Practical Law

Warsha Kalé, Associate Director, and Stuart Stock, Associate, Berwin Leighton Paisner LLP:

This post highlights some of the public procurement compliance issues arising out of the new Cabinet Office guidance “Procurement for growth: a recipe for success”, which was published on 21 May 2013.

The guidance clearly states that, as part of the efficiency drive in public sector procurement, engagement with the private sector in the early stages of a tender process “gives maximum opportunity for success”.

Sir Bob Kerslake, Permanent Secretary of the Department for Communities and Local Government and Head of the Civil Service, also took to Twitter to highlight this very issue following his lecture at the Business Services Association annual conference on 30 April 2013.

Such a sentiment can, however, have some interesting repercussions from a procurement compliance perspective. Involving the private sector in defining the scope of public tenders can result in difficulties for the contracting authority, particularly when the contracting authority only contacts one private sector supplier and that supplier is also a potential tenderer for the relevant contract.

The issue

Clearly, there may be times when the private sector supplier involved in the preparatory works would be well placed to perform the contract in question. Additionally, in certain sectors the number of potential tenderers may be so limited that it is important that the private sector supplier bids for the contract, in order to have some competitive tension during the tender process.

The following questions therefore arise: what steps can be taken by a contracting authority to ensure that (a) it abides by the principle of equal treatment, and (b) the tenderer cannot capitalise on any unfair advantage from having been involved before the formal tender process?

These questions become even more pertinent in light of the recent public statements set out above, indicating that public sector engagement with the market before procurement will be actively encouraged.

The Fabricom principle

In, Fabricom SA v Belgian State (Cases C-21/03 and C-34/03), a case with a rather unusual factual matrix, the European Court of Justice (ECJ) endorsed the view that the principle of equal treatment was infringed by a rule that prohibited an economic operator from ever bidding for a public contract where such an economic operator had been involved in preparatory works leading to the tender in question.  In Fabricom, preparatory works included carrying out research, experiments, studies or development in connection with the tender.

However, the ECJ highlighted that that the principle of equal treatment does not require that the economic operator involved in those preparatory works be treated the same as other tenderers (see paragraphs 29-31 of the judgment). This certainly makes sense given that, as a result, the tenderer may gain an unfair advantage over other bidders. For example, the tenderer may be able to influence the conditions of the contract or design solution to play to its own strengths (or the known weaknesses of others).

The ECJ considered that it would be less restrictive, and therefore preferable, to impose measures to help determine whether or not the tenderer involved in preparatory works has, in fact, enjoyed an advantage that should result in it being excluded from submitting a tender (paragraph 32). The key question is therefore just what these measures should be.

Considerations

Subsequent case law of the European courts has reiterated the principles of Fabricom without providing much in the way of practical guidance to ensure compliance with the rules. However, that is not to say that this issue does not come up frequently in practice!

Although there is currently no definitive view on the extent to which contracting authorities may engage with private sector suppliers in the early, non-formal stages of procurement, contracting authorities may therefore wish to keep the following points in mind before the formal tender process is under way:

• The contracting authority should not automatically implement a policy banning all economic operators involved in preparatory works from bidding for a contract.
• The contracting authority should consider whether detailed services from one provider are actually required, or if they should instead consider running an open market consultation process (for example, see Public procurement: market consultation: questions for the supplier market). While this approach may reduce some of the issues that arise from supplier involvement in tender planning, it will only be advisable if the authority has sufficient expertise and experience to ask the correct questions and incorporate these into its tender requirements.
• If a particular tenderer is engaged in preparatory work, the contracting authority should consider:
  • requiring that tenderer to prove that it will not be unfairly advantaged when taking part in the tender, including taking into account any:
    • information barriers that the tenderer will put in place between those involved in the preparatory works and those involved in the bid; and
    • assurances that those individuals involved in the preparatory works will not receive any financial or other advantage should the contract be awarded to the tenderer;
  • keeping a paper-trail to demonstrate:
    • how it decided that the tenderer would not be unfairly advantaged; and
    • that decisions taken during the tender process itself were taken objectively, taking into account the contracting authority’s own requirements; and
  • having an internal or external lawyer present at key assessments and scoring of bids to preserve the objectivity of the process.

Although not an exhaustive list by any means, such factors may help a contracting authority navigate the difficulties of this area whilst still being able to pursue its commercial objectives.

All comments on whether other factors might also be relevant are welcome!