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May 19, 2017 11:41 AM | Posted by Beresford-Jones, Jenny | Permalink

Think of public procurement litigation … what images come to mind for you?

Perhaps you see scenes straight out of Bleak House – gothic court rooms, scribes scurrying in the gathering gloom, dusty papers and piles of impenetrable legal tomes?

Not a bit of it. The Technology and Construction Court, which hears almost all public procurement claims, is actually housed within the Rolls Building, a temple of glass and steel in the heart of the City. And, since 25 April 2017, there should be no piles of court papers either, as courts have moved across to a compulsory, paperless system of “electronic working”. This uses an electronic filing system which allows claimants to issue claims and file documents electronically as well as pay court fees and obtain publically available documents.

At the time the commitment was made to transform to a wholly electronic system, some commentators expressed concern about what could happen should systems fail or be attacked. Of course the events of this week, which saw NHS IT systems incapacitated by the ransomware “WannaCry”, show that those fears were not without foundation.

However, the overall effect of the change should be to improve procedural efficiency for those bringing or defending public procurement claims.

if you would like a preliminary discussion about potential procurement litigation, do contact  who leads our procurement disputes practice.

Posted by Jenny Beresford-Jones

May 8, 2017 11:14 AM | Posted by Smith, Ruth | Permalink

An unsuccessful bidder wishing to challenge a procurement decision might be forgiven for assuming that if it can prove there has been a breach of the procurement rules, and that it has suffered loss or damage as a result, then there should be a right to damages. But, in a landmark judgment, the Supreme Court has just decided otherwise, stating that damages will only be available if the breach is “sufficiently serious”.

The Court’s decision was made in the long running litigation between the Nuclear Decommissioning Authority (“NDA”) and Energy Solutions EU Ltd (now called ATK Energy) (“ATK”). Although the parties had already agreed a compromised settlement (see our earlier blog), they asked that the Supreme Court still hear the appeal, as there were important points of principle at stake.

The issues decided by the Supreme Court

For an award of damages the breach must be “sufficiently serious”. Agreeing with the earlier decision of the Court of Appeal, the Court confirmed that the three so-called “Francovich” conditions applicable to violations of EU law were applicable to breaches of the EU Remedies Directive (which provides remedies for breaches of the EU Public Procurement Directive). One of those conditions (and the one that mattered in this case) was that to qualify for an award of damages the breach of the Directive must be “sufficiently serious”.

In addition, and overturning the Court of Appeal’s earlier decision, the Court determined that damages for breaches of the UK procurement regulations (the Public Contracts Regulations 2006 (as amended by the 2009 Amendment Regulations to give effect to the Remedies Directive) (the “UK Regulations”) were still subject to the “Francovich” conditions and so were only available when the breach was indeed “sufficiently serious”.

The Supreme Court said the Court of Appeal’s mistake was in assuming that a claim for damages under the UK Regulations could be viewed purely a private law claim for a breach of a domestically based statutory duty which automatically freed it from any conditions which would otherwise apply under EU law. This would mean the claim was only subject to ordinary English law rules and so there was no requirement to show that the breach was “sufficiently serious”.

Whilst it was open to a national legislator to go further than was required under EU law (and so not restrict damages for breaches of the UK Regulations to those cases which met the Francovich conditions), the Supreme Court found that the UK legislators had not done this. That was evident from the clear intention of the legislators not to ‘gold plate’ the UK Regulations and was also consistent with the wording of the UK Regulations (specifically Regulation 47I and 47J) and the use of the word “may ” [award] in the context of the Court’s power to award damages.

The extent of a challenging bidder’s duty to mitigate. In one shred of good news for a challenging bidder the Supreme Court, this time agreeing with the Court of Appeal, found that a bidder should not be prevented from claiming damages where it has commenced it claim in time but not taken steps to invoke an automatic suspension to prevent the contracting authority from entering into the contract. The NDA had argued (unsuccessfully) that, by not invoking an automatic suspension to prevent the contract from being entered into, ATK had failed to mitigate its loss and so should not be entitled to claim damages.

