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Third Party Procurement Challenges

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Procurement challenges are part and parcel of working in procurement. Whether you are a tenderer, economic operator or a contracting authority it is likely that eventually you will either want to challenge the award of a contract, or that you will be faced with a challenge.

We often have clients who feel that they have been treated unfairly and wish to challenge the award of a public contract, on the basis of a breach of the Public Contract Regulations 2015 (PCR).

Alternatively, we have public sector clients sat on the other side of the fence who are faced with the prospect of a challenge which could potentially threaten the success of their entire project.

Usually the challenger is either a tenderer or an economic operator, in which case the PCR 2015 very clearly provides a statutory framework for remedies that enable them to challenge an unlawfully procured contract.

But what isn’t always clear, is what happens when those who bring a challenge aren’t tenderers or economic operators under the meaning of the PCR, and so are not afforded the option of a challenge under the statutory framework?

Firstly, any such third party aiming to fulfil the role of claimant, must prove to the court that they have “sufficient standing” for bringing a Judicial Review.

This issue was recently dealt with in the case of Wylde and others v Waverley Borough Council [2017] EWHC 466.

In this case the Council had entered into a conditional Development Agreement after a competitive tender process.  However, due to various potential financial implications, the Council decided that it wanted to vary the Development Agreement and issued a voluntary ex ante transparency (VEAT) notice.  VEAT notices were introduced in 2009 and are a way for Contracting Authorities to advertise the intention to let a contract without opening it up to formal competition.

If using a VEAT notice, the Contracting Authority must give sufficient information to justify the direct award and they must observe the minimum standstill period, to provide the opportunity for an economic operator to challenge the decision.

In this instance the VEAT notice did not receive any responses from potential tenderers.  Therefore, the Council was confident that their use of a VEAT notice and the direct award of the contract was justifiable and that no challenge would be raised to the development from any such economic operator.

The claimants however, were not an economic operator and instead comprised of 5 local tax payers.  The claimants were opposed to the development scheme and they claimed that the variation to the Development Agreement was illegal, amounting to an entirely new contract, therefore, requiring a new competitive tender process.

The Claimants sought to rely on the similar case of Gottlieb v Winchester City Council [2015] EWCH 231 to argue that their position as tax payers alone gave them “sufficient interest in the matter in which the application relates”.  They additionally argued that had a new process been run, this might have led to a different outcome which would have therefore impacted on the claimants.

The Council and the Developers counter argument was that even if a new tender had been run, this would not have affected the claimants because the development would have continued, albeit potentially with a new Developer.

Mr Justice Dove was somewhat critical of the Gottlieb decision and found that being a tax payer alone was not enough to establish sufficient interest.  The lack of interest in the VEAT was a significant indication that it was unlikely that, had a new process been run, the outcome would have been any different. So what is the effect of the Court’s ruling?

Firstly, it is likely that this decision will come as welcome news to both our developer and public sector clients, as it highlights the various problems which local residents will encounter when attempting to use a Judicial Review as a means for contesting a development scheme and may dissuade others from bringing such a case.

Instead of simply relying on their position as local tax payers, residents who oppose a development will have to establish that they have sufficient interest in the development in some other capacity, which as in this case, may be difficult to satisfy the Court.

It is worth noting however, that although Mr Justice Dove was critical of the Judgment in Gottlieb, he did not completely overrule the previous Judgment and although the Judgment in Wylde would appear to add some support to the argument that being a tax payer alone is not enough to establish “sufficient interest”, the picture remains decidedly unclear.

So, our advice to any council or developer who are faced with a potential procurement challenge is simple…

Seek legal advice.

It is undoubtedly better to err on the side of caution and make sure that you have the necessary advice and knowledge in place to help adequately protect any potential threat to your project than it is to try and resolve the issue without the necessary legal expertise.

James Sargeant is a Junior Associate at Quigg Golden

If you have comments or queries on this topic please contact James.Sargeant@QuiggGolden.com

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