11th October 2022
Yesterday’s post on the latest court defeat of the Good Law Project touched on a serious problem with public procurement in the United Kingdom.
The problem is, in a word, accountability.
The law of public procurement provides for special duties on public bodies (and some utilities) when they procure goods, services and works.
These special duties do not apply to private purchasers of such things.
These special duties include the legal principles of transparency and equal treatment.
One reason for these special duties is to promote competition: public supply contracts can be lucrative, and so the competition for such contracts should be as open as possible.
Another reason for these special duties is that it is a public good that public bodies are transparent and treat tenderers fairly and equally.
But.
It is one thing to have such duties, but it is another to ensure that they are enforced and observed.
The unfortunate implication of the most recent Good Law Project court defeat seems to be that it should be left to disappointed tenderers to bring legal actions in respect of non-compliance with public bodies with the legal principles of public procurement.
There is, of course, no dispute that such disappointed tenderers would have standing to bring a challenge.
But it is unrealistic to expect typical government suppliers to litigate against their customers and to accept substantial litigation and costs risks.
Sometimes it can make commercial sense for a disappointed supplier to bring such a claim, but it is rare in practice.
Typical government suppliers have no incentive to vex or irk their main customers – and, regardless of the theory that such things should not be taken into account in the next procurement exercise – upsetting major customers is not usually a sensible thing to do.
And if disappointed tenderers are disincentivised from bringing challenges, then who enforces the rules?
The courts do not seem to like self-appointed crowd-funded publicity-seeking groups like the Good Law Project bringing such challenges.
But if such groups do not bring challenges, then who will?
My own view, for what it is worth, and as a former central government public procurement lawyer, is that there should be an independent statutory body that can challenge seemingly errant public procurement exercises.
This would do domestically what the European Commission can do in respect of breaches of European Union public procurement laws.
It would be like an Office of Fair Trading or National Audit Office but for public procurement, with powers to request documents and issue sanctions.
Such a body would also be able to look at complex procurement issues in a way that a court is ill-equipped to do in litigation.
And to placate those who would not like this domestic equivalent of the European Commission, it could be called something quaint like His Majesty’s Inspectorate of Public Procurement.
The alternative – given that bodies like the Good Law Project are not to have standing – is to have a system of law that is supposed to act in the public interest which is, in effect, unenforceable other than by the untypical and occasional, desperate and litigious government supplier.
The “public” needs to be put back into public procurement, and this is one proposal for how that can be done.
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Another issue is that the tendering process often leads to the response “commercial confidentiality” whenever requests are made for details. I do have some sympathy with this (but not very much, I admit) but an empowered body would at least have the authority to see documents without them needing to become public and that would probably reduce this problem somewhat as well.
The ‘Alcatel’ stand still process does allow the basis for awarding Tenders to be challenged and for award criteria and scoring information to be released. The amount of the winning Tender amount is normally published too.
It would be quite appropriate to copy the rules set in Europe as they seem to have the edge on us in most matters.
And sensible, too.
Either of which means that this govt won’t do it…
There is the ‘Alcatel’ 10 day stand-still process, that does have the benefit of allowing losing tenderers the chance to object to a public procurement exercise, before it is awarded.
See The Defence and Security Public Contracts Regulations (DSPCR) 2011 Chapter 17: Standstill Period, Contract Award and Voluntary Transparency Notices for an example.
It’s a great idea to have a public body responsible for scrutinizing whether public procurement has been carried out in accordance with the law and relevant procurement policies and guidelines, and in a way that delivers value for money.
The responsible body would need to have strong guarantees of independence if it was to investigate the sort of complaints that the GLP have raised about cronyism involving politicians.
The Comptroller and Auditor General has such independence – he or she is appointed (and removable) by the King on an address from the House of Commons, has a ten-year term, cannot be reappointed, and is restricted from taking up post-appointment employment that is in the gift of Ministers.
He heads the NAO which already carries out value for money audits in relation to public procurement, and it might be convenient to confer additional functions on him – creating the office of His Majesty’s Comptroller and Auditor-General and Inspector of Public Procurement.
Of course there remains the questions of what sanctions and remedies would follow and adverse finding. A Minister who was found to have inappropriately interfered in a public procurement process would be expected to resign. But that would probably require a functioning ministerial ethics code.
