Passing the baton
Ensuring a level playing field for new bidders when re-tendering a service contract can be tricky business, writes Erika Clarke.
Any public body will reach a point in a service arrangement where a contract is about to expire, but the need for that service continues. Assuming that you are content with the current provider and its performance, there will be a temptation to allow the arrangements to continue beyond the expiry date.
However alluring that option may be, your financial instructions, standing orders and (where the type of service and value of the contract dictates) public procurement law, will lead to you ultimately let the new contract through a competitive process. (See Regulations 14(1)(d) of the Public Contracts Regulations 2006 for limited situations where contracts may be extended or renewed)
Aware of your duties under public procurement law, you may be concerned as to how you are going to achieve a level playing field among your tenderers if your current provider also intends to bid.
The current provider will have had access to a whole raft of information and will continue to do so up to the point of the new contract award. Case law clearly sets the principle that tenderers must be treated equally. That does not mean, however, that an existing provider who has a natural advantage over competing tenderers should be precluded from tendering for a new contract (See Fabricom v Belgium [2005] E.C.R I-1559).
A case decided earlier this year by the European Court of First Instance (Evropaiki Dynamiki ñ Proigmena Systimata Tilepikoinonion Pliroforikis kai Tilematikis AE v Commission (Case T-345/03)) acknowledged that an existing provider has an ‘inherent de facto advantage’. In this case, the contracting authority (the Commission itself) had specified that the first three months of the new contract would be an unpaid running-in phase. The existing contract provided for a ‘handover’ period, so that at the end of the three months, any new provider would have familiarised itself with the services and would take over their provision fully up to speed.
A challenge was brought by a failed tenderer, who alleged (inter alia) that this unpaid running-in phase favoured the existing provider and did not comply with the principle of ‘equal treatment’. The Court considered whether this was, by its nature, a discriminatory provision. It noted that while all tenderers (including the existing provider) would be subject to this unpaid running-in phase, the existing provider would still be paid during the existing contract’s ‘handover period’. Any new provider, however, could not provide the services from Day 1 of the new contract, so it was felt that the unpaid period was not inherently discriminatory.
While the principle of equal treatment must be upheld, not every advantage held by an existing provider can be avoided or extinguished. This should only be expected to the extent that it does not prejudice the existing provider or other tenderers and is technically and economically feasible. For example, in this recent case it was said that had there been a dual obligation to pay the existing provider during the ‘handover’ and the new provider for the running-in phase (bearing in mind that this new provider could be one and the same as the existing provider) this would have been uneconomic.
The complainant also alleged that it had not been given certain technical information at the outset which had been available throughout to the successful tenderer. It alleged that this constituted unequal treatment of tenderers. The Court decided that the failure to supply this technical information at an early stage did provide an advantage to the successful tenderer and, had that information been supplied at the appropriate time, the contract might have been awarded to the complainant. There would have been no prejudice to the existing provider (or to any other tenderer) in providing the information at the same time to all tenderers so that they each had an opportunity to base their tenders on the same information over the same period.
In addition, there was no technical or economic reason why a ‘level playing field’ in respect of this technical information should not be secured.
On a related theme, the case of Deloitte Business Advisory NV (Deloittes Business Advisory BV v Commission of the European Communities Case (T-195/05) 18 April 2007) provides guidance on the topic of conflicts of interest in procurements. In this case the procurement documents were clear when it came to conflicts of interest. The contracting authority reserved the right not to award a contract where such a conflict existed. The consortium was rejected from the process (as certain members had been involved in work that would have been evaluated under the contract being procured). This rejection was upheld by the Court as being a real conflict of interest and was upheld despite the consortium not having been given the opportunity to defend its position.
Conflicts of interest can also arise where an existing provider assists in the preparation of the procurement for a new contract. The Fabricom case (Fabricom v Belgium [2005] E.C.R I-1559) acknowledged involvement in the preparation of specifications may give a tenderer an advantage and raises concerns about equal treatment, but automatic rejection of that tenderer is not the only way of addressing the actual or perceived advantage. Identical information held by that tenderer should be supplied to all others. Provided this neutralises the competitive advantage, the tenderer who assisted can remain in the competition.It is worth remembering that the burden rests on the contracting authority to show that the advantage can be neutralised and that you may have difficulty in persuading your other tenderers that the advantage does not remain. They may withdraw from the process or consider a challenge should they have concerns.
To summarise, any procurement of a new contract for an ongoing service requirement must be handled carefully. This is particularly so where the existing provider wishes to tender.
Basic principles include:
• Check the arrangements under your existing contract. Does it provide for a proper handover?
• What are the arrangements for the provision of information by your current provider regarding the services and their means of delivery? Do adequate remedies exist should any of the information supplied by the existing provider be incorrect?
• Decide what is required (bearing in mind technical and economic realities) to neutralise any actual or perceived advantage held by the existing provider. How will this be addressed with the other tenderers and your evaluation team?
• Consider the extent it is necessary to involve the existing provider in the preparation of procurement documents. Much will depend upon the resource of the ‘client side’. A clear audit trail and equal provision of technical information at the outset to all tenderers will be the very minimum required to avoid concerns being raised by other tenderers or claims of unequal treatment.
Erika Clarke is a partner of Birketts LLP
