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Challenges


November 18, 2018 8:36 PM | Posted by Beresford-Jones, Jenny | Permalink

The Court of Appeal has just handed down its judgment in the case of Faraday Development Ltd v West Berkshire Council. This judgment is one of the most important developments in procurement law this year. As it concerned a development agreement, it is especially interesting to those working in the Projects and Construction sectors. However, it also involved a Declaration of Ineffectiveness and the drafting of a VEAT notice, meaning that its relevance extends to all sectors.

The case concerned a development agreement to develop land in Newbury, Berkshire. The contracting authority, West Berkshire Council, entered into a contract with developer St Modwen. The land was parcelled into leases, with the agreement giving St Modwen the option to activate or “draw down” a lease at a future point. Crucially, there was no obligation on St Modwen to take a lease or to start the development works. However, should St Modwen decide to take a lease, an obligation to develop would crystallise at that point and become binding. The arrangement was structured in this way to allow St Modwen the flexibility to decide whether to develop the land in the context of the well-known financial and commercial challenges within the sector.

The Council believed, given that (at the point the agreement was signed) there was no obligation on St Modwen to develop the land or even to take the lease, this contract could not amount to a public works contract as defined in the procurement regulations. Believing itself to be justified in this assessment it published a voluntary ex ante transparency (better known as VEAT) notice in August 2015, explaining that it was entering into the contract, that no OJEU process was required as this was a wholly exempt land transaction with no obligation to develop. The contract was entered into in September 2015, and the claimant Faraday brought a claim, arguing that this was an illegal direct award that ought to have been the subject of a full procurement process under the regulations.

The High Court heard the case at first instance, and, applying the decisions in Helmut Mueller and Midlands Cooperative, decided in the Council’s favour. As there was no obligation on St Modwen to develop, said the High Court, this could not be a contract for public works and therefore there could be no obligation to run a formal procurement process. However, the High Court did give permission for Faraday to appeal, noting that this area of procurement law was one where there was an interest in testing the principles established so far in case law around when a development agreement will (and will not) be caught by the procurement rules.

The Court of Appeal last week overturned that High Court judgment and found in favour of Faraday. It decided that, while it was true that, at the point the development agreement was entered into, there was no obligation on St Modwen to start work, nonetheless, should St Modwen take the option of a lease, the obligation to develop would be triggered. This option was entirely out of the Council’s control, meaning that at some point “down the line” there could potentially be a situation where a developer was developing land for the Council. In other words, the development agreement as signed could lead to a scenario where a public works contract came into being which had not been formally procured in accordance with the regulations.

The Council argued that even if this were the case, it had published a VEAT notice in good faith. This meant, said the Council, that the necessary transparency concerning the arrangement had been achieved as the market had been put on notice of it. The Court however (having looked at the transparency standards set out in the Fastweb case) decided that the VEAT notice was drafted in a way which did not give sufficient detail about the arrangement as a whole in order that other developers could, on reading it, understand the full scope of the transaction. The VEAT notice described the deal as an exempt land transaction without obligations and did not go into detail about the obligation to develop should the lease be drawn down. In reality, the deal was more complex than merely a simple land transaction; the Court held that the VEAT notice fell short of the necessary “clear and unequivocal disclosure”.

Having concluded that the development agreement was, when looked at in the round, a public works contract and that it had been awarded illegally without the necessary procurement process, the court was obliged to grant a Declaration of Ineffectiveness, overturning the contract from the date of the declaration. It was also required to impose a fine on the Council and the penalty was fixed at a nominal amount of £1. This has caused raised eyebrows amongst procurement lawyers, given the requirement in the regulations that these fines be proportionate and “dissuasive”!

However, as leading counsel for the Council explained at the White Paper Procurement Conference in London on Friday, this decision is not in any way a carte blanche to assume that all such civil penalties will be nominal. The circumstances in this case were unusual. The contracting authority had a genuine good faith belief that the procurement regime did not apply to this contract and there was no evidence that the transaction had been structured in this way to deliberately avoid running a procurement. The design of the option structure reflected not a hope to circumvent the rules but rather the commercial reality that developers face in the current climate.

Lessons to take away

Specifically in relation to development agreements, it is no longer safe to assume that where there is no obligation on the developer to develop, the procurement rules will not apply. Post-Faraday (assuming this judgment survives as good law; it is not yet clear whether the Council can or will pursue an appeal to the Supreme Court) it will be necessary to look at the deal in the round, particularly where obligations to develop may crystallise at a later stage in a contingent way.

