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November 16, 2016 2:38 PM | Posted by Beresford-Jones, Jenny | Permalink

The Department of Health has published a guidance note, The Public Contracts Regulations 2015 and NHS Commissioners, summarising the main requirements of the Light Touch Regime (LTR) of the Public Contracts Regulations 2015 (PCR 2015) and highlights the changes to commissioners and those supporting them (Commissioning Support Units, NHS Trusts and NHS Foundation Trusts) with their procurement of healthcare services. The guidance should be read in conjunction with regulations 74-77 of the PCR 2015 and the Crown Commercial Service’s guidance on the LTR for health, social, education and certain other services.

Five areas for commissioners to be alert to

  • The new provisions of the PCR 2015 relating to the award of clinical services came into force for clinically commissioned work within the NHS on 18 April 2016. Any new healthcare services contract procurement procedure that commences on or after that date will need to comply with the requirements of the PCR 2015.
  • Under the PCR 2015 health, social and other specific services are subject to the LTR where the value of the contract is in excess of 750,000 Euros (£589,148 at current exchange rates).
  • Under the LTR the PCR 2015 includes some additional requirements including the requirement to advertise in the OJEU either by a contract notice or a prior information notice the intention to award a public contract with a lifetime value of 750,000 Euros (£589,148) or more, except where there is a reason for using the negotiated procedure without prior publication; and that any variation to the procurement process must comply with the principles set out in Regulation 76(4) of the PCR 2015.
  • Under the LTR commissioners have the freedom to determine the procurement procedure to use when awarding a contract provided that they satisfy the principle of transparency and equal treatment of providers.
  • The guidance note provides that the “PCR 2015 regime is not a barrier to the integration of care services where this make sense for the local community.” - this being a key priority in the NHS Five Year Forward View. Indeed, points out the guidance, the 'light touch regime' specifically states that commissioners may use certain award criteria that are highly relevant to patient care when designing and running their procurement processes, including the needs of vulnerable users, and ensuring the quality, comprehensiveness and continuity of patient services.

    What to take away

    The introductory section of the guidance states that “The PCR 2015 … contain a number of flexibilities that, where justified, can be used by commissioners to dispense with the need for open competition.” It is important not to read this as suggesting that it is possible to dispense with the need to advertise in the OJEU if the value of the contract is over the threshold. It is true that an over-threshold LTR procurement need not follow one of the formal procurement processes provided that the principles set out in Regulation 76 are followed, but the requirement to advertise cannot be avoided if the contract is over the threshold.

    That said, as touched on above, this advertisement need not be made via OJEU Contract Notice; it is instead possible to use a Prior Information Notice (PIN) as a call for competition, provided that the PIN meets the requirements in Regulation 75(1)(b). We have recently seen NHS England use PINs to call for competition for around £15 billion of specialised services contracts and has stated in the PINs its intention to award the contracts for 2017-19 to the incumbent providers, unless expressions of interest are received from alternative operators, triggering a competitive process. The latest guidance draws out the point that commissioners could use the negotiated with notice procedure set out at Regulation 32, provided that the grounds for its use are met. One of these grounds is the situation where in an open/restricted process (for which there has been a call for competition) has yielded no suitable tenders or requests to participate.

    For more information on the LTR and how it operates in practice please see our in depth articles here and here.
November 11, 2016 10:18 AM | Posted by Prandy, Helen | Permalink

Fat-finger syndrome, so the ever-reliable internet tells us, is the “occasional tendency of stressed traders working in fast-moving electronic financial markets to press the wrong button on their keyboard and, in the process, lose their employer a mint…”

Sadly any of us using a keyboard connected to the outside world is at risk of accidentally pressing the wrong button and bidders faced with an imminent deadline for submission of their tender via an electronic portal are no exception.  If cases before the courts are any reflection then there are a significant number of tenders submitted accidentally either with the wrong information, out of date information or, worst of all, completely blank…it does happen just ask the Legal Aid Agency.

When this does occur the contracting authority has two choices: it can either reject the clearly defective tender out of hand or it can bring the obvious error to the attention of a bidder and ask for it to be remedied.  Which approach is correct?  While transparency and equal treatment are non-negotiable in bid evaluation contracting authorities do retain a margin of appreciation in matters of judgement provided the exercise of discretion is not manifestly wrong.

That means that both approaches could be correct depending on the circumstances. 

A Scottish court has recently considered the correct approach when dealing with the extent to which a contracting authority should allow a bidder to correct an obvious error.  In this case a bidder for demolition work had its bid rejected because in relation to Lots 1 and 2 it had omitted mandatory financial information and for Lot 3 had submitted a blank template.  The contracting authority disqualified the bid but the bidder argued that as the omissions were obvious and easily corrected it should have been allowed to correct the mistakes so that the bid could be fully considered.  It argued that the Authority was bound to seek clarification.

The Authority argued that the requirement of strict compliance was plainly set out in the tender documents given to all bidders.  The bidder was not asking to be allowed to correct a formality as it had submitted no figures whatsoever and it was not obvious what it had intended to submit.