Indeed.
I did ask in another place what powers this new body needed over and above those of the NAO (which can and has investigated Covid procurement).
I’d also like to know more about the accountability of this new body if it is to have the power to bring down Ministers (if not governments).
Whilst agreeing with much of what you write, there is an existing court:
https://www.judiciary.uk/courts-and-tribunals/high-court/technology-and-construction-court/
The Technology & Construction Court, a sub court of the High Court which is able to deal with complex procurement challenges.
Looking back in the archives it has dealt with some of the most complex cases.
Before creating yet another potential QUANGO, I’d like to understand how the TCC &NAO between them couldn’t make public sector procurement more transparent & accountable.
The issue isn’t an available forum. It’s the lack of someone who has standing to challenge a decision and won’t suffer significant commercial and reputational harm from doing so. The TCC can’t bring a claim of its own volition (and if it could then there’d be conflicts issues).
Unusually there is a potential option from the US. The US bid challenge process conducted by the GAO could act as a model.
The available fora exist in my view and, to a reasonable extent do a good job.
Private companies have the TCC, a subset of the High Court – it has set a reasonable bar in order to bring a case.
For the public sector, we already have the Government Commercial Function ( within the Cabinet Office) which enforces public sector procurement process including probity of process which itself is subject to the independent NAO and ultimately to Parliament under the Public Accounts Committee.
I’m sure the process both private and public could be streamlined – if you wish to see a fully dysfunctional procurement process, look no further than Italy where probity of process is an oxymoron.
It would be easier if the UK courts accepted that public procurement if alleged to be unfair, is also de facto also treated as poor value for money. Then simply recognising that crowd funded organisations such as the Good Law Project do have standing, as each case has been funded by a range of taxpayers clearly concerned at the government wasting public money.
Going back to DAG’s post:
“My own view, for what it is worth, and as a former central government public procurement lawyer, is that there should be an independent statutory body that can challenge seemingly errant public procurement exercises…”
I maintain the view that ‘seemingly errant’ public procurement exercises can already be successfully challenged at The High Court ( specifically, the TCC) but also the roles of the NAO & Government Commercial Function.
VfM is a somewhat dated concept in public sector procurement. Far more comprehensive f(or the past 7 years), is what is now called Most Economically Advantageous Tender (MEAT) evaluation – this is very different from errant procurements and combines VfM calculations but also includes appropriate risk transfer together with a suppliers ability to deliver the goods/services being procured.
It’s my experience that the majority MEAT evaluations are undertaken at Departmental level, and scrutinised in agreement with HM Treasury & Cabinet Office sign-off.
Given the size of public sector procurement in the UK .c >£250Bn per annum , I doubt that The GLP would have either the capacity or skills in sufficient quantities to be an effective operator.
My challenge about the GLP still stands – it’s role is acknowledged to be much more political by undertaking “lawfare” and “judicial recidivism”.
I think the changes should be wider than simply demonstrating that public funds are spent without favour or undue waste.
I feel it would be better to follow good practice in business along the three lines of defence model – along the lines of this example https://www.ncontracts.com/nsight-blog/the-three-lines-of-defense-vendor-management?hs_amp=true
And example below
An HM Inspectorate seems worthwhile. A significant factor in the Post Office Horizon scandal was surely naivety and incompetence in government procurement, which Fujitsu exploited skillfully (their sole claim to any skill in this tragedy).
I may have a vested interest, having worked for one of Fujitsu’s competitors. However, that has given me an insight into how shoddy suppliers can gull clients who almost want to be deceived. The IT industry has always been notorious for winning contracts with attractively low prices, then later fleecing the client with exorbitant add-ons and changes. The private sector has been wary of this. The public sector seems to have been fixated on short term cost and lost sight of the longer term implications.
“The public sector seems to have been fixated on short term cost and lost sight of the longer term implications.”
It wasn’t always like this.
Back when government departments created their own IT systems, checkpoints for overall value for money – and propriety – were embedded into the development lifecycle.
Things took longer, but they would be right at the point of delivery.
It was only with the introduction (by Tory governments) of private sector-alike practices that things changed.
Specifically, long term value for money considerations were sidelined in favour of short timescale target hitting, and development became a box-ticking exercise.
