10 things professionals should know about procurement litigation – from both perspectives
Today’s public sector is characterised by austerity. An increase in challenges to public contracts awarded under a regulated procurement process, where there is at least a chance that the rules might not have been complied with, is consequently no surprise. Development agreements – in particular, in the real estate sector – seem to have been particularly susceptible to such challenges.
So what, then, can be done to try to “claim-proof” the process and minimise the risk of litigation, from the perspective of the bidder and the public authority? The fallout from a challenge affects all parties involved, so a health check needs to look at the issues from all angles.
What can a bidder do?
1. Read the small print in the tender documentation
Double and triple check that you have provided all the required information. Broadly speaking, there is no duty on public authorities to allow correction of an error once the bid has been submitted. In certain circumstances, it may, however, be considered proportionate to allow the correction – where the error is clear from the tender submission, and it can be established from the tender itself what the correct content should be. But the error should not affect the merits of the tender – in particular, the price.
2. Keep an eye on the time
Don’t wait until the last minute to submit your tender. Public authorities are generally not obliged to accept late tenders, and the courts have not been sympathetic to bidders’ pleas relating to missed deadlines. Public authorities may, however, exercise discretion to do so in limited circumstances, where all bidders are made aware of the change, and given the same extension, particularly if the delay results from fault on the part of the public authority.
3. Be prepared to justify your tender bid price
Public authorities have the power to require tender parties to explain the price or costs proposed in the tender where they appear abnormally low. (Indeed, they must reject a tender that is abnormally low because it does not comply with environmental, social and labour laws.) Moreover, if the bid is low primarily by reference to other bids, the public authority may investigate the possibility of bid rigging.
4. Don’t talk to the other bidders
Only the public authority may hold discussions with the bidders for the purposes of clarifying or supplementing its requirements. Even if there appear to be inconsistencies in the tender documentation, do not be tempted to speak to the other bidders. Bid rigging is prohibited by competition law and may lead to the exclusion of bidders from future, as well as current, processes.
5. If in doubt, shout
Bidders should, as soon as possible, bring to the public authority’s attention any suspected breaches of the procurement rules. Delaying until the end of the process, in the hope that you might win (potential procurement breach notwithstanding), could mean that you lose the opportunity to challenge the defects in the process (see below).
What can a public authority do?
6. Take care in choosing your tender procedure
Thinking through, and documenting, requirements carefully at the beginning of the procurement and working backwards will assist the public authority in choosing the right process for the contract and could prevent any future surprises. For example, although the negotiated procedure has significant flexibility, public authorities should not necessarily adopt it where it is available; another process may be more appropriate – avoiding embarrassing and potentially risky backtracking later on.
7. Ensure your Alcatel letter is properly worded
From the public authority’s perspective, the point of maximum risk in any tender process is once the Alcatel letter has been sent, informing disappointed tenderers that they have not won but simultaneously equipping them with detailed information to challenge the award. Although a public authority may be tempted to adopt a minimalist approach to the drafting of the Alcatel letter, the relevant time limits for a challenge are unlikely to be triggered if it does not contain the requisite information.
8. Ensure future flexibility
It should never be forgotten that the procurement rules continue to apply after the award of a public contract and any material changes to that contract could trigger the need for a fresh procurement process. Ensuring that foreseeable changes are clearly provided for in the contract (to the extent permissible) will help reduce this risk.
9. Keep an eye on the time (again!)
Bidders need enough time to prepare their submissions and engage in the procurement: the rules prescribe minimum – not recommended – time periods, and urgency is no excuse when it is of the public authority’s own making. Time limits for bringing challenges also vary according to the claim: usually one month from date of knowledge for a damages action, and six months from concluding the contract for a declaration of ineffectiveness. The public authority can shorten the latter to 30 days through publishing a contract award notice, while using a voluntary ex ante transparency (VEAT) notice could remove the risk entirely (see below).
10. Do not treat a VEAT notice as a get out of jail free card
Publishing a VEAT notice can remove the risk of a public contract being declared subsequently ineffective where it has not been tendered in accordance with the procurement rules. But this will only protect the parties involved where the relevant legal conditions are met. Using a VEAT notice where the stated justification is not robust – and/or where the VEAT notice does not describe accurately the contract to be concluded – could paradoxically expose the parties involved to additional risk of challenge.
Main image © Westend61/Rex/Shutterstock
Warsha Kalé is counsel in the antitrust and competition practice at Mayer Brown