The court found for the Authority.  It said that there was no duty on the Authority to give a bidder the chance to correct its bid.  The reservation of a right in the bid documents to clarify allowed the Authority to resolve ambiguities but not to seek late submission of information which should have been supplied but was not.  Had the Authority done so here it was likely that it would breach the principle of equal treatment.

It is not always easy to draw the distinction between an ambiguity which might be clarified and the kind of correction which effectively gives the erring bidder a second chance.  In this case although the mistake was obvious allowing it to be corrected meant giving the bidder the chance to submit information it had been required to provide but had not something which is plainly unfair to bidders who had submitted their correct bid by the deadline.

Harsh though this might appear to the (perhaps junior) member of a bid team whose job it is to submit all of the tender on time it is an important reminder that it is never a good idea to leave bid submission to the last minute and to make absolutely sure that the bid is exactly what you need and want to submit. 

As for what happens when you try to submit a bid and the computer says no well, that’s another story…

Case referred to: Dem-Master Demolition Limited v Renfrewshire Council [2016] CSOH 150 CA78/16

by Helen Prandy (click here to see Helen's profile)

 

November 1, 2016 4:54 PM | Posted by Beresford-Jones, Jenny | Permalink

This article was first published in LexisPSL on 19/10/2016.

The Crown Commercial Service (CCS) has issued new guidance on the social and environmental aspects of the Public Contracts Regulations 2015, SI 2015/102 (PCR 2015). The guidance outlines how contracting authorities may incorporate criteria for compliance with social, environmental and labour law in the public procurement process and when assessing the performance of public contracts.

1. What prompted the guidance? What is the policy background?

The new EU Directive 24/14 on public procurement was implemented in England and Wales by the Public Contracts Regulations 2015 (“PCR 2015”) in February last year. This was the biggest shake up of the public procurement regime in a decade. The PCR 2015 contain greater flexibilities around using public procurement to promote supplier (and supply chain) compliance with social, environmental and labour laws as well as wider scope for evaluating social, environmental and labour law issues as part of the award criteria. That said, the government’s interest in using public procurement as a vehicle for the promotion of these (and other) policy considerations long predates the PCR 2015 – see for example the introduction of the Public Services (Social Value) Act 2012 which requires contracting authorities to have regard to economic, social and environmental well-being when commissioning public services contracts.

At around the same time that this guidance was issued, the Crown Commercial Service also released an updated Selection Questionnaire to replace the old Pre-Qualification Questionnaire. The SQ is mandated for use in over-threshold procurements and contains the “exclusion” criteria required by the Directive, including those around social, environmental and labour law compliance, and as such there is a relationship between these two documents which have both been published recently.

2. What are the key issues addressed by the guidance?

There are two core issues: (1) how can contracting authorities ensure their supply chain is compliant with social, environmental and labour law and (2) how can these factors be lawfully evaluated in the context of a public procurement exercise?

3. What should contracting authorities do in order to ensure compliance with relevant social, environmental and labour laws in delivering public contracts? Is the guidance helpful in clarifying the law in this area?

  • The guidance puts the onus onto contracting authorities to decide how they ensure suppliers are compliant and that the approach adopted may vary on a case by case basis. However it makes the following suggestions:
  • Do ensure enough information is obtained from the successful bidder to check it satisfied the exclusion criteria (which amongst other things assess compliance with social, environmental and labour laws); and
  • Consider the risks of breaches as present within the particular supply chain and carry out checks to an appropriate level of sub-contracting (this will vary depending on the contract value and type).

Also, the guidance requires contracting authorities to use the standard wording provided at Annex B, giving the contracting authority a right to terminate a contract if breaches of social, environmental or labour law come to light.

4. What practical guidance is provided in relation to exclusion, specification, award, and contract lifecycle?

In relation to exclusion, the guidance helpfully sets out how exclusion grounds may be used to further social policy goals. Where a supplier is convicted of terrorist, child labour or human trafficking offences they must be excluded. Where the offence is a violation of social, labour or environmental conventions then the contractor may be excluded. The guidance helpfully also references the new Regulation 71 obligation to ensure that sub-contractors who breach these exclusion criteria are indeed replaced and contains an FAQ around how far down the supply chain the contracting authority is expected to probe. Interestingly the guidance does not mention the new “self-cleaning” mechanism set out at Regulation 57(13) onwards. This mechanism allows a supplier who has breached one of these criteria to provide evidence of measures it has taken to address the issue. The contracting authority can then decide whether it views these measures as adequate and whether to exclude the supplier.

Around specification, the guidance highlights how labelling requirements could be used to allow a contracting authority to further environmental goals (for example, labels to certify energy efficiency standards). There is a reminder of the conditions the label concerned must meet in order to be acceptable under the PCR 2015 (particularly, the requirements for use of the label must be based on objective and non-discriminatory criteria and be established by an authority not linked to the contracting authority, “equivalent” labels must also be accepted and there must be a clear with the subject matter of the contract in question.). The guidance also notes the requirement at Regulation 42(8) to actively include accessibility criteria where the end result of the procurement is product or service destined for use by individuals.

