Government contract disputes rise by 84% in a year: research

The number of disputes over public sector contracts has soared by 84%, research published by law firm EMW has claimed.

According to the firm’s analysis, the number of complaints made to the Office of Government Commerce (OGC) jumped to 57 in the twelve months to September 30 2010, up from 31 in 2009. The number of complaints investigated by the OGC also rose 29% from 21 to 27.

Simon Vumbaca, a consultant at EMW, said that the combination of an economic downturn and public sector cuts was fuelling greater competiveness between suppliers and predicted that the number of complaints to the OGC would continue to rise.

He said: “Public sector suppliers feel that they have little visibility over their pipeline of orders so they are going to be much more protective of any public sector contracts that they feel they should have won. There is a lot at stake.

“If the margins on contracts awarded by public authorities do start falling, those businesses will need to win more contracts to make up for the lack of revenue they expected from any failed bids. We are almost certainly going to see more complaints from businesses asking the OGC to investigate contract awards.”

Despite the increase in the number of complaints, the OGC remains extremely reluctant to re-tender contracts, with just one contract being re-tendered in 2010 and none at all in 2009. However, Vumbaca said that challengers can still benefit from lodging a complaint with the OGC even if the likelihood of forcing a re-tender was very low, in part because it delays the winning bidder from beginning work on the contract until the complaint has been considered.

Vumbaca added: “Some companies are using the complaints system to try to gain more information about their competitor’s bid or simply to delay their competitor from actually starting the project. Companies are continuing to explore other aggressive tactics to challenge bids and the Government’s austerity drive means these tactics could be more widely used over the next few years.

“There is a growing trend in rival companies submitting Freedom of Information Act (FoIA) requests about the bidding process in hope of gaining more detailed market intelligence. However, these requests often fail because the company making them does not understand how to time or draft the request to avoid common grounds for refusal, such as commercial confidentiality.

“Companies increasingly want more detailed information about how their own bid compared to other bids. And rightly so. The level of detail provided by the public authority to explain why one company was outbid by another no longer satisfies many businesses, which is why many go on to launch formal complaint proceedings with the OGC.”