Tender does it

Many of you will have read about the case of Harmon CFEM Facades (UK) Ltd vs The Corporate Officer of the House of Commons, where the court decided that the House of Commons had got it wrong. In short, the House of Commons chose a cladding contractor that was not lowest price, citing that it offered best value for money. But Judge Humphrey Lloyd ruled that Harmon, the lowest-priced tenderer, was treated unfairly. The judge also ruled that there was a failure to comply with the terms of implied tender contract, and a failure to identify or rate criteria to be applied in the tender selection process. So the contractor was entitled to recover damages.

While you may find reason to applaud the tenacity and success of the subcontractor, the hurdles that Harmon had to clear, including the small matter of providing security for costs of well over £500 000 in order to proceed with the litigation, are far beyond the means of most contractors involved in public sector work.

Perhaps more significantly, would you be prepared to gain a reputation as "difficult" while not being successful in tender procedures? Such a reputation is hardly likely to be good for business.

So, if you are a contractor that wishes to avoid getting embroiled in detailed litigation (and I would suggest that few fall outside that definition), what is available in your armoury if you are dropped from tender lists?

The Local Government Act 1988, sections 17 to 20, provides a statutory mechanism imposing duties upon local and other public authorities, when considering public sector lists of approved contractors, as to issues not to be taken into account. These include such items as the location of the contractor, its political or industrial affiliations and any involvement with irrelevant fields of government policy.

If a contractor is unsuccessful in achieving a place on an approved tender list or fails to obtain a particular piece of work, it is entitled under section 20 of the act to request reasons within 15 days of the rejection notice. Assuming that reasons have been obtained and that, in the view of the contractor, they are inadequate, it is the next move that is difficult.

Let us take a step back at this point and, rather than get bogged down in the legal niceties, ask the obvious question as to what purpose is to be achieved by reviewing such a decision. The answer is obvious, being the restoration of the company to that particular approved list, since the job in question has probably gone forever. While there may be, in extreme circumstances, if speed permits, the possibility of injunctive relief to prevent the local authority from giving the work to another company, this is an unlikely and expensive potential solution.

Negotiation and discussion are preferable to litigation, not least because having a known track record of challenging public sector clients about their tender procedures is not necessarily going to help the expansion of your business.

One option might be to seek disclosure from the local authority of documentation reviewed in reaching its decision. This may open the door to possible discussions between the contractor and the local authority, which could lead to successful resolution of the matter. This may be a particularly useful route where a contractor believes it has been suspended from a list for inappropriate or incorrect reasons. The local authority will be aware that if it does not provide such information, there is a risk that it can be taken to court for pre-action disclosure of documentation, as the provision of information is relevant in order to enable the party to decide whether it has good reason to complain. This route will also have the inevitable effect of forcing the public sector body to review its procedures in any event.

If matters cannot be resolved amicably, then judicial review can be sought (that is, an application to the court requesting a review of the actions of the public body), but proceedings must be issued expeditiously and within three months of the offending decision, barring good grounds for an extension. So, time is of the essence.

Judicial review seems a heavy weapon. Even if successful, the contractor may not receive damages because the remedies available under judicial review may simply be a declaration as to the appropriateness or not of the public body's decision.

Indeed, my own experience of acting for contractors who have had difficulties getting on approved lists, or dealing with issues such as suspension or removal from such lists, is that appropriate early correspondence followed by continuing discussions, with or without legal proceedings being issued, is clearly a preferable route to expensive and lengthy litigation.

Whether the Harmon situation will arise again must be open to some doubt, but it should ensure that public sector clients are a little more careful as to their tendering procedures in future. If a contractor decides that it is to bite the hand that feeds it, it needs to do so quickly and cleanly, with the full knowledge of both the remedies and routes available, and the risks such routes may bring.