Dealing with a losing bid – part 3

Dealing with a losing bid – part 3

In previous posts we have dealt with scenarios where companies have submitted a deficient or defective losing bid and with scenarios where they submitted a good bid and were hoping to be successful. In this posting, we will outline three options for companies seeking to take specific action following a contract award process. We will deal with three scenarios that have varying degrees of formality and outline the pros and cons of each.

 

Les mots justes – the diplomatic route

This is the most common approach used in Ireland. There is a real fear (based on genuine grounds) of being blacklisted as a supplier if a company is too forthright in contesting a decision. Companies that are very dissatisfied with a decision can seek to express the reasons for their dissatisfaction to the company. They can also ask what they could have done to assuage the contracting authority that they could do at least as good a job as the company awarded the contract. Sometimes, this can provide valuable lessons and insights that determined suppliers can use to improve their operations.

Supplier relations endure peaks and troughs so where a company ensures its erstwhile customer knows it has improved its abilities in the areas they lost out on, it can position them to win next time out.

The benefits of this approach is that the buyer is aware of the supplier’s issues but also their willingness to work hard to gain their trust. The downside is that this assumes the buyer takes supplier management seriously, thinks strategically and wants to keep their supplier options open. Some buyers are like this but others are not.

 

Instigating formal review mechanisms

The next step that companies can take is to lodge a formal challenge. This can be done during the standstill period (or Alcatel period after the telecoms company that won a case to get this right established). This period allows unsuccessful suppliers to lodge an appeal during a 10 calendar day period after they have been notified of the outcome. It is important to understand that the process of challenging the decision will concern public buyers, especially those that have no formal training in this area. They may feel compelled to contact legal advisors and fear the worst. It is important to tread lightly while carrying the stick marked “challenge”.

There are often good grounds for reviewing a decision but at present, this is culturally alien to Ireland and so conflict between the losing party and the contracting authority can ensue.

A further option is to seek the assistance of the Tender Advisory Service. This service is offered by the Office of Government Procurement. It has not been taken up by the market as very few requests for this service were made in its first year. Many people in the market do not know about the service and that may explain why it us not being used. Further to this, many companies may decide that a review by the TAS is not independent enough to be worth the effort of seeking a review. Either way, a company that has lost a bid can seek a formal review from the TAS.

The service has not operated for long enough in a high enough volume for an opinion to expressed either way as to its efficacy. Just four of twenty three referrals proceeded to the review stage in its first year.

Once these two options are exhausted, companies start to move into legal terrain.

 

Going legal and living with the consequences

On high value concessions contracts (like mobile phone licenses or operating motorways) or a large one-off construction contract legal challenges can be a more compelling option. The downside risks of going legal are lower than when there may be a desire for an ongoing relationship. For reasons outlined at the start of this post, companies hoping to maintain a commercial relationship should retain good advice before threatening legal action.

This option initially entails a judicial review of the process. It is rarely triggered in Ireland although numbers are on the rise (from a low base). Some recent cases have been noteworthy like that of RPS Consulting Engineers Ltd. vs Kildare County Council. J. Humphreys presiding outlined some principles that may put a spring in the step of any company appealing a decision in the future. We will do a separate posting on these principles in due course but the ruling is a landmark one for Ireland that requires individual reasons to be given to unsuccessful bidders in the future.

Where a Judge decides to set aside a process because they find that it was:

  • operated in a flawed or defective manner that frustrated principles of facilitating competition,
  • failed to treat suppliers equitably,
  • failed to ensure transparency in the approach,
  • was not proportionate in its construction,

the tender process is normally ordered to be rerun from scratch.

Where something more nefarious is found in a review, other remedies can apply which can include awarding the contract to a party that would have won the contract had it been run fairly (this is only one of many possible outcomes). A legal route can be slow and costly. Litigation can drag on for a long time so it is not for the faint hearted. The State also has very deep pockets so suppliers should proceed with caution.

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We hope that the series of posts on dealing with a losing bid provides clear and constructive advice to companies reviewing their options.We have received extensive feedback on these posts and we know that they have struck a chord with many companies in Ireland. In our forthcoming white paper on public procurement reform in Ireland, we will make the case for an extension to the Office of the Ombudsman with specific powers to oversee public procurement in Ireland.