Beyond the public sector lies the private. It shares a common goal with public sector procurement – using tenders to find providers of goods or services on the best possible terms.
Adam Bernstein spoke to two industry experts – one a lawyer, the other a bid writer – for their perspectives on the process.
Nathan Talbottt, partner at Wright Hassall
For Nathan Talbottt, a partner at law firm Wright Hassall, it’s notable that private sector procurement in the private sector is a free-for-all and there are no rules on process. In contrast, he advises that the process of public procurement is specifically regulated.
He outlines how, since the 1970s, the World Trade Organisation (WTO) and the European Union (EU) have “regulated the procurement of goods and services by public authorities to protect openness, transparency and non-discrimination in these transactions”. He says the UK is bound to these principles by its treaty obligations.
It’s natural to question whether Brexit has changed the landscape. On this, Talbott comments that “even though the UK left the EU, procurement regulations still apply. The UK became a member of the WTO’s Agreement on Government Procurement in January 2021. So, going forward, any national laws relating to public procurement will continue to be made within the framework of these international commitments.”
Public procurement law applies
As to the public procurement rules, Talbott explains that they apply in three circumstances.
First, the contracting authority must be a public authority. Here he says that “state, regional and local authorities, and other bodies governed by public law are all subject to procurement regulations”. That said, Talbott says “a distinction is made, however, between central government authorities” – which include government departments and non-departmental government bodies – “and sub-central authorities” that include local government, police and fire authorities, and universities. “These distinctions are important as they affect the threshold value of contracts that require compliance with the regulations,” he says.
Secondly, Talbott states that “the tender must be for works, products, services or concessions and the contracts envisaged must be for public supplies, public services or public works… defence and security matters, and contracts for utility activities such as water, energy, transport and postal services, have separate regulations”. Further, there are also separate regulations when the contract relates to a concession and operating risk is to be transferred to a concessionaire.
The third circumstance Talbott mentions relates to the value of the tender. He explains: “Most procurement regulations only apply to contracts above certain thresholds. However, public contract opportunities below the threshold values, but more than £12,000 (central government) or £30,000 (sub-central government) must still be published on the Government’s Contracts Finder website to allow interested parties the opportunity to respond.”
Thresholds
For works contracts or concessions, the current threshold is £5,336,937, regardless of the type of contracting authority. For supplies and services for defence and security, the threshold is £426,955, again regardless of the type of authority. But for general supplies and services, the central government threshold is £138,760, sub-central government threshold is £213,477, and for utilities it’s £426,955. All are current from 1 January 2022.
Understanding whether a tender is subject to public procurement regulations “enables authorities to follow the correct processes and allows bidders to know what to expect”, says Talbott, “and, if they have any concerns about decisions, when they may bring a challenge”.
It’s important to understand that tenders regulated by public procurement law must use one of several specified processes to evaluate and award a contract. Talbott says: “The contracting authority must notify all bidders individually of the criteria for an award, the reasons for selecting the successful bid, the scores of the winning and the unsuccessful bidder, and when a standstill period will end.” He adds that this must be at least 10 days from the notification, during which time the awarded contract may not be finalised as unsuccessful bidders may want to review the feedback from the tender.
There’s a big ‘but’ here though: Tenders can be challenged for a number of reasons, before or even after the outcome has been decided, that include the design of the tender being partial to certain suppliers; tender documents containing a mistake; inappropriate negotiation with potential suppliers; valuation of the bids wrongly excluding a bidder, or not applying award criteria correctly; the process specified by the regulations was not followed; or the required information was not provided to all bidders.
And Talbott has seen challenges come from multiple parties: “Individuals, public entities or groups as well as key sub-contractors or bid consortia partners and also, where a procurement contract was modified, those involved in the original tender, along with parties who were not, but who can show that at the time of the attempted modification they had sufficient interest in the procurement process.”
Solutions for unsuccessful bidders
So, can a challenge be mounted before a contract is concluded? Talbott advises it can: “A court may set aside the decision of the contracting authority or order that the contacting authority amends or reissues a document.” And where a challenge is made after a contract is concluded, he says a court may declare that contract ineffective, and/or impose a financial penalty on the contracting authority.