So what are the implications of the judgment for contracting authorities and bidders?

• Although the decision was based on the previous Public Procurement Directive (2004/18/EC) and the previous UK Regulations, it is equally applicable to claims under the current Procurement Directive and the corresponding Public Contracts Regulations 2015 as the provisions relating to remedies are little changed.

• It will be good news for contracting authorities that not all breaches of procurement law will give a right to claim damages, and that a challenging bidder must first show that a breach was “sufficiently serious”. Bidders must in future be mindful that they will be gambling on a Court finding that the breach was sufficiently serious should they decide not to take action to trigger an automatic suspension, but instead to simply claim damages. In future, bidders may be less willing to act as ATK did and take that risk.

• There will inevitably be a good deal of uncertainty, and potential subjectivity, when it comes to determining if a breach is sufficiently serious to merit damages? Based on EU jurisprudence the decisive test is whether the authority “manifestly and gravely disregarded the limits on its discretion”. The factors which a Court may take in to account include: the clarity and precision of the rule breached, the measure of discretion left by the rule to the authority; whether the breach and damage caused was intentional or involuntary; and whether the error of law was excusable or inexcusable. How this will be interpreted by the UK Courts and in a procurement context is uncertain and looks destined to be the subject of future procurement litigation.

• In the short to medium term (for at least the next couple of years), we now have the definitive position in the UK that breaches of procurement law must be “sufficiently serious” to merit damages. But, looking a little further ahead, how will the judgement be dealt with in the Great Repeal Bill and what will be the ultimate position post Brexit; particularly when the requirement for a breach to be “sufficiently serious” stems from principles of EU law and the jurisprudence of the European Court of Justice? Will the position ultimately be governed by ordinary English law rules for breaches of statutory duty where there is no sufficiently serious requirement? It would certainly seem odd for the UK to single out procurement law for different treatment but at this stage it is too early to say.

You can read the full judgment here:
Nuclear Decommissioning Authority (Appellant) v Energy Solutions EU Ltd (now called ATK Energy EU Ltd) (Respondent) [2017] UKSC 34

Posted by Ruth Smith - read more about Ruth here.

April 7, 2017 11:10 AM | Posted by Prandy, Helen | Permalink

Even as a procurement specialist I am forced to admit that public procurement is not the most exciting or glamorous subject. There are not many scripts kicking around in Hollywood which feature a procurement lawyer as the main protagonist but just as no one notices the referee until he makes a bad decision when public procurement goes wrong it can go really wrong and the consequences for nearly all involved can be disastrous.

In August 2016 we blogged about the case of Energy Solutions Ltd v The Nuclear Decommissioning Authority in which a judge had characterised an evaluation by the NDA as “fudged” and verging on the “incredible”. With further aspects of the case before the courts and a pending appeal to the Supreme Court the NDA recently acknowledged that the procurement process had been fundamentally flawed.

In doing so, it was forced to terminate a £6.1 billion contract 9 years early and pay a total of £97.5m in compensation, effectively out of the pockets of us, the taxpayers. On top of that the government has ordered an enquiry into the conduct of the procurement, jobs are likely to be lost and the lead contractor for the “winning bidder” had 3% knocked off its share price on the news.

Clearly not all public procurement is so high profile and mistakes will not have such wide-ranging consequences but the reasons for the failure of this procurement are an object lesson to all contracting authorities to ensure that evaluation is carried out fairly and transparently and that clear records are kept of all evaluation decisions and an appropriate audit trail established.

By Helen Prandy - read more about Helen here

March 24, 2017 2:54 PM | Posted by Beresford-Jones, Jenny | Permalink

Where an over threshold public contract is concerned, The Public Contracts Regulations 2015 (and their 2006 predecessors) set out a prescribed statutory framework for bidders and other “economic operators” in the market to challenge a breach of the procurement rules. This involves the sending of Award Decision Notices by the authority, the holding of a standstill period prior to entering into the contract, and the ability of the claimant to apply to suspend the contract award process by making a claim in the High Court during the standstill period (or indeed to claim after the expiry of the standstill period, usually seeking an award of damages or a declaration of ineffectiveness).

