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Portcullis proves public works regulations exist for a reason

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legal matters

Consider this: a London-based employer wants to procure a prestigious building to be a showpiece of British design at an estimated cost of around £250 million. The design for the fenestration involves the novel notion of cladding or curtain walling that operates as an integral component of the building in engineering terms. It is to be made of welded bronze metals, and will probably be the most expensive fenestration system ever.

The tendering process for this important works package is subject to EU directives and the Public Works Contracts Regulations 1991 (PWR). The PWR sets out the criteria to be applied when evaluating tenders - essentially the lowest price or the tender which is 'the most economically advantageous' to the employer. The PWR also requires disappointed tenderers to be informed of the reasons they were unsuccessful and provide sanctions where the rules are broken.

In any event, our UK employer recognises that there should be no bias for or against overseas companies. Nevertheless the employer is disappointed by the response to the advertisement of the proposed works in that only one of the interested companies is British.

Attempts are made to make the fenestration works more attractive to British companies.

The Construction Procurement Group, which aims to keep the British construction industry in business, becomes involved and the design and metal procurement are taken out of the fenestration package. Even so, the initial round of tenders produces some horrifying results. Against an estimated cost of the fenestration of around £20 million, the tenders are all in excess of £40 million (£3500/m 2).

With cost as dominant factor, the employer enters into discussions with all tenderers. Ultimately the employer has to choose between two companies.

One is a British/European consortium, the other a French-based European offshoot of an American group.

The Americans submit the cheapest tender. The British consortium's tender is more expensive but includes an alternative cheaper design. None of the other tenderers are told about it or allowed to price it but the alternative captures the imagination of the employer and design team who then pull out all the stops to ensure that the British consortium get the job.

When the Americans learn that, despite submitting the cheapest tender, they have lost the job, they suggest they have been treated unfairly and may have a legal remedy under the PWR. They are told, among other things, that 'they will never work in the UK again' and that their ongoing projects will be adversely affected.

In conclusion, they are told that this employer usually tells aggrieved parties to 'eff off' and they obediently cease to complain. Does this sound fair to you?

This of course is a true story and the protagonists are well known. The employer is the Parliamentary Works Directorate for the House of Commons. The building is Portcullis House. The design team included the architect Michael Hopkins & Partners and engineer Ove Arup & Partners. The successful tenderer was Glasblau Seele/Alvis. Harmon CFEM Facades (UK) was the disappointed tenderer which did not 'obediently cease to complain' but instead brought a lengthy action against the House of Commons.

The unhappy story is set out in a 300-page judgement given by Technology and Construction Court Judge Humphrey Lloyd QC last October. He found that the House of Commons had been in breach of the PWR. It had no clear idea of the criteria that were to be applied when evaluating tenders and such criteria as it had changed as the negotiations for the project progressed. The ultimate pick of Seele/Alvis's bid for its own alternative design over Harmon's bid for the specified works was like comparing 'apples with pears'. This was all the more unpalatable because, in the event, the alternative design did not work and was rejected in favour of the original.

The judge found that the House of Commons' treatment of Harmon was 'reprehensible'. Furthermore, had the job not gone to Seele/Alvis, it would almost certainly have gone to Harmon. Accordingly he found that Harmon was entitled not only to the costs wasted in preparing its tenders but also to a proportion of the profit it would have earned on the contract that, in all fairness, ought to have belonged to it.

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