Public sector procurement is under growing scrutiny

Earlier this week, McGrigors published research showing that the number of complaints from businesses challenging the way in which the UK government hands out public sector contracts has risen sharply for the fourth consecutive year.

Our analysis came at a pertinent point. Only last week, the government was “persuaded” to delay a major procurement decision relating to the Cross Rail project in London, highlighting how politicised purchasing decisions have become. The Westminster government is under pressure to deliver jobs for the UK, but has to balance that need against its legal duties. In this context, the figures that we obtained from the Office of Government Commerce were both timely and revealing.

The number of complaints made to central government about public sector procurement jumped 55 per cent over the past year. The number of disputes has almost quadrupled since the year before the recession began, when there were just 14 complaints (2007-8). Looking further into the data, it is also clear that the proportion of complaints subsequently investigated by the government has risen dramatically over the past year.

The surge in complaints has led to an unprecedented number of tenders being amended while the procurement process is still live. In some cases, this may result in suppliers being given more time to prepare their bids.

What this research demonstrates quite clearly is that competition among bidders for government contracts has intensified as the amount of work in both the public and private sector has decreased. Public sector contracts are at a premium, so with less work to go round, disputes over how contracts are awarded have become more frequent and are often bitterly fought.

It also seems that bidders have become more likely to complain about the tendering process as a consequence. This is quite understandable as clearly, in an economic downturn, a contract from a blue-chip client such as a government body is very much a prized asset, not least because you can be certain of getting paid at its completion. For many bidders the risk of failing to secure a public sector contract can mean the difference between survival and going out of business.

The inevitable outcome of a smaller pie is more arguments over fewer pieces.

Perhaps as a result, bidders are becoming increasingly aware of their rights under procurement law, and as such are much more likely to take the government to court if they feel the bidding process was flawed. Indeed, they have had some success. The perception is that courts have ruled in favour of private sector bidders in a number of recent cases. This may have emboldened other potential claimants to bring legal action against the government.

With public finances stretched, the last thing the government wants is to end up in costly court battles. It has introduced a “secret shopper” initiative to try and drum out problem areas, and it is also trying to tighten up processes to make sure that procurements are done correctly the first time round.

For national and local government, the key is to make sure that they provide total clarity around the rules of the bidding process and the criteria upon which contractors will be measured.

For their part, bidders should ensure that they understand the process properly. By understanding what legal duties the purchaser owes to them, they can ensure that challenges are made only when necessary and appropriate. It’s worth remembering that efficient public procurement is essential to economic health, particularly as government seeks to stimulate the economy with major infrastructure projects. There have been numerous examples in recent years of major projects where it was felt that the basis on which contracts were awarded was less than transparent. Mistakes have sometimes proved costly, and in times of austerity, we cannot afford for them to be repeated.

l Stuart Cairns is a director in the public procurement team at law firm McGrigors.