Posts Tagged ‘tendering’

Public procurement – the not-so-new rules

October 21, 2010

Complaining about unsuccessful public bids – the new rules

Over the last few years, more and more contractors are disputing decisions by public bodies when unsuccessful in public tenders. This has long been the hallmark of construction disputes in Scandanavian countries but represents a shift in the mindset, in view of harsh economic times, of UK contractors. Morrison Facilities Services Limited v Norwich City Council [2010] is a recent example.

In this case, Norwich City Council awarded a contract for £17.5m bid to Connaught Partnerships Limited. All other bids were in the £23m-£26m range, including the one from Morrison.

Morrison complained that Connaught’s tender was accepted despite it being “abnormally low” and that the Council had applied undisclosed criteria when assessing the ‘quality’ of bids. As a result, Morrison applied for an injunction to prevent the award of the contract to Connaught, pending the outcome of a trial on its various claims.

The court ruled that Morrison had a seriously arguable case that Connaught had submitted an abnormally low tender and that the Council had failed fully to investigate whether the bid was sustainable. Furthermore, the Court found that Morrison had a seriously arguable case that the Council had relied on undisclosed award criteria in its assessment of the bids. The Court also concluded that, in the absence of an injunction, damages were an inadequate remedy for Morrison. Thus the injunction was awarded.

Morrison had to endure the costly and lengthy process involved in getting their injunction. Under the new Public Contracts (Amendments) Regulations 2009 (“the 2009 Regulations”) there is an automatic suspension of the tender process as soon as proceedings, such as those commenced by Morrison, are started. The issuing of the claim form (without even a letter before action) is sufficient now  to suspend the contract award process.

As Morrison sought an injunctions before 20 December 2009 (the date that the 2009 Regulations came into force) in order to obtain an injunction Morrison was forced to meet the high threshold for being awarded an injunction, set out in the well known American Cyanamid case.

Under those rules, a claimant needs to show that there is not only a serious issue to be tried, but also that damages would not be an adequate alternative to an injunction. Furthermore, a claimant has to show that the balance of convenience does not favour the contracting authority entering into the contract. A claimant also risks being held liable for the contracting authority’s costs, should they successfully resist the claim. This combination represented a significant hurdle for potential claimants to overcome for contractors, some of whom have limited resources, when constantly unsuccessful in public tenders for no good apparent reason.

Since 20 December 2009, when proceedings alleging a breach of public procurement procedure are brought at the contract award stage and before the contract is entered into, the contracting authority must automatically suspend the procurement process. There is no need to apply for an injunction to prevent the contract in question being awarded.

This suspension remains in force until proceedings are determined or discontinued, or until the court passes an interim order lifting the suspension. This shifts the balance much more in favour of aggrieved bidders. The onus is now on the contracting authority to have the suspension lifted.

It is important to respect the timeframes within the 2009 Regulations and to note especially that:

  • proceedings must be started promptly and, in any event, within three months beginning with the date when grounds for starting the proceedings first arose. Proceedings need not be started before the end of the standstill period.
  • proceedings which seek a declaration of ineffectiveness must be brought within six months from the date of the contract, if there has been no publication, or 30 days beginning on the day after the date on which a contract award notice is published in the Official Journal or when the contacting authority has informed the bidder. However, in the 2009 Regulations, the 30 day time period only begins in case of notification to the bidder on the day after the date on which the bidder receives a summary of the relevant reasons, as well as being informed of the conclusion of the contract.
  •  a claim form can be issued even though the contracting authority has not been informed of the breach or anticipated breach of duty. The requirement for a letter before action is therefore removed.

 

The scope for the application of the 2009 Regulations is clear to see in overcoming the initial hurdle and to mitigate the risk of the contract being awarded quickly without others being able to air their grievances. Success will depend on advancing legitimate grounds and not simply using these enhanced remedies as a strategic tool to prevent competitors benefiting from a legitimate award.

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