There are salutary lessons too for those drafting VEAT notices – if you need to do so, you must have regard to the standards laid down in the Fastweb case and ensure that the notice truly reflects the nature of the contract being proposed.

The judgment means that we now have not one but two Declarations of Ineffectiveness in the UK. While on first reading it looks like the civil penalty imposed was anything but “dissuasive” authorities must remember that this case turned on very particular facts and should continue to assume that ineffectiveness fines could well be hefty.

Posted by Jenny Beresford-Jones

November 5, 2018 10:37 AM | Posted by Beresford-Jones, Jenny | Permalink

The lodestar of EU public procurement law is the application of the EC Treaty principles of transparency, non-discrimination, and equal treatment. Much of our work as procurement lawyers involves helping clients to apply these concepts in a practical way to real life situations, where the colour tones tend to be grey rather than black and white!

One of the questions we are regularly asked is about the operation of the equal treatment principle in a situation where an incumbent provider is taking part in the re-procurement of a contract. How far must you go to “level the playing field?” Surely the incumbent has an in-built potential advantage; how do we neutralise that?

A recent European case is helpful and suggests that we don’t need to tie ourselves in too many knots about this.

The claimant was a IT company called Proof. It took part in a competition to provide website and intranet services to the contracting authority, the European Institute for Gender Equality (“EIGE”). This was a re-procurement of a service that was originally set up in 2014. The incumbent provider also took part in the new competition, and emerged as the successful bidder.

Proof brought a claim alleging that the award criteria were vague and that EIGE had deployed excessive discretion in giving a higher score to the incumbent, because of the knowledge the latter had obtained through operating the contract since 2014. Proof cited in particular the following extract from the evaluation report of the winning bid which it said showed favouritism to the incumbent on the basis that it had had the opportunity to understand the contract in greater depth:

‘the tenderer presents a deep understanding of the objectives of the framework contract that is at the same time holistic and highly specific.’

The Court was not persuaded by this argument. It held that, even if the incumbent did enjoy an advantage, this advantage was not as a result of any conduct on the part of EIGE (such as unfair marking or other bias). The Court went on to say that it is “inevitable” that an incumbent will enjoy an “inherent de facto advantage” in any situation where a contract is to be re-procured and the incumbent decides to bid. The authority could only nullify that advantage by excluding the incumbent; this drastic action could not be expected as it would amount to discrimination against the incumbent and would itself be a breach of the EC Treaty principles.

The case illustrates that the equal treatment principle is not a mandate for dealing with all bidders in an identical manner. It shows too that, sometimes, to take this approach might in itself be a breach. Instead, you need to treat bidders who are in the same situation in the same way, and bidders who are in different situations, differently. The reality is that an incumbent and a new potential supplier are in two slightly different positions in relation to the procurement and in terms of their relationship with the contracting authority. While authorities must always guard against any overt actions or decisions that favour the incumbent, it is unlikely that the equal treatment principle will be breached merely for crediting the incumbent with "knowing what it knows" as a result of its prior contractual relationship with the authority.

Case T 10/17 Proof IT SIA v EIGE (16 October 2018)

Posted by Jenny Beresford-Jones

October 1, 2018 8:38 AM | Posted by Prandy, Helen | Permalink

July 2018 will live long in the memory: long hot summer days, a World Cup semi-final and a Welshman winning the Tour de France. With all the excitement it is perhaps not surprising that the latest determination by a judge of what Regulation 69 requires a Contracting Authority to do (or not do) passed by without comment from this blog. However, with the arrival of Autumn it is time to look back at some of the summer’s most interesting procurement decisions.

One of those decisions was Fraser J’s latest analysis of Regulation 69 and whether Contracting Authorities have a positive obligation to investigate if a bid is abnormally low.

In a trial that included evidence that the Claimant might deliberately have over-bid in order to “hurt” the Defendant and in order to effectively create a scenario in which it could bring a challenge based on ‘abnormally low bids’ the judge was critical not just of the behaviour of the Claimant but, more pertinently, of the way it had attempted to demonstrate that the winning bid was ‘abnormally low’.

The judge described the approach to establishing “abnormally low” as “entirely ignoring commercial factors”. The Claimant chose to challenge the bid based on a comparison of rates for some items along with a consideration of its own profit margins. However, the judge was very clear that a simple comparison of numbers is not enough. In every case commercial judgement has to be allowed for including the experience and business skill of the tenderer.

