Project Delivery - Part 2 - Challenging a public sector award decision

Welcome to our Project Delivery article series, designed to provide practical assistance to cover all the key stages of the delivery of projects in the built environment, from inception to handover. We started our journey at the very beginning with a practical introduction to public sector contracting, and the legal procurement regime. In this article, we continue with the topic of public procurement, looking at challenges to a public sector contract award decision under the Public Contracts Regulations 2015. Next month we will take a look at some of the contractual issues to consider with early contractor involvement.

We hope you find this series interesting, if you would like to discuss the article series further, please contact Steve Cannon and Victoria Peckett.

Challenging a public sector award decision 

In our last article, Bidding for UK Public Sector Construction Contracts, we provided a practical introduction to public sector contracting and the legal procurement regime that applies. We looked at the current regulations that apply to the award of public contracts and addressed some common questions about the public procurement regime in the construction sector.

In this article, we look at how bidders can challenge an award decision under the Public Contracts Regulations 2015 (the Regulations).

Organisations that participate in public sector tender processes are well aware of the disappointment caused by investing considerable time, cost, and effort in preparing a bid, to later find out they have been unsuccessful. In many cases, there are legitimate reasons as to why a bid fails. This should be explained by the contracting authority in a feedback letter (often referred to as a standstill letter or award decision notice) with reference to the authority’s project specific requirements and evaluation criteria. 

But what should a bidder do if it believes a contracting authority has failed to comply with its legal obligations under the procurement regime during the procurement process?

Act quickly

It is important for any aggrieved bidder to consider its next steps carefully, as this will undoubtedly have important commercial implications for its business. Any such consideration must be conducted quickly because strict timescales apply to legal challenges under the procurement regime. If a bidder is aggrieved by an authority’s error during the procurement process, it is vital that the issue is raised immediately and not left until after the award decision is announced. Once the award decision is announced, there may be only 10 calendar days in which to prevent the authority from awarding the contract to its chosen supplier. 

Alternatives to legal proceedings

Before we discuss initiating legal proceedings, it is worth considering the alternatives available. 

Often, communication can be used to resolve a potential dispute without recourse to legal proceedings. If, when receiving feedback at the end of the procurement, it becomes evident that errors may have been made by a contracting authority during the process (and those errors were not known to the unsuccessful bidder at an earlier stage) we often see award decisions postponed or abandoned by an authority as the direct result of correspondence received from an aggrieved bidder. It is important that any correspondence (i) sets out factually and in detail, the areas of concern/potential errors made, and (ii) is sent to the authority quickly (certainly within the 10-calendar day standstill period, and ideally in the first few days) so it can be properly considered before the contract is awarded by the authority to the chosen supplier.

For less urgent issues, the Cabinet Office Public Procurement Review Service (PPRS) (formerly known as Mystery Shopper Scheme) also provides a right to complain outside of legal proceedings. Although the PPRS has no power to penalise a contracting authority, pause a procurement process, or change a decision made by an authority, a complaint can result in the authority improving its practices for future procurements.

Legal procurement challenges under the Regulations

Who can bring a challenge under the Regulations?

Generally, a claim can be brought by any organisation who could have delivered the contract in question but has been, or may have been, denied the opportunity to deliver the contract due to the authority’s breach of the Regulations. The rules surrounding a sub-contractor’s right to bring a challenge against an authority are less straightforward and will very much depend upon the circumstances and the facts in play.

Why might a challenge be brought?

A contracting authority is required to comply with the detailed procedures laid out in the Regulations. This includes an obligation to treat all bidders equally, without discrimination, and act in a transparent and proportionate manner. It also must not design a procurement that artificially narrows competition, including unduly favouring or disadvantaging certain bidders. Some example grounds for challenge include:

• A contract has been directly awarded to a competitor without a procurement.
• A contract has been awarded under a framework which is outside the scope of that framework. 
• A specification that demands a deliverable that only the incumbent can provide.
• A decision to accept a competitor’s bid after the submission deadline.
• A decision to include disproportionate insurance requirements in a Selection Questionnaire.
• Incorrect scoring applied during the evaluation, including where the scoring contains mathematical errors.
• The reasons provided in the standstill letter do not reflect the scoring matrix in the tender documents.
• The standstill letter implies evaluators have considered factors that were not disclosed as criteria in the tender documents. 
• A conflict of interest exists between the authority’s project team or an evaluator, and a bidder.
• A previously procured contract is being substantially renegotiated or extended outside of the variation terms set out in the contract.

What types of challenges can be brought?

Challenges can include claims for the following grounds. The type of claim is dependent on whether the contract has been entered into at the time the claim is issued:

Pre-contractual claims include:

• An order to set aside a decision made by the authority during the procurement.
• An order to require the authority amend its procurement documents. 
• A claim for damages if a loss has been suffered.
• A claim for wasted tender costs.

Post-contractual claims include: 

• A declaration of ineffectiveness (cancellation of an awarded contract). 
• A claim for damages if a loss has been suffered.
• A claim for wasted tender costs.

