Whether you are a public body looking for providers of goods or services, or a potential provider trying to obtain a contract to supply these, something may go wrong during the process.
We are here to assist you if it is your procurement process that is challenged, or if you think that another party’s procurement process should be challenged.
But, as the allowed time frames in certain procurement situations are extremely short, we believe that you should be aware of the key points relating to public procurement ahead of time. Then, if you are faced with a procurement challenge you can act right away. And we will be available to help you from the start.
This guide focuses on public procurement.
What is procurement?
Procurement refers to the process of obtaining products or services from a third party. This occurs every day in both the public and private sectors. Although it is advisable that those involved in procurement in the private sector develop clear processes and documentation – and our commercial contract lawyers are always very happy to assist you with this – it is only the process of public procurement that is specifically regulated.
Why is there a legal framework for public sector procurement?
Since the 1970s the World Trade Organisation (WTO) and the European Union (EU) have regulated the procurement of goods and services by public authorities to protect openness, transparency and non-discrimination in these transactions. The UK was generally bound to these principles by its treaty obligations and developed UK procurement regulations accordingly.
What has changed since Brexit?
Even though the UK has now left the EU, UK procurement regulations still apply. The UK also became a member in its own right of the WTO’s Agreement on Government Procurement (GPA) in January 2021. So, going forward, any national laws relating to public procurement will continue to be made within the framework of these international commitments.
The main regulations currently applicable to public procurement are:
- Public Contracts Regulations 2015
- Concession Contracts Regulations 2016
- Utilities Contracts Regulations 2016
- Defence and Security Public Contracts Regulations 2011
When does public procurement law apply?
- The entity involved is a public authority
- The tender is for works, products, services or concessions
- The value of the tender is above specified thresholds
Public authorities include State, regional or local authorities, as well as other bodies governed by public law.
These authorities are defined as either central government authorities, which include government departments and various non-departmental government bodies, such as the British Library, the Competition and Markets Authority, the Gambling Commission, and, since 16 August 2021, NHS Trusts, or sub-central authorities, which include local governments, police and fire authorities, and higher and further education. Utilities have separate regulations when contracts concern utility activities such as water, energy, transport and postal services.
These distinctions affect the threshold value of contracts requiring procurement compliance, and certain procedures that must be followed. Contract opportunities below the threshold values, but over £10,000 (central government) or £25,000 (sub-central government) must still be published on the Government’s “Contracts Finder” website to allow all interested parties the opportunity to respond.
The contracts envisaged must apply to public supplies, public services or public works. Where the supplies or services apply to defence or security matters, or are for utility activities, separate regulations apply. There are also separate regulations when the contract is a concession, and operating risk will be transferred to a concessionaire.
Public Procurement Regulations: Thresholds
||Central Government authorities
||Sub-central Government authorities
|General supplies & services
|Supplies & services for defence & security
Understanding whether a tender is subject to the public procurement regulations enables authorities to follow the correct processes, and allows bidders to know what to expect, and, if they have any concerns about decisions, when they may bring a challenge.
What is the tender process?
If a tender is regulated by public procurement law, authorities must use one of several specified, complex processes in order to evaluate and award a contract. Each of these processes involve minimum time limits, selection and award criteria, and the obligation to disclose various details when announcing the results.
How must results be announced?
A contracting authority must notify all bidders individually of:
- The criteria for the award
- The reasons for selecting the successful bid
- The scores of the winning bidder and the unsuccessful bidder
- When the standstill period will end.
Following notification to all bidders of the results of a tender, there is a mandatory standstill period before a contract may be concluded. This is to allow unsuccessful bidders to review the feedback from the tender. If the authority notified bidders electronically, the standstill period is generally 10 days, and if notice was by other means, it is 15 days.
CAUTON: as calculating timing is regulated by several different rules, if you have any concerns, a lawyer’s assistance with this may be vital.
When may a tender be challenged?
There are many reasons why a tender may be challenged both before or after a contracting authority decides the outcome of a tender. These may include:
- The design of the tender is partial to certain suppliers
- The tender documents contain a mistake
- There was inappropriate negotiation with potential suppliers
- The evaluation of the bids wrongly excluded a bidder, or did not apply award criteria correctly
- The process specified by the regulations was not followed
- The required information was not provided to all bidders.
Who may make a challenge?
Any person or public entity or group who made a bid may challenge the results of a tender. Other key sub-contractors or bid consortia partners may also be able to make a challenge. Where the concern is the modification of a procurement contract, parties involved in the original tender may bring a challenge, and possibly also parties who did not, but who can show that at the time of the attempted modification they had sufficient interest in the procurement process.
