Defence mechanisms

Against a backdrop of rising litigation, Fran Mussellwhite looks at what contracting authorities can do to protect themselves.

A significant majority of the respondents to our survey said that legal challenges had increased over the past three years, with only 2% noting a decrease. The greatest area of risk identified by respondents appears to be evaluation methodology, and in a separate article on page 12 we reflect on the apparent problems and potential solutions to this issue. In this article we consider the causes of the increase in procurement litigation, and ask what authorities can do to minimise spend on defending legal challenges.

The increase in litigation demonstrates that many economic operators are – rightly, as a matter of law – not afraid that challenging will prejudice their prospects of winning future bids. Whatever the legal position, there used to be a reluctance among many economic operators to ‘bite the hand that feeds you’. This appears to have been replaced by a perception that challenging poor processes exposes a failure to achieve value for money, and can bring reputational benefit to the challenging party. Virgin Trains’ recent challenge to the West Coast rail franchise procurement can only serve to raise awareness of this further.  

Double jeopardy
In specialised market sectors the competition for contracts among a limited number of providers can be intense, with failure to win a contract being the difference between insolvency and healthy profits. Sophisticated operators who have lost a bid know that bringing a challenge can result in a re-run of the process. This at once jeopardises their competitor’s position. In any event, the process of legal challenge can reveal useful information.   

The current economic climate may, of course, also explain why many bidders are more prepared to challenge contract award decisions that do not go their way. This is arguably even more the case where the competition is for inclusion on a framework, such as the many potentially lucrative centralised government frameworks.

Pushed to the limit
There was much debate when the EU Remedies Directive was implemented into UK law in December 2009, and then when the Public Contracts Regulations 2006 (the Regulations) were amended again in October 2011, as to whether these changes would give rise to an increase in procurement litigation.

These amendments to the Regulations introduced not only enhanced remedies for successful claimants (including for the first time the remedy of ineffectiveness) and the automatic suspension of a procurement where a claim is issued, but also a significantly reduced limitation period, meaning that claims now have to be issued within 30 days of the date the claimant first becomes aware of the alleged breach.

Whether the changes to the legislation are directly responsible for the rise in procurement challenges is unclear, but in our experience the reduced limitation period in particular has certainly meant that contract award decisions tend to come under more intense scrutiny at an earlier stage and that, occasionally, bidders are forced to issue proceedings on a protective basis while continuing to seek feedback from authorities as to why their bid did not succeed.

Further, the automatic suspension means that halting a procurement process is now a relatively simple and cheap step, with the need to prepare witness evidence to support an application for an injunction disposed of.

A notable comment made by one respondent to the survey was: “Many suppliers will now just ‘have a go’ issuing a standard ‘we wish to challenge’ letter regardless of whether there are any grounds”. This is clearly a frustrating situation for a contracting authority to be faced with, resulting in the need to spend valuable management time and money in responding to or defending a challenge.

Debrief encounter
In our experience, many economic operators will ‘have a go’ if they are in any doubt as to how a contract award decision has been made. If there is any inconsistency in what is presented to unsuccessful bidders in debrief compared with the process they were told would be used in the procurement documents, then alarm bells are bound to ring.

With the clock quickly ticking for them to be able to protect their position through the courts, ‘having a go’ is often the only way to get the information they need to satisfy themselves that the correct process has been followed.

The Regulations require that the criteria for the award of the contract and the reasons for the decision, including the characteristics and relative advantages of the successful tenderer, must be provided.  

However, if contracting authorities are able to respond openly to further questions asked by bidders during debrief, they are often able to assuage concerns at an early stage. As one respondent commented: “We carry out feedback to unsuccessful bidders. Generally this is sufficient to demonstrate the fairness of the process.”
For a debrief to be effective it is essential that the debrief team is clear on what they can and cannot say (that is, in terms of protecting winning bidders’ confidential information), and how far the team are prepared to go in discussing the losing bidders’ questions.

For example, a bidder may have a complaint about a particular perceived flaw – but if the flaw is immaterial and the bidder stood no chance of winning anyway, it may be better to address that ‘head on’ in a debrief to defuse the situation and set the clock running for bringing a challenge.

Viewing debrief as an opportunity to demonstrate the robustness and lawfulness of a procurement is often a far better tactic than responding defensively to requests for information received in this period and leading bidders to feel they have no option but to go to the courts to protect their position.   

Fran Mussellwhite is a solicitor at Bevan Brittan.