Challenges to Public Sector Procurement and the Public Interest

Scotland
In public sector procurement, when an unsuccessful bidder claims that there has been a breach of the Public Contracts (Scotland) Regulations 2012 (the Regulations), the public body procuring the contract is prohibited from entering into a contract with the successful bidder.  This prohibition will remain until the dispute is resolved or a court brings the prohibition to an end by interim order.  The Accountant in Bankruptcy (AiB) recently sought such an order after an unsuccessful bidder, Hastings & Co (Insolvency) Ltd (H), brought proceedings against AiB in relation to its tender process for the provision of insolvency services.

The Facts

AiB issued an invitation to tender (ITT) for a framework agreement for the provision of insolvency services.  After being informed that its tender had not been successful, H received a debrief from AiB following which H contacted AiB to express its concerns about the tender process.  H was not satisfied with AiB's response and so raised proceedings against AiB, namely on the grounds that the tender process was discriminatory against small and medium-sized enterprises (SMEs) and that the ITT was not transparent (as the Regulations require).  As a result, AiB was prohibited from entering into a framework agreement with the successful bidders.

Notice of Proceedings and Transparency

Prior to the proceedings H gave AiB notice of its specific claims and its intention to bring proceedings, as is required by the Regulations.  In this notice however, H failed to refer to the alleged lack of transparency in the ITT and as a result this argument was struck out.  The court stated that:

"An economic operator may develop its arguments in support of a particular notified challenge in the course of a legal action. But it would defeat the practical purpose of the notification requirements if it were allowed to open up new fronts on raising legal proceedings."

Nonetheless, the court did discuss the issue of transparency briefly and affirmed the approach previously taken by Scottish Courts the test of transparency is whether a hypothetical reasonably well-informed and normally diligent tenderer would have expected that a particular matter was required by and included within a criterion.  The court also emphasised that the wording in dispute must to be read in the context of the ITT as a whole. 

Undisclosed Criteria and Discriminating Against SMEs

As part of the criteria, the ITT asked the tenderers to (i) provide an organisational structure for providing services (including management hierarchy, CVs etc.), (ii) set out their ability and commitment to support training and development of AiB staff, and (iii) demonstrate how their organisation supported the Scottish Governments objectives on sustainability.  The debrief showed that there had been a lack of detail in H's responses to these questions which had led to its low scoring.  Further, the comments on the merits of the successful bidders focused on the detail they had provided in their responses. 

H claimed that (i) the questions favoured larger organisations with the resources to offer considerably wider services, and (ii) the detail that H had omitted (and that the successful bidders had been merited for) was undisclosed criteria, which had only become apparent in the debrief.  The court disagreed finding that the fact that larger organisations can offer to undertake more than smaller organisations does not in itself make a criterion discriminatory, AiB was entitled to compare the detail of the responses and the debrief document did not disclose previously undisclosed criteria as the scorers comments related to the approach by which tenderers responded to the disclosed criteria.

Interim Orders and the Public Interest

Taking the above into account, the court stated that H had a weak case for a breach of the Regulations and even if H was successful in its claim, it is unlikely that H would have then been a successful bidder.  As such, H's claims did not merit prohibiting AiB from entering into a framework agreement with the successful bidders; only a strong case for a breach of the Regulations would warrant the continuation of a prohibition.

Further, the court considered that the prohibition would not have been in the public's interest as the framework agreement was expected to save public money and improve services; public interest is a relevant factor, particularly where the case for breach of the Regulations is not strong.

Comment

Some important points clarified in this case are:

Square Notifications of intentions to bring proceedings should specify all claims; it is not possible to include further claims during proceedings.
Square In considering the transparency of an ITT, the hypothetical reasonably well-informed and normally diligent tenderer test applies and the wording in question should be considered in the context of the ITT as a whole.
Square The fact that larger organisations can offer to undertake more than SMEs does not in itself make a criterion discriminatory.
Square When marking tenderers responses, the body procuring the contract is entitled to compare the detail of responses and comment on the approach used by the tenderers to respond.

In addition, the decision to grant the interim order is good news for public bodies procuring contracts as it reaffirms that if an unsuccessful bidder makes a claim for  breach of the Regulations and the resulting prohibition is not in the public interests, where the claim for breach is not strong it is unlikely that the contract will be delayed.

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