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Victorious losers
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 …
“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”
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.
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.
Readers are invited to forward recent
judgments for reporting in this column (with full
acknowledgement) to: Tony Bingham, 3 Paper Buildings, Temple,
London EC4Y 7EU. DX: 37164 Biggleswade
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