In terms of award criteria, attention is drawn to the fact that Regulation 67(2) now expressly states that award criteria may include environmental or social aspects as long as a clear link with the subject matter of the contract can be demonstrated. So, where products are being acquired, the criteria could take into account not only price and operating cost but also social/environmental issues such as recyclability and the involvement of disadvantaged persons in the manufacturing process. Other examples might include fair trade requirements, such as the requirement to pay a fair price to producers. The new provisions at Regulation 68 on life cycle costing allow the assessment of the cost over the whole lifecycle of a product and allow scope to consider environmental factors such as disposal costs.

The guidance reminds readers that the Directive does not permit contracting authorities to require suppliers to have corporate social responsibility or environmental responsibility policies in place in a generic sense. This is because award criteria (including social or economic award criteria) need to be linked to the specific contract being procured.

Finally, there is a new provision expressly requiring contracting authorities to reject tenders that are abnormally low where the reasons for the low tender is because the supplier is not compliant with national or international labour, social or environmental law.

Once the contract has been signed, social and environmental factors can still play a role. For example Regulation 70 allows special conditions to be included in the contract around its performance, provided this has been highlighted in the procurement documents and the condition can properly be linked to the contract. An example might be conditions around recycling of waste or packaging, or in relation to fair trade requirements.

5. What are the key overarching policy and statutory requirements that contracting authorities should take account of in delivering public contracts in addition to the environmental and societal impact? Is this expected to change in light of Brexit?

While the general approach of the government is to favour light touch regulation, nonetheless it has not shied away from the opportunity to use public procurement regulation as a tool through which to further policy goals. As well as social and environmental goals we have seen other policy objectives. For example: 

  •  Improving access to public contracts for small and medium sized entities (SMEs). This policy goal has led to extra regulation (at Part 4 of the Public Contracts Regulations 2015) around advertising on Contracts Finder and rules around the use of the selection stage to ensure that SMEs are not prejudiced unduly); and
  • Increased transparency about opportunities available and contracts awarded. Again, the aim of the Contracts Finder site has been to improve the position here, although perhaps recent Crown Commercial Service reminders about these obligations suggest that not all contracting authorities are compliant.

Although it looks like we will end up with a “hard Brexit” and a very British solution to our relationship with Europe nonetheless we are unlikely to see much change in the public procurement regime at least in the shorter to medium term (although longer term it is possible that the regime will be tweaked or recast). Public procurement is unlikely to be high up the agenda of the post-Brexit legislators. In any event, as the above shows, the government has always had a healthy appetite for regulation in this area, often going beyond the core requirements imposed by the EU Directives.

6. What are the key takeaways for public sector lawyers? Are there any grey areas?

Public procurement is notorious for its “grey areas” and the issues practitioners grapple with are rarely straightforward. Instead we are usually required to apply core principles to a particular circumstance in order to arrive at a view and make a judgment as to how best to proceed. The question of how to introduce social and environmental factors into a public procurement is no exception. The new regime does introduce greater flexibility to evaluate these issues but do bear in mind that:

  • Any criteria must be properly linked to the subject matter of the contract and not merely generic; generalised statements about compliance will be insufficient and could open the procurement;
  • A contracting authority must not impose requirements that are discriminatory, for example requiring an environmental label that is only available in one member state; and
  • Transparency is key, so for example any contract conditions must be set out in the procurement documents, any life cycle costing formula needs to be objectively based and set out upfront in the procurement documents.

7. When is the new guidance effective from? Is further guidance expected?

The new guidance is effective now. Given the CCS’ workload it is perhaps unlikely that further guidance in this area will be issued for a while now, unless responses to this document indicate a need for this.

September 27, 2016 2:17 PM | Posted by Beresford-Jones, Jenny | Permalink

The Crown Commercial Service (CCS) has just published a procurement policy note containing statutory guidance on the selection stage and an updated version of its standard pre-qualification questionnaire. This is mandated for use in over-threshold procurements by virtue of Regulation 107.

Why was a new PQQ document needed?

The old PQQ needed updating in order to fit together with the requirements of the European Single Procurement Document (“ESPD”). There has been an obligation on contracting authorities to accept ESPDs since January of this year and of course a mismatch has arisen between the standard form ESPD and the CCS’s PQQ. The ESPD allows suppliers to simply self-certify that they meet the requirements, with the contracting authority seeking evidence of this only from the winning bidder at the end of the process. The new document is aligned with the ESPD.

Key points to note

  • The “Pre-Qualification Questionnaire” (PQQ) is now known as a “Selection Questionnaire” (“SQ”).

 

  • Authorities should stop using the old PQQ and start using the SQ with immediate effect. The guidance is silent on the question but we assume this instruction is in relation to new SQs being issued and there is no requirement to recall PQQs that are already being used in a current procurement. 

 

  • The SQ is structured in three parts, not dissimilar to the old PQQ. Part 1 of the standard SQ covers the basic information about the supplier. Part 2 covers a self-declaration regarding whether or not any of the exclusion grounds apply. Part 3 covers a self-declaration regarding whether or not the company meets the economic, financial, technical and professional selection criteria. There then follow some "additional" questions at the end of the document.

 

  • The exclusion grounds in the SQ now correlate to those in the latest version of the Public Contracts Regulations 2015 and in the ESPD (e.g. including, where applicable, exclusions around the Modern Slavery Act 2015).