The judge reiterated that the law on abnormally low bids remains that set out in NATS (Services) Ltd v Gatwick Airport Ltd despite the fact that this decision related to the 2006 Regulations and earlier Directive. In particular he emphasised the finding of the court in that case that the purpose of the Regulations is to encourage competition and that:

“A key aspect of this is price and tenderers who are keen to secure a project will want to pitch their prices at a level which will be the lowest. They might be keen to break into a market or establish their market share. There is nothing wrong with that for them or for the utilities or contracting authorities, who are (almost) always keen to place contracts at the lowest price and, preferably, at lower than they have budgeted. One needs to consider how, commercially, a tenderer, which is not the incumbent provider or not the market leader, will ever get a contract unless it puts in attractively low prices”.

Mr Justice Fraser approved the NATS judgment and concluded that the court should be “very slow to interpret the Regulations…as imposing some wide ranging obligation….to determine whether there is or might be an abnormally low tender”. As for whether failing to consider if a bid was abnormally low might amount to some kind of “manifest error” on the part of the Authority this risked “placing an impossible burden on contracting authorities, and stifling true commercial competition.”

The judge concluded that there was no obligation under Regulation 69 to investigate any allegedly abnormally low tender. Regulation 69 simply requires that if a bid is to be rejected as abnormally low then it must be investigated before that is done. There is no corresponding duty to investigate it if the bid is accepted albeit that many contracting authorities, including here, may carry out some form of independent verification of bids as part of their own due diligence process.

For anyone interested in the behaviour of bidders, and perhaps particularly incumbents, the case generally makes interesting reading not just because the judge found that the Claimant “took a conscious decision not to bid on a commercial basis….to try to engineer a situation where the other bids were far lower than its own, in order to justify an attack on the outcome…”. There was also some interesting evidence on the behaviour of (some) incumbents when providing TUPE information and the disclosure of some damning evidence on the decision making process which the judge refused to keep confidential. This included the presentation slide about seeking “to hurt” the Defendant.

It is possible that this case sounds the death knell of challenges on abnormally low bids. They are difficult anyway but the emphasis on commercial factors, nous and experience are all intangible factors which might be impossible to gainsay. That is not to say that we will see an end to Authorities rejecting abnormally low bids but it must be right that the factors the judge relied on here to dismiss the claim must also have to be factored into an Authority’s thinking when considering a bid under Regulation 69 and whether or not it can properly be rejected as ‘abnormally low’.

SRCL Limited v The National Health Service Commissioning Board (also known as NHS England)

Posted by Helen Prandy

August 29, 2018 2:16 PM | Posted by Helen Prandy | Permalink

This firm recently successfully defended the Secretary of State for Health and Social Care against a claim by DHL Supply Chain Limited for summary judgment in connection with the procurement of a new logistics contract. The procurement is part of an overhaul by the Department of Health and Social Care of the NHS Supply Chain and disaggregating it from a single supplier, DHL, in order to drive efficiencies, leverage NHS purchasing power and generate savings which can be applied to front line services.

In an application before the Technology & Construction Court in early August DHL sought summary judgment on “a simple point of construction” relating to one of the requirements in the Selection Questionnaire. At the same time, the Court also heard our application to lift the automatic suspension imposed by Regulation 95 of the Public Contracts Regulations 2015 and allow the Department to enter into a contract with the winning bidder.

The case was unusual as it looked at summary judgment in the context of a procurement claim where no limitation argument was considered.

In order to defeat a claim for summary judgment a Defendant is required to show that it has a defence with “a realistic prospect of success”. The Court accepted that the construction of the Selection Questionnaire put forward by the Department was supported by other tender documents and in any event the wording should be construed against a factual basis on which the Court needed to hear evidence.

The application to lift the automatic suspension came down to a consideration of where the balance of convenience lay which is always fact specific. In this case, the judge held that the balance of convenience lay in favour of the Department allowing the automatic suspension to be lifted.

DHL were subsequently denied permission to appeal these decisions by the Court of Appeal although a claim for damages continues.

DHL Supply Chain Limited v Secretary of State for Health and Social Care [2018] EWHC 2213 (TCC)

Posted by Helen Prandy

June 14, 2018 11:45 AM | Posted by Prandy, Helen | Permalink

Readers of this blog may recall that last year the Supreme Court dealt something of a blow to bidders by limiting the circumstances in which damages for a procurement breach might be awarded (click here to read our blog post on this).

Now, almost exactly a year later, the High Court has further clarified the position on the court’s powers to order that a contract should be awarded to a bidder where a finding has been made that the Contracting Authority breached the Regulations.