But there are, necessarily, time limits for challenges. Court proceedings must start 30 days from when the bidder first knew, or strongly suspected, that the contracting authority had breached the regulations. Talbott has seen this happen when notification of an award decision is received. But, if an infringement becomes apparent sooner, he recommends that “a bidder should not wait for the award notification to bring a challenge; the clock starts ticking as soon as a bidder is aware of the breach”.
As a result, in Talbott’s experience, it is recommended that unsuccessful bidders send contracting authorities a letter of claim before any formal proceedings are issued to grant an opportunity for a challenge to be settled without litigation. Even so, he thinks “quick decisions may need to be made about bringing more formal challenge proceedings which always involve significant expenses.” Clearly, the merits of any challenge and the sums involved must be carefully considered before issuing a claim.
As to what may happen next, Talbott notes that “legitimate challenges may be dealt with by corrective action such as suspending or setting aside the contract award”. He adds: “If, after investigation, the contracting authority believes that the contract award was lawful, unless the claimant is prepared to drop its challenge, litigation may be unavoidable.”
Practically speaking, if legal proceedings are issued before a contract has been entered into with a successful bidder, the conclusion of that contract is automatically suspended. But Talbott highlights that a contracting authority may apply to a court to end a suspension “if it can show that the claimant does not have an arguable case, that damages will be an adequate remedy, and that retaining the suspension will inhibit vital public services for a significant time”.
Confidentiality is important
Protecting confidential information is important in procurement challenges, just as it is in other commercial situations.
Even so, while unsuccessful bidders will want to determine whether bids have been correctly marked, contracting authorities want to avoid pointless disclosure and breaches of confidentiality. This means they must disclose enough for the unsuccessful bidder to understand why it has lost. Talbott says: “Refusing this level of disclosure may prevent an authority from later using that evidence in support of an application to lift the automatic suspension imposed when proceedings are issued.”
Talbott adds that it should also be remembered that a successful tenderer may be joined with a contracting authority in any court proceedings to protect its confidentiality, and any damages claim it may have because of the delay caused by an unsuccessful challenge.
While this should give all some assurance, it can also add to the length, complexity and cost of proceedings.
The future
The procurement process has been set in stone for some time now, but it should be noted it could be changing soon. In June 2021 the Cabinet Office, which is responsible for public procurement, published new information and guidance that requires contracting authorities to consider national strategic priorities when undertaking procurement, rather than simply awarding the most economically advantageous tender.
These priorities include creating new businesses, new jobs and new skills; tackling climate change and reducing waste; and improving supplier diversity, innovation and resilience. Talbott says the government intends to make this law.
Alan Kittle, managing director of the Kittle Group
Alan Kittle, managing director of the Kittle Group, sees countless contracts for public services and, in his view, for an “ambitious, proven business seeking to diversify revenue and create more resilience, tendering is a great opportunity and can help it reach new heights”.
In unpicking the process, Kittle explains that “a tender is the document, or series of documents, that companies participating in the competition submit to the buyer. It provides answers to a series of questions the buyer has asked and is the company’s opportunity to explain why they should win the contract”. He uses the term “buyer” to represent the public body.
Tenders vary enormously, from a few sides of A4 to several volumes of hundreds of pages each. Usually, Kittle sees local authority tenders being shorter than those for central government because of the complexity of the service.
He points out that while questions do differ between tenders, typically they seek the same information about the company – what it does, turnover and any accreditations held; past experience – where a similar service has been delivered before; how the service will be run; recruitment and training of staff; the approach to health and safety; and whether the contract will create new jobs or support local business.
Buyers do set limits for how long answers can be – from a few hundred words to several pages along with diagrams, says Kittle. And by definition, he says answers should be sufficiently detailed.
A complex process
Kittle acknowledges that the law is complex, but details that “in simple terms, any contract for a public body must be tendered if the total value is above certain limits set by the government each year”.
He adds that if the total contract value comes to less than these thresholds, the buyer does not have to tender the service, but it can do so if it wishes. He adds: “If they choose not to tender, most will ask a few local suppliers to provide a quote for the work so they can benchmark and decide which one to select.”
Kittle points out that there are some exceptions where the buyer can avoid compulsory tendering. These are, in the main, “limited to emergency situations where the service is required immediately as there is a significant immediate threat to national security or public health”.
As to where public tenders are published, Kittle highlights two websites on gov.uk – Contracts Finder for any contract below £118,000 and Find a Tender for any contract over that value. He says: “These sites are where details of the tender can be found, such as the name of the buyer, details of the contract, its likely value, how to submit a tender, and the deadline for doing so.”
