PFI Procurement Heads to Court

The first project supported by the Government's Infrastructure Finance Unit, the £3.8 billion Greater Manchester waste PFI, is heading to the Courts.  This is the most recent example of an unsuccessful bidder seeking compensation for their failure to secure a tender.

Sita (UK) launched proceedings against the Greater Manchester Waste Disposal Authority, (GMWDA) for "unlimited" damages.  Sita claim that:

• The contract let to the successful bidder, Viridor/Laing was for a sum significantly in excess of the figure that Sita had tendered.
• There had been significant changes to the project after the appointment of Viridor/Laing as preferred bidder and yet no other bidder was given the opportunity to revise their tender to take account of these changes.
• The GMWDA's actions were in breach of the European Treaty principles of equal treatment and transparency.

It is no longer acceptable to engage in lengthy negotiations, heavily revising the scope or scale of a project, with a preferred bidder. Only 'fine tuning' is permitted once final tenders have been received. These problems should have been resolved by the introduction of the competitive dialogue procedure.

Unfortunately, the Greater Manchester waste PFI process began prior to the introduction of the competitive dialogue procedure and was let using the negotiated procedure.  The negotiated procedure allows for a more flexible approach, which almost cetrainly led to the issues outlined above. 

The Competitive Dialogue procedure is not however a panacea for all ills.  It does not definitively address the issue of what to do if a procurement needs to change prior to completion. 

For the contracting authority to have confidence that it is proceeding in line with the Eurpoean Regulations, it must assure itself of two things:

• At the end of the process, they are still letting the same contract, i.e. it is demonstrably the same procurement. If after any changes it is clear that the scope or scale has changed, then the Authority must restart the procurement.

Even when the Authority is satisfied that it is the same procurement, they should go on to satisfy themselves that:

• The change would not have had a material impact on a bidder, or potential bidder, had it taken place at an earlier stage of the procurement.

Scott Brown, EiB's Managing Partner who leads on Competitive Dialogue support to the public sector highlighted the problem.

"If an organisation, which originally elected not to bid, would have submitted a bid, had the change taken effect from the start of the process; or if a bidder who was rejected at an earlier stage would not have been rejected in light of the change, then it will be necessary to restart the procurement."

"What is absolutely clear is that changes to a procurement cannot be made on the quiet, in the hope that none of the other bidders will notice; unless of course the Authority want to end up in Court!!"