This is an order commonly sought by bidders whose key interest is usually to secure a valuable commercial contract particularly where a court has already concluded that but for the Authority’s breach of the Public Contracts Regulations it would have been the winning bid. With some justification most bidders might consider that in those circumstances it is ‘only fair’ that the contract should be awarded to them.

The Public Contracts Regulations prescribe 3 potential remedies for bidders but these do not include a power to order an Authority to enter into a contract with a bidder who has been successful in proceedings. However, the Regulations do not fetter “other powers of the Court” and so in principle it is possible to ask the court to order that the Authority must enter into a contract with a bidder following the outcome of legal proceedings.

However, the High Court has reiterated that such a remedy will be granted only in “exceptional circumstances”.

As is often the case with such pronouncements there is no clarity around what might amount to an “exceptional circumstance” but the way English law stands at the moment it is in fact difficult to identify any circumstance where such an order might be made.

Why so pessimistic?

Well, English courts have had a long-standing aversion to forcing the provision of services. For example, an employee cannot be ordered to work and an employer cannot be ordered to employ someone. Even more importantly though, in most procurements, ordering an Authority to appoint a particular bidder actually places that bidder in a better position than it was in the tender process itself. Usually the tender documents will reserve a right not to award a contract so all bidders go into the process knowing that a contract may not be concluded.

English courts particularly dislike the principle of putting a litigant in a better position than it would have been in the ordinary course of events so as long as procurement documents retain the right not to award I cannot see any circumstance in which a court will take it upon itself to award the contract and oblige the Authority to appoint a previously unsuccessful bidder.

It is fair to say that the English legal system is not a particularly welcoming place for disappointed bidders: ineffectiveness is virtually unheard of, even now an automatic suspension can be relatively easy to lift , the path to a damages claim is not straight-forward and costs can be prohibitive. However, given the knots the UK Government already finds itself in over the terms of Brexit it is difficult to see this at the top of anyone’s list of legislative priorities any time soon.

MLS (Overseas) Limited v The Secretary of State for Defence and SCA Shipping Consultants Associated Limited (as Interested Party)

Posted by Helen Prandy

February 1, 2018 10:11 AM | Posted by Smith, Ruth | Permalink

What do you do when you’re a successful bidder and a challenging bidder seeks disclosure of confidential documents contained within your tender? Whilst instinct might be to vehemently oppose this, one successful bidder has recently had to pay the price (in costs) of doing so.

The facts

This was a procurement claim brought against Merseytravel by an unsuccessful bidder, Bombardier Transportation UK Limited (“Bombardier”) in the Technology and Construction Court (“TCC”). The successful bidder was Stadler Bussnang AG (“Stadler”) who was not a party to the proceedings.

Bombardier made an application relating to disclosure of what were termed “highly sensitive documents” (“HSD”). The HSD included elements of Stadler’s tender. The most important aspect of Bombardier’s application was that disclosure of the HSD should be to all persons within the confidentiality ring, not just the lawyers. This was because of the difficulties they were having in understanding Stadler’s tender.

The Defendant, Merseytravel, took a neutral position on the application but Stadler opposed it.
The TCC granted the majority of Bombardier’s application (save for a request to add an additional named person to the confidentiality ring). The question then arose as to the costs of the application and who should be responsible for these? The TCC noted that this was a potentially important point for procurement cases as it concerned the potential liability for costs of a non-party (in this case Stadler), who will often be the successful tenderer.

The law on liability of a non-party for costs

Although cost orders made against non-parties are to be regarded as “exceptional”, this means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate question in any such "exceptional" case is whether in all the circumstances it is just to make the order, which will inevitably be largely fact specific.
An important consideration will be whether the party against whom costs are to be awarded was in fact the ‘real party’ to the litigation (a critical factor being the nature and degree of their connection with the litigation).

The Courts have also repeatedly held that the trial judge has a wide margin of discretion when considering orders against non-parties.

Decision

Applying these principles, the TCC decided that Stadler should be responsible for Bombardier’s costs in relation to the successful aspects of its application (being the majority of the costs claimed). In deciding this, the TCC made the following points:

• Stadler should have agreed to the application and its objections were unreasonable. The Court rejected out of hand, Stadler’s allegation that Bombardier was using "a tactic routinely deployed by the claimant…to gain access to highly confidential and sensitive material". Stadler went on to allege that, in their view, Bombardier was seeking to deliberately misuse confidential information to "give [Bombardier] an entirely improper competitive advantage". The TCC said this was a serious allegation which was wholly unjustified on the evidence;

