Background

The Public Contracts Regulations 2006 (“the Regulations”) set out a regulatory system governing the award of substantial public sector contracts. The water, energy, transport and postal services sectors are governed by a similar regime (the Utilities Regulations 2006). This note is a brief summary of the issues that can arise when a challenge to the procurement process is being considered. This note is only an overview of some complex regulations and should not be used as a substitute for legal advice.

An overview of the requirements under the Regulations

The main thrust of the Regulations is that the procurement process should be open, transparent and non-discriminatory as between all tenderers and potential tenderers. A breach of the Regulations can entitle an unsuccessful tenderer to make a claim against the body responsible for awarding the contract (“the contracting authority”).

A claim can only be made by a tenderer if:

  • The Regulations have been breached; and
  • The tenderer has suffered, or risks suffering, loss or damage as a result of the breach; and
  • The tenderer has notified the detail of its claim and intention to bring proceedings in writing before any court proceedings are issued; and
  • Court proceedings are brought by the tenderer “promptly and in any event within 3 months” from the date when grounds for bringing proceedings first arose.

The court may extend the time limit for issuing proceedings where it considers that there is “good reason” for doing so (e.g. where the fact of the breach was not apparent until a later date).

Remedies for breach of the regulations and the “standstill period”

The Regulations provide for two main types of remedy:

  • an injunction (a court order restraining the award of the contract, and ultimately requiring the contracting authority to amend or re-start the procurement process); and/or
  • damages.

The Regulations prevent the contracting authority from entering any contract for a minimum period of 10 days after notice of the contract award is issued (“the standstill period”). This is to enable further information to be requested/supplied and any injunction application to be brought. Very tight timeframes apply to these steps, and legal advice should be sought at the earliest stage if a challenge is anticipated.

Damages

The tenderer must have lost a chance of winning the contract that was “substantial” and not “speculative”. Any damages award is likely to be based on the anticipated profit that the tenderer would have earned under the contract, less a discount to reflect the chance that it would have been unsuccessful in the procurement and to reflect any other uncertainties inherent in predicting the future profitability of the contract.

The tenderer may also recover its costs of tendering, discounted on a similar percentage basis. In cases governed by the Utilities Contracts Regulations 2006 there is specific provision that a tenderer who has lost a “real chance” of a contract award as a result of a breach of the Regulations will be entitled to recover its tender preparation costs, in addition to any other losses.

Practical considerations

Before any claim can be brought it will be necessary for the tenderer and its advisers to review the procurement process to date, and in appropriate cases make requests for information from the contracting authority.

From a contracting authority’s perspective, it needs to ensure that it complies with the Regulations, and does not unwittingly provide a tenderer with grounds for bringing a claim.

The very short time limits that apply both to making requests for information and to bringing court proceedings mean that tenderers and contracting authorities need to understand their legal positions at an early stage in any potentially contentious procurement.