EU rules insist that public contracts be run in a fair and open way. So, if you miss out, and you think the client wasn’t fair, you can ask a court for damages. A lot of damages …
When yet another tender was lost, the chief estimator for a Northern Irish contractor raised a tortured cry. Favouritism! And the reason he did was that he thought the bidding process lacked transparency. Now, thanks to joining a fancy club called the EU, there is a law against it – favouritism, that is; and a law in favour of it – transparency, that is.
There is more. The torpedo that sinks favouritism when bidding, tendering, beating your brains out to win local authority and central government building works (you and I call them public works contracts) is the Public Contracts Regulations 2006. You knew all that, didn’t you? Come on, don’t be modest, you know all the “common procurement vocabulary”. It’s the “reference nomenclature applicable to public contracts adopted by the regulations of the European parliament and the European council of the ‘common procurement vocabulary’”. Enough, enough. I give in. But don’t blame me. Blame the chief estimators up and down the land.
Look what’s happening. Four builders in Belfast became very peeved when they failed to win their way into a framework agreement for £600m worth of schools contracts. So they then used the “common procurement vocabulary” and the “competitive dialogue procedure” to shout “Foul!” Let me tell you the story.
Thanks to joining a fancy club called the EU, there is a law against it – favouritism, that is; and a law in favour of it – transparency, that is
There is a need in Northern Ireland to bring numerous schools up to snuff. So the Central Procurement Directive”engaged well-known firms EC Harris and Chandler KBS to manage the procurement process. They followed the current fashion and set up a framework contract for a package of 12 schools. Framework contracts are specifically mentioned in these Public Contracts Regulations, where they are given a cautionary thumbs-up. The first move was to invite 12 to 16 “economic operators” (that is, builders) to take part in a competition to win a place on a list of eight privileged companies. So the lucky eight are in with a chance of winning all or none of the work by secondary bidding within the framework.
Can you see the snag with all this? President Lyndon B Johnson, when unsure whether to keep J Edgar Hoover as the head of the FBI, said: “It’s probably better to have him inside the tent pissing out than outside the tent pissing in.” In this case, eight are in the tent and the rest are not. Those on the outside are a mite peeved. And, oh dear, oh dear, the builders outside the tent are undoing their flies.
These chaps have begun an action accusing the Department of Education for Northern Ireland of being in breach of the procurement rules for public works contracts. It seems that when they heard they were shut out of the tent, they asked what shutting-out criteria had been used. Seemingly, entry to the privileged list was evaluated in accordance with a “weighting” system, which was 80% qualitative and 20% commercial. On the commercial side, all this clever stuff boils down to questions about the percentage mark-up on the works, the subcontracts and design services.
If errors in the evaluation process are found, the judge will award damages for loss of chance. It could be tens of millions
The disappointed builders probed a bit further and sniffed on the wind some errors in the evaluation process. That’s what happens when you go transparent. The rules insist on strict “equality”, “transparency”, “objectivity” and “non-discrimination”. These words mean, said one judge, that any award of public contracts shall be on the basis of serious assessment and without any kind of favouritism or quid pro quo, whether financial or political.
Now what? The builders’ lawyers applied to the court for an injunction to stop anyone getting into the tent. The judge declined to give an injunction, but agreed that there were real grounds for a full-scale trial. If errors in the evaluation process are found, he will award damages for loss of chance to the builders left out in the cold. It could be tens of millions. And there is a small queue of other court cases across the UK along the same lines.
So, for all you public bodies going out to tender, it sounds like mighty thin ice. There may be more to gain for economic operators by suing for damages than actually winning the bloomin’ job.
Tony Bingham is a barrister and arbitrator