Isles ferry service lifted.
Abnormally low tenders create serious risks – as was demonstrated by the collapse of Connaught plc in September 2010 – but the law about them is ambiguous.
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