Procurement challenges

Companies competing for public contracts have been given a boost by a European court victory in a case filed by a Sheffield-based surgical instrument maker, Uniplex, against the UK National Health Service.

In July 2007 Uniplex submitted a tender to the NHS to compete for the supply of surgical equipment. Later that year, Uniplex was informed in writing that its tender had been refused. At Uniplex's request, the NHS provided details of its evaluation methodology and the characteristics of the successful tenders.

On January 28, 2008, Uniplex sent NHS a letter informing it of its intention to challenge the procurement process and on March 12, 2008 started proceedings in the UK High Court seeking damages against the NHS. The NHS countered by claiming that the challenge filed by Uniplex was too late under the three-month, time-limit stipulated at law for legal claims when tendering rules are alleged to have been breached.

The High Court referred the matter to the European Court of Justice for a preliminary ruling on whether time for such procurement challenges starts to run from the date of the breach of law or from the date when the tenderer knew or ought to have known of the breach.

The Advocate General in his opinion noted that there were no express time limits for bringing proceedings under the Remedies Directive but that any limitation period introduced by member states must comply with the principles of effectiveness and equivalence. He opined that the principle of effectiveness requires that a limitation period for compensation claims may not start to run until the time when the tenderer knew or ought to have known of the alleged breach of procurement law.

In its ruling the ECJ agreed with the opinion of the Advocated General and held that the three-month limitation period only starts to run from the date the claimant knew, or ought to have known, of the infringement of the public procurement rules. Consequently it is wrong to start the clock running as soon as the rejected tenderer has been notified that its application has been unsuccessful since a tenderer may not be placed in a position to effectively challenge a procurement when it is notified of the rejection of its application.

Rather, the time limit for a challenge to public contract decisions only starts when the rejected tenderer has reason to believe that the tendering rules have been breached.

Contracting authorities are already under a duty to disclose all relevant information which will enable a tenderer to assert its rights. This requirement will need to be carefully adhered especially in view of this European decision since a tenderer could only come to an "informed view" about whether there may have been a breach of tendering rules once it has been given full details of why it failed to win the contract.

Tenderers may have been reluctant to challenge the decisions of public authorities. No longer! Indeed, the ECJ decision eases the pressure on tenderers who currently feel they have to launch proceedings immediately if they wish to challenge a decision, although it must be admitted that it may lead to uncertainty in some respects since challenges may surface even long after a contract has been awarded.

Dr Grech is an associate with Guido de Marco & Associates and heads its European law division.