Procuring a fair deal

Many organisations tender for work, and many of those believe that public procurement rules will only affect them if they are bidding for high value work – this is not true. The Public Contracts Regulations 2006 govern the purchasing of goods and services by “contracting authorities”. The definition of a “contracting authority” is wide and includes: organisations which are financed wholly or mainly by another contracting authority; or subject to management supervision by another contracting authority. This means that if an organisation receives 50% or more of its funding from its arts council, local authorities or other public bodies, the Regulations apply.

Principles And Procedures
All tenders to which the Regulations apply must comply with the principles of fair contracting, irrespective of value. The principles include transparency, proportionality, equal treatment and non-discrimination. The Regulations set out prescribed procedures for the purchasing of goods and services where the contract in question is above certain financial thresholds. The threshold for contracting authorities other than central government is £139,893 (€206,000) for goods and services. The common misperception is that tenders below this amount are not subject to public procurement rules.

The Remedies Directive
A new law, the Remedies Directive, comes into force on 20 December 2009. It substantially strengthens the remedies available to unsuccessful bidders for breaches of the Regulations. Previously, if a bidder wanted to make a challenge, it had to start proceedings before the contract was concluded and the only remedy was damages. In practice this made a challenge difficult, as often bidders could not gain sufficient information soon enough to start proceedings. Under the new directive, where a contract has been concluded, bidders can apply for a “declaration of ineffectiveness” which prevents the contract proceeding. This change and other changes in the directive are likely to have a significant impact on public tenders.

A New Environment
Formal challenges to procurement procedures are on the increase. The Remedies Directive is likely to increase the ability of unsuccessful bidders to mount legal challenges and impose a greater onus on contracting authorities to ensure tendering procedures can withstand scrutiny. With more potent remedies now available, if a bidder makes a formal complaint about a bidding process which appears to have merit, a contracting authority is more likely to want to investigate rather than press on with the selected bidder. We have found that an authoritative legal opinion can be an effective means of establishing that the contracting authority has a serious issue to address. It can encourage a contracting authority to consider the issues before proceeding and has the substantial benefit to the bidder of being far less costly than commencing legal proceedings.
Recent cases show that courts will apply the fair contracting principles broadly. One concern of smaller organisations contemplating bids is that local authorities can appear to apply an unnecessarily rigid “one size fits all” approach to tenders which may not be justified by the subject matter. For instance, there may be a requirement that a host of policies relating to health and safety issues are in place, even if they are not necessary for the work on offer, or that there are strict requirements as to bidders’ balance sheets. Unless these requirements are fair and justifiable then they could be challenged. Contracting authorities should therefore review their tenders in each case to ensure they do not unfairly favour certain bidders over others. Organisations bidding for work should be encouraged that the new remedies will help to ensure a level playing field.