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Procurement Challenges: An overview for both Unsuccessful Bidders and Contracting Authorities

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The first point to be examined in any article on remedies on public procurement law is whether an economic operator has standing to bring a procurement challenge. Regulation 91(1), Public Contracts Regulation (PCR) 2015 provides that:

“A breach … is actionable by an economic operator which, in consequence, suffers, or at risk of suffering, loss or damage”

In essence, this means that an unsuccessful bidder who has been affected by an alleged breach of the procurement rules by the contracting authority shall be able to bring an action.  However, prospective bidders who were excluded from participating in the tendering process will not have standing to be able to bring a challenge, unless it relates to their exclusion.

A procurement challenge must be commenced within 30 days of the date on which the economic operator knew or ought to have known that it had grounds for commencing proceedings.  The court shall also have discretion to be able to consider whether to extend the period for bringing a challenge if there is good reason for doing so.  However, the courts may not extend the limitation period so as to permit an economic operator to commence proceedings 3 months after they knew or ought to have known that they had grounds to commence proceedings.  Once a claim form has been issued, proceedings have commenced. (Regulation 94 (1)).

Upon commencement of proceedings the economic operator must serve the claim form on the contracting authority within 7 days of the date of issue.

The remedies available to any economic operator differ, depending on whether they relate to pre-contractual remedies or post-contractual remedies.  In relation to pre-contractual remedies, the remedies that are available to the claimant are as follows:

(a) An order setting aside a decision.

(b) An order requiring the contracting authority to amend.

Both remedies can be as an alternative to a claim for damages or be in addition to same.

Once a Contracting Authority makes an award decision, a standstill period must be entered into between the Contracting Authority and the successful bidder in order to allow the unsuccessful bidders to consider whether they have a potential challenge.

The standstill period begins once a contracting authority sends an award notice by fax or email to all economic operators involved in the tendering process and ends at midnight on the end of the 10th day thereafter. (Regulation 87(2), PCR 2015).

A Contracting Authority must issue an award notice as soon as possible after a decision has been made pursuant to Regulation 86 (1) PCR 2015.  The award notice must include; the award criteria, the reasons for the decision, including why the successful bidders tender was preferred, the scores obtained by the recipient and the operator to be awarded a contract, the successful operator’s name, a statement as to when the standstill period ends and any reasons for non-compliance with the technical specification.

The above points are a requirement pursuant to Regulation 86 (2), PCR 2015.

A somewhat similar notice is also issued to candidates who applied to be included in the tender process, however, were unsuccessful, unless they were previously informed of their rejection and the reasons for same.  (Regulation 86 (3), PCR 2015).

 

Automatic suspension

The 2009 Regulations introduced the automatic suspension of the tender process once proceedings had been issued by an economic operator and served upon the relevant Contracting Authority.  Meaning that it is no longer necessary to seek injunctive relief to restrain a contracting authority from awarding and entering into contract with an economic operator.  Any such suspension shall remain in place until such time as it is brought to an end by an interim order of the court under Regulation 96.1 of the PCR 2015 or upon determination of the proceedings.

In these circumstances the Contracting Authority may apply to a court to lift or amend the automatic suspension.  In deciding whether or not to lift the suspension the courts have decided that tests to be applied is the test set out in the American Cyanamid case used to decide whether injunctive relief is appropriate:

  • Is there a serious issue to be tried;
  • Whether damages would be an adequate remedy for either party;
  • Where does the balance of convenience lie?

 

Damages

In circumstances where the courts determine that an automatic suspension should be upheld, as well as setting aside the Contracting Authority’s decision, the courts will also decide whether to award damages.  Damages will generally only be awarded in circumstances where there has been serious breach of the procurement rules by the Contracting Authority.

 

Post-Contractual Remedies

A remedy that may be awarded by the courts in circumstances where an economic operator has been successful in challenging a contractual award is a declaration of ineffectiveness.  This remedy was introduced by the 2009 Regulations and the effect of this is generally that the procurement procedure must be re-run.  Grounds for a declaration of ineffectiveness are:

(a)  When a contract has been awarded without the necessary notice being published in OJEU, in circumstances where a notice was required.

(b) Where there has been a failure to comply with a standstill period or an automatic suspension.

(c) Under a framework or dynamic purchasing system agreement, when a call of contract is awarded with a value more than the applicable public contract threshold in breach of the applicable requirements.

The remedy of a declaration of ineffectiveness is not discretionary and must be awarded by the court if it is satisfied that any of the three grounds above have been satisfied.

The Regulations also make provisions for the courts ability to be able to address issues of restitution and compensation between the parties to the contract, so that an outcome can be achieved which is just in all the circumstances of the case.

So, what questions must a Contracting Authority or unsuccessful bidder ask itself in relation to a potential challenge?

(a) Do you or the party wishing to take an action against you have standing?

(b) Is the challenge pre or post contract award and what reliefs are available?

(c) If proceedings are issued and an automatic suspension put in place, what does the American Cyanamid test say having regard to the facts of the case

(d) If the Courts finds a breach of the procurement rules, is the breach sufficient to warrant damages?

(e) Is there ground for a declaration of ineffectiveness?

John Bell is a Barrister and Associate at Quigg Golden

If you have comments or queries on this topic,

contact John.Bell@Quigg Golden.com 

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