In most competitions, there can only be one winner. When it comes to bidding for a public contract, the rules are not much different. What happens, then, when a bidder is unhappy with something about the process or with a contracting authority's decision and wants to challenge it?
What are the timescales for bringing a procurement challenge?
The first, and perhaps the most important, issue for potential challengers is time. It is important to move quickly when you think there is a problem in a procurement process.
As soon as you receive something alerting you to a problem, be that an Invitation to Tender that sets unfair requirements, a clarification response, or feedback in your letter (known as a "standstill letter") informing that you have not secured the contract in question, clocks start ticking.
Time-bar
While bidders and contracting authorities in Scotland and England are subject to separate sets of procurement regulations, in both jurisdictions a legal challenge must be raised within thirty days from the day a bidder first knew, or ought to have known, that it had grounds to raise an action. This is sometimes called the "date of knowledge". The date of knowledge will depend on what the basis for challenge is – for example, if the potential breach of procurement rules is an issue with evaluation, then it may be the standstill letter that provides the relevant knowledge. If, on the other hand, the problem is the award criteria themselves, then the date of knowledge is likely to have been the date on which the invitation to tender was issued.
It is therefore important to challenge problems with procurement processes as soon as a bidder sees them – a bidder that is unhappy with the award criteria cannot "wait and see" and bring a challenge only if its tender is unsuccessful (it is though possible to bring a challenge and ask the court to pause ("sist" in Scotland, "stay" in England and Wales) the action pending the outcome of the procurement).
Failing to adhere to the tight time limits can have potentially fatal consequences for a legal challenge. See here for our blog covering just a couple of cases which demonstrate the importance of seeking legal advice promptly where there is a risk of running out of time. It is therefore important to seek legal advice as soon as possible in order to determine if there is a legal issue with the way that a procurement is being or has been run.
The standstill period
The standstill period comes at the end of the process. It is a minimum, statutory period following the issue of standstill letters, in which the contracting authority must not enter into the contract with the winning bidder.
If letters are sent electronically the standstill period must be at least ten days long.
The purpose of that is to allow unsuccessful tenderers to consider whether there is anything they wish to challenge. The standstill letter has to provide reasons why the winning bidder is to be awarded the contract and why its bid is better than those of other bidders. That may indicate issues with the procurement process.
Once the standstill period expires the contracting authority can enter into the contract with the winning bidder. Once it has entered into that contract, there are very limited circumstances in which the courts will set the contract aside, but a claim can still be made for damages.
The standstill period can be extended by the contracting authority (although as we wrote here, changes to procurement law soon to be introduced in England, Wales and Northern Ireland, and in Scotland for procurement by UK-wide bodies, will change that).
On what grounds can an unhappy tenderer bring a procurement challenge?
The grounds of challenge upon which a disappointed bidder might challenge a decision of a contracting authority can be split into two categories. The law in this area is in substance the same across the UK.
Procurement principles
All contracting authorities are required to comply with four key principles in public procurement decisions: they must treat economic operators (i) equally and (ii) without discrimination, and they must act in a (iii) transparent and (iv) proportionate manner. They are required to comply with these all the way through the procurement process, from deciding what to buy through to choosing the successful bidder, and beyond.
Challenges commonly arise where the contracting authority has not approached the procurement in the way that it said it would, or has not treated all bidders equally.
Manifest error
Challenges can also arise where the contracting authority simply gets its evaluation wrong. For example, it may have misinterpreted the terms of a bid, or miscalculated scoring in its evaluation process with the result that the disappointed bidder wrongly missed out on the contract. The courts will generally be reluctant to second guess the evaluation decisions of contracting authorities unless the error is one that is "obvious or easily demonstrable without extensive investigation", such as an arithmetical mistake. In other words, the mistake must be a "blunder so obvious and obviously capable of affecting the determination as to admit of no difference of opinion". If two interpretations of an award criterion are possible, for example, then the court is unlikely to say that the evaluators used the wrong one.
Who can bring a challenge?
The duties that contracting authorities have under public procurement law are duties that they owe to "economic operators". A recent judgment of the High Court of England and Wales held that this only extends to bidders in a process – intended subcontractors, group companies or suppliers do not have standing to bring procurement claims. If the challenge is to the design of the process (for example the requirements in the ITT) then the duty will extend to potential bidders.
Is there anything I have to do before I bring a challenge in court?
An important point to bear in mind if contemplating a challenges is the applicable requirements for "pre-action" steps, i.e. what a challenger must do before serving its claim.
