Remedies and challenges under the Procurement Act 2023 – what will change?

• Will opportunities for supplier challenges increase or decrease? 
• How will the risk profile for contracting authorities and utilities change (if at all)? 
• And how might the PA 2023 change the dynamic of procurement challenges?

As will be seen, the answer to these questions, as with other aspects of the PA 2023, is that there will be no "Big Bang" on 24 February 2025.  For procurements run under the PA 2023, unsuccessful bidders will still have rights to challenge that, on paper, look quite similar to the pre-PA 2023 regime.  Contracting authorities will also have to factor challenge risk into their decision-making in a similar way to the present. 

It was not always inevitable that this would be so.  In the consultations preceding publication of the Procurement Bill in 2022, the previous Government toyed with various more radical ideas to streamline the remedies regime in public procurement, with a view to producing a faster, cheaper and more accessible system of review of procurement decisions, none of which were ultimately pursued in the Bill and subsequently the Act.  These included:

• A special tribunal for lower value and "in-flight" procurement claims;
• A requirement for contracting authorities to have a process of independent internal review;
• A requirement to give pre-contractual remedies primacy over post-contractual remedies (damages); and
• A cap on the level of damages recoverable by successful claimants.

Whilst all of these ideas were rejected for different policy and/or practical reasons, the likelihood is that radical change to the remedies regime for procurement – in the sense of making it easier and swifter for claims to be brought and determined – was simply unpalatable for the previous (and probably any) Government.  The remedies regime in procurement has always, in truth, been somewhat ambivalent about whether procurement challenges are ipso facto a good thing.  On the one hand, the ability of bidders/ suppliers/ economic operators to bring challenges to procurement decisions can be seen as essential both to protect the rights of those entities and encourage compliance with the regime.  On the other, challenges, even unsuccessful ones, can be hugely costly and distracting for contracting authorities and divert resources away from public services.  A streamlined regime, supporting a higher volume of lower value claims, is hardly likely to be less distracting than a regime in which only a relatively small number of high value claims is likely to get off the ground.

Thus, the pre-PA 2023 regime includes a number of very powerful-sounding rights and remedies for claimants which are unknown in other forms of litigation, such as automatic suspension of contract-making or declarations of ineffectiveness of contracts, as well as more conventional remedies such as damages.  But the practical availability of these remedies has been pegged back both in the specific wording of the legislation and in the way that they have been interpreted and applied by the courts.  As will be seen below, the essential fabric of the present rules is preserved in the PA 2023.

In this blog we consider the key features of the procurement challenge regime under the PA 2023 covering:

• Contracting authorities' statutory duty to comply with the Act
• Time limits for bringing claims
• Automatic suspension of contract-making
• Practicalities and dynamics around service of the claim
• Remedies
  • Pre-contractual
  • Damages
  • Setting aside contracts

Statutory duty to comply with the PA 2023

As is the case under the present rules, contracting authorities have a statutory duty to comply with the PA 2023 which is enforceable under the terms set out in the Act.  That duty is owed to UK suppliers and suppliers from treaty states, i.e. suppliers that are entitled to the benefits of an international agreement covering public procurement to which the UK is a party, such as the Government Procurement Agreement of the WTO. 

Proceedings may be brought under the PA 2023 by UK or treaty state suppliers who have suffered or risk suffering loss or damage in consequence of a breach of a contracting authority's duty to comply.  This appears to be materially the same as the standing rule (i.e. entitlement to bring a claim) under the pre-PA 2023 regime, which essentially limits standing to bring a claim to those who would have had an interest in bidding for the public contract in question.  Interested parties who are not potential bidders (e.g. campaigning groups) will, as at present, have to seek remedies (if at all) by way of judicial review. 

There are some exclusions from the right to bring a claim for breach of statutory duty under the PA 2023.  These cover a contracting authority's duties to have regard to barriers facing SMEs and to the procurement policy statements.  Breach of such duties would also need to be enforced (if at all) by way of judicial review.

