Legal challenge fears force Environment Agency to freeze water and environment bids
The Environment Agency has suspended the procurement of a new £2.5bn framework contract after flaws were spotted in the bidding process.
“The model is flawed because it is not identifying value”
The Agency was forced to suspend bidding for its new 10 year Water and Environment Management (WEM) framework just weeks before it was due to be awarded, on legal advice.
An independent review into the procurement process instigated after the recent West Coast Main Line franchise debacle - where the process was also suspended - warned that the framework award could be challenged in the courts.
“We regret that this decision has been taken at a late stage in the tender process and consider the decision to be absolutely necessary in order to ensure that the tender evaluation is transparent, fully compliant with public procurement regulations and not liable to challenge,” said a bulletin issued by the Agency to potential suppliers last week.
“Whilst we have considered the contents of the tenders, our decision has been taken independently of the tender contents and on the basis of legal advice from advisors who have not themselves viewed the tenders,” said the statement.
The new WEM framework combines four existing frameworks - the strategic flood risk management framework, the national engineering and environmental consultancy agreement, the national contractors framework and the environmental services framework.
The Agency had been expected to announce the successful firms in the next few weeks, with the new arrangements due to begin in April.
Major UK contractors and consultants are bidding for the framework, and the suspension is expected to cost them millions of pounds in tender costs in total.
One major consultant told NCE that bidding for a place on the framework had cost it hundreds of thousands pounds, with several staff working on the bid full time for almost a year.
The Agency said much of the work done by bidders could be reused, but the consultant told NCE there would still be plenty of new work to do on tenders if the bidding process is restarted on a different footing.
Another consultant speculated that one possible area for a legal challenge was that bidders could manipulate rates.
“The model is flawed because it is not identifying value,” said the consultant, explaining that bidders could ascribe 1p rates for areas that were weighted more heavily in the tender process, such as construction equipment, but then decide to subcontract this area.
The firm could then make up its margin by increasing rates in areas that were not weighted as heavily, such as staffing costs.
“It’s impossible to compare apples to apples in this system,” said the consultant.
Last year contractor Amey used similar pricing tactics in its bid to win a road maintenance framework with Transport Scotland.
Amey mounted a legal challenge when the contract was awarded to Bear Scotland, despite its bid being more expensive, but it failed to get Transport Scotland’s decision overturned (NCE 15 November 2012).
But similar tactics were successfully used by bidders for the recent Highways Agency Area Support Contracts (NCE 21 June 2012).
Another reason the process could be open to challenge is that the Agency has reportedly told bidders that some of the major contracts could be awarded through existing frameworks.
As a result some firms are questioning the necessity of bidding for the new framework.
The Agency has given no timescale for restarting the tender process.