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the inside track on challenging procurement decisions

15 July 2011
Recent headlines have been dominated by The Department for Transports decision to award a £3 billion rail contract to German manufacturer Siemens over Derby-based manufacturer Bombardier. Transport Secretary Philip Hammonds response to lobbying by the Trades Union Congress and the National Rail Union highlights the impact EU procurement legislation has on public bodies and their suppliers. In answer to calls to delay or alter the procurement decision, Mr Hammond has stated that EU judges would likely rule that Siemens is appointed in any event meaning that lengthy legal proceedings would only waste money and do nothing to save the jobs at Bombardiers UK plant in Derby.

This case highlights the difficulties faced by public bodies in balancing the need to comply with European legislation with the need to support British industry. One of the chief aims of the procurement regime is to allow the free provision of goods and services throughout the internal market. The intention is that public bodies should award contracts solely on the basis of merit rather than taking into account the location of the provider.

Challenges

Tenderers may seek to challenge public bodies at any point during a procurement process and informal challenges are becoming more common. It is important to ensure that everyone involved in the tender process is able to recognise a challenge and follow a specific procedure for dealing with it.

A timely and efficient response to a challenge may be enough to prevent further skirmishes and allow the procurement process to continue unhindered. A challenge can provide an excellent opportunity for a tenderer to obtain useful information in relation to the procurement process. Even if it transpires that a challenge or complaint is resolved by a public bodys response, the information provided may enable a tenderer to alter or amend their bid to increase their chances of success.

Commencing proceedings

Once a procurement process is complete and notification has been sent to the unsuccessful tenderers, there should be a ten-day standstill period before the award of any contract. This period allows unsuccessful tenderers to challenge the decision before a binding legal agreement is entered into. This is a tenderers best opportunity to challenge a decision before the contract is awarded and tenderers will commonly issue a claim which will automatically prevent the public body and the successful tenderer from entering into the contract.

Breach of duty

The procurement regulations state that public bodies should comply with the regulations to commercial entities throughout the EU. Where a tenderer believes that a public body has breached this duty, it has three months from the date it knew or ought to have known the reason for the complaint in which to bring a claim.

This claim will be for damages representing the losses suffered by an unsuccessful tenderer as a result a public bodys breach. Damages for breach of duty can take into account the unsuccessful tenderers chances of success. Provided that a breach of duty actually occurred, a tenderer can still claim for losses even if it cannot show that it would have definitely been awarded a contract. Public bodies who have not complied with the regulations could, at worst, find themselves paying for the contract with the successful tenderer, and for the unsuccessful tenderers lost profits. Given the value of some public body contracts, the cost of getting procurement wrong can be devastating.

Other remedies

Other remedies are also available depending on whether the relevant contract has been entered into by the parties. If the contract has not been entered into, a court can order that certain decisions be set aside or re-made, or that specific documents are amended. If the contract has been entered into, a court can make a declaration that the contract is ineffective.

Conclusion

Whilst procurement regulations may appear to limit public bodies ability to manage and control their own affairs, the reality is that if they are adhered to they should mean that public bodies will enter into contracts with the most suitable tenderers on the most suitable terms. Whilst adhering to the regulations can be costly and time consuming for public bodies and tenderers alike, the European Commission has published a report stating that the procurement rules have saved the EU approximately €20 billion at a cost of just €5 billion. Whether or not this figure is accurate remains to be seen, but many public bodies who have mastered large scale procurement exercises have found that it can lead to significant savings.

Likewise, tenderers should be reassured that if they are able to provide the best tender, they will in most cases be successful. The regulations make it very difficult for non-measurable factors, such as personal opinions or nepotism, to have a significant impact on the outcome of a tender process, adding transparency to dealings with the public sector.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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