Contracting with public bodies during Coronavirus
In addition to the general challenges around supply chain contracting discussed in our Commercial contracts and supply chain FAQ, the additional overlay that the public procurement rules introduce can provide further complication when dealing with public sector customers, including the NHS. In these FAQs we look at how Government is dealing with the impact of the Coronavirus outbreak on urgent supply chain requirements, as well as the risk of later challenges and how this can be handled.
My business supplies goods or services to public bodies, including the NHS. Do the traditional procurement methods still apply, in light of the Covid-19 crisis?
If the party you are contracting with is a public body then they are usually obliged to issue public tenders for contracts in respect of goods, services or construction that they procure in excess of a certain value. However, this tender process can sometimes take months and, in light of this, the government have recently issued new guidance (Cabinet Office Procurement Policy note PPN 01/20) as to how this process can be expedited in respect of goods and services that are urgently required due to the COVID-19 crisis. It indicates that some traditional procurement requirements imposed by the Public Contracts Regulations 2015 can be by-passed for “reasons of extreme urgency brought about by events unforeseeable by the contracting authority” and the latest government guidance indicates that the COVID-19 outbreak is captured by this definition-although it states that the Contracting Authority must be able to justify (see below) why the usual procedures were not followed.
If a public body procures my goods or services outside of the traditional methods, is there a risk that my contract could later be challenged?
When a public body is the contracting party, the onus is on them (and not the supplier) to prove that they have abided by the regulations under which the procurement process is governed. However, there is a potential risk that the contract could be challenged or even declared ineffective in certain circumstances. If they seeking to rely on the “reasons of extreme urgency” exception, then the public body must be able to demonstrate that the following tests have been meet:
- There are genuine reasons for extreme urgency
- The events that have led to the need for extreme urgency were unforeseeable
- It is impossible to comply with the usual timescales in the Public Contract Regulations
- The situation is not attributable to the contracting authority
Public bodies should also be keeping written justifications of their ability to satisfy these four tests and, if these tests are not met, there is a risk that the contract could be open to challenge by third party suppliers who were denied the opportunity to participate in a tender.
Contracting parties should also bear in mind also the Government’s guidance on responsible contractual behaviour, which strongly encourages responsible and fair behaviour from contracting parties, particularly where dealing with claims under contracts or enforcing contractual rights. For further detail on the new guidance, see our Coronavirus and the implications for Local Government Frequently Asked Questions.
What is the risk to my business if my contract with a public body is challenged and how can I protect against this?
In the event that the public body you are contracting with is challenged, for failure to comply with the procurement regulations, then it is the public body and not you (as the supplier) who will be held to account for this. However, the risk to your business arises if legal action were to be taken as this has the effect (depending on when proceedings are issued) of granting an automatic injunction which (temporarily or permanently) prevents the parties from performing their obligations under the contract. At this point your only course of action, as the supplier, would be to challenge this decision and try to recover your losses through the courts. This process is likely to be lengthy and extremely costly for the business.
In order to address this risk more pro-actively, including a full indemnity (or other well-crafted drafting alternatives) in your supply contracts against the costs and difficulties that you might be subject to can help give you piece of mind if your business is supplying goods or services to public bodies in order to support the COVID-19 effort. If you would like any further support on this, one of our experienced members of the team would be delighted to help.
If you would like to talk through the consequences for your business, please email us and one of our team will get in touch.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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