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Expressions of interest – Rescue remedy?

Monday April 19th, 2010

By Michael Dean, Partner, EU Competition and Regulatory Department, Maclay Murray & Spens LLP

The new ‘procurement remedies regime’ greatly increases the options open to bidders who feel they have been the victim of an unfair tender process, explains Michael Dean.

A harsh reality for those involved in public sector procurement has dawned, several months after the new procurement remedies rules were reinforced. The beefing up of the rights available to aggrieved bidders applies to all procurements from 20 December 2009, but it has taken a few months for the full effects of the changes to become apparent.

Until the introduction, non-compliance with a tender procedure was largely a concern for the contracting authority – they were the loser if any challenge was mounted. The successful bidder holding a signed and binding contract was, bad faith aside, free to reap the benefits (absent any rare move by the European Commission or, even rarer, a court exercised about the lack of a standstill period). Now every party to a tender has an interest in ensuring the procedure is broadly compliant, given that the courts are expressly required to rule contracts ineffective where there has been either a meaningful breach of the procurement rules and no adequate standstill, or an illegal direct award of a contract.

No bidder wants to gear up in manpower, facilities and equipment to perform a contract only then to have that investment rendered fruitless by a challenge within the maximum six-month period permitted. Apart from the trio of authority, winning bidder and aggrieved bidder, those involved in providing funding or other support relevant to major contracts now also have an increased interest, given the potential for the courts to order a contract to be unwound.

And, if the challenge takes place before the contract is awarded, consider the difficulties arising from the new automatic suspension requirement. The authority’s procedure automatically grinds to a halt. Again the potentially successful bidder will – and indeed may agree to be bound to – hold available the resources to perform the contract pending the outcome of the challenge. That can be expensive, even if possible. It may also feel it is necessary to intervene in the court action – again not without cost. The authority may also face an immediate dilemma as to how to deal with its requirements.

Authorities retain the option of applying to the court to have the automatic suspension lifted, effectively getting the court’s permission to go ahead and award the contract.  This is not without problems. First, the attitude of the courts to the new provisions is not yet clear. Second, if an authority is allowed to go ahead and award a contract, but later found to have breached the procurement rules, it may find itself effectively having to pay out twice – contractual payments to the bidder awarded the contract and damages to the bidder who has lost out.

To avoid these problems, authorities should obviously try to ensure their tender processes are compliant and leave bidders with little motivation or cause for challenge. Preparation is key. Disappointed bidders should receive a comprehensive debrief in line with the new rules. Some believe it is best to stop a potential challenge gaining any momentum by comprehensively explaining where a bid has fallen down.

Another school of thought holds that ‘least said, soonest mended’ is the best approach. The rules contain certain requirements on what information to give, but the precise level of detail required in everyday debrief situations remains a hot topic. Concentrate on getting the debrief letter right and ensure that it itself does not give grounds for challenge.

There certainly appears a greater nervousness among authorities and a higher expectation among bidders, leading to an increased willingness to pursue challenges. However, attention to fairness and an appropriate debrief letter will not only help to achieve compliance; it may also help to quell the sense of injustice which often drives a challenge.

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