Abandonment of Public Contract Procurement Processes: Going Off The Rails

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The Government’s decision to cancel the award of the West Coast Main Line franchise is a very high profile example of how badly wrong a procurement process can go if the process is allowed to get out of shape and all the more so if it is permitted to proceed to a disputed award which is then not completed. 

The legal action commenced by Virgin Trains was begun when the Government refused to agree to postpone awarding the contract to First Group.  The commencement of that action froze the process and the Government would have had to go to Court for permission to carry on.  Instead, it has now exposed itself to legal action from First Group by revoking the contract that it had awarded to First Group but which had not yet officially been signed .  There are no winners in a procurement dispute like this but any public authority which becomes concerned that a procurement procedure is not going to plan has options to try to rectify the problem or at least to prevent it getting to the worst and most expensive stage which is what has happened with the West Coast Main Line franchise award. 

The documentation for a procurement process should specify that one possible outcome of the process is that no contract will be awarded.  This is intended to allow a contracting authority that receives a series of unacceptable bids not to be compelled to sign up for the best of a bad lot.  It is also a means by which the contracting authority can stop the process short of award and maintain the position that even had it allowed the process to run its course there might not have been an award anyway. 

Abandoning a live procurement process cannot be done on a whim and there is significant case law from the European Court of Justice to highlight some of the does and don’ts of abandoning a procurement process and trying to start again.  Where a part of the process has been misapplied and cannot be properly rectified at the later stage it is appropriate to stop the process and start again. Equally where it becomes clear where a significant piece of information has not been included in the calculations to assess competent bids such that the results will not work properly there is no need to carry on to produce a result that nobody can use. it will be interesting to find out which (or both) of these problems beset the Rail Franchise process.

There are requirements to communicate with all bidders and the decision to discontinue the process must be proportionate in the circumstances. 

Where a procurement process is abandoned the challenge usually comes from the party that was running in second place and contends that it would have won had the process been improved by removing the winning bidder instead of restarting the entire process.  In some circumstances it is possible to take one bidder out of the running (for example if it has made an abnormally low bid) but the problem is a systemic flaw in the procurement procedure itself all parties are potentially affected in the same way and the best solution may be to come clean to the bidders and start again.

It might be tempting to move to an award of the contract and then tidy things up afterewards. Post-award renegotiations and variations to contracts are usually enough to be treated as equivalent to a new direct award of a different contract and can open up the contracting authority to the full range of procurement challenges from bidders who lost out before the contract was changed and will say they would have done it all differently if the contracting authority had given them as much leeway as the winning bidder was allowed.

If the procurement procedure is stopped and restarted then contracting authorities need to be aware of the potential for the use of freedom of information requests by bidders to try to get details about the competing bids that were lodged in the abandoned process.  It may be that commercial confidentiality can be used as a ground to withhold information that might otherwise be released under the Freedom of Information Act or similar legislation where the replacement procedure is still running and information about the abandoned procedure would be particularly sensitive.  Where there is a legal challenge to the abandoned process documents relating to the decision to abandon and any mechanism for awarding the contract that was considered to be flawed may have to be disclosed under the Court rules in the event of a challenge.  It may be possible to impose confidentiality restrictions on the extent of that disclosure but Courts have indicated that making known things such as model answers or even mark schemes that the awarding body was going to use serves not to make a replacement competition impossible but instead to make clearer to potential bidders what the contracting authority was expecting from them such that bids in the second round should be better than in the first.  

Once a public authority is in the middle of a procurement process and things start to go wrong there may not be a good way out.  Assessing the position, being aware of the options and taking sensible action at an early stage may prevent the outcome being as bad as it now appears to be for the Department of Transport. 

The Public Sector Team at Forbes Solicitors can assist in relation to potential procurement disputes or questions about the appropriate use of procurement processes and procedures.  Contact Daniel Milnes or Robin Stephens if you have questions on these topics.

Daniel Milnes

About Daniel Milnes

Dan is a Partner and Head of Contracts & Projects. Dan’s blogs cover the areas in which his specialities lie in commercial, regulatory and governance law which cover a broad range of matters dealing with contracts, projects, corporate and group structures, funding and compliance with a range of legal regimes including data protection. This also involves writing and advising on various forms of commercial contracts including joint ventures, development and construction agreements and intellectual property contracts including IT agreements, sponsorships and other rights licensing arrangements.
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