Cancellation of Public Tenders: Legal Process and the Right to Compensation

This article is an English translation of the Turkish original published by the office.

Public tenders are one of the most important — and most complex — subjects of administrative law. Broadly, they are the set of procedures by which a public authority determines the bidder offering the most suitable price and awards the work to that bidder. The main law governing these procedures is the Public Procurement Law No. 4734. Tenders are sometimes cancelled for various reasons — for example, defects in the tender documents that cannot be corrected, breaches of fundamental principles, an award to a bidder who is barred from tendering, or errors made during the process. In this article we look at the cancellation of public tenders and the bidder’s right to compensation for losses suffered.

Legal remedies against public tenders

1. Complaint and objection

Anyone who claims to have suffered, or to be likely to suffer, a loss of rights or damage because of unlawful acts or actions in the tender process may file a complaint and then an objection, provided the procedure is followed. These are administrative remedies that must be exhausted before going to court.

a. Complaint to the contracting authority

A complaint is made directly to the authority conducting the tender by the person whose rights have allegedly been infringed through erroneous or irregular steps in the process. Its purpose is first to have the error remedied through the authority’s own internal mechanisms. The complaint must be filed before the contract is signed, within five days (for tenders under Article 21(b) and (c)) or ten days (in other cases) from the day after the act or action complained of was, or should have been, noticed.

The authority examines the complaint and decides within ten days. If it finds an unlawfulness that prevents the process from continuing and cannot be remedied by corrective action, it cancels the tender; where the problem can be corrected without interrupting the process, it determines corrective action; and if the complaint does not comply with time, procedure and form rules, the contract has already been duly signed, or no unlawfulness requiring cancellation or correction is found, it rejects the complaint. The decision is notified to the complainant, the other candidates or bidders and potential bidders within three days of the decision.

The complainant may file an objection with the Public Procurement Authority (Kamu İhale Kurumu, KİK) within ten days of notification of the authority’s decision. Once a complaint has been made, the contract cannot be signed until a final decision is given.

b. Objection to the Public Procurement Authority

As explained above, the decision of the contracting authority on a complaint may then be challenged before the Public Procurement Authority — an application known as an objection (itirazen şikâyet). The period is ten days from notification of the decision on the complaint. An application fee must be paid, and application guarantees are deposited into the Authority’s accounts.

On an objection, the Authority decides, with reasons:

• to cancel the tender, if it finds an unlawfulness that prevents the process from continuing and cannot be remedied by corrective action;
• to determine corrective action, where the problem can be corrected by the contracting authority without interrupting the process;
• to reject the application, if it does not comply with time, procedure and form rules, the contract has already been duly signed, no unlawfulness is found, or the matter is outside the Authority’s remit.

Except where the matter is outside the Authority’s remit, if the objection is rejected and a guarantee was deposited, the guarantee is also recorded as revenue.

The Authority must give its final decision within twenty days of the date on which the necessary information and documents and the tender file are registered. All Board decisions are sent for notification to the parties within five working days and published on the Authority’s website within five days after that; access to decisions is free of charge.

2. Annulment actions and judicial review

Tender decisions are ultimately administrative acts, and administrative courts have jurisdiction over them. Article 59 of Law No. 4734, headed “judicial review”, provides that final decisions of the Authority on complaints may be brought before the courts of the Republic of Türkiye and that such cases are heard with priority. The general grounds for annulment of administrative acts apply to these cases too. As in any annulment action, a stay of execution may be ordered where there is clear unlawfulness and a risk of damage that would be difficult or impossible to remedy. Because of this statutory priority, tender cases are heard ahead of other annulment actions. The Public Procurement Authority is named as the defendant and the judgment is given against it. Filing an annulment action does not, unless a stay of execution is granted, suspend the implementation of the Authority’s decision.

Claiming compensation after a public tender is cancelled

When a public tender is cancelled, bidders’ losses may be compensated under certain conditions. If the tender is cancelled because of a faulty or unlawful act of the authority, the bidders harmed may claim compensation from the authority. To do so, those who claim to have suffered damage through the authority’s fault may file a full-remedy action (tam yargı davası) at the administrative court, seeking compensation for pecuniary damage arising from the cancellation.

Several points are crucial in such actions. First, there must be a direct causal link between the cancellation decision and the bidder’s loss. Second, the cancellation must result from an unlawful or faulty act of the authority. Finally, the amount and nature of the loss must be proven with concrete evidence.

In short, when a public tender is cancelled, both administrative and judicial remedies are available for bidders’ losses. To avoid losing rights, bidders should follow the procedures and time limits carefully.

Türker Law Office provides legal representation and advice on complaints and objections in public tenders, annulment and stay-of-execution actions against decisions of the Public Procurement Authority, full-remedy actions for losses allegedly caused by unlawful acts in the tender process, and other administrative disputes arising from public procurement legislation.