Minimising the risk of procurement litigation

Warsha Kale and James Harrison reveal how to avoid procurement pitfalls.

In a world of ever-decreasing budgets, challenges to regulated procurements are, unsurprisingly, on the rise. Here are ten ideas to minimise the risk of procurement challenges in the courts.

Choose your tender procedure carefully

Carefully consider which procedure is most appropriate. Although the negotiated procedure (with prior call for competition) offers significant flexibility, it is not necessarily a default option. An innovation partnership may be more suitable and avoid embarrassing and potentially risky backtracking later on.

A stitch in time saves nine

Similarly, carefully thinking through, and documenting, the procurement requirement and the process at the beginning, and working backwards, can help prevent future surprises. In a negotiated procedure, it is vital to consider, and set out in the procurement documentation, how often and how many candidates might be excluded earlier in the tender process, potentially before final offers.

Word your Alcatel letter precisely

The point of maximum risk to a procurement process is after the Alcatel letter has been issued, informing disappointed tenderers that they have not won and giving them information to challenge the award, should they so wish. Although it is tempting to keep detail to a minimum, the time limits for a challenge may not apply if the letter does not contain all the necessary information.

Foresee flexibility going forward

And don’t forget that the procurement rules continue to apply after a contract has been awarded, and any material changes to the contract could mean a fresh procurement process. Clearly providing in the contract for foreseeable changes can help reduce this risk.

Keep a consistent record of “wash-ups” and other internal discussions

The same, familiar, standards of trans­parency and equal treatment apply to the moderation stage. Internal notes must be recorded consistently and clearly and provide a full and transparent record of the utility’s reasons and reasoning (do not confuse the two) behind the conclusions reached.

Do your sums

The operation of the aggregation rules must be checked when considering whether to conduct a regulated procurement. Although an individual contract may be below the relevant financial threshold, the total value of purchases to be made under a number of similar contracts may, with aggregation, take the overall value above the threshold.

Beware the low price

Utilities are under a duty to investigate abnormally low tenders and, in certain circumstances, may be under a duty (rather than have a discretion) to reject them. And if the bid is low primarily by reference to other bids, it may be appropriate to investigate whether there has been bid-rigging.

No double counting

Although the historic distinction between selection criteria and award criteria has been muddied in recent times, the shortlisting process should be kept separate from the award stage. In particular, care must be taken not to assess bidders twice on the same criteria at different stages of the procurement process.

Keep an eye on the time

Bidders need sufficient time to prepare bids and engage in the process: the statutory periods represent minimum time limits, and urgency is no excuse where it is of the utility’s own making. The time limits for making a procurement challenge differ. To claim damages it is usually one month from the date of knowledge, but for a declaration of ineffectiveness it is six months from concluding the contract. Publishing a contract award notice will shorten the latter to 30 days, while publishing a voluntary ex ante transparent (VEAT) notice could remove the risk.

A VEAT notice is not a “get out jail” card

A valid VEAT notice, setting out justification for not conducting a tender process before awarding a contract, can remove the risk of that contract subsequently being declared ineffective. This will, however, only protect a utility where the relevant conditions are met. Publishing a VEAT notice where the purported justification is less than robust could have the opposite effect and expose the ­utility to an additional risk of challenge.