 

  • Contracting authorities will need to brief potential candidates on how they can access the SQ and submit their responses. The guidance envisages three options (1) include all three parts of the SQ with the procurement documents; (2) direct suppliers to the Commission's EU-ESPD service for parts 1 and 2, and include standard selection questions separately within the procurement documents; or (3) provide access details to an e-procurement system that asks the same questions as listed in the standard SQ plus any procurement-specific questions.

 

  • Self-certification declarations are required as part of the selection stage not only from suppliers but also from any other supplier being relied on to meet the selection criteria. The guidance reminds contracting authorities of the "self-cleaning" procedure which allows suppliers who have breached the criteria to demonstrate that they have "righted their wrongs".

 

  • Contracting authorities must accept self-certifications via the EU-ESPD template, even if this is in the format adopted by another member state.

 

  • Evidence of compliance need not be requested until award stage (although the winning bidder's evidence must be checked prior to award). That said, evidence may be requested at an earlier stage if the contracting authority decides this is necessary.

 

  • Deviations are not permitted from Parts 1 and 2. You can deviate from Part 3 provide you report. The guidance says you must report:
    • changes to the wording of the standard questions and instructions; and
    • additional questions that are included which are not specific to the individual procurement.
    • Helpfully, the guidance confirms that additional questions which are specific to the procurement do not need to be reported, nor does the decision to leave out a question or tweak wording to make it compatible with e-procurement systems. You only need to report once (which is helpful for those authorities wishing to report an on-going deviation in their standard form SQ).

 

  • The prohibition on holding a separate selection stage for under-threshold procurements remains.

 

  • The guidance notes that, while completing parts 1 and 2 is not mandatory for over-threshold 'light touch regime' procurements for health, social and other services, nonetheless it would be good practice to exclude a supplier against those criteria in any event, and recommends that parts 1 and 2 are used even where the procurement is light touch, together with part 3 around economic and financial standing and technical and professional capacity.

 

  • Interestingly, the SQ no longer contains the "additional PQQ modules" on, for example, Health and Safety, Environmental Management or Compliance with Equality Legislation that used to feature at the end of the old PQQ. Instead, additional modules on e.g. Steel, skills and apprenticeships are set out, to be included depending on whether the relevant policy in those areas applies to the contracting authority in question. Presumably, however, the old additional modules could still be included in the additional modules section if desired.
September 16, 2016 12:17 PM | Posted by Souter, Katherine | Permalink

Yes, apparently you do!

The ECJ has just handed down a preliminary ruling on request of the Danish Supreme Court in Finn Frogne A/S v Rigspolitiet ved Center for Beredskabskommunikation Case C-549/14.

In short, this is a surprising decision and one which may cause difficulty for contracting authorities and disputes lawyers. The inference from this decision seems to be that, unless the terms of a settlement, agreed between a contracting authority and a supplier who are embroiled in a commercial dispute over a public contract fall within the remit of:

(1) Regulation 72 “modification of contracts during their term”; or
(2) Regulation 32 “use of the negotiated procedure without prior publication”,

then it is possible for the terms of that settlement to itself constitute an illegal modification to a public contract which should have been advertised and procured under the procurement rules (with possible consequences of ineffectiveness of the settlement and damages to the aggrieved third party supplier).

Facts of the case

The Centre for Emergency Communication of the National Police in Denmark (CFB) awarded a contract to Terma for the supply and maintenance of a communications system for all emergency response services worth around €70m. A dispute arose between the parties relating to delivery times. The parties agreed a settlement of that dispute which involved reducing the scope of the contract to:

• the supply of a radio communications system for regional police worth under €5m;
• the sale of two central server farms to CFB worth under €7m (Terma had purchased the latter for the purpose of leasing the servers to CFB under the original contract).

The parties waived all other rights from the original contract as part of the settlement. CFB published a VEAT notice in respect of the settlement and Frogne (who had not been involved in the original procurement exercise at all) brought a challenge to the settlement on the basis that it constituted a material amendment to the original contract and should have been competed under the procurement rules.

The Danish Supreme Court then referred a question to the European Court of Justice (ECJ) for interpretation of the procurement rules, asking whether the procurement rules must be interpreted as meaning that, following the award of a public contract, a material amendment cannot be made to it without a new tendering procedure being initiated, even in the case where the amendment is objectively a type of settlement agreement where both parties agree to mutual waivers designed to bring an end to a dispute with an uncertain outcome, which arose from the difficulties encountered in the performance of that contract.

Decision of the Court

The Court decided that:

  • an amendment of a contract consisting in a reduction in its scope may result in the contract being brought within reach of a greater number of economic operators (particularly smaller economic operators who may not have otherwise qualified for the larger original contract);
  • it was irrelevant that the settlement agreement did not arise from the desire of the parties to renegotiate the essential terms of the contract, but instead out of objective difficulties with unpredictable consequences encountered in the performance of that contract.  Contracting authorities can opt for a direct award of a contract, that is to say, negotiating the terms of the contract with a selected economic operator without prior publication of a contract notice, only in the circumstances expressly referred to in the procurement rules (in the UK these are contained in Regulation 32 “use of the negotiated procedure without prior publication”); and
  • contracting authorities may retain the possibility of making amendments to a contract after it has been awarded, on condition that this is provided for in the documents which governed the award procedure. By expressly providing for the option and setting the rules for the application of them in those procurement documents, the contracting authority ensures that all suppliers interested in participating in the procurement procedure have been made aware of that possibility from the outset and are therefore on an equal footing when formulating their respective tenders. The position would be different only if the contract documents provided for the possibility of adjusting certain conditions, even material ones, after the contract had been awarded and fixed the detailed rules for the application of that possibility. 