• Stadler were the ‘real party’ here. The opposition to the application came only from them, as it related to disclosure of elements of their tender. The Defendant, Merseytravel, was neutral on the issue;

• there was no need for Bombardier to demonstrate exceptional or unreasonable behaviour on behalf of Stadler (which Stadler had argued was necessary before an order against a non-party could be made);

• even if it had been necessary for Bombardier to demonstrate exceptional or unreasonable behaviour on the part of Stadler, the Court felt that they had done this. It would have been both sensible and proportionate for Stadler to agree to the application and it acted unreasonably by not doing so. Stadler also made an unwarranted and unreasonable allegation regarding Bombardier’s motives for seeking disclosure which the Court had rejected out of hand; and

• no formal application would have been necessary had Stadler consented to the application. Had they done so there would have been no need to trouble the Court.

Court’s concluding remarks – and a warning for successful bidders in procurement cases

Having concluded it should exercise its discretion in favour of Bombardier and make an order for costs against Stadler, the Court went on to state an important point of principle, and warning, for successful bidders in procurement cases where similar issues are at stake: It said: “such an order [for costs] will not always be justified against a non-party; it will always turn on the facts. But in procurement cases, successful tenderers will need to consider carefully the balance between, on the one hand, the undoubted confidentiality of their tender documents and, on the other, the need for a proper and fair disposition of the unsuccessful tenderer's challenge. In circumstances where confidentiality rings are common (as in this case), a non-party will need very good evidence before it suggests that the claimant is seeking the documentation for its own commercial advantage, rather than for the purposes of the litigation. Stadler had simply no evidence of that kind at all.”

Comment

The case is a valuable reminder to successful bidders that, even when emotions are high and the disclosure of confidential tender documents to a competitor are at issue, there is still a need to behave reasonably and proportionately; and to avoid making unsubstantiated, or spurious allegations about the motives of the claimant in seeking the documentation. Failure to do so could see a successful bidder (such as Stadler) facing an unexpected and potentially significant order for costs against it.

Case: Bombardier Transportation UK Limited v Merseytravel (No. 3: Costs) (Rev 1) [2018] EWHC 41 (TCC) (17 January 2018). The full judgment is available here.

Posted by Ruth Smith


January 5, 2018 12:22 PM | Posted by Beresford-Jones, Jenny | Permalink

Just before Christmas we had sight of the judgment in the recent case of MLS (Overseas) Limited v The Secretary of State for Defence. The case highlights how an apparently simple error in drafting an evaluation methodology can lead to significant consequences for the progress of the procurement. It also shows how wide the gap can be between what the contracting authority thinks it has communicated in the methodology and what a bidder's actual understanding of that methodology may be on reading it.

The Contract

The Ministry of Defence (“MoD”) ran a procurement for a contract valued at around £350 million for global port, maritime and other logistical support services for the Royal Navy. Given the sector, the procurement was regulated by the Defence and Security Public Contracts Regulations 2011, as amended. However, the principles on which the case turned apply equally to procurements regulated by the Public Contracts Regulations 2015.

In particular, in running the procurement, the MoD was under a duty to conduct the competition in a manner which respected the EC Treaty principles of transparency, non-discrimination and equal treatment.

The claimant, who was also the incumbent provider, emerged from the evaluation as the most economically advantageous tender, according to the stated award criteria. However, on one particular question (“question 6.3”) relating to ensuring safe working cultures not only within the tenderer's own organisation but also down the supply chain, the claimant’s response was judged to be inadequate as it did not fully address how the tenderer would pass on health and safety obligations to its own contractors. Question 6.3 was a “pass/fail” question; both evaluators and a further moderator marked the response as a “fail”.

On this basis, following requests by MoD for the claimant to clarify its response and a further moderation meeting, MoD marked the claimant's tender as uncompliant and excluded it.

The Claim

The claimant commenced the claim prior to the award of the contract to the second-placed bidder, which suspended the award process pending legal proceedings.

The claimant argued (amongst other things) that the ITT did not state, or at least was ambiguous as to, the consequence of a "fail" score in respect of Question 6.3. This meant, argued the claimant, that the MoD was not entitled automatically to reject its tender for a single fail score. In rejecting its tender, the MoD acted unlawfully in breach of its obligations of transparency and equal treatment.

The MoD argued, in return, that the evaluators and moderator were entitled to conclude that the claimant’s tender failed to meet the minimum requirements specified in the evaluation criteria for achieving a "pass" score for Question 6.3.

