How Can Contractors Challenge Authorities Who Do Not Comply With The Public Procurement Rules?

Contracting authorities are under a duty to comply with the public procurement rules (where applicable). If they do not comply, Contractors have two avenues of redress.

Firstly, they may bring actions in the UK courts for damages and/or for the award decision to be set aside. However such an action is subject to the strict time limits set out in the "Alcatel" case, whereby the EU Procurement Legislation now requires a minimum mandatory standstill period of 10 clear days after notifying unsuccessful bidders and before the contract commences. In other words unsuccessful bidders must be informed of the outcome of the tenders and have the opportunity to obtain feedback prior to the contract getting underway. Notification must be provided to all unsuccessful suppliers involved in the tendering process, irrespective of the stage that they may have been deselected.

During the mandatory standstill period, a legal challenge can be brought in court by a Contractor seeking the suspension or setting aside of the contract award decision. Where such a challenge is brought, the contracting authority concerned should wait to see whether interim measures are granted before proceeding to contract conclusion, and where interim measures are granted, should wait until the outcome of legal proceedings before entering into a contractually binding agreement.

When a court challenge is brought by an aggrieved tenderer during the mandatory standstill period, both the tenderer and the contracting authority can apply for the court to expedite the hearing. However, it will be up to the parties to demonstrate to the court that the case is of "sufficient urgency and importance"; it is unlikely that the proceedings would be dealt with within the standstill period.

Alternatively, a Contractor may bring the breach to the attention of the European Commission by lodging a complaint with it.

If the Commission were to launch an investigation, this could ultimately lead to the UK facing formal legal proceedings in the European Court of Justice, as the member state where the alleged breach took place. Although damages could not be awarded to the aggrieved Contractor, the Commission could insist that the UK take action against the authority in order to ensure that it complies with any judgment. This could mean that a concluded contract awarded in breach of the regulations might have to be set aside. The contracting authority might then re-tender its requirements lawfully under the Regulations.

Limitation

Regulation 47(7)(b) states that:-

Proceedings under this Regulation must not be brought unless those proceedings are brought promptly and in any event within three months from the date when grounds for the bringing of the proceedings first arose unless the Court considers that there is good reason for extending the period within which proceedings may be brought.

Even if proceedings were brought within the three month period, they could therefore still be ruled out of time if the tenderer failed to act "promptly" under the circumstances.

The High Court in M Holleran Ltd v Severn Trent Water Ltd rejected the idea that the requirement for promptness was contrary to Article 6 of the European Convention on Human Rights.

The action for damages

There is now a statutory duty in Regulation 47(1) obliging a contracting authority to comply with the relevant provisions of the Regulations and with any directly effective Community obligation under the Procurement Directives; this is "a duty owed to an economic operator". Thus there is a statutory duty owed to an actual or potential tenderer, known as "an economic operator" who wanted to tender and could or would have been awarded the contract.

Under Regulation 47(6):-

A breach of the duty owed in accordance with paragraph (1) or (2) is actionable by any economic operator which, in consequence, suffers, or risks suffering, loss or damage and those proceedings shall be brought in the High Court.

Damages could be both an economic operator's tender costs and their lost profits. This is because the applicable basis for the assessment of damages is to put the claimant into the position they would have been in, had the breach of contract not occurred. It can include pure economic loss, such as loss of prospective profits.

It is insufficient for a claimant merely to allege "some damage" and let the court do the rest. The claimant has the burden of proof and must prove his loss and the amount of that loss. The amount recoverable will always be constrained by the evidence before the court. The standard of proof is the balance of probabilities; so if it is more likely than not that damage has occurred, an award of damages will be made.

Although the court has a general discretion, the successful party will usually recover the majority of their reasonable costs.

To read further articles and papers from Fenwick Elliott, please visit our website - www.fenwickelliott.co.uk

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Ms Victoria Russell

Fenwick Elliott LLP 

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