Nicolas Pourbaix looks at some of the issues facing consortiums when their bedfellows change part way through a public sector bid
Sometimes mid-way through a key, public sector bid, one of the bidders finds that a member of its consortium withdraws and has to be substituted by another. This can happen more frequently than one might think. A recent example is the reported replacement of one partner within one of two shortlisted bidders for the Olympic International Press and Broadcast Centres.
This raises the much more general question of what flexibility there is for consortiums to change members on public sector bids. These concerns do not exist for private sector bids which are not governed by the same regulatory framework stipulating a strict procurement process to ensure fairness and transparency.
In a public sector context, unless the tender documents state otherwise, it is generally permitted to change consortium members (or identified sub-contractors) in the course of a procurement process provided that:
- The newly formed consortium continues to meet any pre-qualification / selection criteria used for the initial shortlisting of bidders;
- If the contracting authority has reduced the number of bidders in the course of a staged competitive dialogue or negotiated procedure, the newly formed consortium would have got through to the next stage had the bid been put in and evaluated in its new formation; and
- The consortium complies with any formal notification requirements to the contracting authority as set out in the tender documents.
Continuing pre-qualification criteria
The contracting authority will need to verify that the newly formed consortium meets any minimum levels imposed at the pre-qualification / selection stage, e.g. any minimum turnover or minimum experience requirements. Contracting authorities sometimes also impose minimum pass-marks at the selection stage in order to be invited to tender. To the extent that this was applied, the contracting authority will need to verify that the newly formed consortium continues to meet this minimum pass-mark and would have been shortlisted had it applied in its new formation.
Reduced number of bidders
If the contracting authority has reduced the number of bidders in the course of a staged competitive dialogue (“CD”) or negotiated procedure, it may be that the identity of the consortium member or the quality of the offer provided by the consortium member that is being replaced played a part in the evaluation of the bid and the selection of that bid to move to the next stage of the CD or negotiated procedure. In that case, the contracting authority will need to ensure that the newly formed consortium, had it bid in its new formation, would have been taken through to the next stage of the CD or negotiated procedure.
It is common for contracting authorities to make it clear in the tender documents that any change in consortium membership (or identified subcontractor) must be notified to the authority for prior approval. The newly formed consortium would need to comply with any formalities required by the contracting authority in this respect.
What about changing partners (or identified sub-contractor) during contract execution?
It can also happen that partners or key sub-contractors need to be replaced during contract execution. Does this raise any procurement issues? First, from a contractual perspective, it is quite common that the contracting authority will need to be notified about the change for prior approval. Secondly, from a procurement law perspective, the impact of the proposed change on the evaluation of the consortium, had it bid in its new formation, will need to be considered. This will only be relevant when the identity of the consortium member (or key sub-contractor) now being replaced played a part in the evaluation of the winning bid, in which case, the contracting authority will need to verify that the newly formed consortium, would still have won. This will be the case when the consortium member being replaced was responsible for the delivery of a key aspect of the contract.
Finally, there may also be competition law issues to consider when two suppliers decide to team up in the course of a tender process, especially if both of them were able to deliver the project on their own, as a teaming-up arrangement may lead to a reduction of competition to the detriment of the contracting authority. The rules on this are quite complex and need to be considered on a case by case basis. Although contracting authorities are often alive to the issues of the changing face of bidders and frequently provide for this in complex projects they are less aware of the competition law point.