Decisions to include a supplier on the debarment list (or not remove a supplier from the debarment list) are also excluded from the general remedies rules as these are subject to their own special appeals process (see our previous blog: 'Supplier exclusion and debarment under the Procurement Act').

Time limits for bringing claims

For most claims arising under the PA 2023, the claim must be commenced within 30 days beginning with the day on which the supplier first knew, or ought to have known, about the circumstances giving rise to the claim. 

This mirrors the position on limitation under the present procurement rules, with the slight tweak that, whereas at present the relevant knowledge is that "grounds for starting the proceedings had arisen", under the PA 2023 knowledge must be of the "circumstances giving rise to the claim".  It is not clear that this change of wording is intended to represent a material change in approach and may just reflect the position that has developed under the case law that, essentially, any knowledge of information that might potentially found a claim is sufficient to start the clock on limitation.  

At all events, bidders in procurements under the PA 2023 will continue to need to move swiftly once they have information potentially giving rise to a claim (which as now may arise during the procurement procedure itself).

Automatic suspension of contract-making

The PA 2023 maintains the present rule that, once a claim has been issued, the contracting authority is automatically prevented from entering a contract with the preferred bidder – the so-called automatic suspension of contract-making.  The suspension lasts until either the claim is determined, or the Court decides to lift the suspension on the application of the authority. 

For unsuccessful bidders in procurements, this is a seemingly powerful procedural tool which opens up the possibility of reversing a contract award decision and potentially securing the contract (or at least a re-run of the procurement), rather than simply an award of damages. 

The benefit of the automatic suspension to claimants has, however, been blunted over the years by the tendency of the court in very many cases to lift the automatic suspension on the basis that damages would in fact be an adequate remedy for the claimant, applying long-established legal tests for the award of an interim injunction.  It has as a result become particularly difficult for commercial entities, who would naturally be bidding for a public contract with a view to making a profit in monetary terms, to show that damages would not be adequate, thus warranting the upholding of the suspension. 

The PA 2023 makes some changes to the test to be applied by the court when considering whether to uphold an automatic suspension.  The Act requires the court, when considering whether to make an order lifting the automatic suspension (or any other interim order), to have regard to:

• The public interest in:
  • Upholding the principle that public contracts should be awarded, and contracts should be modified, in accordance with the law;
  • Avoiding delay in the supply of the goods, services or works provided for in the contract or modification;
• The interests of suppliers, including whether damages are an adequate remedy for the claimant; and
• Any other matters that the court considers appropriate. 

Superficially, these changes might be thought to make it easier for claimants in procurement challenges to uphold the automatic suspension (and that may have been the previous Government's intention).  It is notable for example that, although adequacy of damages is included as one of the factors to be taken into account, no primacy is given to any particular factor.  The court has to balance up all the relevant factors.   This is in contrast to the current law where (at least on one particularly restrictive view), if damages are shown to be adequate, there is no need for the court to balance this against other factors, such as awarding public contracts in accordance with the law.

However, the absence of any primacy cuts both ways.  The factors set out in the Act are just matters to which the court has to have regard.  Ultimately the decision whether or not to uphold the suspension remains in the discretion of the court.  The jury is therefore out on whether these changes will be anything more than cosmetic in terms of the ability of claimants to uphold automatic suspensions. 

The Act also makes a small, but potentially significant, change to the way that the automatic suspension is triggered in the first place.  Under the present rules, the automatic suspension is triggered if proceedings are commenced any time before the contract is entered into.  Under the PA 2023, the automatic suspension is triggered only if proceedings are commenced, and the contracting authority notified, before the end of any applicable standstill period.  The result of this is that no automatic suspension would be available to a claimant after the end of the standstill even if the contract has not in fact been entered into.  

Thus, whilst at present it is highly advisable for claimants wishing to trigger the automatic suspension to do so within the applicable standstill period, for claims under the PA 2023 it will be essential to do so for the suspension to take effect. 