The MoD accepted that, due to an administrative error, the MoD had omitted to include an express statement in the ITT that the consequence of a "fail" score would be rejection of the tender, However, said the MoD, it would have been apparent to a reasonably well-informed and normally diligent tenderer from the ITT that a "fail" score for Question 6.3 would lead to automatic or discretionary rejection of the tender.

The ITT

The section of the ITT on technical requirements contained an example technical evaluation table, which showed the weighting and scores available, up to a possible score of 100%, for the following questions:

• Question 1 – Capability;
• Question 2 – Customer Relationship;
• Question 3 – Supply Chain Management;
• Question 4 – Value for Money; and
• Question 5 – Insurance

It was clearly stated that failure to meet a minimum standard of “good confidence" for any of these five questions would result in rejection of the tender.

Significantly though, the technical evaluation for Question 6, Safety and Quality Management (of which question 6.3 was obviously a part), was not included here. The methodology for this question was clearly stated to be a simple “pass/fail” judgment, but it was not made clear that a “fail” result here would amount to a judgment that the response fell below “good confidence” level and would consequently be non-compliant, leading to the rejection of the tender.

The Law

The question before the court was whether the failure to expressly state that a “fail” result on question 6.3 would result in exclusion was a transparency breach by the MoD (as the claimant argued)?

Or, on the other hand, as MoD argued, was it a reasonable expectation that tenderers looking at the ITT should have “put two and two together” and realised that exclusion would be logical consequence of a failure on question 6.3?

The judge considered some of the leading cases in this area, in particular the SIAC and Healthcare at Home cases. These established the principle that the award criteria must be formulated in such a way as to allow all reasonably well informed and normally diligent tenderers (“RWIND tenderers”) to interpret them in the same way.

The judge noted that this was an objective test: the question was not whether it had been proved that all actual or potential tenderers had in fact interpreted the criteria in the same way, but whether the court considered that the criteria were sufficiently clear to permit uniform interpretation by all RWIND tenderers.

The judge also looked at the more recent Nuclear Decommissioning Authority case, where the transparency obligation was considered in the context of the contracting authority’s obligation to adhere to a procurement process/rules that it has previously stated. In that case, the judge said this:

The principles of equal treatment, non-discrimination and transparency require a contracting authority that has adopted a decision-making procedure for assessing bids to comply with it once it has begun to do so. A different way of expressing the same principle is to state that a contracting authority that has set rules for that procedure must follow them, applying those rules in the same way to the different bidders. Changing the decision-making procedure during the process of assessment risks arbitrariness and favouritism, a risk that it is the purpose of such requirements to avoid”.

Judgment

The judge concluded that the MoD had indeed breached the obligation to act transparently.

The ITT did not indicate that a "pass" score for each part of Question 6 was a minimum standard that had to be met to make the tender technically compliant.

The judge disagreed with the MoD’s argument that a RWIND tenderer should have understood, that a "fail" score for Question 6.3 would be treated as an assessment of lower than "good confidence" and lead to automatic rejection of the bid. The judge said, conversely, that the RWIND tenderer would assume that there would be a difference in treatment between Questions 1 to 5 and Question 6 because the ITT identified different categories of assessment for such responses. The ITT could have stipulated that a "pass" would equate to "good confidence" but did not do so.

Conclusion

The case highlights to contracting authorities the risks of ambiguity in the evaluation methodology and need for the evaluation criteria to make it absolutely and explicitly clear where a “fail” result will lead to rejection of the bid.

Note that this is the case not only in relation to the ITT stage (as in this case) but also during the selection phase. Indeed, Cabinet Office guidance explicitly states that SQ evaluation methodologies must make candidates expressly aware of any SQ questions where a “fail” result will lead to disqualification on that ground alone.

You can read the full judgment in the case here.

Posted by Jenny Beresford-Jones

October 20, 2017 10:15 AM | Posted by Prandy, Helen | Permalink

Two things which make claims for breach of the Public Contracts Regulations so daunting for unsuccessful bidders are the perceived inequality of arms in terms of the information available to the challenger and the Authority and the need to get on with the claim with more than usual speed.

Regular visitors to this site will know that sometimes a bidder might have as little as 10 days to make up its mind about whether to issue proceedings (compared to a 6 year time frame for breach of contract claims) and that once the button has been pushed a quirk of the Regulations and the court rules means that you only have a further 7 days to put in the detail of the claim (compared to 14 days normally).

It is not uncommon therefore to ask the Authority to extend the relevant time period and to provide relevant documents. Indeed the new Technology & Construction Court (“TCC”) guidance on public procurement claims encourages the early disclosure of documents if necessary into a confidentiality ring. But what if the Authority will not agree to extend time? It is not obliged to after all. What should a bidder do then?

