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Leaving a procurement paper trail


Local authorities can best manage risks associated with procurement with a clear audit trail, says Rebecca Rees of Trowers & Hamlins

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Brexit has created a considerable amount of uncertainty for local authorities. Like Alice falling through the rabbit hole into Wonderland, what awaits us on the other side of Brexit negotiations is unknown and will hold surprises. Nevertheless, it is unlikely that the procurement landscape will change significantly and neither will the need for having a clear approach to managing risk throughout the procurement process and managing the procured contracts effectively and efficiently.

This article aims to provide a timely reminder to local authorities that there are some key risk management items that every procurement procedure and contract should have in place to mitigate or remove the most common risks and encourage best practice in the sector. These should remain relevant regardless of the results of Brexit.

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Audit records

One risk that undermines the success of a procurement is uncertainty about what is being procured and what rules apply. The Public Contracts Regulations 2015 (PCR) encourage local authorities to undertake preliminary market engagement to ensure they are packaging up their works and services in an attractive way and engaging with potential bidders to ensure their requirements are clearly communicated. Pre-market engagement must be undertaken in a way that does not favour any particular bidder but can significantly help in achieving local authorities’ procurement goals.

Conducting a procurement process transparently is a core requirement of the PCR and can help mitigate the risk of a successful judicial challenge by an aggrieved bidder. On this point, it is not often that the risk profile of a local authority is compared with that of the UK’s nuclear sector, but the case of Energy Solutions EU Limited v Nuclear Decommissioning Authority (despite its 324-page length) is essential reading, not least to show the importance of keeping an audit trail of all of the key decisions taken in the procurement process. Other risk management tips that can be gleaned from the case include the following:

  • Keeping records of dialogue or negotiation meetings to ensure consistency of treatment between bidders in order to avoid unequal treatment. Where procurement processes stretch for months, it is essential the evaluation panel takes notes to ensure it is not simply relying on its memory, which can lead to poor judgements being made and an inconsistent application of the evaluation criteria.
  • Do not shred documents. The judge in the landmark case cited above made it clear that the more comprehensive and robust the record of the evaluation process, the stronger a contracting authority will be in terms of any challenge (assuming the evaluation was undertaken correctly).
  • Know the content of the tender documents: in this case, the evaluation panel had not read or could not remember the content of its data room. The judge pointed out that a reasonably well informed and normally diligent tenderer could reasonably expect the client to know the content of the documents.
  • Apply your evaluation criteria correctly and consistently with what is written in the tender documents. Some of the scores awarded were subsequently changed in an unrecorded meeting, resulting in the evaluation panel being unable to explain why a bidder that should have been rejected remained in the process.

All of the above points highlight the importance of a local authority maintaining a clear record of all key procurement decisions: the award criteria to be used; the scoring methodology; the reasons behind the de-selection of bidders; the discussions of the evaluation panel; the process of moderation and so on.

In fact, Regulation 84 of the PCR obliges local authorities to:

  • Draw up a written report of all key procurement decisions
  • Document the progress of all procurement procedures and maintain sufficient documentation to justify decisions taken in all stages of the procedure

At the very least, every local authority should have a template Regulation 84 report for their procurement officers to use and guidelines setting out what key procurement documents should be retained and for how long. These can be seen as key risk management tools, increasing accountability and transparency in each procurement process.

It is hopefully a thing of the past for contract managers to boast they keep their contracts in the bottom drawer.

“Risk management in procurement should remain relevant regardless of the results of Brexit.”

When disputes arise, the first thing to reach for is the contract. A central tenet of risk management for local authorities is ensuring all contract managers read, understand and operate the contract in accordance with its terms. Regular risk reviews of major contracts should be undertaken, with key risks to the relationship and service delivery identified and a plan put in place to mitigate, manage or remove such risks. This also helps spread corporate memory of the contract across the local authority, thus mitigating the risk associated with changes of personnel or interim appointments.

Even if perfectly procured, new relationships and contracts can be undermined through poorly drafted contracts. Ambiguity in contract terms creates misunderstanding, which can lead to dispute, particularly when money is tight or personnel or political control change.

Double check

Even well-drafted contracts can be negated by inconsistent specifications, unclear pricing documents or the contractor’s proposals. The supporting documents need to knit together with the contract terms. Review by the lawyer who drafted the contract can mitigate the risk of inconsistencies and is a worthwhile investment to ensure the contract will provide what was envisaged and be flexible if circumstances change.

Brexit has added a further layer of uncertainty for local authorities, already asked to do more with less. Key to moving forward in a post-Brexit world will be for a local authority to have put their house in order in terms of risk and contract management.

The maintenance of a comprehensive audit trail across the procurement process will assist in risk mitigation and is good practice, regardless of whether the procurement legislative framework requires it in the future or not. What is more, the focus of local authorities needs to be on efficient and proficient contract management – which will help drive best value through the delivery of the services, works and supplies.

Rebecca Rees, partner, Trowers & Hamlins


This article was written independently and was commissioned as part of a package sponsored by Monarch Partnership

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