What is public procurement law?

Public procurement is the purchase of works, goods and services by public bodies. UK public procurement law consists of EU procurement rules and related implementing UK legislation (the Public Contracts Regulations 2006 and the Public Contracts (Amendments) Regulations 2009).

The procurement rules are aimed at ensuring that public contracts are awarded fairly, transparently and without discrimination on the grounds of nationality and that all potential bidders are treated equally.

When do the rules apply?

Generally, the procurement rules apply where a public body procures a contract for works, goods and services which exceeds specified financial values: currently, £3,927,260 for works contracts and £156,442 for goods and services contracts (specifically £101,323 for goods and services contracts for central government bodies).

The rules apply: what next?

In most cases, the public body awarding the contract is required to advertise the contract in the Official Journal of the European Union and to follow specified procedures for selecting candidates and assessing tenders. Public bodies are also required to disclose the evaluation criteria and methodology to be used when assessing Pre-Qualification Questionnaires and tenders.

Once the decision to award a contract has been made, the public body must advise all unsuccessful bidders of its decision (the standstill notice) and observe a standstill period of at least 10 days between the date of the notice and contract signature. The standstill notice must contain the full reasons for the award decision and include the identity of the winning tenderer, plus the "characteristics and relative advantages" of the winning tender. Where possible, it should contain the score of the tenderer receiving the standstill notice and the score of the winning tenderer.

Even where particular contracts fall outside the application of the procurement rules or are subject to less rigorous procedural requirements, general principles of EU law may apply. Where EU principles do apply the award process must be conducted transparently and bidders treated equally and in a non-discriminatory way.

Remedies available for breach of the procurement rules

The 2009 Amendment Regulations apply to all procurements commenced on or after 20 December 2009 and make a number of important amendments to the 2006 Regulations; most notably the introduction of the remedy of ineffectiveness.

Where a contract is declared ineffective by the court, all future obligations under it are cancelled and the contract is set aside from the date of the declaration. The court may also make an order for the payment of compensation by one party to the other. In addition, a financial penalty will be imposed on the public body.

Automatic suspension

Under the 2009 Amendment Regulations, where challenge proceedings are brought, the award of the contract is automatically suspended. The contract cannot be entered into unless the suspension is lifted by the court or until the proceedings have been concluded. Under the 2006 Regulations the claimant is required to obtain an interim injunction if it wishes to prevent the award of a contract.

Time limits for bringing a claim

Claims for breach of the procurement rules, other than for ineffectiveness, must be brought within three months of the date on which the claimant knew, or ought to have known, of the alleged breach.

It may not always be clear when the time limit for bringing a claim starts to run: this will depend on the nature of the claim in the proceedings. Moreover, aggrieved bidders should not wait until conclusion of the tender process to see whether an apparent breach results in their elimination from the tender process. If they do so, the risk is that any claim brought at that stage may be out of time.

Claims for ineffectiveness must be brought within six months of the date on which the contract was entered into. It is possible in certain circumstances to reduce the length of the challenge period.

To disclose or not to disclose?

Unsuccessful tenderers are increasingly requesting disclosure of tender documents to enable them to properly build their case against an awarding public body. The public body may resist disclosure on various grounds including confidentiality with competitors' information being commercially sensitive.

Alternatively, the public body could compromise its ability to re-run future successful procurements by, for example, disclosing its model answers. The courts will however order disclosure in certain circumstances, including bidders' confidential information, subject to safeguards such as confidentiality rings and redacting and limiting access to information. Model answers may also need to be disclosed to enable potential claimants to determine whether they contain additional evaluation criteria that should have been disclosed to bidders as part of the tender process.

Important matters to bear in mind

With the remedy of ineffectiveness, the stakes are considerably higher given the imposition of a financial penalty on the public body where a contract is declared ineffective and the court's discretion to make consequential orders for compensation. This is in addition to any award for damages by the claimant.

The stakes are also raised for contractors that, in the past, could rest assured that once a contract had been entered into, there was no possibility of it being set aside and putting at risk upfront investment and future margin. Under the 2009 Amendment Regulations, the risk of a successful procurement claim is shared by both parties. It is advisable for public bodies and contractors to seek to agree contractual terms setting out the obligations and rights of the parties in the event of a claim for ineffectiveness being made.

Tenderers should consider the impact of the Freedom of Information Act obligations on the public body and designate any commercially sensitive information as not to be disclosed to third parties. Both tenderers and public bodies need to ensure that the procurement rules are followed strictly, while not forgetting to keep an eye on the principles of EU law. Finally, both parties need to act quickly where there is a potential challenge as limitation issues are far from straightforward!