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Procurement challenge analysis 2013

2013 bucked trends in that it didn't see a significant increase in challenges being brought against procurement decisions of contracting authorities.

The calendar year 2013 bucked recent trends in that it didn’t see a significant increase in the number of challenges being brought against procurement decisions of contracting authorities. While the scale of increase has slowed down the volume of claims remains very high and we can be certain that the number of challenges in 2013 is roughly 5 times those in 2009. This is due to numerous factors including understanding of the rights of bidders, the wider economic climate, and the entrance into the market of after the event insurers. In this mature litigation marketplace we are seeing certain recurrent themes, the analysis of which can enable contracting authorities to more accurately target resource on the riskier parts of a procurement transaction.

In this article we seek to identify those issues accounting for some 80% of the successful challenges being brought before the High Court in England and Wales in 2013. Unsurprising they are not related to obligations set out in detail within the Public Contract Regulations 2006 (“Regulations”). They are to be found in the intangible and undefined implied obligations which are mainly inherited from the Treaty on the Functioning of the European Union.

Transparency

The obligations of transparency are set out in the Regulations in numerous guises most explicitly within Regulation 4.

This imposes a duty on Contracting Authorities to treat economic operators in an open and transparent way. In 2008 and 2009 a series of cases pointed to an obligation on contracting authorities to disclose all information pertaining to a procurement activity, the failure to do so lead to a breach of the obligation of transparency. Case law has evolved into a slightly more sophisticated position in the last couple of years with the current batch of case law reinforcing that the obligation of transparency will not be breached if the withholding of information or scoring methodology did not alter what the contracting authority said it was going to do in the tender, did not have a discriminatory effect between the tenderers and the non-disclosure could not have effected the bid preparation if they had been disclosed. The key, and the problematic part of this current position, is the latter issue of, “what difference would it make”? If a bidder can genuinely say, “If I had known that, my bid would have been different”, then the Contracting Authority is prima facie in breach of its obligations of transparency. .

Non-discrimination and equality of treatment

While it may seem obvious that all bidders need to be treated equally many contracting authorities fail to do so, leaving this head of claim one of the most popular to be pleaded before the courts. Inequality of treatment can manifest itself in some very subtle ways. For example, in one of our cases the claimant alleged that a question concerning contract termination and performance artificially favoured smaller economic operators. Due to their enormous international reach and multi-billion pound turnover this economic operator claimed that it was inevitable that contracts would have gone wrong and they were unfairly penalised when the PQQ question asked about instances of termination or non-renewal within the context of thousands of contracts as opposed to a very small number of contracts for smaller/local providers.

The Greedy Buyer

Many tender processes are commenced with a view to completing as quickly as possible. This means that timescales are left to the absolute minimum required, including development of the specification. Problems with specification lead to many instances of the tender process not reflecting fully the buyers requirements with this only becoming apparent upon receipts for tenders. Occasionally this can result in contracting authorities (for convenience) wanting to award contracts they have not actually advertised, favouring instead, some infinitive or alternative proposal of the bidder which was in fact not openly competed at all. We have seen multiple instances of this problem manifesting itself in the last 12 months.

Award Criteria

Many contracting authorities wish to award contracts based on a whole range of criteria reflecting various agendas and political concerns. Typically these are around social, environmental, or local considerations. This practice is fraught with difficulties. Regulation 30 sets out only two bases for the award of contracts, one being the most economically advantageous tender from a point of view from the contracting authority, the other being the lowest price. Establishing that social and local and environmental considerations have an economic advantage to the contracting authority is not straightforward. Similarly, the criteria used must be linked to the subject matter of the contract concerned and this is another area to potential breaches of the regulations arise. In the last year we have found confusion about this and misinterpretation of the role of the Public Services (Social Value) Act 2012, leading some contracting authorities to erroneously use criteria linked to the social and economic wellbeing of their area within procurement processes.

In the face of all this doom and gloom it is worth recognising certain legal points which remain “The Buyers Best Friends”

Manifest Error

The average procurement challenge contains in its earliest stages an element of the loser claiming that their product or service is better than the product or service of the winning bidder. The courts are spectacularly uninterested in such arguments. They do not see themselves as a technical arbiter as to whose solution is the most effective or appropriate. They see their role as upholding the legal obligations of the contracting authority.

That said, the courts will interfere in the marking of a procurement exercise where it believes that there has been “a manifest error”, i.e. an error that is obvious and apparent in the marks that are allocated between different solutions. This remains a high bar, allowing contracting authorities a reasonable amount of discretion when finding one particular solution more attractive than another.

The 'so what' defence

Many an otherwise successful challenge seeking a damages award have failed or been discontinued when the effect of any potential breach has been nullified in a rescoring of a tender exercise in such a way as to avoid the effect of beach of the Regulations so that the breach did not alter the result or outcome of the tender process.

Limitation

The limitation periods for bringing a claim for a breach of the Regulations are radically different than many other areas of law. For example, breach of contract claims need to be brought within 6 years, whereas breach of the Regulations claims must be brought within 30 days of the date of which the claimant knew or ought to have known of a contracting authority’s breach. This means that many breaches of the Regulations cannot be prosecuted because of the limitation implications. In a typical process breaches of the Regulations that are apparent on the face of the ITT will be time barred by the time the result is announced. As the limitation period runs from the date of which the claimant knew or ought to have known of the breach, the contracting authority has the benefit of the fact that most economic operators will not seek the challenge the process if they still think they stand a chance of winning. As a result, the vast majority of claims based on obvious defects in invitations to tender are brought out of time. This is an absolute bar to progressing the case. The Regulations allow the courts to extent the 30 day period to bring a claim to a period of 3 months, although the courts current attitude to that is to resist such applications and place a very strict bar on potential claims with regard to litigation.