UK accused of favouritism in ship tender

Date: 29/06/2000

By Peter Chapman

European Commission single market watchdogs are investigating allegations that the UK government broke strict EU rules by rigging a lucrative military shipping tender worth more than €1.6 billion.

The move follows claims that the UK's military procurement agency changed a tender mid-way through the process to give the Govan shipyard in the depressed Clyde area of Scotland a better chance of winning the contract to supply some or all of the ships.

Union rules on public procurement explicitly rule out any favouritism towards particular suppliers, insisting that the handling of all large tenders - which must be published in the EU's Official Journal - must be scrupulously fair.

The investigation is likely to focus on the UK's decision to lengthen the selection process by a month to 8 July to give firms a chance to improve their original bids. The move was justified on the grounds of "changing economic circumstances".

These "new circumstances" are believed to be the recent sale of Govan by its former owners, the Anglo-Norwegian industrial firm Kvaerner, to the UK's Bae Systems - a move which effectively ensured the short- term future of the troubled yard.

Four consortia had already been short-listed by the UK to supply and service the ships - six roll-on,-roll-off ferries - under a 20-year contract with the Ministry of Defence. The winner would have managed the project, including sub-contracting shipbuilding work to yards.

Until the new timetable was announced, this building work appeared to be destined for foreign yards in the Far East and continental Europe which were able to offer a cheaper price. One of the four shortlisted firms, Denmark's Maersk said no British yards had made a competitive bid for the building work.

The changes in the tender are being interpreted by the industry as a clear signal that the government is bending over backwards to ensure that Govan wins a share of the spoils from the contact.

Commission insiders say the institution has not yet received complaints from aggrieved bidders, but insists officials have the right to launch a formal probe on their own initiative if they suspect wrong-doing. "If it appears that they have not complied, there may be enough to pursue the case," said one, adding: "We can ask for detailed information, and can ask if the specifications [of the tender] had been changed to favour a particular supplier."

If the Commission judges that the UK has broken the rules, it could take London to the European Court of Justice, which could force it to start the tendering process again. National courts could also award damages to losing bidders on the basis of this ruling. But officials say few cases go this far. "What tends to happen is that not many cases end up in the court where there has been an infringement. More often than not, the government in question says 'it won't happen again' or decides to re-let the contract," said one.