Home Knowledge Challenging the Contract Decisions of Public Authorities Remains an Uphill Task

Challenging the Contract Decisions of Public Authorities Remains an Uphill Task

Winning public contracts is the lifeblood of many companies, from large multi-nationals to SMEs.  Public contracts also represent a significant part of the domestic economy.  In 2010, Irish public bodies spent around €15 billion on goods, works and services.  Recognising the importance of this sector, the EU and the Department of Finance have adopted laws and guidelines governing the award of contracts by Government departments, local authorities, other public bodies and utility companies.  These provisions, referred to as public procurement rules, aim to achieve value for public money while allowing businesses to compete on a level playing-field for public contracts.

Both EU and national procurement rules apply in Ireland.  The EU regime is somewhat of a strait-jacket whereas its Irish counterpart is more flexible.  The EU rules are primarily contained in a series of Directives implemented into Irish law, and govern the award of supply, works and service contracts above certain financial thresholds (for example, €4.85 million in the case of works).  Contracts below these thresholds are subject to Department of Finance guidelines.  Whichever rules apply, the contracting authority must respect the key principles of transparency, equality and observance of fair procedures.

While the majority of public tenders run smoothly, problems sometimes arise.  Various actions have been found to constitute a breach of procurement rules, including failure to advertise, the adoption of discriminatory compliance or assessment criteria, and changing the award criteria after submission of bids.

Public procurement rules impose a number of disclosure obligations that can give participants an indication that a breach has occurred.  For example, a body must quickly (i.e., before concluding the contract with the successful bidder) inform an unsuccessful participant of the outcome and provide a summary of the reasons for rejecting its submission.  A participant may also use Freedom of Information rules to seek records relating to the award process.  Its experience of the process coupled with knowledge of the relevant industry might also lead a company to suspect a breach of the rules.

If a business feels hard done by, it has two main choices.  It may take court proceedings or submit a complaint to the European Commission. 

Challenging decisions of a public body in court is subject to judicial review principles. The proceedings are not an appeal and the Courts have repeatedly stated that their role is not to ‘second guess’ the public body’s actions.  Instead, the focus is on how the decision was reached.  Were there procedural errors or bias?  Was the action so unreasonable it could not be objectively sustained?  The burden of proof usually lies on the disappointed bidder. However, this burden might switch to the public body if the challenger can show that another bidder had access to additional information.

Timing is a key consideration and disgruntled bidders must not delay.  A company usually has 30 days after it learned of the decision (or knew of the infringement) in which to issue proceedings, and must inform the public body before doing so.  (Thus, records requested under Freedom of Information legislation are unlikely to arrive in time.)  Challenges may be made to any decision that produces legal effects, not just contract awards.  The strict timing rules mean that if, for example, a bidder believes that the wrong procedure was used, it should issue proceedings within 30 days of publication of the contract notice.  If it does not institute a legal challenge yet continues to participate in the process until its bid is rejected, any proceedings contesting the choice of procedure will be ruled ‘out of time’.

A disappointed party may also complain to the European Commission, which will engage with the contracting authority, usually via the relevant Government department.  If the Commission feels that a breach of EU procurement rules has occurred, it will seek to persuade the body to terminate the infringement.  Although there is no legal obligation to accede to the Commission’s wishes, many cases are resolved this way.  In the absence of co-operation, the Commission could take Ireland to the EU Court of Justice.  At that stage, the action becomes more about State responsibility than obtaining a remedy for the complainant.

Despite recent reforms, the odds are stacked against bidders seeking to challenge decisions of contracting authorities under public procurement rules.  High Court litigation is extremely expensive and businesses are often reluctant to take such a confrontational step for fear of rupturing relationships with the contracting authority.  In the absence of an Irish procurement authority with powers to resolve disputes outside litigation, the only real alternative is to bring the Commission on side, which is unlikely to result in a speedy or effective resolution.

Contributed by Cormac Little and Claire Waterson

This article appeared in the Sunday Business Post on 9 October 2011.