Should you challenge a procurement decision?

Almost all organisations have felt the pain of spending considerable time and effort tendering for an important public sector contract and then being told that the bid was ultimately unsuccessful. In most instances, there will be legitimate reasons for a bid failing but what should a bidder do if they believe that the procurement process was unfair and want to challenge a decision? It is vital that they approach their next steps carefully as these may have important commercial, legal and financial impacts for their business.

What are the reasons for making a claim?

There are a variety of reasons why bidders may choose to challenge a procurement decision, including (but not limited to):

• their price was lower than the winning bidder;
• the procurement documentation/questions/structure favoured the incumbent bidder;
• the evaluators have incorrectly scored the response;
• the winning bidder provided an unrealistic, abnormally low price;
• being incorrectly barred from bidding at the qualification stage;
• technical issues uploading tender submissions via an online portal; and
• suspected corruption or bribery which has distorted the procurement outcome.

Whatever the reason, bidders need to think rationally about their claim, weigh up the options available to them and take all information into account before proceeding. In many instances, procurement decisions can be easily explained via tender specification documents (such as evaluation and scoring criteria) – so it is important that bidders are fully aware of what parameters are involved before continuing with a challenge. If they are unsure of the legitimacy of their claim, they should seek both legal and bid specialist guidance.

Making a legal challenge

In UK public tendering, challenging a procurement decision is likely to involve legal action involving public courts. As such, it is critical that bidders engage with a lawyer experienced in procurement litigation (including relevant industry / contract size experience) at the earliest stage possible.

A good lawyer will give independent advice on the likely outcomes of the case (based on the situation) and also provide a breakdown of the costs of their services, the courts, and what potential damages a claimant’s organisation might need to pay if a court decision was awarded against them. Bidders should review these direct costs and also the potentially considerable amount of employee time needed to prepare a legal case and determine whether the risk of winning or losing a legal claim makes sense for their business. In many instances, winning a claim might only be a pyrrhic victory – as the financial and commercial costs (such as minimal compensation claims and damaged reputation with Buyers) may outweigh any compensation gained through the courts.

If bidders believe that legal action is the most suitable path, they should understand that there is only a limited time to challenge procurement decisions. Public bids have at least a 10-day period after the bid result notification – called a “standstill period” – where bidders can object to the result, asking the Buyer to clarify and respond to their concerns before conclusion of the procurement process. There is also a 30-day period (from the date of knowledge of a breach), to file a claim in the courts. It is worth remembering that the date of a knowledge of a breach may not actually be when the results were issued and could have been months earlier upon the release of the tender documents – effectively time-barring any potential claim!

If your objective is to overturn the contract award in the hope of the contract being awarded to you, then you must raise your objections to the buyer within the standstill period.

If a challenge is raised after the 10-day stand-still period but within the 30-day period you will not be able to overturn the contract which has by then been awarded, and your redress will be restricted to payment of compensation and/or wasted bid costs.

In very serious cases, the court may declare the contract to be ‘ineffective’, meaning that the contract ceases to exist and is treated as if the award had never been made. Declarations of ineffectiveness are very rare as they are usually not in the public interest.

Any legal action taken will interject and halt the award of a contract. Upon resolution of the legal process, which may take several months, outcomes could include:

• winning the case and being awarded the contract;
• winning the case and being awarded compensation;
• winning the case with the procurement being re-run for the contract; or
• losing the case, and paying legal / court cost and potentially damages to the Buyer for non-delivery of the contract.

Alternative avenues to challenge procurement results

As an ill-thought-out or high profile legal challenge has the potential to cause significant damage to bidders’ brands and relationships with Buyers, other avenues may want to be explored to challenge a procurement result. These may include seeking out of court resolution, writing to the CEO of a Buyer, approaching an industry regulator, entering discussions with a tribunal (in the case of the construction industry) or even contacting the media. However, careful thought is needed when deciding what approach should be taken and specialist legal / commercial advice should be sought.

Pre-emptive action may nullify the need for claims

Public procurement opportunities in the UK will have a set time period during the live bidding phases for bidders to ask clarification questions to Buyers. All queries and answers should be collated at regular intervals and shared transparently with all bidders involved in the procurement process. This mechanism provides the perfect opportunity to raise concerns, ask questions and receive clarity from the Buyer before tender responses are submitted – perhaps negating the need to pursue a costly claims process after the procurement process has closed.

Potential questions from bidders often focus on the following issues:

• the procurement process/documents;
• the evaluation/scoring mechanisms involved;
• the specification documents and clauses; and
• steps taken to avoid conflicts of interests.

Bidders should be aware that the answers that Buyers provide may constitute a material change in the specification and legally supersede any relevant information or instructions provided in the original bidding documentation. Understandably, savvy bidders will often use this to their strategic advantage by asking tactical questions which:

• seek to create a level playing field in the procurement process by asking the Buyer for information that only the incumbent might know;
• create complications for their competition by knowingly asking for clarity on certain issues that 1) competitors will find difficult to respond to or 2) which the bidder has very strong experience in; and
• indirectly eliminating other competitors from the procurement process by asking questions on pre-qualification conditions and minimum requirements.

Bid specialist consultancies are adept at such techniques and will provide expert advice as to where, when and how clarification questions can be raised to the benefit of their clients.

To challenge, or not to challenge?

There are cases where challenging a procurement outcome is the right and fair thing to do.

However, as we have seen, the process is not without risk. You must have a solid basis for your challenge and be able to prove impropriety in some significant aspect of the procurement process.

Therefore, it is far better to make use of the alternatives described above. If you feel you must challenge, take early advice from a procurement lawyer and from a bid specialist. In many cases it may be wise to take a pragmatic view, identify lessons learned (what could we have done differently …), and move on to the next bid.

 

AM Bid
14 Newmains Holding
North Berwick
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