What happens, though, where a claimant finds itself sitting outside of this statutory framework and wishes to challenge a procurement decision in court? Perhaps the claimant is not itself a tenderer in the procurement or does not fall within the definition of “economic operator” and there it has no right to use the statutory framework to bring a claim?

In this situation a claimant may fall back on a judicial review, or “JR”, claim. As the name suggests, this a claim to have the decision of a public body reviewed by the Courts. It is often used in the procurement context where the claimant is not a tenderer nor a supplier more generally and therefore is unable to use the statutory route to a public procurement claim. An example could be the end-users of a particular health service claiming that the reorganisation of health services in a particular area has not been done lawfully by the authority concerned. However, bringing a JR claim is not always possible, due to the requirement for the claimant to demonstrate to the satisfaction of the Court that it has “sufficient standing” to claim.

In the recent case of Wylde and others v Waverley Borough Council [2017] EWHC 466 (Admin) the court was asked to consider whether the Council's decision to enter into a development agreement to develop a town centre was judicially reviewable or not. The judgment provides an interesting reminder of the issues a court will look at to establish whether the claimant has “sufficient standing” and as such will be of particular interest if bringing (or defending) a procurement challenge outside of the usual mechanism provided in the procurement regulations.

The Council had run a competitive process to appoint a development partner and entered into a contract in 2003 for the work. This was a conditional contract, with the “viability condition” being (put simply) that the scheme to be implemented had to be guaranteed a minimum level of profit. It proved difficult for the parties to meet this viability condition and, in May 2016, the parties agreed to vary the condition and make it less onerous, so that the contract could become unconditional. In November 2016, following the start of this claim for judicial review, the Council published a voluntary ex ante transparency notice (VEAT notice) to give notice of the variation; no responses to the notice were received from any supplier in the market.

This claim was actually brought by five claimants, none of whom was a developer who had, for example, lost out in the procurement process. Rather, the claimants were all local tax payers and some were members of local civic societies aimed at preserving the town, who objected to the development scheme. The claimants claimed that the variation to the development agreement in May 2016 was in fact an illegal variation which amounted to a wholly new contract, requiring a wholly new competition to be run.

The immediate issue for the court, therefore, was whether this group was able to demonstrate “sufficient interest” in the development to warrant it having the necessary standing to bring a claim.

The claimants argued, following the Gottlieb case, that as tax payers to the Council, this indeed gave them “sufficient interest” in the scheme in order for them to claim. The Council and the Developer counter-argued, following the Chandler case, that, even had a new competition been run as the claimants argued it should have been, this would not have affected the claimants since they were not tenderers and because the development, which the claimants opposed, would still have gone ahead (just maybe with a different Developer).

The Court agreed with the Council and the Developer and found that the claimants had insufficient interest in the development agreement to have the necessary standing to bring the JR claim. First of all they could not show that a new process would have produced a different outcome (and indeed the lack of interest in the VEAT notice tended to show that the outcome of a new process would have been unchanged). But further, even if a new process were run and the outcome different, since the Claimants were not themselves tenderers nor connected to one, their interests were not affected.

The case shows some of the hurdles non-tenderer claimants attempting to use the JR route have to get over to succeed. Had the claimants here been, for example, the end users of a health service that was being tendered, it is possible that they may have found it easier to demonstrate that their interests would have been affected by the running of a new procurement and the appointment of a different service provider, and thereby they might have been able to establish standing to bring the claim.

Posted by Jenny Beresford-Jones

March 8, 2017 11:19 AM | Posted by Beresford-Jones, Jenny | Permalink

Transparency is one of a triumvirate of principles underpinning procurement law (the others being non-discrimination and equality of treatment). It is also a cornerstone of UK government procurement policy, with transparency clauses having been included in government model contracts since at least 2011.

