Procurement processes are usually set up to give the procuring body no duty to pay bid costs if schemes don’t go ahead. But there may be particular circumstances on certain contracts that could justify bidders recovering their bid costs

One example is if a statement was made by the procuring body when encouraging parties to bid that could be taken to mean that bid costs would be paid in the unlikely event of cancellation.

There is also the recommendation of the Bates Review [conducted in 1997] in relation to PFI, which was carried out for the last government and advised that “when a decision is made not to proceed with a project and that decision is not related to the viability of tenders received, contractors’ bidding costs should be refunded”. This was of course carried out to inform policy for the last government, but contractors could argue it was current practice when they were tendering (and applies to local authorities, despite suggestions to the contrary).

Preferred bidders on cancelled schemes have been compensated in the past and hopefully the current government, with an eye on PFI’s future, will adopt a similar approach.

Rupert Choat is a partner at CMS Cameron McKenna

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