Nancy Clinton covered here two recent court cases that provided interesting outcomes in terms of public procurement challenges. Now there is no guarantee that these cases will be seen as strong precedent for future cases, either in the UK or more widely across the countries covered by EU procurement directives, but equally they may well prove to be important.
There was one very specific point in the Sunderland case that really got our attention, as it provided an interpretation of the directives that is maybe not what most of us in procurement might have expected. This revolved around the contract manager for the existing contract and service being provided to Sunderland by the incumbent supplier. He (a Mr Seale) was also part of the evaluation panel who considered the bids from various suppliers, including the incumbent, when the contract was re-tendered.
The incumbent lost the bid, and challenged on several grounds. The contract award was suspended, and this case saw Sunderland trying to lift that suspension. They were not successful, to a large extent because the implications for the incumbent will be very serious if they lose the contract. So the judge upheld the suspension until the full case comes to court.
One of the grounds for challenge was that the contract manager and the incumbent supplier had a very poor relationship. In fact, the supplier had even complained formally to the authority about the contract manger. That was, in the view of the supplier, a “conflict of interest”. This is where the unexpected nature of the challenge comes in.
The 2014 UK Regulation 24 (based very much on the EU directives) says this.
“Conflicts of interest
- (1) Contracting authorities shall take appropriate measures to effectively prevent, identify and remedy conflicts of interest arising in the conduct of procurement procedures so as to avoid any distortion of competition and to ensure equal treatment of all economic operators.
(2) For the purposes of paragraph (1), the concept of conflicts of interest shall at least cover any situation where relevant staff members have, directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement procedure.”
Now I think most of us assumed this was largely to address situations where (for instance) someone involved in the evaluation might have formally worked for one of the bidder, was a friend / relation of someone or perhaps had a shareholding in a bidding firm. But “conflict of interest” meaning someone who had been close to the incumbent as a contract manager and therefore was conflicted in that way – I must admit, that did not occur to me as a valid conflict. But it could well be a “personal interest” as defined in the Regulations.
You can certainly see where the judge was coming from on this. Frankly, if a supplier had complained about me to my boss, then I might find it very difficult to be absolutely objective when I was assessing their bid!
We should add that the judge here did not comment on whether Mr. Seale had actually been biased in his marking; she suggested though that at the further hearing, the court might need to look at the marking in some detail (which reminds us of this recent case, where the judge basically re-marked two entire tenders in great detail!) “I have no hesitation in concluding that there are serious issues to be tried”, the judge said in this case.
However, whatever happens at the next stage, contracting authorities now face a dilemma. There are very good arguments for having contract managers involved in the procurement process. They understand the service delivery better than anyone in many cases. But that may now be introducing an additional risk of challenge.
And that might not only be in this sense – an incumbent supplier claiming a bias against them. We might imagine another case where an incumbent supplier wins, and an unsuccessful bidder claims that the contract manager has a conflict of interest because he or she knows and gets on well with the winning incumbent! So we might be facing a lose: lose situation here. An unhappy bidder, whether incumbent or outsider, will always be able to claim that there was a conflict in terms of the contract manager.
Now if in this case the next court finds that Mr. Seale marked very objectively, and the challenge fails, then perhaps we are worrying unnecessarily. But at the very least, contracting authorities need to look at that “conflict of interest” issue very carefully and be aware of anything that might trigger a challenge based on that provision. It also of course re-inforces the need for very careful handling of evaluation and marking processes, and good audit trails, as we have previously suggested.