The National Audit Office’s (“NAO”) new review into the high profile failed procurement by the Nuclear Decommissioning Authority (“NDA”) pulls no punches. With a total cost to the taxpayer of more than £120m, what are the lessons for procurers, contractors and the courts?
Public procurement can be difficult to get right. A combination of regulations, case law, guidance and increased scrutiny from unsuccessful tenderers has led to a significant uptick in procurement challenges in the UK over the last 10 years. The increasingly long term and high value of public contracts means that legal remedies are often the only resort open to unhappy contractors.
Perhaps the highest profile procurement dispute of 2016 (Energysolutions EU Ltd v Nuclear Decommissioning Authority  EWHC) related to the tender process to decommission up to 12 of the UK’s nuclear plants. A competitive dialogue procurement run by NDA resulted in the challenger losing the competition by a narrow margin of just over 1% on the tender scoring. A legal claim was brought, the court found that “manifest errors” had been made in the evaluation of the bids, and the original winning bidder should have been disqualified on the NDA’s own evaluation criteria. This, ultimately, resulted in damages being paid to the contractor of almost £90m and the abandonment of the procurement.
The NAO report is critical of the approach taken by the NDA in the procurement process, with the NAO head noting that “serious questions” needed to be asked about the NDA’s “understanding of procurement regulations”.
What went wrong?
In some ways, the issues raised provide an abject lesson of what can go wrong in a large public sector procurement.
The scale of the task to award the contract was magnified by tender evaluation criteria which the court noted were “overcomplex”, which made making mistakes in tender evaluation more likely.
The NDA relied heavily on external advice, including the unusual step of the NDA’s advisors undertaking a separate review of the tender marking – which resulted in some scores being changed. The NAO noted that none of the advice had identified the issues which later came to light in the court action. A key issue was the lack of any contemporaneous notes being retained by the NDA of the dialogue meetings or the evaluation sessions. Whilst in itself a breach of regulation 84 of the public contracts regulations (the obligation to keep contemporaneous records of the different stages of the procurement), and the NDA’s overarching transparency obligations, it also, practically, made it very difficult for the NDA to defend various of the legal claims being brought.
Changes were made to the tender evaluation criteria during the process, and issues arose where these changes had a knock-on effect on the overall tender scoring approach. One bidder’s marks were inflated so as to avoid the changes to the criteria excluding that bidder due to a failure to meet a required scoring threshold. All of this was sufficient to breach the NDA’s obligations.
The Government has promised to look at the recommendations made in the NAO’s report, and the NDA has made changes to its structure and governance following the failed procurement. With Brexit negotiations continuing, access to public procurement markets across the EU will be one of the issues to be agreed in any future trade relationship. The lessons for procurers are set out clearly in the court’s judgment and NAO report – but cost to the public purse may have much further reaching consequences in terms of the UK’s approach to large scale procurement projects in the future.