Public procurement tenders often leave room for interpretation but is this flexibility an invitation for unhappy customers?
"The more open the requirement, the more open the procurer is to litigation and challenge"
Christos Tsinopoulos, professor of operations and project management at Durham University Business School
Public procurement often walks a fine line between value for money and innovation. Jeff Bezos’s Blue Origin challenge to NASA’s award of a contract to SpaceX was a situation where the procuring body did not want to give simple specifications but to give the provider the chance to be creative. There are situations where the procurers often don’t know what they want until they have it.
This has its plus sides but the more open the requirement, the more open the procurer is to litigation – contractors that didn’t win can complain they fulfilled the brief better than their competitors.
Every country has its own rules about public procurement – procurers have to follow these but should accept that there can always be disagreement about whether the criteria have been met.
The legal system should encourage innovation and not require the procurer to specify what they want to the nth degree, so this sort of award will be difficult to challenge.
Partnerships in supply chains are another fine line. Research shows that having close relationships between purchasers and suppliers is good because they can work together to innovate and reduce costs. However, this can breed complacency and stifle progress. It might be worth annoying partners, even to the extent of risking legal challenges, to keep things fresh.
Another case where you might see legal challenges is when a public body wants to favour local suppliers. But this might be seen as anti-competitive and it would have to be very careful about litigation.
"Change is necessary – however, how far can you go before it alters the nature of the contract?"
Peter Ware, head of government sector at Browne Jacobson
The rules around public procurement are complex and it is easier than you think to get things wrong. Given that circa £264bn is spent through public procurement across 200,000 organisations, the amount of litigation is not that considerable, although it has increased in recent years.
Ten to 15 years ago, most bidders would have been very reluctant to bring a challenge due to reputational damage. While that is still true to some extent, more unsuccessful bidders are willing to assert their rights and question the procurement decisions of public sector bodies.
There are a number of reasons for this change, including new types of bidders, consolidation and changing economic conditions.
The decision to challenge is difficult for bidders. It is costly, time consuming and the unsuccessful bidder often has only limited information on which to make its decision. The government’s recent green paper on the future of procurement suggested it will seek to redress that imbalance and give bidders greater visibility.
Another area for angst is change to long-term contracts. Change is necessary in long-term contracts but how far can you go before it alters the nature of the contract?
While there are rules about change, the public sector often finds itself in a difficult position, of weighing up the legal risk, time and costs.
The private sector is missing out on valuable opportunities that should be procured and often this is done without any or limited visibility. The green paper suggests greater clarity on this front is needed, and we look forward to seeing change in this area.