So, as long as senior project managers were able to demonstrate that they’d hit a target date or a deadline (which box-ticking would be communicated back to the minister as a win – a demonstration of the effectiveness of private sector behaviours), the principle became one of fixing the problems caused by rushed implementation, later in the lifecycle.
Believe me, those of us involved in such projects, hated it because we knew precisely what it meant in terms of value for money, quality and long term implications…
I wonder how far such an inspectorate would genuinely be independent. Not least because the funding for its work would have to come from government, either directly or via Parliament (which is essentially the same thing, given our taxation and budget system).
Excellent and clear-sighted idea.
Excellent idea – and especially as I am a contributor to the Good Law Project!
It rally should have been mandated in the original legislation – though I doubt many foresaw the blatant corruption that would be everywhere manifest in a UK government.
Let’s hope the next (Labour) government learns…
Although it might not yet a widespread issue in the UK, an examination of procurement practices elsewhere in the English-speaking world would suggest that we are moving inexorably towards a [much] more litigious environment as a baseline.
For example, in 2021, the US Space Agency, NASA, awarded a contract to SpaceX to provide services related to returning humans to the moon. The other competitor in the race, Blue Origin, owned by Jeff Bezos, sued. This despite the fact that SpaceX at the time had a years-long track record of successful launches, offered significantly cheaper prices – and the fact that Blue Origin still (to this day) hasn’t actually put a payload in orbit. Despite the complete lack of merit to their case, a not-yet-even-in-orbit Blue Origin were awarded a $2.1 billion “consolation prize” by NASA. The contract won by SpaceX was $2.9 billion.
As the stakes rise – and public procurement contracts can be outrageously lucrative – the problem of “bad faith participants” can become ever more serious.
Yet one thing we *don’t* see, as part of the initial vetting-to-tender process, is a requirement for anyone invited to the second round to sign a “will-not-sue” agreement, once the terms of the bidding process have been clearly documented to all parties.
I am not suggesting that anyone should sign up to a bidding process in blind faith. However, once the process and terms are published and fixed, anyone who wishes to proceed to actually bidding could and should be forced to agree to abide by the terms of the process – or risk being forever blacklisted.
This might not be appealing unless the actual tender/bid process was entirely transparent… and it might only be viable for commodity contracts [as opposed to those where different bids could result in different solutions] but the bottom line remains that the government could do (an awful lot) more to add discipline, transparency and robustness to the process.
Being cynical, I rather assume that the reason this doesn’t happen is largely because those in office would like the ability to “influence” the process in return for “considerations”.
For example, such as (Prime Minister at the time) Gordon Brown only agreeing to sign the contracts for the new Queen Elizabeth class Royal Navy aircraft carriers if the bidders agreed to construct the vessels at Rosyth, a yard within his constituency… That is a classic example of a corrupt condition that should never have been allowed.
I very much like the idea of having a completely independent watchdog for government procurement, as long as they have added teeth. No point in setting something up and then having it neutered in the same way as has happened with OfCom, OfGen and the rest of the “regulatory agencies”.
Could you source the NASA/Blue Origin “consolation prize”.
I respect that this could have taken many forms, some very indirect. But I can’t find any evidence for it.
Blue Origin did appeal the $2.9B contract awarded to SpaceX instead of them, but appear to have been defeated (eg https://www.nytimes.com/2021/11/04/science/blue-origin-nasa-spacex-moon-contract.html)
This is a sensible, fair minded, public spirited idea. As such there is no chance the current government will adopt it, but it might be the time to start lobbying the future government to consider its merits. As we have seen, no government can bind a future government, not even against stupidity or corruption, but the making explicit of such disregard for the public good does serve a purpose.
Ah….this is a benefit of Brexit. You can now run a public procurement in an uncompetitive manner, with ‘fast track’ for mates and other niceties, and the CEU can’t get at you for it. Why did we not see this before?
The proposal has much merit. One criticism might be that it adds to the proliferation of OFthis and OFthat bodies. Why should this not be given to the NAO to undertake? – they are already independent of the government of the day, and this woud avoid the overheads involved in creating another public body…
The USG has an appeal process for procurement awards that is routinely used by big contractors. Worth understanding why that works- from what I have heard, it seems to function reasonably well.