Comment

Our first thought on reading this case was to consider whether we should update dispute resolution clauses in public contracts to provide expressly for this kind of settlement, and thus try to ensure that any settlement is a "permitted modification" because it has been clearly precisely and unequivocally set out in the original contract. However we soon discounted this strategy as unfeasible: we don’t think a general term permitting modification as part of a settlement would be capable of ever being specific enough for the particular circumstances in which it was ultimately used.

This case also serves as a reminder that material changes to public contracts can relate to reducing the contract scope as well as increasing it.

This case was a reference for a preliminary ruling, which the Danish Supreme Court requested from the ECJ to aid the Danish Court’s interpretation of European derived law. Similarly in the UK, our courts must still refer to and use ECJ jurisprudence when deciding matters derived from European law, but once the UK has left the EU, the UK Courts may not still be bound and may decide not to follow the decision.

Finally, if you are wondering, “what is a VEAT?” you’ll find the answer here on our procurement portal.

by Katherine Souter - click here for more about Katherine 

 

August 17, 2016 3:12 PM | Posted by Prandy, Helen | Permalink

A High Court judge has issued a warning to contracting authorities who might be tempted to minimise the amount of paperwork they keep particularly where they fear that a high profile procurement exercise might be challenged.

In finding that a contracting authority had made “conscious decisions” in relation to sparse record keeping the judge noted that serious consideration appeared to have been given to restricting the keeping of contemporaneous records of evaluation because it was known that these would be disclosable in litigation.  The court took the view that if the evaluation process is performed in accordance with the obligations under the Regulations then they would present no danger to the Authority because they would constitute an ‘audit trail of the decision making'.

He also went on to find that a proposed destruction of notes relating to the evaluation was extremely worrying given the express obligations of transparency on public authorities under the Regulations.

In the absence of adequate contemporaneous documents a court is forced to rely on the recollection of witnesses.  Documents may be embarrassing but the memory of witnesses is extremely unreliable and is just as likely to lead to an ‘embarrassing’ revelation.  In this most recent case the witness most closely involved with the evaluation admitted on cross examination that he did not accept that inconsistency in evaluation of bids might amount to unequal treatment.

The judge found the almost complete absence of documents relating to a critical dialogue phase of the procurement and a reliance solely on the memory of witnesses to “verge on the incredible”.

The case arose under the 2006 Regulations and there is a requirement now under Regulation 84(8) of the 2015 Regulations to keep “sufficient documentation to justify decisions taken in all stages of the procurement procedure…”  and to do so for a period of at least 3 years from the date of the award.

This case is not the first where a deliberate failure to keep documents has created problems for a contracting authority.  However tempting it might be it is always far better to have a clear audit trail of reasons for evaluation decisions at every stage, including moderation, and for that audit trail to be in writing.

Case: EnergySolutions EU Limited v Nuclear Decommissioning Authority [2016] EWHC 1988 (TCC). A link to the judgment is here.

by Helen Prandy

http://www.mills-reeve.com/helen-prandy/

 

July 29, 2016 10:05 AM | Posted by Prandy, Helen | Permalink

The famous historian Thomas Macaulay apparently noted that Frederick William I of Prussia, a man not short of a bob or two, was known to have saved 5 or 6 reichsthalers (coins) a year by feeding his family unwholesome cabbages even though the poor diet sickened his children and the resultant medical care cost him very much more than he saved.  The false economy of such an approach is obvious but its lure remains and very often becomes an issue in litigation.

It is no secret that legal proceedings can be expensive.  A big loser in the previous government’s austerity project was the Ministry of Justice whose budget has faced a huge reduction.  This has meant that alternative means of funding had to be found leading to a very significant increase in court fees.  In March 2015, the cost of issuing a claim where damages were expected to be in excess of £200,000 rose to £10,000.

In a public procurement context it is very easy to see how damages for the failure to win a substantial public contract could be in excess of £200,000.  Unlike most litigants, however, a Claimant in a public procurement case only has a maximum of 30 days (and perhaps as little as 10 where a standstill period is not extended) in which to decide whether to bring a claim and that frequently means that Claimants are immediately faced with the prospect of paying out a substantial and irrecoverable court fee without having any real idea of the strength of their case.

It is hardly surprising therefore that some Claimants choose to issue proceedings seeking only a ‘declaration’ that the process was in breach of the Regulations.  *Until recently that cost just £480.  Once issued, however, it is not uncommon for the claim to be amended to seek damages once more is known about the merits.

Like Frederick William’s cabbages such an approach is undoubtedly superficially attractive (at least from a cost if not a dietary point of view) but there are significant risks.