Practicalities and dynamics around service of the claim

Under the present rules, where a claim is issued in court, potentially triggering an automatic suspension, it must be formally served on the contracting authority together with detailed "particulars of claim" within seven days of issue.  This is a tight timetable for claimants, especially given the challenges often faced by claimants in getting access to sufficient information to be able to properly plead out grounds of claim.    

In a perhaps surprising omission, the PA 2023 does not require a claim form to be served within seven days of issue (or within any period).  Service of the claim form and particulars will therefore be governed by the normal rules of court under which a claim form and particulars must be served within four months of issue. 

If four months sounds like an extraordinarily long period of time in the context of normally very fast-moving procurement litigation, defendant authorities are entitled to give notice requiring a claim form that has been issued but not served to be served within a specified period, which must be not less than 14 days.  It can be expected therefore that in claims under the PA 2023, defendant authorities will routinely give notice requiring service of an issued claim form within 14 days.  From a claimant's perspective, however, 14 days for service is already looking a lot better than seven!

The timing benefits for claimants under the new regime continue.  A defendant's notice requiring service of the claim form within 14 days only applies to the claim form itself.  Once the claim form has been served, the claimant has up to a further 14 days to serve detailed particulars of claim.

So, from a rule which at present requires service of both claim form and particulars with seven days, the new regime will in practice afford claimants 28 days from issue of the claim form to prepare and serve particulars.  From the perspective of practitioners used to the whirlwind of procurement challenges, 28 days seems positively leisurely!

It is not at all clear whether the previous Government intended this outcome or whether the failure to specify a time for service of the claim form in the PA 2023 was an oversight. 

Either way, it is on such details of timing and procedure that important strategic and tactical decisions turn in procurement litigation.  As noted above, the seven-day rule in the current regime can be highly dissuasive for all but the clearest of claims.  A claimant who is minded to "pull the trigger" on litigation by issuing a claim form knows that, unless it able to gather sufficient information to prepare and serve credible particulars within one week, the claim will lapse and there is a very short window within which to seek further disclosure from the defendant authority.  In practice, therefore, a claimant needs to have sufficient information at the point of issue to be confident of being able to serve a fully pleaded case. 

Whilst the PA 2023 regime does not change the position that at least one pleadable ground of claim should be known to the claimant at the point of issuing the claim form, the longer window for service of the claim form and particulars potentially opens up new opportunities for claimants to seek further disclosure in advance of serving particulars, and even perhaps for parties to engage in constructive dialogue to avoid the need for the claim to be pursued further. 

Remedies

Pre-contractual remedies

Where a contract (or a modification to a contract) has not been entered into, the PA 2023 empowers the court, where it finds that there has been a breach in relation to that contract (or modification), to make one or more of the following orders:

1. An order setting aside the decision or action;
2. An order requiring the contracting authority to take any action;
3. An order for the award of damages; and
4. Any other order that the court considers appropriate.

This broadly mirrors the current regime which enables the court to make a wide variety of orders in cases of breach where the contract has not been entered into.  In practice, such orders are rare because of the unwillingness of the court in many cases to uphold automatic suspensions, leading to the majority of procurement claims being or becoming post-contractual damages claims.  Whether pre-contractual orders and remedies become a more familiar feature of procurement litigation under the PA 2023 will in large measure depend on whether the changes to the test for automatic suspension, discussed above, lead to a change in the court's practice with regard to suspensions.

Post-contractual remedies – damages

Given the difficulty under the pre-PA 2023 regime of obtaining pre-contractual remedies (e.g. having the award decision set aside), the remedy that is most likely sought by claimants who can successfully show that they have been harmed by a breach of the procurement rules is post-contractual damages in the form of monetary compensation for loss.  In most cases, such damages would amount to the loss of profits that the claimant would have made on the contract had it been lawfully awarded (or, in some cases, the loss of the chance to make such profits). 