If the latest decision from the TCC is anything to go by the one thing a bidder cannot do is ask the court to extend time without very good reason even where there is a perceived lack of information.

The dispute arose over a procurement for the manufacture and supply of railway sleepers. Proceedings were issued to automatically suspend contract award and in the subsequent application to lift that suspension the court was asked to consider a number of things.

In a combined application for an extension of time to serve its Particulars of Claim and for specific disclosure of documents Cemex were unsuccessful in persuading a judge that it was appropriate to leave service of Particulars until the documents had been disclosed. Whilst this may seem harsh at first sight in fact it emphasises some key points about procurement litigation which everyone should keep in mind.

Above all, the court is not going to allow procurement litigation to drag on indefinitely. The nature of the dispute and in particular its impact on a third party (the winning bidder) and often the public at large requires that there should be as little delay as possible in achieving a resolution.
Secondly the bidder must focus on what its challenge is. It is not enough simply to assert that there is insufficient information to plead a claim. Here the principal ground of complaint was an alleged ‘abnormally low’ bid but the judge felt that there was enough information already available to enable this to be set out in sufficient detail without the need to see further documents or to require more time.

Thirdly, any request for specific disclosure must be concise and focused on the actual documents needed and not a lot of other documents which might be sought perhaps in the hope of fleshing out additional claims.

And finally, the judge appears to have taken a very dim view of the bidder’s refusal to co-operate over the terms of a confidentiality ring into which the relevant documents could have been disclosed. In this case the bidder insisted that 2 people, outside the legal teams, should be included but those people were not prepared to give all the undertakings necessary to ensure the integrity of the ring.

As ever, every case turns on its own facts but it is nevertheless a worthwhile reminder that the landscape for procurement claims is a challenging one which requires a clear focus on the actual issues, an ability to act quickly and a degree of co-operation with the Authority encouraged by the TCC Guide.

Cemex UK Operations Ltd v Network Rail Infrastructure and another [2017] EWHC 2392 (TCC)

Posted by who leads our procurement disputes practice.

July 21, 2017 2:56 PM | Posted by Beresford-Jones, Jenny | Permalink

After several months of waiting, the new Technology and Construction Court (TCC) guidance note on procedures for public procurement cases has been formally launched. The Guidance forms a new "appendix H" to the general TCC Guide.

We first wrote about the new Guide in our article here back in September - there have been no material changes to the format since then, so do have a look at that article if you need to get up to speed with the changes the Guide brings and its likely impact.

If you're looking to challenge a procurement decision, do see our content hereHelen Prandy is a procurement litigation specialist, if you wish to have a preliminary discussion about your options.

You can read a copy of the new guidance on procedures for public procurement claims here.

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

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)

 

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.

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.

February 2, 2016 2:36 PM | Posted by Beresford-Jones, Jenny | Permalink

It is now February 2016 and the Public Contracts Regulations 2015 (PCR 2015) have been in force for almost a year. It takes case law a while to catch up with statute, but we are now seeing the first cases coming through where the Court has had to consider the new regulations.  An interesting recent example is the case of Counted4 Community Interest Company v Sunderland City Council [2015] EWHC 3898 (TCC), in which the Court for the first time looked at the new Light Touch Regime for health and social services, and at Regulation 24 which requires a contracting authority to take active measures to nullify any conflict of interest.

Brief facts

Sunderland City Council was re-procuring a contract for substance misuse support services (the existing contract was due to run out in January 2016), The re-procurement was advertised in June 2015 and, as it was for health/social services, it fell within scope of the new Light Touch Regime (see Regulation 74 onwards of the PCR 2015). The incumbent provider was Counted4 Community Interest Company (the “CIC”), a non-for-profit business that was established for the purpose of providing these services to the Council, a job which it had been doing since 2008. The judgment does not state this expressly, but the CIC may well have been awarded the contract at that time without any advertisement or competition (as was previously permitted under the old, now repealed, Part B services regime).

The CIC was unsuccessful in its bid to operate the new contract and brought a claim during the standstill period, triggering the “automatic suspension” of the award to the successful bidder (a local NHS Trust). The Council applied to the Court to have the suspension lifted. As such, this was not a trial of the substantive alleged procurement breaches by the Council, but rather of whether the suspension ought to be maintained until full trial, or lifted. In these situations, contracting authorities are often anxious to be able to proceed with the award process to ensure continuity of services, while the claimant’s goal is to prevent the contract being awarded at all and to preserve its chance of ultimately obtaining the work.

