Public procurement challenges – a new regime beckons

3rd February 2021

As the UK looks to its post-Brexit future, the government is consulting until 10 March 2021 on transforming public procurement. Its stated goal is to speed up and simplify procurement processes, place value for money at their heart, and unleash opportunities for small businesses, charities and social enterprises to innovate in public service delivery.

In this briefing, Walker Morris commercial dispute resolution and procurement specialists Lynsey Oakdene and Kathryn Vickers consider one aspect of the consultation – the proposals for fair and fast challenges to procurement decisions.

What is being proposed?

The proposals, which are significant, are set out in Chapter 7 of the government’s Green Paper. In short, they are:

• Reforming Court processes, including through the introduction of a tailored expedited process, to speed up the review system and make it more accessible.
• Investigating the use of a tribunal system to determine low value claims and issues on ongoing procurements and for wider use should the proposed Court reforms not deliver the required benefits.
• Refocusing redress for suppliers onto pre-contractual measures which preserve their opportunity to participate in the procurement.
• Capping the level of damages available to aggrieved bidders to legal fees and 1.5 x bid costs, reducing the attractiveness of speculative claims.
• Amending the test to be applied by the Courts when determining whether to lift the automatic suspension so that it is no longer based on the test applied when granting an injunction, but is a more appropriate, procurement-specific test.
• Removing automatic suspension on the award of contracts let competitively in crisis or extreme urgency situations.
• Removing the mandated requirement to provide an individual debrief letter to each bidder at the end of a procurement process.

And why?

According to the Green Paper, while the current procurement review system is rigorous, thorough and trusted, concerns have been raised by suppliers and contracting authorities that the process is lengthy, expensive and complex. The government wants to develop a new remedies system that can make faster decisions on procurement challenges on all types of procurements, relying more on pre-contractual measures, so that fewer challenges proceed to court for post-contractual remedies. It proposes formally stating in new regulations a preference to shift the focus of supplier remedies away from damages and towards measures which allow for elements of a procurement to be re-run, decisions to be set aside or documents amended where a breach has been identified.

As to the proposal to cap the level of damages, the government says that it does not believe the principle that public funds must be spent effectively is upheld by spending large amounts of public money on expensive litigation and/or to compensate losing bidders in the event that the rules are breached. While the government recognises that bidders may regard limiting the level of damages as unfair, and suppliers may be less willing to bid for public contracts, it does not believe it is an appropriate use of public funds to pay compensation to suppliers for the loss of a ‘chance’ of being awarded a contract because of unintentional errors made during the procurement process.

WM Comment

While the government’s proposals for improving the current review system and making it more accessible are largely to be welcomed, arguably one of the most controversial proposals concerns the capping of the level of damages. One of the themes running through this Chapter of the Green Paper is that the potential for large payouts can encourage speculative claims from bidders. However, the government recognises that this risk has been mitigated to some extent by recent UK court rulings which have set a legal test whereby damages can only be awarded where the breach is ‘sufficiently serious’. It also recognises that only a small proportion of claims make it to trial.

When implementing these reforms, it will be important to ensure that the review system remains a fair one for all involved – while innovation and efficiency are to be encouraged, the level of compensation awarded for significant breaches must nevertheless act as a suitable deterrent against poor procurement practices.

Contact

Walker Morris’ Commercial Disputes team are experienced in advising both contracting authorities and economic operators. If you have any queries in relation to the government’s proposals, or would like any advice or assistance in relation to public procurement contracts and effective commercial dispute resolution, please do not hesitate to contact Lynsey or Kathryn, who will be very happy to help.