However, the ability of claimants to secure damages in procurement claims has been curtailed in recent years by the interposition by the courts, relying on EU law, of a requirement that, for damages to be awarded, the breach by the defendant authority must be "sufficiently serious".  Debates have raged over what is meant by "sufficiently serious".  The most recent statement of the current law, by the Court of Appeal in the Braceurself case ([2024] EWCA Civ 39), indicates that the focus should be on the nature of the breach, not its effect, and the state of mind or culpability of the infringer.  From a claimant's perspective, this means that it is not sufficient on its own to show that the breach, if corrected, would have resulted in a different outcome to the procurement to the claimant's benefit.  There must be something further (and probably nefarious) in the defendant's conduct of the procurement to warrant an award of damages. 

This approach obviously presents a challenge for a claimant at the outset of a potential claim where the only information it may have consists of its scores, those of the preferred bidder and some (probably rather brief) reasons for the scores.  Whilst the potential claimant may be able to discern errors in that scoring information that if corrected would have changed the outcome in its favour (a very common way in which procurement challenges get off the ground), it will have no way of knowing (at least without significant further disclosure from the contracting authority) whether an apparent breach was sufficiently serious in the Braceurself sense for damages to be available.

The PA 2023 does not contain any requirement that a breach need be sufficiently serious before damages can be awarded.  And, of course, there is no longer any EU law reason to interpose such a requirement as has occurred under the pre-PA 2023 regime. 

So, will claimants be able to rest easy that, if they can show a breach of the PA 2023 that has caused them loss or damage, they will obtain compensation for that loss irrespective of the "seriousness" of the breach? 

Unfortunately (at least for claimants), the answer is probably "no".  The PA 2023 mirrors the language of the current rules in providing that, in cases of breach causing loss, the court may (not must) award damages.  Damages therefore remain in the discretion of the court, leaving it open to judges to develop guidance through case law on when, and when not, damages should be available in procurement claims.

Setting aside unlawfully awarded contracts

Another feature of the remedies regime in public procurement that is preserved in the PA 2023 is the power for the court, in certain circumstances, to declare unlawfully awarded contracts ineffective, although as with other aspects of the Act the terminology has changed, a 'declaration of ineffectiveness' becoming, more prosaically, a 'set aside order' in the new legislation. 

Whilst actual declarations of ineffectiveness under the pre-PA 2023 regime have been rare, the existence of the possibility of an unlawfully awarded (or modified) contract being declared ineffective has been an important disciplining factor on contracting authorities, promoting compliance with rules.  Often, in the case of direct award or contract modification, compliance is driven by suppliers who want to minimise the risk to them that a contract they are awarded without competition, or a substantial contract modification, might be declared ineffective. 

Ineffectiveness under the pre-PA 2023 regime applies if one of three grounds of ineffectiveness is met, namely:

• Where an above-threshold contract is awarded without any required advertisement and competitive procedure (the first ground);
• Where the standstill is breached (and certain other conditions are met) (the second ground); and
• Where a call-off contract is unlawfully awarded under a framework and no voluntary standstill has been applied (the third ground).

The circumstances in which the court may make a set aside order (the "set aside conditions") have been recast in the PA 2023.  A set aside condition is met if the court is satisfied that the claimant was denied a proper opportunity to seek a remedy before the contract is entered into because:   

• A required contract award notice was not published;
• The contract was entered into or modified before the end of any applicable standstill period;
• The contract was entered into or modified during a period of automatic suspension or in breach of a court order;
• Where an exception to mandatory standstill applies, the breach only became apparent on publication of the contract award notice;
• Where a contract is modified, the breach only became apparent on publication of a contract change notice; or
• The breach only became apparent after contract was entered into or modified.

It can be seen that the above implies that, to obtain a set aside order, a claimant must be able to show:

• That it would have been entitled to seek a remedy under the PA 2023, i.e. that it has suffered or risks suffering loss or damage as a result of a breach of the Act; and
• That it has been denied a proper opportunity to seek that remedy because of one of the circumstances listed in the points above.

Although couched in different language, this appears broadly to cover the same ground as the pre-PA 2023 regime.

If you would like to discuss any of the issues raised in this blog, please contact Nick Pimlott.

The content of this blog does not constitute legal advice and is provided for general information purposes only. Specific legal advice should be sought before taking any actions based on the content of this blog.