Ineffectiveness is only available for the most serious breaches of the Regulations. This is on the basis that, if successful, it will result in the court prospectively cancelling or shortening a live contract and issuing a financial penalty against the authority. There are only three grounds for an ineffectiveness claim:

1. Failure by the authority to advertise a contract where it was required to do so.
2. Failure by the authority to comply with the standstill period or automatic suspension obligations where there has been an earlier breach of the Regulations during the procurement. It is essential that the failure to comply with standstill / automatic suspension has prevented the challenger from bringing a claim for the earlier breach.
3. Failure by the authority to carry out a call-off competition in accordance with terms of a multi-supplier framework agreement.

How can a challenge be brought under the Regulations?

A challenge is brought against a contracting authority by the aggrieved party issuing proceedings in the High Court (usually the Technology and Construction Court). A letter of complaint or other correspondence is insufficient to formally challenge a procurement process. Proceedings must be issued within the relevant limitation period (see below).

Once proceedings are issued in court, they must be served on the contracting authority within 7 days of issue, including the Particulars of Claim.

What is the effect of issuing proceedings?

The effect of issuing proceedings, where the contract has not yet been signed, is that the contracting authority is prevented from going ahead and awarding the contract. An “automatic suspension” is imposed, and the authority may only award the contract to the winning bidder if it applies to the court for the suspension to be lifted, or the matter settles or proceeds to trial.

The automatic suspension is a powerful tool for challengers seeking redress at the end of a procurement, but it does require urgent action to be taken. As it is usual for a mandatory 10-day standstill period to apply after the award decision has been announced (during which an authority is prevented from awarding the contract), this gives challengers the best opportunity to use a challenge to prevent the award of the contract going ahead. Once the standstill period has expired without challenge, an authority can enter into the contract.

Although the limitation period for most procurement claims is 30 days (see further details below), the contract award process can only be “suspended” by a challenge if proceedings are issued prior to the authority entering into the contract. If proceedings are issued after the contract has been signed (but still within the 30 days), the claim can still proceed but the contract (now in force) will be unaffected.

If a challenger issues proceedings after the standstill period (but within the 30 days), it may still get the benefit of the automatic suspension if the authority has not entered into the contract promptly. However, it has no guarantee that issuing proceedings after the end of the standstill period will halt the contract award.

What are the limitation periods that apply?

One of the biggest hurdles for bringing challenges to a procurement process is time. As mentioned above, strict limitation periods are in place under the Regulations. Except for ineffectiveness claims, the limitation period for a procurement challenge is 30 days from the date the challenger knew, or ought to have known, of the grounds for the claim. This is often referred to as the “date of knowledge”. Depending on the information published by the authority that indicates the wrongdoing, this could be the date the procurement documents were published, the date a clarification response was issued or (as is often the case) the date the standstill letter is received by the unsuccessful bidder. A Court does have discretion to extend the 30 day period up to a maximum of three months. However, this extension is rarely granted.

The impact of the short limitation period means that the final date for bringing a claim can expire before the winning bidder is announced. This often catches out aggrieved bidders, who typically want to see if they have been successful before raising a complaint. Another common issue is that bidders’ internal procedures often make it difficult to progress a legal challenge within the 30-day period. The internal escalation procedures can take up a large proportion of the 30-day period, leaving little time to seek legal advice and commence correspondence with the authority to try to settle the dispute without legal proceedings. We would recommend bidders have an internal policy setting out the process and timescales that apply where a procurement outcome is disputed. This should involve seeking legal advice as early as possible.

Generally, a claim for ineffectiveness has to be issued within 6 months of the date the contract was entered into. In respect of the first ineffectiveness ground (failure to advertise a contract) this period can be shorter or indeed eliminated completely where an authority has published a justification for not advertising a contract in a Contract Award Notice or VEAT Notice. However, unless the published justification complies with the Regulations, the shorter limitation periods will not be valid. The third ground (framework breach) can also be disapplied where the authority has undertaken a voluntary standstill period.

Judicial review

As an alternative to bringing a challenge under the Regulations, it may be possible to challenge a procurement award decision by way of judicial review.

Judicial review applies to the lawfulness of a decision or action taken by a public body. A court has wide powers to grant remedies including an order quashing the authority decision, prohibiting the authority from acting unlawfully or mandating the authority to comply with its legal obligations. If the authority decision is governed by the Regulations, the judicial review claim must be issued within 30 days of the date the challenger knew, or ought to have known, of the grounds for the claim. For decisions made outside of the Regulations, proceedings must be brought promptly, and in any event within 3 months.

The Procurement Act 2023

As we mentioned in our previous article, a new procurement regime under the Procurement Act 2023 is due to come into effect, expected October 2024. The Procurement Act will replace the existing Regulations. Our procurement team will issue updates on the Procurement Act over the coming months. 
If you have any questions about the content above or are looking for assistance with a public procurement contract, please get in touch with members of our procurement team below.