Procurement Law Reform - Let’s Start a Discussion

This is the third in our short series of bitesize feedback notes following on from DLA Piper’s Panel Discussion Webinar held on 1 July 2020 which launched our discussions paper – “Procurement Law Reform – Let’s Start a Discussion”. This third paper now looks at the complex issues that arise in terms of procuring authorities complying with their conflicting obligations to act transparently and treat bidders equally and yet at the same time to protect each bidders commercially sensitive information as well as protecting the authorities position in terms of not making unnecessary or damaging disclosure that may cause more problems in due course.

The case for reform of confidentiality and transparency requirements

There was agreement amongst the Panel, led by Fionnuala McCreadie QC¹, with the view that public bodies often appear to withhold full and effective disclosure prior to the commencement of a formal procurement challenge in the hope that the lack of sufficient feedback/transparency combined with the extremely short limitation period and the excessive cost of actually commencing a procurement challenge would ensure that prospective challengers, regardless of the potential merits of their challenge, would be deterred from commencing proceedings. It was considered that the combined effect of the current rules has led in some cases to a cynical approach to the provision of feedback and disclosure and that this has, also, often led to public bodies ignoring their duty of candour and “hiding behind” confidentiality requirements and the need for confidentiality rings or using the formalities of FOIA as an excuse to withhold or delay production of relevant information on a pre-action basis.

This lack of appropriate disclosure has in turn led to a series of cases where formal litigation has had to be commenced to force disclosure only for that litigation to then be withdrawn because disclosure has shown the challenge to be of minimal merit. This can then lead to an unnecessary and wholly avoidable satellite dispute about legal costs and the extent to which the public body should be liable for the costs of the withdrawn challenge.

By way of a clear contrast Frank Roth, from DLA Piper’s Cologne office, explained that in Germany if a potential procurement challenge is threatened then the first requirement imposed on the procuring authority will be to disclose to the Procurement Tribunal the authority’s procurement file. There is a very preliminary merits assessment by the Tribunal to ensure that a challenge is not wholly vexatious or frivolous but subject to that preliminary threshold review the Tribunal will then require the procurement file to be produced so that it will have proper visibility of the way in which procurement has been conducted and can then determine what further material should be made available to a prospective challenger and the terms on which this should be done. If the disclosure reveals that the challenge is without real merit then the challenger may withdraw.

The German approach clearly helps to negate any perverse incentive on procuring authorities to try to conceal or withhold information in the belief that that alone may deter a challenge regardless of the merits of such a challenge.

In the UK, it was suggested that one route to reform in this area would be to build into the Public Contracts Regulations (PCR) an automatic confidentiality ring structure that should apply in all cases and would require disclosure of commercially sensitive material to the legal advisors of a prospective challenger once a challenge has been intimated and that additional time should be allowed for such material to be reviewed so that the merits of a prospective challenge could be more effectively assessed on a pre-action basis. The onus would then be on the challenger to apply to the Court after proceedings have been commenced for the terms of any confidentiality ring to be extended or revised, but in the meantime there should be no good or lawful reason for an authority to withhold such disclosure.

On the other side of this particular coin, Paul Stone highlighted that the way in which many authorities provide feedback following evaluation often breaches commercial confidentiality in an unacceptable way and goes beyond what is strictly required to comply with the PCR. This is particularly the case in relation to disclosure that then permits a losing bidder to reverse calculate the pricing of the winning bidders bid so that they then know how to revise their bid in terms of reduced pricing if they can force a re-tender.

This dynamic can create a perverse incentive, especially in mid to lower value tender processes, for a procuring authority to permit a re-tender both to avoid the cost and delay of threatened litigation and because the authority may benefit from a wholly unfair situation where the winning bidder may well effectively be bidding against themselves on price in order to avoid being undercut by the losing bidder².

Clearly, in certain situations there may be a need for a losing bidder to be provided with feedback in relation to the pricing of a winning bid, but this should always be done on terms that mean that anyone who conceivably might be involved in a re-tender will not be placed in a position where they can then abuse that information.

The alternative would be a revised PCR so that authorities are under an obligation to set up the price evaluation of their tenders so that feedback on pricing scores will not permit losing bidders to reverse calculate the actual pricing of the winning bid. This would be perfectly feasible in most tender processes and would go a long way to cure an obvious abuse.

Both these competing comparatives could be resolved by relatively simple reforms to the PCR that would go a long way to correcting what are currently relatively common and wholly unfair abuses of the system.

The final point is that if there is to be a re-tender it is completely unfair that the winning tenderer has not had any feedback about the other bids. The losing bidder will know where their tender scored better than the winning bidder’s bid and where they have to improve (often including on price as matters stand) but the winning bidder is blind and so doesn’t know which elements of their bid to improve relative to the losing bidder(s). There is no justification for this and the PCR should be reformed to compel a level playing field.

Read other articles in the series

¹ As noted in our first feedback note Fionnuala McCreadie QC sees the problem with obtaining appropriate disclosure as a powerful argument for retaining the rigour of full High Court litigation as the best procedural mechanism to resolve procurement challenges in the case of complex higher value procurements.
² There is the general view that authorities have a very broad discretion to abandon procurements which must be correct especially pre-evaluation. However, post award if an authority is seeking then to cancel that award because of a threatened challenge there must be a strong case for arguing that it should give reasons to the bidder whose award is being revoked and give them a fair opportunity to comment / challenge . A general assertion that a procurement is being cancelled and re-run post award because of a threat of legal challenge with no proper explanation of why that is appropriate is clearly unfair and open to abuse.