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The risks of delay in procurement challenges

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04/06/2020

Where contractors identify an issue with a procurement process, they may be tempted to wait until the outcome of the process is known before issuing proceedings. This might be because they want to wait to see if their tender is successful despite the issue or because they don’t want to risk antagonising the contracting authority whilst it is still considering tender submissions. However, this is a very risky approach as by the time a decision is issued any challenge may already be out of time. Even if the contractor is successful and doesn’t need to make a challenge, if its competitors become aware of the issue and make a challenge then it could result in the procurement process having to be repeated with the potential for a different outcome and even on a best case scenario any challenge is likely to result in a delay to the award of the contract.

The risks associated with the ‘wait and see’ approach can be seen clearly in Riverside Truck Rental Limited v Lancashire County Council [2020] EWHC 1018 (TCC) where procurement and judicial review proceedings were dismissed as having been made out of time.

Riverside complained of the requirement in an Invitation to Tender (ITT) for a tractor cab to be “standing height” and the contracting authority’s decision to treat it as a mandatory requirement of a pass/ fail nature, saying that the requirement was ambiguous and that to treat it as a mandatory requirement breached the requirements of objectivity and transparency. The cab proposed in Riverside’s tender was 1.6 metres tall which the authority assessed as not being of “standing height”. Riverside’s tender was therefore rejected, but it subsequently discovered that if it had not been rejected on these grounds its tender would have been the most economically advantageous tender. It claimed that if it had known that its cab would not be considered to be standing height it would have included a taller cab in its tender, which it could have done for the same cost and whilst keeping the price to the authority the same. It therefore claimed that if the ITT requirements had been clearer, as it said they ought to have been, it would have been the successful tenderer.

The issue before the Court was whether Riverside’s claims were time barred. Claims for breach of the procurement regulations must be brought within 30 days of the date upon which the economic operator knew or ought to have known of the grounds for bringing proceedings. That period can be extended to 3 months from that date if the Court considers there is good reason to do so, but it rarely does so.

Riverside argued that the time for issuing a claim under the procurement regulations started on 10 January 2020 when it became aware that the award of the contract to another tenderer was at a much higher price. It therefore said that its claim, issued on 24 January 2020, had been brought in time. This argument was rejected by the Court.

Riverside was found to have two potential grounds for challenging the procurement process in relation to the “standing height” issue; one relating to the requirement in the ITT itself and the other relating to the authority’s decision to exclude Riverside from the procurement due to the authority’s assessment that Riverside had not met the requirement. The Court found that the time for a challenge in respect of the first ground started no later than 25 September 2019 when the authority confirmed in a clarification to tenderers that the requirement for standing height was a pass/fail requirement and that any tenderers not complying would be excluded from the process. The claim on this ground had therefore been made out of time.

The time for a challenge on the second ground started no later than 29 November 2019 when Riverside was notified that it had been rejected from the process. It was irrelevant that at this time Riverside did not know whether its exclusion from the process had had any affect at all on the overall outcome. The claim on this ground was therefore also made out of time and the Court did not consider that there was any good reason why time should be extended. It appears that the delay in proceedings being issued was a result of Riverside misunderstanding the relevant time limits and believing wrongly that time did not start to run until the expiry of the standstill period (the period within which following the announcement of the outcome of a procurement process, an authority cannot award the contract).

The Court was clear that time starts running from when an economic operator becomes aware of a breach of the procurement regulations which causes or risks causing the operator loss or damage, not when the operator becomes aware that such loss or damage has in fact been caused. The Court acknowledged that this might lead to a number of proceedings being issued at different times in the procurement process but reiterated that there are good policy reasons behind the tight timescale for a claim which should be properly and rigorously applied.

Although the contracting authority in this case successfully defended Riverside’s challenge, the dispute will still have cost it dearly in terms of time and legal expenses, all of which could have been avoided by the use of clearer ITT requirements. The dispute will also have been expensive for Riverside, which will have been required to pay its own legal costs and a substantial amount of those of the authority. This outcome must be particularly frustrating for Riverside in circumstances where the outcome of the claim may have been very different if it had issued proceedings earlier, before the 30 day deadline. The Court never even got to the stage of considering the merits of the challenge itself relating to the use of the “standing height” requirement as the claim was found to have been made out of time.

Top tips to help avoid time consuming and costly disputes

For contracting authorities:
  • Ensure that tender requirements are as clear and unambiguous as possible, especially for any pass/ fail requirements – tenderers need to be able to identify exactly what they need to do to meet the criteria.
  • Try to avoid criteria which require subjective assessment – consider how those evaluating the submissions will assess compliance. If they are likely to need further guidance in addition to that in the ITT to enable them to assess whether a tenderer has passed or failed then that guidance should instead be added to the ITT or at the very least issued to all tenderers as a clarification. For example, here, instead of including a requirement for “standing height” the contracting authority could have included a requirement for a minimum height of e.g. 2 metres.
For economic operators:
  • Upon receipt of the ITT consider whether there are any requirements which are unclear or ambiguous and seek clarification in relation to them. Insist upon specific requirements or details of the evaluation criteria to be used by the evaluators, particularly in relation to pass/ fail requirements.
  • If the contracting authority fails or refuses to provide clear requirements then there are likely to be grounds for a challenge at that point even though the procurement process has not yet been concluded. The time to make a claim is likely to start running at this stage so you will need to consider whether to make a claim at that point or risk losing the opportunity to do so.
  • If your tender is unsuccessful, do not wait for feedback showing whether you would have won the procurement process before making a challenge as it may then be too late.
  • Seek legal advice at an early stage, as soon as a potential issue is identified, otherwise economic operators risk leaving it too late and losing the right to pursue their claim and the opportunity of obtaining any redress.

Walker Morris’ Commercial Disputes team are experienced in advising both contracting authorities and economic operators on these types of issues within such short timescales. We can offer practical, commercial advice on the deadline by which a claim must be pursued, on the merits of a challenge itself and on a strategy for dealing with it.

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