Public procurement remedies in a post-Brexit world: time for change?

As the end of the transition period looms, questions mount as to the form the UK’s public procurement remedies regime will take once it ceases to be bound by EU law. The provisions of Directive 2007/66/EC (the Remedies Directive), like the other EU public procurement Directives, have been incorporated into English law and therefore will continue to apply automatically following the end of the transition period on 31 December 2020 unless and until the UK government seeks to amend them. Against the backdrop of the UK’s ongoing trade negotiations and accession to the Government Procurement Agreement (GPA) in its own right, some see this as a moment of opportunity to reimagine and reform the current regime.

Drawbacks of the current system

The fact that the remedies regime is coming under scrutiny is unsurprising. A product of the prescriptive requirements of the Remedies Directive and the procedural traditions of the High Court system, the current process for resolving tender disputes is certainly rigorous, but it also has drawbacks that present significant difficulties to aggrieved economic operators and contracting authorities alike. In particular:

• Claims can be lengthy and expensive for all parties.

• The absence of an obligation on the contracting authority to automatically disclose bid documents means that there is a disparity of information at the outset.

• Claimants struggle with the tight time limits which, combined with the disparity of information, often pressure them to issue a claim (which can cost £10,000) simply in order to protect their position.

• The requirement for a cross-undertaking in damages can act as a deterrent to seeking to maintain the automatic suspension.

• Winning bidders have to get involved in proceedings in order to prevent disclosure of their sensitive commercial information.

• The process for protecting confidential information is expensive and cumbersome. While there is a Technology and Construction Court (TCC) protocol, this arguably does not go far enough and the lack of pro forma documents (such as confidentiality agreements) often leads to protracted negotiations between parties.

What would a reform look like? 

Any reform to the current remedies regime will still have to comply with the provisions set out in the GPA. However, with no requirements (i) for a standstill or automatic suspension; (ii) for damages to be available for lost profits; or (iii) for there to be a remedy of ineffectiveness, the remedies provisions of the GPA are far narrower than those in the Remedies Directive (and, arguably, less ‘claimant friendly’). This leaves considerable scope for amending the current system.

Citing the comparatively lower costs of enforcement across the EU, some critics of the existing regime have called for cheaper and simpler dispute resolution procedures. One way of achieving this, it is suggested, would be for procurement disputes to be heard by administrative review bodies in the first instance, with time limits imposed for the length of review and a focus on pre-contractual remedies.

In light of the hefty and high-profile damages awards made by the UK government in recent years, a discussion regarding the availability of damages in procurement disputes is also inevitable. There will no doubt be proponents of an approach that more closely reflects the minimum requirements of the GPA and limits damages awards to bid costs and/or challenge costs.

Whichever proposals for reform are put forward, some important questions must first be addressed. For example:

• In a simpler and/or more rapid process, what procedural safeguards will claimants have? The length and complexity of the existing regime can in part be attributed to the level of rigour inherent in High Court proceedings, which sets it apart from many civil law jurisdictions. Safeguards such as disclosure, witness cross-examination and advocacy are important tools in ensuring that challenges are addressed thoroughly and that justice is achieved.

• How would a new system translate into cost savings for parties? Before deciding to abandon the High Court as a first instance review body, it may be worth revisiting the tools the TCC has at its disposal to address cost concerns; by imposing ad valorem issue fees, for example, or strict costs management orders to ensure that costs are proportionate. Parties can expect to incur considerable legal fees regardless of the forum for dispute resolution, depending on the nature and complexity of the claim, and if the decisions of an administrative first instance review body are frequently appealed, disputes may be even longer and more expensive. It is also unclear how an administrative tribunal would be funded; in the current economic climate it is likely that any costs will be passed on to the parties and/or be incorporated into public contracts.

• How would public law or state aid elements of a claim be dealt with by an administrative first instance review body? Procurement claims often entail elements of public law or state aid, necessitating review by the Administrative Court. This has historically left parties struggling to manage related claims but in different forums. To avoid the host of problems this can cause, the TCC and Administrative Court have dealt with the issue by consolidating claims. It is not clear how an administrative first instance body would be able to follow suit, meaning that claimants may find themselves back in a situation where they must plead different elements of the same claim in multiple forums.

• Who would sit on the panel of an administrative first instance review body? Judges presiding over procurement disputes today have specialist knowledge of procurement law and are independent of the Executive, so are well-placed to make rulings regarding alleged breaches by contracting authorities of public procurement rules.

• How transparent would the proceedings be? The GPA requires that domestic review procedures, whether judicial or administrative, are transparent, and that any administrative rulings “of general application” are published. Review bodies that are not courts must also have their decisions subject to judicial review or provide the option for the proceedings to take place in public with witness evidence produced. Such requirements help to ensure accountability in the expenditure of public funds and would apply to any first instance administrative body. Serious concerns have been expressed at Government accountability for public spending on contracts awarded directly to manage COVID-19. It would be of grave concern if procurement review procedures were to take place behind closed doors.

• Would damages for bid costs alone suffice? The GPA allows for damages to be limited to “the costs for the preparation of the tender or the costs relating to the challenge, or both.” Amending the current regime down to these limits would no doubt be welcomed by contracting authorities. However, the availability of damages for loss of profits provides a powerful incentive to contracting authorities to abide by the public procurement rules.

Given that access to effective remedies is essential to ensure the effectiveness of any procurement regime, these questions will be of vital importance when considering any potential reform of the existing system.

There is, of course, a fine balance to be struck: the interests of claimants and the entitlement to compensation for breach of regulations, including lost profits, with the impact on administrative efficiency and need for a remedy that is proportionate. It is possible that an administrative tribunal or other reform could achieve this, but it is unlikely to be a panacea for the flaws in the existing regime. For all its drawbacks, the current remedies regime in the UK has evolved in a way that reflects the rigorous legal practices and traditions of the English legal system, and any alternative would need to preserve the levels of rigour and transparency afforded to parties (and the public) under the current system.

Let us know if you would like to discuss…

For more on how to protect your position in a bid challenge under the current regime, see our briefing note.