Resolving public procurement challenges: A practical update for clients

26th September 2017

The Public Contracts Regulations [1] allow disappointed tenderers or certain other parties who have been affected by an alleged breach to take legal action.  However, procurement challenges raise significant legal and procedural hurdles.  Recent case law and the publication of a new protocol for public procurement cases highlight just how important it is for any potential claimant to seek urgent, specialist advice. Walker Morris’ Gwendoline Davies and Lynsey Oakdene explain.

Challenges with procurement challenges!

Apart from the fact that there are specific legal restrictions on the bringing of a public procurement claim (such as whether a disappointed party has the relevant standing; whether the claimant can establish a breach; and so on), a key trap is that the timescale within which a claim may be brought and served is particularly tight.

The cost and risk of issuing a claim mean that potential claimants generally wish to be as sure as possible that their claim has merit before commencing proceedings. However the limitation deadline of just 30 days from the date on which the potential claimant first became aware of the grounds for its complaint, and the need for contracting authorities to protect the confidentiality of commercially sensitive submissions and documents, can operate as significant obstacles.  (The requirement that a claim must be served on the defendant and any other parties within just 7 days of issue is also a procedural constraint which can cause practical problems, particularly when the court’s 2-day deeming provisions [2] and/or weekends and holidays are taken in account.)

Other issues of which potential claimants should be aware are that there may be a brief and strict ‘standstill’ following the authority’s announcement of its intention to award the contract to the successful bidder within which potential claimants may consider their position before the contract is entered into; the issue of proceedings triggers an automatic suspension of the contract [3]; and that available remedies differ depending whether or not the contract has been completed at the time the challenge is made.

Over the last few years, regulations governing the public procurement process have been subject to a series of amendments and additions, many of which have resulted in it becoming increasingly difficult for claimants to proceed or succeed with their claims. Recent case law and procedural changes also mean that, perhaps more than ever before, potential claimants now need to seek urgent and specialist legal advice immediately there is any possibility of a procurement contract claim.

Additional legal and procedural hurdles

In April 2017 the Supreme Court introduced an additional legal hurdle for claimants when it determined that the EU’s ‘Francovich’ conditions [4] applied to claims brought under the Public Contracts Regulations and that breaches of procurement law would only be actionable for damages where the claimant was able to prove that the breach was “sufficiently serious” [5].

In September, the High Court refused a claimant’s application for an extension of time for service of its particulars of claim and for specific disclosure of documents pertaining to the successful bidder’s bid (without which, it argued, it could not produce its particulars) [6].  In so doing the High Court confirmed:

• A challenger could not make an assertion about a successful tender and expect to be given all the terms to undertake a comprehensive review – that was the job of the authority before the award was made. Rather, a procurement challenge is limited to whether the contracting authority made a manifest error in evaluating the tender.
• The claimant had embarked a risky course by choosing to apply for more time to serve particulars rather than doing the best it could on the information available, and the tactic failed.
• The claimant’s argument that determining whether there was a serious issue to be tried required a thorough and detailed review (and therefore merited early, specific disclosure) was wrong.
• The claimant’s request for specific disclosure failed because (a) it was not necessary for the claimant to plead its case; and (b) early disclosure of such highly confidential documents would be disproportionate and unjustified.

To help parties with the particular challenges of public procurement cases, and consistent with the UK courts’ wider drive to encourage parties to resolve disputes as quickly and cost-effectively as possible (and, ideally, without progressing to litigation), the Technology and Construction Court published, in July 2017, a Guidance Note on Procedures for Public Procurement Cases.  The Guidance effectively amounts to a pre-action protocol because, whilst it is not mandatory, a failure to follow its provisions may lead to costs penalties in cases where litigation is pursued which might otherwise have been avoided.  Amongst other items, the Guidance encourages parties to exchange key information and documents about the claim, and to consider using Alternative Dispute Resolution (ADR) [7] methods (to the extent that that is practicable within the timescales allowed).  It also provides practical recommendations to balance the competing needs of confidentiality of sensitive documents on the one hand, and disclosure to assist dispute resolution, on the other.  The Guidance also contains a procedure for claimants to follow where they require to issue judicial review proceedings alongside their procurement claim.  (That can be necessary or advisable where, for example, a claimant’s right to bring a procurement claim might be disputed.)

All of these recent developments impact upon a party’s ability to successfully pursue a claim.

WM Comment

Public procurement claims raise unique and increasingly significant challenges for potential claimants. Legal risks and procedural requirements can result in missed opportunities and wasted costs.  The best advice is therefore for anyone considering a claim to speak to a specialist at the earliest possible opportunity as soon as they become aware that they may have grounds to make a challenge, as the time limits run from the date of this knowledge.

Walker Morris advises on the full range of dispute resolution procedures involving public law issues including procurement challenges, judicial review applications, court proceedings, the exercise of regulatory powers, investigations, claims for breach of duty and other regulatory procedures. Our Commercial Dispute Resolution team is regularly instructed to advise both authorities and contractors on procurement challenges brought under the Public Contract Regulations and/or in judicial review proceedings.  Our litigators work closely with the commercial lawyers in our Public Sector team, to advise upon the appropriate strategy for any given case, in the relevant commercial context.

If you would like any further advice on information on any of the issues highlighted in this briefing, please do not hesitate to contact Gwendoline Davies or Lynsey Oakdene, who will be very happy to help.

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[1] See: Public Contracts Regulations 2006; Public Contracts (Amendments) Regulations 2009; Public Procurement (Miscellaneous Amendments) Regulations 2011; Public Contracts Regulations 2015; and Concession Contracts Regulations 2016
[2] Civil Procedure Rules 6.14 and 7.5 (1)
[3] which puts the onus on to the contracting authority to apply to the court to lift the suspension.
[4] namely, the conditions applicable to violations of EU law (also known as the principle of state liability in EU law) which derive from the case of Francovich v Italy [1991] ECR I-5357>  The conditions are: the rule of European Union law infringed must be intended to confer rights on the individual; the breach of that rule must be sufficiently serious; and there must be a direct causal link between the breach and the loss or damage sustained by the individual.
[5] Nuclear Decommissioning Authority v Energy Solutions EU Ltd (now called ATK Energy EU Ltd) [2017] UKSC 34
[6] Cemex UK Operations Ltd v Network Rail Infrastructure Ltd (2017) (unreported as at the time of writing)
[7] For more information on ADR, see our recent article and our website