In Scotland, the disappointed bidder, or its solicitor acting on its behalf must send a "letter before action". This is a letter which puts the contracting authority on notice of the disappointed bidder's intention to bring legal proceedings and the reasons for them, by reference to the relevant procurement rules. That letter must be sent before an action is commenced (though it can be very soon before the action is commenced).
In England, the procurement rules contain no equivalent obligation on the disappointed bidder to send such a letter, though the civil procedure rules do. Failing to do so will not therefore invalidate a claim, but may have consequences in the claimant's liability for (or ability to recover) costs.
How do I start a procurement challenge?
There is no prescribed period a disappointed bidder must wait before raising proceedings after sending its letter before action, but the longer the contracting authority has to consider the pre-action correspondence, the greater the scope for resolving the issue without the need for court action.
If however the matter cannot be settled between the parties, the next step is raising proceedings in the relevant court.
In most cases in Scotland, procurement challenges are brought in the Commercial Court in the Court of Session. In England and Wales, cases are brought in the Technology and Construction Court, part of the High Court.
What remedies are available?
There are three remedies a disappointed bidder may seek if its challenge is brought before the standstill period ends. It may ask the court to:
- set aside any unlawful decision taken in the process, including a decision to award the contract; or
- amend unlawful tender documentation; and
- make an award in damages for loss or damage suffered as a consequence of the breach, provided that the breach is "sufficiently serious" to justify damages.
After the contract has been entered into (when the standstill period has ended), a challenger will generally only be able to pursue an award of damages. In limited circumstances, such as where a contract has been the subject of a direct award and not subject to any competitive procurement process, a challenger may be able to seek an ineffectiveness order (an order which declares that the contract awarded is ineffective from the date on which the order is made, with the effect that all of the obligations which are "unperformed" will be unenforceable).
What do I have to do once I've lodged my challenge?
In all litigation it is essential to serve proceedings on the other party, but this is particularly important in procurement cases because of something called the "automatic suspension".
In Scotland, once the pursuer receives a signeted summons back from the court the summons has to be served on the contracting authority. Given tight timescales that will often be by sheriff officers, unless the contracting authority has agreed in advance to accept service, for example by email or through its solicitors. When (and only when) the summons has been served, the authority is prohibited from entering into a contract with the winning bidder until the claim is resolved or the court makes an order allowing it to do so.
In England, once the sealed claim form has been received back from the court, it is sufficient to make the contracting authority aware that proceedings have been raised. This is easier where there has been pre-action correspondence so that lines of communication are already open. But although the automatic suspension will begin from that point, it is still necessary to serve the claim form and to serve the particulars of claim within seven days of that (this is a shortened version of the normal period and is specific to procurement claims).
The challenger must also make the successful bidder aware that it has brought proceedings against the contracting authority.
What happens next?
Many contracting authorities are keen, for several reasons, to get the new contract up and running, so it is quite common for them to make an application to the court asking it to lift the automatic suspension. In Scotland those applications are almost always granted – the statistics are a little more balanced in England and Wales – in either case the question the court must ask is whether the balance of convenience between the parties favours maintaining the suspension or lifting it. If damages can provide the challenger with a sufficient remedy, or the public interest weighs strongly in favour of the new contract beginning, that balance will generally favour allowing the authority to proceed.
In English cases where the suspension is not lifted it is common for the challenger to be required to give a "cross undertaking in damages" – a commitment that, if the authority wins, the challenger will cover the authority's losses, such as from having to pay more to keep an existing contract in place for longer than intended.
What if I win my case?
If the challenger is successful then, assuming the suspension has not been lifted, the court will ordinarily set aside the decision to award the contract to the successful bidder and the contracting authority will need to start a new procurement process. In some circumstances the court may direct a particular outcome (for example finding that the challenger should have won the contract) but only in very exceptional circumstances will it order the contracting authority to enter into a contract with the challenger.
If the authority is persuaded that it did indeed get things wrong, it will often be possible to resolve the issue without lengthy proceedings, with the authority abandoning the procurement and starting a new one (although authorities have to proceed with care here – abandonment does not prevent an action for damages, and the successful bidder may itself challenge a decision to abandon simply to make someone else's challenge go away).
Is there one key piece of advice you would give to a tenderer unhappy with a procurement decision?
Time is of the essence so act quickly. If you perceive there to be a problem with a public procurement exercise then the fact that you have developed that view is a good indicator that the clock is already ticking to do something about it.
If you have any questions in relation to the above, or indeed in relation to procurement law more generally, please get in touch with Jamie Dunne, Charles Livingstone or your usual Brodies contact.
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