As the public sector is required to make savings, there will be pressure for public procurement to contribute to those savings, and those charged with delivering them will need to resist the temptation to take shortcuts with the legal framework.
In the current climate, whether caused by the recession or the realisation that the courts will intervene, bidders are increasingly taking what until recently would have been the unthinkable step of making a legal challenge.
Consequently, in a growing string of cases the courts, both in the wider EU and the UK, have ruled against what had long been accepted practices.
Pressure will increase this December when the European Remedies Directive is due to be enacted into UK law.
Though final drafting is awaited, this will change the current position that once a contract has been entered into, it cannot be set aside on procurement grounds.
Richard Auton
In the future, if certain "grounds of ineffectiveness" exist, the presumption will be that the contract will be set aside, exposing the public body to disruption, the costs of a fresh procurement and even compensation to the contractor it had wrongly contracted with. In addition, an "effective, proportionate and dissuasive" civil penalty, a fine, will be imposed and aggrieved bidders could be awarded damages.
The first grounds of ineffectiveness is a failure to advertise a procurement in the OJEU where required. In the light of recent judgments this could also potentially apply where an unlawful amendment or extension to a contract has been made. A decision not to advertise, therefore, should not be lightly taken.
The second is depriving bidders of the normal opportunity to prevent the award of the contract because of a failure to comply with the so-called Alcatel notification and standstill process.
Giving bidders the information required, the name of the "winner", their respective scores and the relative advantage of the winning bid prior to contract award will now reduce both the period in which an aggrieved bidder could challenge, and the financial consequences if that challenge were successful.
The final ground relates to the award of an individual contract under a framework agreement which breaches the regulations dealing with that process.
It will be important to ensure strict compliance with the process and that the contract is fully within the scope of the framework.
A breach of the rules can lead to serious financial consequences
Even if the additional consequences stemming from a "ground of ineffectiveness" are not applicable, a breach of the rules can lead to serious financial consequences either by having the award of the contract stopped, if the challenge is brought in time and, in any event, damages for losses bidders have incurred.
Failure to comply with the regulations increasingly brings risk to the public sector and "smarter procurement" will need to be based on compliance.
In particular, the preparatory work for the procurement and the timetable allowed need to be commensurate with what is required. In the light of some of the recent cases, key areas to focus on to avoid risk of challenge include:
• properly scoping and defining the requirement (not how it will be met) from the outset, and not seeking to make changes to it during the process
• settling appropriate award criteria, to determine who will be the winner that reflect what the procuring body really requires. They should be fair and objective and focus on the content of the bid, not the financial standing or experience of the bidder which should be settled at an earlier stage. They need to be fully disclosed, fully complied with and not changed
• all fundamental matters, including price, need to be settled under competition. In a simple procurement it will be on the basis of submitted bids with no scope for negotiation. In more complex procurements, either competitive dialogue or negotiated procedure enable substantive discussion to take place, but not with a single "preferred bidder", frameworks require all matters to be settled either when the framework is awarded or by means of a mini competition.
If the procurement process is to deliver savings, it will not be by seeking to avoid the legal framework. The rules must be used to deliver a competitive solution.
Not only is this more likely to deliver best value but will avoid the potentially serious financial consequences of a challenge. The potential scale of such costs is illustrated by the recent case where Bristol city council, to avoid a delay to its Leisure PFI scheme, settled out of court with a bidder threatening to challenge in the sum of £800,000.
Richard Auton is a director in the commercial and public sector and projects group at national law firm Walker Morris
