Procurement Challenges – the future
On 6 December 2021, the Cabinet Office published its response to its consultation on proposals for reform to English procurement law as first described in its 2020 Green Paper “Transforming Public Procurement”.
Over the coming weeks, and as we noted in a blog published on 8 December 2021 (“Public procurement reform … the times they are a-changin’”), we will be considering the outcome of the consultation in further detail. In this post, we consider the proposed reforms to procurement challenges.
The original proposals
The Green Paper outlined broad and radical reforms in respect of procurement challenges. The proposed reforms included changes to the Court processes, which apply to the determination of procurement disputes, and a consideration of a tribunal system to determine low value claims. The Green Paper also proposed that there should be a re-focus on pre-contractual remedies and that there should be a cap on damages. Finally, the Government also canvassed views on proposals in respect of the automatic suspension and the removal of the mandated requirement to provide an individual debrief letter to each bidder at the end of the procurement process.
Outcome of the consultation exercise
In its consultation response, the Government has confirmed that the majority of the proposed reforms relating to procurement challenges will not be taken forward. In summary:
- There will be no Independent Contracting authority review
However, the Government expects and will encourage contracting authorities to review the merit of challenges made during procurement processes and respond appropriately (for example, with more detailed investigation and/or corrective steps).
- There will be no tribunal system for lower value claims.
The objectives of a faster and simpler Court process will instead be targeted through the planned introduction of reforms such as summary decisions on written pleadings, early and enhanced disclosure and a dedicated procurement judge. The Government has however said that this proposal will be kept under review once the impact of the new regulations and Court processes can be assessed.
- There will be no cap on damages
The Government received mixed responses on this proposal. Some consultees welcomed the proposal in order to disincentivise speculative challenges and limit public spending on damages. Others raised concerns about the unintended consequences which could increase the cost to the tax payer and be more problematic. In its consultation response, the Government sets out its intention that the new regime overall should allow for more challenges to be resolved before new contracts are placed, meaning less scope for compensatory damages without the need to implement a cap.
- Calculating bid costs
As the cap on damages is not being introduced, there is no need to determine a uniform approach to calculating bid costs for the purposes of the cap.
- The Government will not legislate to provide for primacy of pre-contractual remedies over post-contractual damages
This is because of the decision not to put a cap on damages but also again due to the emphasis in the new regime being on creating greater opportunities for pre-contractual resolution.
- No cap on profits for contract extensions where the incumbent has challenged
Although dealt with in Chapter 8, it is worth noting that the Government have concluded that where a contract has been extended due to a challenge by the incumbent, there will not be a cap on profits.
The following changes are still intended to go ahead:
- Reforming the test for lifting the automatic suspension
The Government plans to replace the current test (which is based on the standard legal test for granting an injunction). Under this test, the court considers: the balance of convenience between the parties, which party suffer the greatest irremediable prejudice from granting or not granting the injunction, and whether damages would be an adequate remedy for the claimant. Courts often take the view that the commercial party can be compensated in damages for the loss of the contract and in most cases the automatic suspension is lifted.
The Government has said that it is still working through the potential options. However, it is envisaged that the new test will be a simple, single limb test which provides for suspensions to be lifted where there are overriding consequences for the various interests concerned. This will include the impact on public service delivery.
- The automatic suspension is to be removed in extremely urgent cases
There is a recognition that the terms for urgent contracting need to be clear, measured and proportionate. There will be a requirement for a notice prior to (or concurrent with) contract award which will ensure greater transparency and scrutiny of contracts relying on these measures for extreme urgency. This will be followed up by the publication of a notice containing details of the contract. Due to the absence of a standstill requirement with these contracts, the remedy of ineffectiveness will remain available where suppliers can show that the grounds have been relied upon inappropriately.
- De-brief letters will be no longer mandated in terms of transparency
The Government has considered the information that should be released at the start of standstill (in competitive procedures) and this will be included as part of the transparency requirements.
The intended process for competitive procedures will be as follows:
- the Award Notice will confirm the authority’s intention to award a contract and notify the market of the outcome of the procurement, anticipated contract value/description and identity of all bidders. It will also detail the standstill period;
- when the contracting authority releases the Award Notice signalling their intention to award a contract, they will additionally provide participants with certain evaluation documents for the winning bidder (redacted for commercial sensitivity);
- all bidders will be provided with their own, unredacted, evaluation document(s) to enable them to compare the relative advantages of the winning bid against their own;
- contracting authorities may, if they choose, provide individual covering debrief letters to bidders (which may include feedback on improving performance) but this may not be appropriate or possible in all circumstances.
The Government is still considering what information should be released relating to call-off contracts under framework agreements or Dynamic Markets. It is intended that the information to be provided will be enough to provide sufficient transparency to demonstrate legal compliance and allow bidders to improve future bids without placing a large burden on contracting authorities.
Overall, we think that the scaled back approach is sensible and welcome the focus on the more practical measures such as working with the Civil Procedure Rules Committee to provide for early and enhance disclosure.
It is clear from the Government’s response that the intention is that the regime should allow for challenges to be dealt with pre-award and that this should reduce post-contractual challenges. Whether this works in practice remains to be seen. It will mean that contracting authorities will need to deal with potential challenges as they arise and ensure that sufficient feedback etc is provided throughout the process. Similarly, bidders need to ensure that they raise questions as and when they arise as opposed to waiting until after the award notice.
At least from the perspective of challengers, the Government’s proposed increased levels of transparency is desirable and if full information about the evaluation process is provided in in time by contracting authorities then the need for a debrief letter should fall away. However, if the information is not readily available to losing bidders at the contract award stage then challenges will be more and not less likely. Therefore, contracting authorities will need to be mindful of this throughout the process and ensure that those dealing with bidders are fully aware of the requirements.
Finally, the proposals in respect of the automatic suspension should be positive given the current test is often considered to be skewed in favour of the contracting authority. However, as the Government has still not yet set out its proposed test, we will have to wait to see whether this will give greater certainty to all parties involved or not.
Following a green paper and consultation earlier this year, the Government has outlined proposed changes to the public procurement remedies regime. In this article (the second in our series considering the consultation outcome), Jessica Hill outlines the key changes. This is essential reading for contracting authorities and bidders alike.