In these recessionary times, competition for public sector contracts is fierce and challenges to decisions are becoming more common. The construction team has dealt with several challenges in the last few months alone. Matters are complicated by the changes to the regulations that came into force on 20 December 2009.

Public procurement is regulated by EU and UK public sector law contained in the Public Contracts Regulations 2006 as amended by the Public Contracts (Amendment) Regulations 2009, together called “the regulations”.

The regulations impose strict rules upon the way in which public bodies procure contracts. They also provide remedies for unsuccessful bidders if the regulations are breached.

Broadly speaking, the regulations apply to contracting authorities who seek offers in relation to public works, supplies or services contracts which are above the threshold value.

Thresholds

As of 1 January 2010 the thresholds changed. The regulations now apply to:

  • Public works contracts with a value above £3,927,260.  
  • Public supplies and services contracts:
    • If the contracting authority is a central government department, or other listed organisations, which include NHS trusts, the value of the contract has to be above £101,323.
    • Otherwise the value of the public supplies or services has to be above £156,442.  

A couple of words of caution on thresholds:

  • We have seen situations where contracting authorities have decided to comply with the regulations for all contracts, regardless of the value of the contract. This has had the effect of imposing all the obligations in the regulations on the contracting authority.  
  • Where a contract is terminated (which is much more common in the present economic climate), and the works or services remaining to be undertaken after termination are still above the thresholds, then those works should be retendered in accordance with the regulations. This can be a major headache for contracting authorities who are faced with addressing the fallout and delay that arises from a termination anyway.  

Procedure

Contracting authorities can only use one of four procedures for selecting the bidders which are the open, restricted, competitive dialogue or negotiated procedures.

Once selected, the bidders submit tenders which are assessed by the contracting authority on one of two bases. The chosen basis must be stated in the contract notice. The bases are either:

  1. lowest price (which is not permitted if the competitive dialogue process is used); or  
  2. the most economically advantageous offer. This takes into account other elements of the tender as well as the price and can probably best be equated with best value for money. The criteria and sub-criteria that will be evaluated must be set out in the contract notice, contract documents or any descriptive document. The relative weightings must also be set out.

The contracting authority then decides who to award the contract to.

If the decision arose out of a contract award procedure which commenced on or after 20 December 2009 then as soon as possible after the decision the contracting authority must inform all unsuccessful bidders of the following:

  • the name of the successful bidder;
  • the award criteria used;  
  • the score of that particular unsuccessful bidder and of the successful bidder;  
  • reasons for the decision, including the characteristics and relative advantages of the successful tender; and  
  • a precise statement of when the standstill period (or “alcatel” period) is expected to end. The standstill period is either:
    • 10 days, if the award decision letter is sent by email or fax; or  
    • 15 days, if the award decision letter is sent by any other means.

This is different from the position for contract procedures commenced before 20 December 2009, when the onus was on the unsuccessful bidder to request information from the contracting authority within 48 hours of being informed of the decision.

Challenging decisions

An unsuccessful bidder must usually commence high court proceedings “promptly and in any event within three months” from the date when the grounds of the challenge first arose. As a result of the recent case of Uniplex, an unsuccessful bidder is likely to have the whole three months to bring proceedings.

There is one important exception to the three-month rule, introduced by the 2009 amendments to the regulations, which relates to a declaration of ineffectiveness where there is a six-month rule (although this can be shortened to thirty days where a contract award notice has been published in the Official Journal or where the contracting authority has informed the economic operator of the conclusion of the contract and a summary of reasons).

In relation to procurements prior to 20 December 2009 the court has the power to order a temporary injunction, set aside a decision, order documents and/or where a contract has yet to be entered into, award damages.

In respect of procurements on or after 20 December 2009, a contracting authority is automatically obliged to suspend the contract making when a legal challenge to the decision is launched. If a contract with the successful bidder has already been entered into the court can order the ineffectiveness of a contract where certain serious rule breaches have occurred and fine the contracting authority as well. It can also shorten the period of a contract or simply impose a fine.

Finally, apart from court proceedings it is also always open to an unsuccessful bidder to make a Freedom of Information Act request, which can be used as a tactic to obtain documentation to support a challenge.

This whole area is rapidly evolving and merits careful attention by all parties involved in it. If one prediction can be made, it is that challenges to decisions are likely to continue to increase.

Look out for our autumn seminar programme which will include seminars on this topic.