Firstly if you issue a claim for a declaration only and a Contracting Authority succeeds in lifting the automatic suspension then there is effectively no further remedy as the claim has not been issued for damages.  Result: the claim fails and you pay the Authority’s costs and your own.

Secondly, the courts have taken a very strict line with Claimants deliberately issuing at a low fee and then seeking to amend to claim damages once those proceedings are up and running.  That has been held to amount to an abuse of process and could lead to the court  striking out the claim.  Result: the claim fails and you pay the Authority’s costs and your own.

Thirdly, and most significantly in a procurement context, claims are only regarded as ‘brought’ within a limitation period where the Claim Form is delivered along with the “appropriate fee”.  Where the incorrect fee is paid then a claim will not be considered to have been brought in time for the purposes of limitation.  Where the limitation period is very short, as it is in procurement cases, that would mean that a court would consider that any claim for damages has not been brought in time where only the fee for a declaration is paid on issue.  Result: the claim fails and you pay the Authority’s costs.

This case law has not yet been tested in a procurement context but is likely to be followed.  At the very least it is likely to tie the claim up in expensive, satellite litigation.

A far better approach would be to pay a realistic fee for damages (the fee for claims up to £199,999 is 5% of the claim value) based on a reasonable and justified assessment of the facts at the time of issue and then present a cogent case to the court if amendment is subsequently needed.  Result: the prospect of success, an award of damages and the Authority has to pay your costs as well as its own.   Much better than cabbages!

by Helen Prandy (click here to see Helen's profile)

*From Monday 25 July 2016 the cost of seeking a declaration has increased to £528.

July 25, 2016 2:53 PM | Posted by Beresford-Jones, Jenny | Permalink

The Crown Commercial Service has just issued a new PPN around publishing information to its Contracts Finder website. It reminds contracting authorities of the obligations to place information about contract opportunities and awards on Contracts Finder, and it may suggest that there is a feeling at the CCS that too many authorities are failing to meet their obligations in this area.

As a reminder, where a contracting authority chooses to advertise a contract opportunity valued at over £10,000 (for central government authorities) or £25,000 (for other contracting authorities), then the advertisement must be placed on Contracts Finder. If a contracting authority does not choose to advertise the opportunity (perhaps it simply seeks three quotes or approaches a supplier directly) then there is no obligation to advertise on Contracts Finder.

The text of the new PPN could be potentially be read as suggesting that all opportunities over those thresholds must be advertised, but this is not actually the case; the advertisement must be made on Contracts Finder only if the contracting authority decides to advertise that opportunity. On a closer reading, the new PPN bears this out - it links (at footnote 1) to earlier CCS guidance here, where it is clearly stated at paragraph 4 that the obligation only applies where the authority has decided to advertise.

The situation is different for publication on Contracts Finder of contract award details (as opposed to opportunities). Award details must be published for all contracts (whether these were originally advertised or not) that are over the £10k/£25k thresholds mentioned above (unless one of the exemptions apply).

For completeness, a reminder too that these Contracts Finder requirements do not apply to the procurement of health care services for the purposes of the NHS, nor to procurements run by maintained schools or Academies.

June 28, 2016 12:11 PM | Posted by Beresford-Jones, Jenny | Permalink

Following the result of the EU Referendum on Friday, here in the Mills and Reeve procurement team, our thoughts have quickly turned to the likely implications for public procurement.

Given that our public procurement rules implement European Directives on public procurement, utilities and concessions contracts, there is the potential that the decision to Leave could eventually bring far-reaching changes in our field. As a starter for ten, out of many possible examples:

• the obligation since April 2016 to run an OJEU competition for clinical health services over a certain threshold is a product of an EU directive. It would, in theory, be open to a government to amend our regulations and remove this obligation, reversing the trend towards increased private sector delivery of healthcare services;

• the official procurement processes come down to us via the EU Directives. In principle, a government could legislate to remove the obligation to follow one of these in favour of a more flexible regime;

• the government could alter the respective thresholds at which the obligation to advertise a contract and run a competition bites; or

• in theory, at least, it could even abandon the regulation of public procurement altogether!

That said, we think we are likely to see Business as Usual rather than any immediate change, at least in the short to medium term. And, although the Law Society of Ireland says it has received a surge in applications from UK lawyers to work in its jurisdiction due to fears about Brexit, here at Mills and Reeve we are not yet consulting the ‘situations vacant’ pages. Here is why.

Even the most cursory look at the fast developing news stories of recent days illustrates the fact that the process of withdrawing from the EU will be complex and will not happen overnight. Indeed, some more sceptical commentators are questioning whether Brexit will ever come to pass at all. There is a two year period following triggering under "Article 50" of the exit process for the UK to reach its “divorce settlement” with the EU, around how to untangle the status quo.

Separately from that, it may take us a much longer period to agree a framework upon which our future relationship with the EU will be based. It will take time for us to negotiate new trade deals, with and outside of the EU (particularly if our potential trading partners want to see the terms of the “divorce settlement” with the EU before reaching any agreement with us on future trade deals).

