Hitting the pause button on procurerment

As with most wrongs, the sooner they are righted the less damage is done. When the procurement process seems to be going wrong, most procurement regimes have a "pause button", to maintain the status quo while the alleged wrongdoing is examined.

Under Guam law, based on the ABA Model Procurement Code, once a protest is filed, there is an automatic "stay" which stops the procurement process in its tracks. The stay is, in legal effect and parlance, the equivalent of an injunction.

Under US Federal law, the stay is not automatic but is available upon application. The significant difference between Guam law and Federal law is that, under Guam law, the stay only enjoins the procurement process. Once an awarded contract is made, the automatic stay is unavailable (although there is some possibility of obtaining an injunction of the contract under a common civil injunction action, outside of the procurement law and process)..

Federal law, however, enjoins not only the procurement process but contract performance as well.

The global law firm, Morrison Foerster has published a Client Alert about the way the United Kingdom handles the "pause button". The UK law is intended to follow, and implement, European Union law on the subject. The authors, Alistair Maughan and Masayuki Negishi, explain:

Under the public procurement remedies regime, a public contract procurement process must be suspended if an aggrieved bidder brings a legal challenge; and the contracting authority will have to apply for a Court order to lift this automatic suspension. The test which the Courts will apply in determining such an application will be no different from the test that the Courts have traditionally applied in assessing applications for interim injunctions made by aggrieved bidders under the old regime.

Whilst the tables appears to have been turned in bidders’ favour by the new remedies regime, bidders still need to make sure that their complaints have a sound legal foundation in order to derive a meaningful benefit from the new automatic suspension remedy.

In the context of public procurement challenges, applications for interim injunctions were typically brought by an aggrieved bidder who was disqualified at an early stage in the procurement process before the final award, and sought to suspend the on-going public procurement process pending a full trial.

Under the “old” remedies regime, an interim injunction was seen as the only really meaningful remedy (albeit a difficult one to obtain) available to an aggrieved bidder, due largely to the fact that, once the contracting authority and the winning bidder had concluded the contract or framework agreement in question, the Court could only award damages if a claimant managed to establish a breach of the procurement rules.

Under the new regime, the position has changed considerably, and not only is the set-aside of an illegally awarded contract available as a potential remedy, but also, where an aggrieved bidder challenges a contracting authority’s decision by formally initiating legal proceedings, a contracting authority is now legally obliged to suspend its procurement process.

This automatic suspension of the procurement process essentially turns the tables around by requiring the contracting authority facing the legal challenge to make an application for an interim order to lift the automatic suspension, if it wishes to continue the procurement.

The Client Alert provides instructive review of recent case law applying these principles, including the tests and standards which are applicable to obtaining, and keeping, the "pause button" on.

It might be noted, also, that MoFo (as the firm is "affectionately" known in legal circles) provides very good practical advice on procurement matters, and other legal issues, such as this
Legal Updates & News Bulletin.

For another discussion of the EU suspension process (at least the UK version), see "
When and how to challenge public procurement contracts" by Wragge & Co. LLC, solicitors.