Both regulations and case law need to be considered when deciding to make a challenge. Again, obtaining professional advice as early as possible is always important.
What remedies are there for an unsuccessful bidder?
|Before contract entered with a successful bidder
||Court order to set aside decision of contracting authority
||Court order that contracting authority amends or reissues a document
|After contract entered with a successful bidder
||Declaration by court of ineffectiveness of contract
||Financial penalty imposed on contracting authority
What are the time limits for challenges?
Court proceedings must be started with 30 days from when the bidder first knew, or ought to have known, that grounds for starting proceedings had arisen. This is usually once notification of an award has been received from the contracting authority. However, it may be before this. If this is the case, a bidder should not wait for the award notification to bring a challenge because the time limit will start running as soon as a bidder is aware of the infringement.
CAUTION: Although a court may extend this time limit if it considers that there is a good reason to do so, in most cases incorrectly calculating this time limit will prevent a challenge being made. Obtaining legal advice as early as possible is critical.
Issuing a challenge before a contract has been entered into with a successful bidder automatically suspends the conclusion of that contract.
How is a challenge brought?
Because of the tight time frames, although it may be best to try to resolve challenges via correspondence, there is limited scope for negotiation. Quick decisions may need to be made about bringing more formal challenge proceedings. This will always involve significant expenses, so the merits of any challenge and the value involved should be carefully considered before issuing a claim.
What should a contracting authority do if a procurement award is challenged?
The courts which ultimately hear public procurement matters have published guidance for all parties to a dispute, ahead of any formal proceedings being issued, with the hope that issues may be settled without the need to go to litigation. A contracting authority is urged to respond promptly to any letter before claim, and to provide the unsuccessful bidder with all information to which it is entitled.
The contracting authority should try to establish as quickly as possible whether there are good grounds for the proposed challenge. If more time is needed to consider the matter, the authority may extend the standstill period. If there are in fact issues with the procurement exercise, corrective action without recourse to litigation is encouraged, such as suspending the contract award and/or setting it aside altogether. But, if after investigation the contracting authority believes that the contract award was lawful, unless the unsuccessful bidder is prepared to drop its challenge, litigation may be unavoidable.
When can the contracting authority apply to lift the suspension?
If proceedings are issued, and the award of the proposed contract automatically suspended, the contracting authority may apply to the court to end or modify the suspension. The court will decide this after considering whether the unsuccessful bidder has an arguable case, whether damages will be an adequate remedy, and whether retaining the suspension will inhibit vital public services for a significant time.
A common issue in procurement challenges is protecting confidential information, such as the price of the winning bid. Unsuccessful bidders want as much information as possible in order to work out whether bids have been correctly marked. Contracting authorities want to avoid pointless disclosure and breaches of confidentiality. Authorities are expected to disclose the key information needed by the unsuccessful bidder to understand why it has lost. Refusing this level of disclosure may prevent an authority from later using the same evidence in support of an application to lift the automatic suspension imposed when proceedings are issued.
The courts understand that a balance must be found between protecting confidential information and open justice. Once a challenge becomes litigious, a successful tenderer may be joined in the proceedings to protect its interests, not just from a confidentiality perspective but also it may seek to claim damages if the claim issued by the unsuccessful tenderer fails and it can prove it has suffered a loss due to the delay caused by the challenge itself. The court will manage all proceedings in such a way as to protect confidentiality, and parties are encouraged to use confidentiality rings and undertakings to facilitate the disclosure of confidential information. These procedures may give all parties some assurance, but they also often add to the length, complexity and cost of proceedings.
In the future
In June 2021 the Cabinet Office published new information and guidance for public procurement. This requires contracting authorities to consider national priority outcomes (which are also termed “social value outcomes”) alongside any additional local priorities when they are conducting a procurement. These include:
- Creating new businesses, new jobs and new skills
- Tackling climate change and reducing waste
- Improving supplier diversity, innovation and resilience.
Government intends to bring forward legislation to ensure that this becomes part of all public procurement exercises. It has also outlined its intention to consolidate the four different sets of procurement regulations currently in operation, and to simplify the seven possible procurement procedures that may now be used into three streamlined procedures. New Civil Procedure Regulations are also envisioned to fast track legal challenges and to clarify issues of disclosure and confidentiality.
Updated public procurement processes that are faster and simpler will be good news for both public authorities and potential contract providers. But, for now the existing rules apply, and any one involved in public procurement should be aware the processes, time limits and challenges, and the need for expert advice and support as expeditiously as possible.