Even once we have withdrawn, our Public Contracts Regulations 2015, Utilities Contracts Regulations 2016 and Concessions Contracts Regulations 2016 (and their Scots equivalents) are pieces of UK legislation that, unless and until amended or repealed, will stand perfectly well on their own account as our public procurement regime. Not forgetting, too, that the UK has had its own home-grown procurement law regime dating back to long before the European regime was adopted.

Of course, once we have left the EU, our legislature may amend or repeal our procurement regulations. That said, given that the priorities of the post-Brexit parliament (and the newly established "Brexit Unit" headed up by Oliver Letwin) are very likely to be elsewhere, unravelling the tangle web of our relationship with Europe, we think we are unlikely to see major legislative change to procurement law in the short to medium term, especially as we have already been through a major legislative change in 2015 and 2016.

Also, our current membership of the Agreement on Government Procurement (“GPA”) is by virtue of the our being part of the EU but, even once we Leave (and our membership of the GPA ends), we anticipate that in forging any trade details the UK would likely look to becoming a member of the GPA in its own right. The significance of this for procurement is that the GPA imposes similar obligations to the EU Directives; another reason not to throw away your copy of the procurement rules just yet. Of course if the country does a "Norway-style" deal, we will need to continue to abide by the EU procurement law regime.

Our final reason for our view there is no need for procurement teams to expect major change is that the UK government has historically had a healthy appetite for legislating in our field, sometimes going beyond, or “gold plating”, the requirements of the EU Directives. See, for example, Part 4 of the Public Contracts Regulations 2015 and its obligations around use of Contracts Finder and the regulation of the PQQ stage. These measures stem from the so-called “Lord Young” reforms and are designed, in particular, to increase opportunities for small and medium sized entities, a major policy objective of this government and one that seems unlikely to change. Another example of this is the fact that, while one of the core EC Treaty principles is “transparency”, the government has domestically been pursuing a parallel transparency agenda for a considerable time now. Even as an ex-Member State, it is almost certain that principles of transparency/equal treatment/value for money are still likely to remain high up in the UK’s priorities in any new framework for public sector contracting.

Having said all that, there is no doubt that we are in a period of dramatic change in the country’s political and economic direction and it is clear there is considerable uncertainty around its effects in the medium and longer term, both in our field and more widely.

The detailed implications of Brexit will vary depending on whether you are a contracting authority or supplier, and, for suppliers, depending on the size of the business whether your usual market is within the UK or within the EU, but as yet it is too early to say what these are in any detail. We can expect an onslaught of policy development and/or consultation from the government in due course, and we’ll be scrutinizing this and blogging on any developments relevant to our field.

June 20, 2016 11:02 AM | Posted by Ruth Smith and Jenny Beresford-Jones | Permalink

“What is adequacy? Adequacy is no standard at all!” So said Winston Churchill in 1938 in the House of Commons, as part of his criticism of the politics of appeasement and the then government’s statement that it had an “adequate” rearmament programme.

So in the context of adequacy, how does a Court assess adequacy of damages in a procurement case, when hearing an application to lift an automatic suspension involving two not-for-profit NHS organisations? That was the difficult decision before the Court in the recent case of Kent Community Health NHS Foundation Trust v NHS Swale CCG and NHS Dartford, Gravesham and Swanley CCG [2016] EWHC 1393 (TCC)

The facts of the case

Kent Community Health NHS Foundation Trust (the “Trust”) was the incumbent provider of adult community services in north Kent, under a contract which expired on 1 April 2016. In planning for this expiry date, the commissioning CCGs (NHS Swale and NHS Dartford, Gravesham and Swanley) decided that they would put the service out to competitive tender. As health services, the services were “Part B” services falling under the Public Contracts Regulations 2006. The Trust submitted a tender but following the tender evaluation, the CCGs announced their intention to award the contract to one of the other bidders, Virgin Care. The Trust then issued proceedings in the High Court and so triggered the automatic suspension of the contract award.

When hearing the CCGs application to lift the suspension, the Court applied the usual American Cyanamid test.

The test asks three questions:

• can the claimant bidder show that there is serious issue to be tried? Unless the bidder has no real prospect of succeeding at trial, this part of the test will usually be satisfied;

• assuming there is a serious issues to be tried, would financial damages be an “adequate remedy” for the successful party? If, in the case of a challenging bidder, the answer is “yes” then the Court will usually agree to lift the suspension and allow the contract to be entered into; and

• if damages are not adequate as a remedy, then does the “balance of convenience” favour one side or the other? In public procurement cases, this is usually shorthand for saying “does the public interest lie in allowing the contract to be awarded prior to a full trial on merits, or not?”

In this case, both parties to the application were public sector, NHS bodies with similar public sector duties to the people of Kent in respect of the provision (or commissioning the provision) of adult community healthcare services. However, they each held diametrically opposed views on how that duty should best be fulfilled and the services provided.

The application of the American Cyanamid test

The parties accepted there was potentially a serious issue to be tried and so that was quickly dealt with by the Court.

It then went on to consider, in detail, whether damages would be an adequate remedy for each party.

