knowledge 18 February 2022 |

Taking a Stand – Who Can Challenge a Procurement Process?

In the most recent Word Perfect¹ case, the High Court took a strict view on the need for a challenger to have submitted a tender in order to be eligible under the Remedies Regulations². This is consistent with the judgement in Payzone Ireland Limited v National Transport Authority³, in which it was held that a subcontractor will not generally be “eligible” to bring a claim under the Remedies Regulations. Together they speak to a strict interpretation of the eligibility requirement as a matter of Irish law.

Legislation

The Remedies Regulations are a dedicated review process for procurement challenges. They provide a powerful avenue of challenge, which brings with it an automatic suspension if the case is filed before the contract is signed (which prevents an authority from signing the contract until the case is determined, or until the Court gives permission to lift the suspension). Because the automatic suspension is such a powerful tool, the use of the Remedies Regulations is limited to “eligible persons”. To be “eligible”, an entity must:

1. have, or have had, an interest in obtaining the reviewable contract; and

2. allege that he or she has been harmed, or is at risk of being harmed, by the infringement complained of.

Does the challenger need to submit a tender in order to be eligible?

Through both Irish⁴ and European case-law⁵, it has become a well-established part of the public procurement process that for an applicant to be eligible to challenge an award of contract it must have submitted a tender for that contract, save for in very exceptional circumstances.

Word Perfect Translation Services Limited (“Word Perfect”) initiated proceedings against the Minister for Public Expenditure and Reform (the “State”). The case concerned a competition for a Multi-Supplier Framework Agreement for the Provision of Irish Language Translation Services (the “Competition”) and Word Perfect’s central argument was that the design of the Competition was unlawful.

Word Perfect argued that:

1. the proposed method of allocating contracts by way of rotation amongst the successful suppliers breached the general principle of equal treatment, due to the fact that, under this rotation mechanism, lower ranked successful tenderers might end up with higher value contracts when compared with their higher ranked peers, through luck of the draw;

2. the requirement that tenderers must not bid below a minimum price breaches the general principle of free competition under EU law; and

3. the minimum turnover requirement was too low and breached the general principles of proportionality under EU law, as Word Perfect argued that it would permit Tenderers who were not “sufficiently financially robust to provide the services” to participate.

The distinctive feature of this case is that Word Perfect was not challenging the decision to award the contract to another bidder; it was challenging the way in which the Competition was structured. Word Perfect brought its challenge before the expiry of the tender deadline (so as to ensure it challenged within 30 days of becoming aware of the issues it complained of), but it did not actually submit a tender.

The State argued that Word Perfect was not an “eligible person” as it did not have an interest in obtaining the relevant contract. Case law has interpreted this as requiring that the challenger must submit a tender, except in exceptional circumstances.  The question before the High Court therefore was whether the fact that Word Perfect had not submitted a tender rendered it ineligible, in circumstances where it was actually challenging the legality of the tender documents themselves, as distinct from a challenge to an award of contract.

In its submissions, the State relied heavily on the strict interpretation adopted in Copymoore⁶ and Grossmann⁷ of what is meant by “an interest in obtaining” the public procurement contract. The Court agreed that, save in “exceptional”⁸ circumstances,  a failure to submit a tender is “impossible to overlook”⁹ when considering whether the applicant has an “interest in obtaining”¹⁰ the contract.

To fall within the remit of such “exceptional” circumstances, the Court agreed that the applicant would have to have been precluded from submitting a tender due to the allegedly unlawful requirement(s) complained of. The Court concluded however that such exceptions “are not of relevance in Word Perfect’s case” as the breaches complained of in this case “did not prevent Word Perfect from winning any State translation contracts, [but rather] were likely to reduce its current market share of the State translation contracts.”

