Challenges to procurement decisions: Government Response to the Transforming Public Procurement consultation
The Government's proposals in Chapter 7 of the Green Paper attracted a lot of attention. Five proposals, in particular, would (if implemented) have had a significant impact on how procurement disputes are conducted and the remedies available to challengers.
However, the Cabinet Office has considered the range of feedback received from its consultation and a number of their initial proposals have been moderated or shelved completely. Let's have a look at the developing position:
Conduct of claims
Chapter 7 consultation proposals asked whether procurement disputes should be dealt with by a specialist Tribunal. Such Tribunals already exist and are effective for other types of specialist disputes (e.g. Employment and Competition).
The Government asked whether consultees agreed this was a good idea, in particular for low value disputes. It was suggested this could speed up the litigation process – delay being a concern for contracting authorities in need of awarding contracts for works and services.
In connection with this question the Government asked whether an existing Tribunal (such as the Employment Tribunal or the Competition Tribunal) should be adapted to accommodate procurement disputes, or if a new Tribunal should be created.
Having considered consultation responses, the Government has indicated that a suitable existing Tribunal does not exist but that a dedicated procurement judge (or judges – given the volume of claims?) is a proposal to pursue. Additionally, the Government's primary aim is to speed up current court processes and it will seek to achieve this by making changes to the Civil Procedure Rules and/or the Technology and Construction Court Guidance, with increased transparency and disclosure obligations, and a greater emphasis on written evidence and submissions.
Chapter 7 consultation proposals also asked whether contracting authorities should carry out time-limited, formal internal reviews of complaints before they are lodged with the Court by staff not directly involved in the procurement that is the subject of the complaint.
The Government will not be taking this proposal forward. Consultation responses raised concerns about costs and lack of impartiality and the Government has recognised that funding would also be a concern.
Cap on damages
Chapter 7 proposed that damages available for challengers should be limited to legal fees and 1.5x bid costs. In connection with this, consultees were asked whether there should be a greater focus on pre-contract remedies. This was proposed in response to concerns from contracting authorities in having to pay out onerous damages claims and from bidders who are interested primarily in winning the contract, not fighting legal battles for damages awards.
The Government will also not be taking this proposal forward. Consultation responses highlighted that this proposal was most likely to have unintended consequences: it would most likely slow down procurement procedures and awards of contracts as it would increase the number of claims where the 'automatic suspension' would not be lifted.
Automatic suspension is the prohibition on contracting authorities from entering into the contract where a claim has been issued, which can only be lifted (i) when the claim has concluded or (ii) by order of the court. In most cases contracting authorities do apply to lift the automatic suspension and almost always succeed because they can satisfy one of the tests – 'would damages be an adequate remedy?', A number of consultees made the point that in the event that damages were capped as suggested, it would be easier for challengers to argue that damages would not be an adequate remedy.
The Government has also recognised that large damages awards in procurement disputes are the exception, rather than the norm.
Chapter 7 proposed changes to the test for the lifting of the automatic suspension. Currently the test is based on the well established 'American Cyanamid' principles, being (i) is there a serious issue to be tried and (ii) where does the balance of convenience lie? In assessing the balance of convenience, the court will assess whether damages would be an adequate remedy. If damages would be an adequate remedy, the balance of convenience is most likely to favour lifting the automatic suspension.
The Government wants to simplify the test with the aim of seeking to strike the right balance between the public interest and protecting bidders – the current test means that it is very rare for the automatic suspension not to be lifted.
The Government has confirmed it will be taking this proposal forward, however, it has not yet decided what the new principles will be. It anticipates the creation of a 'single limb' test, with a focus on the impact on public service delivery.
Chapter 7 proposed removing the requirement that contracting authorities provide debrief letters. It was suggested that this requirement was unnecessarily onerous and time consuming and, in combination with greater transparency requirements embedded "by default" throughout the procurement process (for example publication of procurement documents on a central database), debrief letters would no longer be necessary.
The Government has stated that it will proceed with this proposal, however, with some clarifications and amendments. In particular, the Government has emphasised that removing the requirement to provide debrief letters will not mean that bidders will be provided with less information. On the contrary, there will be a greater focus on transparency and more information will be provided, with contracting authorities having to provide on contract award (i) evaluation documents for the winning bidder to unsuccessful bidders (redacted for commercial sensitivity) and (ii) each bidder with their (unredacted) evaluation notes.
Whilst the Government has decided not to take forward certain proposals from Chapter 7 of the Green Paper, contracting authorities and bidders alike should be prepared for changes to the way litigation is conducted once new procurement legislation is passed.
We will provide further updates as / when more details are published by the Government as to how these changes will be implemented.