Public procurement: a costly reminder of the importance of getting it right

In May of 2023, work to repair Parliament’s tallest structure, the Victoria Tower, was put out to tender with an estimated contract value of £95M. In April 2024, it was revealed that the tender process was flawed and would have to be started again while bidders had incurred costs. A further tender notice has since been published in June 2024.   

The likely significant costs that have been incurred from the first tender, together with the time delays subsequently incurred, provide a salutary reminder of the importance of complying with the requirements of the Public Contract Regulations 2015, ensuring the correct documents are provided, and the process is followed.  

What is public procurement?  

Public procurement is the process by which public sector bodies purchase goods, services and/or works. In selecting a supplier for these goods, services and/or works, contracting authorities are required under the Public Contracts Regulations 2015 (the PCR 2015) to award on the basis of the most economically advantageous tender.  

Invitation to tender (ITT) 

When dealing with contracts for proposed building works, it is imperative that the form of contract to be entered into is reviewed early on as part of the public body’s planning for the procurement and is included in the procurement documentation in the initial call for competition. The public body should allocate time in the project to conduct a full review of contracting documents and the ITT itself, including stress testing to ensure that the documentation to be published is fit for purpose.  

From both the contractor’s and the public body’s perspective, early market engagement is strongly recommended in advance of a major works project not only to advertise and warm the market to the upcoming opportunity but to also understand whether the market’s approach is aligned to the public body’s expectations for delivery. This helps to mitigate a reputational and financial risk once the competition ‘goes live’ if the approach and processes are found to be not fit for purpose. It also means that potential bidders are clear early on of the public body’s expectations.  

When public bodies go out to tender via an organised framework, that framework will typically identify the forms of contract which the public body can use, as well as whether they have the ability to impose project specific, bespoke amendments to the standard form.  

Negotiations

Specific procedures under the PCR 2015 allow for negotiation and the ITT documents will set out the process to be followed. Suppliers should review the procedure carefully and the evaluation methodology that will be applied.  

Where permitted, negotiation of contract terms take place once the ITT has been circulated to the providers and the initial bids have been submitted. The purpose of this exercise is to allow all parties to refine and improve their bids before submission of ‘Best and Final Offer’, to ensure that the price, timeframes, and terms are competitive.  

It is imperative from a ‘supplier’ perspective that any amendments they require to the contract terms are identified either as part of their tender clarifications, or as part of the negotiated procedure. Negotiations outside of this window are at risk of falling foul of the principles of transparency, equal treatment and non-discrimination under regulation 18 of the PCR 2015. A public body which subsequently agrees contract amendments to the published form of contract which were not raised either as part of tender clarifications, or during the permitted negotiation window could expose the public body to a challenge for non-compliance with procurement law and judicial review. The legal risks can be compounded by commercial risks to the public body, for example, external time pressure to finalise the contract.  

The Birketts view 

To promote an effective tendering process, suppliers should engage with contracting authorities via the tender portal, not just to ensure that the timeframes are understood and submit bids in good time but also to ensure any potential issues are identified early and mitigation steps are taken.  

Once in force from October 2024, the Procurement Act 2023 will provide for greater flexibility to public bodies, such as designing the procurement procedure. However, in designing the procurement, the public body must have regard to the proportionality of the procedure and to the importance of certain objectives such as delivering value for money and maximising public benefit. Consequently, contractors/consultants will be faced with procedures that may look familiar to those available under the PCR 2015 but should treat the sense of familiarity with caution and read the tendering documents carefully to understand the public body’s process and requirements. 

From a contractor/consultant perspective, whilst the tender process can often be expensive and time consuming, it is imperative that tenders give due consideration not only to the project for which they are tendering, but also the terms which will apply. We therefore recommend seeking advice on the proposed contract terms as part of the tender stage, and these should also be issued to your insurers. That way, you can ensure that any required amendments to the contract terms are captured as part of your tender, and you are not bound by unacceptable terms as part of your bid.