This ebriefing outlines the provisions in the new Procurement Bill (the Bill) about challenging a public procurement process, the remedies available, and the proposed new procurement oversight authority.
Limitation periods and remedies for challenging – largely unchanged, a new area of contention
There are no substantive changes to the general 30-day limitation period in which a tenderer may commence legal proceedings to challenge the award of a public contract or the long-stop of six months for seeking the ‘set aside’ of a contract. However, as outlined below, the effect of the automatic suspension provisions will serve to artificially reduce the standard limitation period for tenderers wishing to challenge ahead of contracts being entered into.
Similarly, the remedies available in the event of a challenge remain substantively the same as under the existing Public Contracts Regulations 2015 (PCR 2015). Where the challenge is brought prior to the public contract being entered into, the available remedies are:
- an order setting aside the decision of the contracting authority in the procurement;
- an order requiring the contracting authority to take action(s);
- an order for the award of damages; and/or
- any other order that the court deems appropriate.
Where the challenge is brought after the contract has been entered into (or the challenge does not attract the automatic suspension and the contract is subsequently entered into – see below), the available remedies are:
- an order that the contract or modification is set aside, where a relevant ‘condition’ has been made out (retaining the remedy of ineffectiveness that is available under the PCR 2015);
- an order reducing the term of the contract or the goods, services of works to be supplied under it – available where a ‘set aside condition’ has been made out but the court is satisfied that there is an overriding public interest in not setting the contract or modification aside; and/or
- an order for the award of damages.
The new ‘set aside conditions’ differ from the grounds of ineffectiveness under the PCR 2015 and have been expanded to cover the following circumstances:
- a failure to publish a required contract award notice;
- the entry into or modification of a contract before the end of any applicable standstill period; or during the automatic suspension;
- if a standstill is not mandatory, where the breach only becomes apparent on publication of the contract award notice (can be negated by running a voluntary standstill);
- in the case of a modification, the breach only became apparent on publication of a contract change notice (can be negated by running a voluntary standstill); and
- the breach becomes apparent only after the contract has been entered into or modified.
Significantly, this last circumstance (5) seems like a very wide ‘set aside condition’. The explanatory notes to the Bill gives the example of where the contract notice or contract change notice did not correspond with the contract or modification that was entered into. However, it is easy to envisage how this condition may open the door to claimants seeking to expand the remedies available to them from simple damages to a more desirable set-aside order, which could form the basis of many challenges under the new regime. Whilst we would anticipate that the circumstances in which it can be shown that the breach was not known, or ought to have been known, prior to contract award or modification will be few and far between, that may not stop it being pleaded to seek a set-aside order. These expansions to the grounds for a set-aside order could increase risk for contracting authorities who let contracts in good faith, only to have the contract set aside, and to be left with no contract and a risk of legal claims from the contractor with whom the contract had been signed.
Where a ‘set aside condition’ is found, there is no provision for a civil financial penalty order, as is the case under the ineffectiveness provisions in the existing PCR 2015.
Standstill period and automatic suspension – challenge now, explore merits later?
The mandatory standstill period in the Bill is amended to eight working days beginning with the day the contract award notice is published (a change from the existing ten calendar days).
The Bill preserves the ‘automatic suspension’ which prohibits contracting authorities from entering into (or modifying) a public contract where proceedings have been commenced and the contracting authority has been notified of that fact. There is a peculiarity in the drafting in that the automatic suspension applies where proceedings are commenced ‘in relation to the contract’. This is different to the wording in the PCR 2015 which provides for the automatic suspension where proceedings are commenced ‘in respect of a contracting authority’s decision to award the contract’. This suggests a widening of the remedy for claims brought at any stage of the procurement process.
A significant change, and one to be monitored as the Bill progresses, is that the automatic suspension would only apply in circumstances where the proceedings were issued and the contracting authority is notified of that fact before the end of the standstill period (eight working days).
Whilst the limitation period remains at 30 days, the effect of this change to the automatic suspension is that remedies available to a claimant will be minimised if they either:
- issue proceedings after the eight working-day standstill period; or
- issue proceedings within the eight working-day standstill period yet fail to notify the contracting authority within that period.
In those circumstances, the contracting authority will be able to proceed to enter into or modify the contract in question. Unless a ‘side aside condition’ is made out then the claimant will only be able to pursue the remedy of an award of damages.