He continues: “They signpost to portals where firms can download the tender documents and submit their bid.” Kittle warns, however, that there are many portals used by public bodies, so it is important to follow the instructions on Contract Finder or Find a Tender.
Consultation with companies
And there is another complexity to consider – buyers sometimes consult with companies they think may be interested in tendering for the contract. On this, Kittle says that they “may seek advice or may simply promote the fact that a tender will be released in the future to drum up interest in becoming part of the competition”. Regardless, notices should still be advertised on the two sites, and it’s also possible to register for automated notifications of contracts.
Cynics suggest that tenders – essentially a competition – can be kept secret to stifle rivals. Kittle says this doesn’t happen but, for national security reasons, a tender may, rarely, be kept confidential.
That said, the process itself, while advertised, should be confidential. Kittle says: “Bidders do not get to learn about other companies’ tenders and they don’t get to learn about rivals; firms will also only be allowed to share the documentation with those involved in preparing the tender.”
Clarifying questions can be submitted – through the portal used by the buyer – and the default position, according to Kittle, is for the buyer to share all questions and answers with all those tendering. He adds a rider though – “if a question is commercially sensitive, the bidder can ask buyers not to share the question and answer”. The decision is that of the buyer only; the question can be withdrawn if the buyer declines confidentiality.
The tender
Because tenders are invariably time-limited Kittle advises clients to prepare for a tender as far in advance as possible. His advice to bidders is to undertake research to understand the types of services that are currently contracted in the sector and contact buyers to tell them about an interest in tendering in the future.
Next, Kittle says to think about the types of questions that might be asked and gather up information, including case studies, which he says are “particularly useful in explaining where a firm has delivered a similar service in the past”.
Copies of the past few years of accounts and insurance policies are necessary, as are copies of recent policies, procedures and any certifications and trade/professional bodies. Everything should be checked and current.
Bidders should also think about how the service will be delivered in a way that would please the buyer. Here Kittle says: “If a bidder is going to approach a prospective buyer to talk to them about their contracts, they must be sure to do it early. Once the tendering process has begun, buyers will not talk.” He says this is to comply with the law that says all companies must be treated fairly and equally.
At the same time, he points out that because the process can take some time, the price submitted with the bid may have to be held for several months. In other words, pricing needs careful thought.
Kittle also emphasises tenders may demand that firms demonstrate they are financially solvent and are not at risk of failing; and that the company, or its directors, have not been convicted of a wide range of offences, including corruption, bribery, fraud, money laundering, terrorism, organised crime, child labour, drug or human trafficking, and non-payment of tax.
He adds that other checks may halt the submission of a tender. He lists these as including prosecution for a health-and-safety breach, polluting the environment, committing grave professional misconduct, or performing very poorly on a previous contract. And for national security contracts, the company, its directors, and key personnel will undergo government vetting. DBS checks also may be required if staff will work with children or other vulnerable people.
And to throw in a googly, Kittle says: “Buyers can choose to run the competition in two halves. The first is often called a Selection Questionnaire or Pre-qualification Questionnaire. It asks a fair number of questions about the business, what it does and its experience. In particular, bidders should be prepared to submit case studies of around 500 words each.”
He explains that these questionnaires not only remove any company from the process that is clearly unsuitable, they also take through a smaller group of companies to the second stage so that those which are unlikely to win do not waste their time, and the buyer can run a more manageable process.
Even so, Kittle knows that the unsuccessful will understandably be disappointed and want to make sure their tender has been marked fairly. For that reason, he says, “the law requires the buyer to give every company that participated in the competition feedback about their bid – what they liked and where it could have been better”. He says they should also mention why the winning company’s tender was better.
The decision can be challenged through the courts, but Kittle warns this “is complex and can be expensive if lost.” He suggests bidders take legal advice from a qualified procurement solicitor if there is a genuine concern.
However, in most instances, Kittle says “it will be a matter of learning lessons for the future”, noting that “once the tender process has been fully completed and the new contract has been signed, buyers may be happy to talk in more detail about where bidders went wrong”.
Summary
Public tendering is more than a legal process; it’s an art. Success takes time and considered preparation. However, those that put the effort in stand to make large gains.
Remember, the public sector doesn’t necessarily ‘make’, but it does ‘do’ – and it does this to the tune of £300bn a year.
