Procurement Alert: Procurement challengers beware – costs of claiming are rising - DAC Beachcroft

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Procurement Alert: Procurement challengers beware – costs of claiming are rising

Published On: 21 November 2014

In a blow for claimants and good news for defendants, the High Court has decided that if:

  • A losing bidder challenges a public procurement decision, triggering the automatic suspension of the procurement process;
  • The defendant contracting authority applies to lift the automatic suspension;
  • The winning bidder participates in that application as an interested party and contributes something relevant to the question of how likely the claim is to succeed at trial or otherwise to the question of whether the court should lift the suspension; and
  • The application is successful and the suspension is lifted then…

The winning bidder is entitled as a matter of principle to recover its costs from the losing claimant.

This decision is important because it increases the costs exposure for disappointed bidders thinking about bringing a claim. All parties know that cost-benefit analyses usually decide parties' strategies in bringing or defending procurement challenges.

Almost the first thing a sensible contracting authority will do on receipt of a procurement challenge (or even a threatened claim), is ask itself whether the risks of defending the claim (and in particular the risks of having to pay the claimant's costs) outweigh the financial and other harm of conceding the claim and rerunning the procurement.

A claimant considering bringing a claim should do the same exercise. With this decision, the costs risk for a claimant of bringing a claim has increased. The claimant is likely to end up paying three sets of legal costs if the automatic suspension is lifted: its own, the defendant contracting authority's, and the winning bidder's. This could be a substantial sum: in this case the defendant's costs of the automatic suspension hearing were summarily assessed at £38,700 and the interested party's at £40,100 (reduced from an initial bill of over £70,000). The claimant has been left with a costs liability of nearly £80,000, plus its own solicitors' costs, and following the lifting of the automatic suspension, a damages-only claim, which are rarely pursued. All in all this has proved to be an expensive day in court for the claimant.

For claimants, the key lesson from this case is that bringing a procurement challenge is far from risk free. Defendants considering an application to lift the automatic suspension may wish to liaise with the winning bidder, as this decision makes clear that the court will welcome the winning bidder's participation, and its doing so will increase the costs pressure on the claimant.

What is an automatic suspension?

Under the Public Contracts Regulations 2006 (as amended) and the Utilities Contracts Regulations 2006 (as amended), if a challenger to a procurement process issues a claim form before the award of a public contract, the Contracting Authority cannot go ahead and award the contract unless a court has lifted the suspension or the proceedings have been concluded. The purpose of this is to give a successful challenger the opportunity to win the contract rather than simply pursuing a claim for damages after contract award.

Group M UK Ltd v Cabinet Office [2014] EWHC 3863 (TCC)