At first glance, this change appears to provide contracting authorities with greater certainty and confidence in letting contracts following the expiry of the standstill period and pending notification of any formal challenge. However, in practice, many tenderers request an extension to the standstill period to enable them to raise questions and concerns, and to exchange information and receive disclosure from contracting authorities within the protection of the automatic suspension. In some cases, that ultimately prevents proceedings being issued. This practice is likely to continue, regardless of the new provisions for an ‘assessment summary’ to be provided ahead of the contract award decision.
Contracting authorities are not always willing to extend the standstill period, for example, where they do not consider they reasonably need to provide any further information or disclosure for the tenderer to be able to consider the merits of a potential challenge or there is an urgent need to let the contract. The reality is that eight working days will not be sufficient for some tenderers to digest the outcome, seek legal advice as to the merits of a challenge, request and receive further information/disclosure from the contracting authority and then to issue proceedings and notify the contracting authority. In the context of high-value public contracts, this may increase the likelihood of legal proceedings being issued within the eight-working day standstill period to preserve tenderers’ positions and the remedies available to them. To offset this risk, contracting authorities may well adopt a longer standstill period at the outset to provide sufficient time for any aggrieved tenderer’s concerns to be addressed without the time pressure of the eight working days.
Alternatively, as outlined above, tenderers who fail to trigger the automatic suspension are likely to try to argue that the new set aside condition (that the breach became apparent only after the contract was entered into or modified) applies, to seek more desirable remedies. We expect this to be an area for much ‘satellite litigation’ if the Bill is brought into law as drafted.
Setting aside the automatic suspension – new name, same test?
As is the case under the PCR 2015, contracting authorities defending a procurement challenge will be able to apply for an order that the automatic suspension be lifted. Under the Bill, elements of the existing ‘test’ applied by the court in considering these applications are adopted into a new, slightly simpler test.
The new test will involve the court considering the public interest, the interest of suppliers (including whether damages are an adequate remedy) and other ‘appropriate’ matters when determining whether to lift the automatic suspension. Examples of public interest considerations include upholding the principle that public contracts should be awarded and modified in accordance with the law and that delay should be avoided in the supply of goods, services or works provided for in the contract (including the continued provision of public services). As the tests are similar, it will be interesting to see how it will be applied by the courts in practice and how that might vary from existing case law governing these applications.
Procurement oversight – an unknown entity?
The Bill outlines that an ‘appropriate authority’ (AA) may investigate a contracting authority’s compliance with its provisions. To that end, a contracting authority may be required to provide relevant documents or other assistance. If the AA concludes that a breach of obligations has occurred or is likely, then it can make a ‘recommendation’ (which may include the requirement for progress reports to be submitted by the contracting authority) although it does not need to publish the results of its investigation. The explanatory notes confirm that this is intended to replace and build upon existing investigative powers under the Small Business, Enterprise and Employment Act 2015, which in turn served to strengthen the Public Procurement Review Service, a ‘mystery shopper’ service aimed at helping tenderers who felt they might have been treated unfairly in a procurement process. Nonetheless, it is not clear from the Bill whether complaints raised by tenderers will trigger an investigation, or whether it will require more formal referrals, for example from government departments.
Contracting authorities would be required to ‘have regard’ to the recommendation reached when considering how to comply with the Bill’s provisions, although that does not appear to be enforceable. Presumably, evidence that a contracting authority has acted against the recommendations of the AA may be a relevant consideration for the court in procurement challenges, although recommendations cannot relate to compliance with the overall procurement objectives or the exercise of discretion in a particular procurement.
An investigation may result in guidance being published for contracting authorities generally as to the ‘lessons learnt’ for compliance, which may assist with the interpretation and application of provisions.
It is unclear how the oversight provisions would function in practice, how they would connect with challenges under the Bill (if at all) and how useful the ‘lessons learnt’ guidance may be for contracting authorities generally. At first glance, the changes made may not appear ground-breaking, however they are likely to result in new points for dispute and may result in more protective proceedings being issued by unsuccessful tenderers to ensure the automatic suspension applies.
For more information
If you would like to find out more about challenges, remedies or oversight authority under the new Procurement Bill, please contact Amy Callahan-Page.