I thought that this was the function of the National Audit Office?
And at local government level the Audit Commission (before it was abolished? )
No.
The NAO’s remit is value for money (VFM), and VFM is just one criterion for public procurement.
Would a faster solution be increasing the remit (and funding) of the NAO so that they can do this? Setting up new bodies is generally more expensive than giving current ones more powers.
The NAO’s remit is not only VFM. It is also (and primarily) audit. In my (admittedly last century) experience the NAO view failure to comply with statutory requirements as an automatic failure of good management of public money. Hence e.g. their report in 2020 on Covid-19 procurement[1] set out, and addressed failures to comply with, the regulations. I don’t doubt it could have done so more extensively and with greater forensic detail; or that it fell well short of the depth needed to prosecute. But before a new body is created I think it right to consider the duplication that will result.
[1] https://www.nao.org.uk/wp-content/uploads/2020/11/Investigation-into-government-procurement-during-the-COVID-19-pandemic.pdf
Another overriding reason for these special duties of accountability and transparency is that *it is our money*. Public, taxpayers’ money.
I agree with others that it would seem better to include the role within an existing body like the NAO rather than create a new one. But the main difficulty is how to ensure enforcement and restitution. This government has ignored the NAO before, as they ignored the OBR for the recent fiscal event. As far as the procurement scandals are concerned, we want our money back – but how to get it?
This essentially calls for the UK to have a domestic state aid enforcer. That job was supposed to go to the CMA, but ultimately all it got was a weakened “subsidy control” framework. So there’s no need for a new regulator, just for the existing regulator to be given some actual powers.
Hi there,
I wonder if you can say a bit more about why the Good Law Project are sometimes criticised? As far as I can see, they do smashing work and take action in areas where you feel it really should be an official body taking action (which backs up the point you make in this article). I was therefore a bit surprised to read that they do attract criticism for their work.
Other than those they expose, I wonder who has a negative perception of what they do?
Cheers, Estelle
I agree and support them for that reason.
I can’t obviously reply on behalf of the author but there is a view (with some merit) that the GLP whilst doing some genuinely good work also accentuate s legal ‘lawfare ‘ which, paradoxically undermines laws (& much of the legal system) which it doesn’t like. It can also be accused of sometimes tilting at windmills & wasting a court ‘s time especially on cases of a more political than legal nature.
What we’ve got at the moment might not be optimal with the Technology & Construction Court for disputes and remedies of alleged probity of individual procurements – we’ve also got the Government Commercial Function & the NAO undertaking post procurement audits too.
” It can also be accused of sometimes tilting at windmills & wasting a court’s time especially on cases of a more political than legal nature.”
While agree that there’s often – necessarily – a political dimension to the GLP’s actions, I see their “tilting as windmills” more as making a principled stand in order to make a point: this case is actually a good example – regardless of the court’s findings – of the GLP “getting under the skin” of ministers and government about matters of public interest.
https://www.theguardian.com/law/2021/may/25/good-law-projects-jolyon-maugham-they-see-us-pushing-back-hard
There is zero chance of the current government implementing this sensible proposal, so in the meantime more power to the GLP’s elbow.
This is an excellent suggestion (although I suppose it could be part of the mandate of the NAO) – and I would be more than happy to lend this any support via petitions or whatever
Hi David,
Thank you for this and I am really interested in this idea of a statutory independent body – an interesting idea I had not thought of.
I note in your last post expressly, and this post more implicitly, you suggest that you are not fully on board with the work/approach of the GLP. I wondered if you might be able to expand further on your views on this and what you perceive to be some of the problems with the enterprise? Genuinely interested to hear your thoughts as I would have assumed you were fully on board given the importance you place on accountability, transparency, and fairness.
thank you!!
I can’t obviously reply on behalf of the author but there is a view (with some merit) that the GLP whilst doing some genuinely good work also accentuate s legal ‘lawfare ‘ which, paradoxically undermines laws (& much of the legal system) which it doesn’t like. It can also be accused of sometimes tilting at windmills & wasting a court ‘s time especially on cases of a more political than legal nature.
What we’ve got at the moment might not be optimal with the Technology & Construction Court for disputes and remedies of alleged probity of individual procurements – we’ve also got the Government Commercial Function & the NAO undertaking post procurement audits too.