Word Perfect acknowledged that they did not fall within these exceptions but argued instead that the test of eligibility should differ for applicants challenging tender documents, as opposed to applicants challenging an award of contract. Whilst the Court agreed that Word Perfect may well be deemed to have an “interest” in the contract, in the general sense of the word, there is nothing in the wording of Regulation 4, nor in the case-law, which suggests that the threshold for eligibility should differ depending on the stage of the procurement process.

The Court was further persuaded to rely on the very strict interpretation of eligibility on the basis that, unlike with other forms of judicial review, an applicant challenging a public procurement process does not have to seek the Court’s leave to initiate proceedings. In addition, once an applicant submits a challenge to an element of the public procurement process, that entire process is put on hold because of the automatic suspension. The Court highlighted the “very significant consequence” this has, regardless of the merits or substance of an applicant’s challenge.  The Court accordingly concluded in no uncertain terms that, for the purposes of Regulation 4,

“the eligibility requirement for challenging a Request for Tender is the same as that for challenging an award of a contract, namely that save in the most exceptional circumstances the applicant has to have submitted a tender.”

Ultimately the Court found that Word Perfect was ineligible to challenge as it had not submitted a tender.

It would seem from this judgment that a tenderer who believes that a competition has been structured in a non-compliant way, must submit a tender in order to be eligible to challenge (notwithstanding that the submission of that tender might actually post-date the institution of the challenge), except if the breach being complained of would prevent them from submitting the tender altogether, or would render such tender doomed.

Standing of a sub-contractor to bring a claim under the Remedies Regulations

Standing of sub-contractors was considered recently by the Irish courts in Payzone Ireland Limited v National Transport Authority¹¹. Here, the NTA brought a motion to dismiss proceedings on the grounds that the applicant was not an eligible person.

Payzone did not tender for the contract but instead agreed to participate in the tender of DXC Technology as a subcontractor. It had also been in negotiations with Cubic Transportation Systems Limited and understood itself to be included in the Cubic tender as a proposed subcontractor. Cubic was identified as the successful tenderer, although it subsequently informed Payzone that Payzone had not been included as a proposed subcontractor. Payzone sought to challenge the award of the contract to Cubic by way of the Remedies Regulations, and the NTA brought a motion seeking dismissal of those proceedings on the ground that Payzone was not an eligible person.

The Court ultimately held that Payzone did not qualify as an eligible person because it did not have an interest in being awarded the contract. Payzone did not apply to be shortlisted in the competition to be awarded the contract. It submitted no tender. It could never have been awarded the contract, not because of any rule preventing such an award but because it had never sought to win the contract; it had merely been involved as a proposed subcontractor to an unsuccessful tenderer. Payzone made no claim that it should have been awarded the contract and even at the hearing, it did not say that it would compete for the contract in the event that it succeeded in the proceedings. This was found to be fatal to its claim under the Remedies Regulations, although it separately launched judicial review proceedings to protect its position.

Conclusion

The Remedies Regulation regime is a powerful tool for any potential eligible applicant; if a bidder takes an action under the Remedies Regulations, they get the benefit of the automatic suspension which prevents the authority from signing the contract until the case is determined, unless the Court gives permission to lift the suspension.

Following on from the Word Perfect and Payzone judgments, contracting authorities should take some comfort that the courts will strictly enforce the eligibility requirements in the Remedies Regulations. The strict interpretation here will be welcome to contracting authorities, especially given the risk of disruption to a procurement process which the automatic suspension can entail.

Despite this, contracting authorities should keep in mind that decisions to award contracts in the public interest may be subject to judicial review (outside the Remedies Regulations) by other types of interested parties, who may not necessarily be “eligible”.

On the other hand, potential challengers should view Word Perfect and Payzone with caution, ensuring that they determine in early course whether they are eligible (and in particular whether they need to submit a tender to fulfil that definition). This should allow challengers to ensure they pursue the correct regime (and if possible, take steps to protect their ability to challenge under the Remedies Regulations).

Also contributed to by Grace McKnight