The concept of “Transparency” can crop up in many different contexts, from the transparency of contract opportunities available, or the transparency of a procurement process and the ability of the objective bidder to understand what is required of it, through to the transparency of information about the identity of successful bidders in the market.

However, in its latest PPN update to the Transparency Principles first published in the summer of 2015, the focus of the Crown Commercial Service (CCS) is on how a contracting authority can decide whether requested information is disclosable, or not.

In the previous iteration of the principles, the CCS advised applying the disclosure exemptions in the Freedom of Information Act 2000 (FOIA) to determine whether information was or was not disclosable. In the updated principles, however, there seems to be an even stronger emphasis on disclosure, suggesting that there may be a feeling amongst policy makers that contracting authorities may be tending to rely more heavily than they need to on the FOIA exemptions.

While the PPN acknowledges that sometimes the FOIA exemptions will indeed apply, the note now states that there is a presumption of disclosure for the vast majority of commercial information about government contracts, with the FOIA “commercial confidentiality” exemption being relied on only rarely.

The scope of guidance has also been widened and now includes suppliers, whether private, public or third sector. The onus is on suppliers to work together with government to deliver transparency. With private sector suppliers now being brought within the definition of potential in scope organisations, there is a warning to them that companies delivering public services must be mindful of their existing contractual obligations around disclosure. That is, when complying with these principles, the onus is on the provider to ensure nothing disclosed breaches some other contractual obligation (e.g. perhaps with a sub-contractor or other supplier, or indeed with a contracting authority, where, for example, a supplier has acquired sensitive information as part of its provision of the service).

The PNN advises contracting authorities to discuss transparency and disclosure with bidders at an early stage of a procurement process and include wording about these requirements in the procurement documents.

Helpfully, the PPN gives a flavour of the sorts of information that remains likely to attract the FOIA “commercial confidentiality” exemption. For example:

  • the method by which a supplier has arrived at the price charged (note this is distinct to the contract value, which would normally be disclosable);
  • IP rights – proprietary details of the product or service may be confidential (although information around performance would normally be disclosable);
  • Business plans – the guidance notes that the detail of how a supplier expects to generate a return from the contract is likely to be confidential.

The PPN also sets out the following useful guidelines in terms of publishing information:

  • where information is redacted, explain why;
  • update the information published during the lifecycle of the contract, particularly if there have been significant changes (for example, detailing plans for performance improvement);
  • there is also a reminder of the Contracts Finder obligations at Part 4 of the Public Contracts Regulations 2015.

Posted by Jenny Beresford-Jones

December 23, 2016 2:50 PM | Posted by Beresford-Jones, Jenny | Permalink

At this time of year here in the Mills and Reeve procurement team we reflect on the year gone by and on all the queries we have answered via our procurement portal helpline. In no particular order of importance the top five issues this year seem to have been:

(1) Do I really have to advertise on Contracts Finder? How does that fit with our standing orders?
(2) Can I extend or change the contract without having to run a new process?
(3) Do I really need to have all the documents ready to publish when the advert is published?
(4) I think my bid was evaluated incorrectly. Can I challenge?
(5) And finally, will Brexit affect public procurement?

If you too are wondering about any of these questions, please get in touch!

Roundabout now we also usually succumb to a little festivity and this year is no exception……

 <<fades to black and white scene by the fire, as the music begins …>>

I’m dreaming of a perfect procurement
That's advertised transparently
With a reminder
On Contracts Finder
Of every 'opportunity'...

I'm dreaming of a perfect procurement
That treats all bidders equally
With criteria apparent
In docs transparent
And published electronically...

I'm dreaming of a perfect procurement
With ev’ry OJEU form I see
May you always get value for money
And may all your procurements be challenge-free!

Merry Christmas and a Happy New Year from the Mills & Reeve procurement team!

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