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Procurement challenge is a costly experience for a local authority. Helen Randall and Michael Mousdale offer some advice on how to keep out of the courts. Our article ‘Watch out for contract challenges' in The MJ, (16 December 2010) reflected on the steady increase in the flow of procurement challenges brought before the courts, and the reasons why that might be so. In essence, the message was that in difficult economic times, it is inevitable that bidders will need to justify their bidding costs and not pass up the opportunity for redress and recompense when they are justifiably aggrieved about a tender award or failure to find a place on a framework. Pic: treckandshoot/Shutterstock Ironically, this increase in the incidence of challenge comes at a time when there has been an unprecedented growth in the perceived importance of the procurement function in the public sector. It is now highly unusual for a contracting authority not to be resourced by well-informed procurement professionals, for whom the intricacies of the European public procurement rules are no longer quite the mystery they once were. But the focus for the improvement in the procurement function has largely been as a result of the need to make procurement work better for the authority's broader objectives of delivering efficiencies and economies, and not through any deep-held commitment to upholding the principles in the European treaty which preserve the single market. This focus is proving unrelenting. The Efficiency and Reform Group under Francis Maude is heaping more pressure on procurement teams, so as to help realise the savings targets in public sector expenditure, and comes on top of the review of procurement across central government by Sir Philip Green, which concluded that there was much more yet which could be done to harness the public sector's massive purchasing power. But what there seems to be comparatively little of is any particular emphasis on greater compliance. And yet, paradoxically, the push towards greater value for money, lower contract costs and speedier procurement might just raise the risk of compromise to the fundamental principles of transparency and non-discrimination designed to protect the single market, and as a consequence, the risk of challenge is even higher. So, what can the contracting authority do about it? It would be trite to say that it should simply adhere to procurement rules. Most authorities do not knowingly or wilfully commit breaches of the rules. However, long-held practices and procedures – which may have a track record of delivering successful outcomes, in terms of savings – might not stand up to detailed scrutiny. All too frequently, procurements driven by the laudable aims of delivering value for money or greater savings can lose sight of the more legally-relevant principles of transparency and non-discrimination on which the procurement regime is founded. Many authorities will have invested significantly in ensuring their procurement function delivers. However, few invest in any sort of analysis of how vulnerable their procurement function is to challenge. Such an analysis begins with a recognition of where they are most at risk. Certain procurement activities are more vulnerable than others, such as high-value projects – particularly if conducted under the competitive dialogue procedure at high cost to the bidders – and frameworks. In those cases, the stakes will be particularly high for the bidders. And the stakes will be even higher if the bidder is the incumbent supplier of a service. The point of risk recognition is that it enables the authority to target resource, increase vigilance and assess whether inherently-riskier procurements demand a more tailored approach. There is a whole host of difference between purchasing photocopier paper and a major infrastructure PPP. If the council is largely applying the same procedures and documents to each procurement, it probably hasn't fully assessed the risks involved. Councils should give strong consideration to undertaking a review or audit of their whole procurement function to find out where the flaws and fault lines lie in their processes and procedures. It is recommended that such an audit exercise will review the whole system and resource applied to procurement, as well as a forensic examination of the documents used and the processes followed. Procurement challenge is almost always a costly experience for the authority. Even if it successfully defends the action, it will expend time and money in doing so, with no guarantee that it will be able to recover all its costs, never mind compensation for lost time and anxiety caused. To lose a procurement challenge will be extremely expensive in terms of payment of damages, possible cancellation of contracts, and the costs of re-procurement, to say nothing of the damage to the authority's reputation. It is surely worth spending some time in making sure that challenge is unlikely to occur, and that if it does, it can be resisted. Michael Mousdale and Helen Randall are partners at Trowers & Hamlins

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How to keep out of the courts

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