The Trust argued that, as it was a not-for-profit entity which exists to service the public good, damages would not be an adequate remedy and instead it needed the suspension to be maintained pending full trial of the issues. Procurement for NHS services, said the Trust, could not be treated as an ordinary commercial exercise. If Virgin Care were awarded the contract, this would undermine the Trust’s public service mission to provide integrated health care to people in Kent, in a way that could not be compensated in financial terms. In any event, said the Trust, it stood to lose 10% of revenue and would suffer from reduced economies of scale, which would impact on patient care as it would have to make savings elsewhere.

Unsurprisingly, the CCGs argued that the suspension should be lifted and the award of the contract allowed to proceed. They argued damages would be an adequate remedy for the Trust were it to win at full trial. The financial loss to the Trust could easily be calculated and the financial and reputational impact of losing the contract would not be so catastrophic as to cause the Trust’s total disintegration as an entity/service provider (in the few cases where the courts have held that damages were inadequate as a remedy, it has usually been for reasons along these lines).

In contrast, the CCGs argued damages would not be adequate remedy for them. The Court acknowledged that if the suspension remained in place, the CCGs losses were more difficult to quantify. The CCGs had some on-going concerns about the quality of the Trust’s services but, in assessing damages, this had to be balanced against possible similar or different difficulties in the bedding in of a new service in the early days the proposed contract with Virgin Care. The CCGs were concerned that any delay in finalising the new contracting arrangements, even with an expedited trial, would still present a real risk of their not having adequate arrangements in place by winter of 2016/2017 (when demand for the services would be at its heaviest).

Judgment

The court accepted that in some cases damages might not be an adequate remedy on grounds other than it not being possible to calculate the financial loss incurred. For example, where the relief sought is the protection of protection of privacy, financial compensation might well be inadequate. The question of the adequacy of damages should be answered by reference to the interests of the person seeking the injunction. In principle there was no reason why damages should be regarded as inadequate simply because the Trust, as a not for profit organisation, would not suffer a substantial financial loss. The Court accepted that, in some cases, the immediate financial loss may be modest, but the knock on effects (which would not be compensated) could be catastrophic. This then might create a real interest that could not be compensated in damages to meet the substantial justice of the case.

That said, the court was not persuaded by the Trust’s arguments on adequacy of damages, and said:

• The Trust having a public service mission to provide health care services in Kent did not give it a monopoly on doing so. The chosen procurement regime set out to treat the Trust and other bidders equally, and on a level playing field of providers. There could be no justification for approaching the question of adequacy of damages differently had Virgin Care been the loser and the claimant in this case. In short, the Trust’s status as an NHS Body did not secure it any special treatment in the decision about adequacy of damages, and in financial terms its losses could be easily calculated.

• The award of the contract to Virgin Care would not cause a significant reputational loss to the Trust or have a catastrophic effect on the its ability to continue providing services.

• The Trust’s core argument was that the award of the contract to Virgin Care would undermine its public mission to deliver integrated care across Kent and the new arrangements with Virgin Care would not serve the interests of patients as well as would be the case if the contract remained with the Trust. It was a category error, said the Trust, to expect financial damages to compensate for this. Indeed, the Trust’s purpose in engaging in the procurement was not to generate money but rather to best serve the interests of patients; and its interest in pursuing the litigation was in the protection of the public good. Therefore, it would not be doing substantial justice to the Trust if the Court held that all it could recover was money.

In response to this, the Court said its role was to resolve the dispute before it, it could not and would not express a view about the comparative merits of the services depending on whether these were provided by the Trust, as part of integrated provision of a wider service, or by Virgin care as a separate provider. All it would rule on was on whether the procurement process was flawed and, if so, the consequences.

On that basis, the Court ruled that damages would be an adequate remedy for the Trust, should it win on the substantive points at full trial. In contrast, the Court said that there was a significant risk that, if the suspension remained in place, an award of damages would not be an adequate remedy for the CCGs.

Given that damages would be adequate, on a strict application of American Cyanamid, the judge noted, it was not usually necessary to look further at the balance of convenience but in this case he did.

He noted that the public interest brought a couple of issues into play: (1) the procurement exercise should be conducted fairly and (2) the CCGs should be able to put arrangements they consider in the public interest into effect promptly. The Court found that overall the balance of convenience did not weigh heavily in favour of either party.

The Court concluded the prudent course, in the interests of justice in the run up to full trial, would be to maintain the “status quo”. But what was the “status quo?. The CCGs argued, since the contract with the Trust had already expired on 1 April 2016, the status quo was that it should be free to contract with Virgin Care. The Trust argued that maintaining the status quo required its contract to be extended in the interim period. The Court favoured the CCGs reasoning, concluding the suspension should be lifted and the CCGs allowed enter into the contract with Virgin Care. In short, faced with the question of whether it was just in all the circumstances that the Trust should be limited to a remedy in damages the Court’s answer to this was “it is”.

You can read the full judgment here.

Comment

The case provides useful insight on how the Court will consider adequacy of damages in an automatic suspension case where both parties are not for profit organisations.

Interestingly, no reference is made in the judgment to the NHS (Procurement, Patient Choice and Competition) (No 2) Regulations 2013 and the CCGs duty, under those Regulations, to procure the provider (or providers) who are most capable. Indeed, the Court was quite clear in this case that its role was not to assess the respective merits of each bidder’s services but simply whether or not the procurement process was flawed.

Highlights

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