What is procurement law and how does it affect me?
The public sector spends almost £300 billion annually on its procurement of works, services, goods and supplies and as such it is a highly regulated area. If you work with or would like to work with “contracting authorities” (e.g. central government, local government or other parts of the public sector such as the police, universities, schools and hospitals), then having an understanding of the regime that those contracting authorities are subject to is important.
This note only considers procurements that are “above threshold” (i.e. procurements that have a value in excess of a set amount – please see here for more details).
Understanding the procurement process
When procuring contracts with a value above set thresholds, contracting authorities are required to comply with various statutory obligations.
With certain very limited exceptions, the authority will be required to advertise its needs on the government’s “Find a Tender” site (Find high value contracts in the public sector – GOV.UK (www.gov.uk)). The notice will state the type of procurement process that has been selected (usually the open process where anyone can submit a bid), the value of the opportunity and other useful information.
At the same time as publishing the advert, the contracting authority also needs to make the invitation to tender documentation available (instructions to tenderers, conditions of contract, technical documents, form of tender etc.).
There are normally two clarification phases in procurement exercises – pre-tender submission and post tender submission (while the bids are being evaluated). The first clarification phase is important from a bidder’s perspective as it is the bidder’s opportunity to clarify any unclear aspects of the tender pack issued by the contracting authority and also to highlight any areas of concern. Fairly frequently bidders will not use the first clarification phase to its full advantage and will simply qualify their submitted bids by noting that certain items are “to be discussed” or will attempt to raise issues later on in the procurement process. Contracting authorities tend to take a fairly dim view of clarifications that are raised too late on in the process and, being mindful of their duty to treat bidders equally, fairly and to act in a transparent fashion, the contracting authority’s response will usually be to instruct the bidder that it must withdraw its qualification or clarification request. The risk to the authority if it does not do this is that it may open up the procurement process to challenge by a disaffected bidder. Authorities will often note that their contract terms are not subject to amendment. It is nonetheless important that bidders read the contract terms carefully and, if need be, make representations for the authority to consider (authorities do occasionally reassess their requirements based on representations made to them, particularly where a number of bidders have raised the same concern). Frequent clarifications requests include the levels of insurance required and caps on liability (particularly where the contracts contain no cap on contractor liability). To summarise, the first clarification phase is an important one for both bidders and the contracting authority (who will be gauging the market response and may refine its documents as a result of the clarification questions). Leaving clarification questions too late may either result in bidders submitting imperfect or qualified bids or having to accept requirements that they would rather have avoided.
Contracting authorities must apply the evaluation criteria that they have set out in their invitation to tender and must not use any undisclosed weightings or criteria. Failure to disclose the criteria and weightings that are actually being used is a common ground for challenge to procurement exercises. During the evaluation period, the authority may ask bidders to clarify various aspects of their bids. An important point to note is that bidders cannot use this second round of clarification as an opportunity to seek to perfect an imperfect bid.
Once the contracting authority has made its decision to award, it must notify all bidders (including the winning bidder) of the outcome of the procurement exercise and must provide certain information to the losing bidders, including (importantly) the characteristics and relative advantages of the winning bid and the scores that the losing and winning bidders achieved. On issuing the standstill letter, the contracting authority is prohibited from progressing to award the contract until the standstill period (10 days if the notification was sent electronically) has expired. This period is a critical period for unsuccessful bidders to raise any questions about the scores that they have received, any concerns that they have about the process and the scores that the winning bidder has received. Any formal challenge raised to the procurement process in the pre-contract award period will result in an automatic prohibition on the contracting authority from awarding the contract unless and until that prohibition is lifted. With certain exceptions, challenges raised after contract award will generally only result in the payment of damages.
What does the future look like?
In one word: interesting. The government has recently published its Procurement Bill and it is currently winding through the parliamentary process. Although we can expect some amendments to the Bill as it goes through parliament, some of the changes being proposed are significant. A few of the more interesting changes are detailed below:
The government considers existing procurement procedures to be “complex and inflexible”. The government proposes to streamline the procurement process by reducing the number of procedures and, most significantly, allowing authorities to select “such other competitive tendering process as the contracting authority considers appropriate for the purpose of awarding the public contract.”
Exclusion of bidders
The government has included provision for contracting authorities to have a discretionary right to exclude bidders for past poor performance. There are also requirements for the contracting authority to publish certain details about poor performance and some contract breaches.
Some (but not others) will be relieved to note that the proposal that damages awarded for successfully challenging the award of a contract should be capped has not made it through to the Bill.
There is an increased focus on transparency in the new Bill. Transparency will no longer be one of the general procurement principles (or procurement objectives as they are called in the Bill) instead it is embedded throughout the proposed legislation, including in the increased number of notices.
For more information on the proposed changes to transparency and the procurement procedures please click here.