American Cyanamid test

When deciding whether to lift or maintain a suspension, the Court will apply the test set out in the American Cyanamid case. This test poses a hierarchy of three questions:

  • Is there a serious issue to be tried?
  • If so, would damages be an adequate remedy for either party?
  • If not, where does the “balance of convenience” lie? (this would factor in issues such as the public interest in the contract being awarded or suspended).

The CIC’s arguments

The CIC argued that the suspension ought to be maintained until a full trial of the alleged procurement breaches could be held. It alleged that the Council had breached its obligations under Regulation 24 to take appropriate measures to identify and prevent a conflict of interest. The CIC had had a very strained relationship with the Council’s employee who had been responsible for the contract management of the existing contract. It alleged that the inclusion of this employee on the evaluation panel for the procurement of the new contract amounted to a failure to take steps to nullify a conflict of interest. The CIC also alleged that there were errors during the evaluation stage in how the tenders had been marked and that certain elements of the bid had not been taken into account.

The Council’s arguments

The Council, arguing that the suspension should be lifted and that it should be allowed to proceed with the award, argued that the CIC’s case was weak and/or that it raised no serious issue to be tried. It also argued that, should the CIC eventually be successful at full trial, damages would be an adequate remedy for it and there was therefore no need to stop the contract award process going ahead before the trial. On the other hand, the Council argued, there was an urgent need to ensure service continuation for vulnerable service users, such that damages would not be an adequate remedy to the Council if the suspension were maintained; therefore, the public interest lay in allowing the award to proceed.

The Decision

The Court was required to rule not on the substantive questions of whether the breaches alleged by the CIC had in fact taken place (these are questions for the full trial at a later date), but only of the issue of whether, in the interim, the suspension of the award should be upheld, or lifted.

The Court ruled that the suspension should be maintained. This is a relatively unusual decision. In most cases it proves difficult for the claimant to show that damages would not be an adequate remedy and/or the public interest element brings the Court down on the side of the contracting authority.

In applying the American Cyanamid test, the judge came to the following conclusions:

  • Evidence provided about the very difficult relationship with the Council employee did suggest that there was at least a serious issue to be tried on the conflict of interest point (although at this stage the Court made no judgment about the substantive complaint)
  • Previous case law is authority for the conclusion that, where there are allegations about mis-evaluation, it is logical to conclude that there is a serious issue to be resolved at full trial.
  • Damages would not be an adequate remedy for the CIC, given that it was set up solely for the purpose of providing this service to the Council and that, were the contract award to go ahead, all its specially trained staff (who could not be easily replaced) would TUPE transfer over to the new provider. Significant also was the fact that the CIC would be (financially) unable to pursue the claim were the contract award to proceed.
  • The public interest did not tip the balance in favour of allowing the award to proceed. Despite the Council’s evidence as to the urgency in order to secure the provision of services, the Court was not persuaded that there were any significant problems with the existing contract and, on the evidence, it did not judge the Council to have been acting with particular urgency over the course of the procurement. Given that an expedited trial of the substantive claims could be held in Spring 2016, the Court was not persuaded that a two or three month delay would be so critical as to tip the balance of convenience in the Council’s favour.

Comment

This case turns on its own facts to some extent – it unusual for the claimant to be as entirely dependent on the contract in question as CIC was in this case. Because of this relatively uncommon set of facts, the CIC here was able to successfully argue that, were the suspension to be lifted, the new contract awarded and the CIC to go on to win on the substantive claims at full trial, then damages would not be adequate compensation,. There are not many suppliers who are entirely dependent on one source of business in this way.

That said, the judgment is a warning to contracting authorities that the Court will apply the American Cyanamid test on a case by case basis and there are no guarantees that the judgment will go the contracting authority’s way.

This case will be an interesting one to look out for when it comes to full trial. It will be interesting to see what the Court has to say about the contracting authorities’ obligations around evaluation in the context of a Light Touch regime process to which the full public procurement regime does not apply. It will also be useful to get the Court’s view on the conflict of interest point; should the contracting authority in this case have taken clearer steps to nullify the conflict, such as ensuring the employee in question was not involved? Watch this space.

You can find a copy of the judgment here.

 

September 28, 2015 9:48 AM | Posted by Minnis, Anthony | Permalink

Fraud in the NHS has once again hit the headlines following the publication of a report co-authored by Jim Gee of PKF Littlejohn LLP (former CEO of the NHS Counter Fraud Service) and the University of Portsmouth.

The financial cost of healthcare fraud 2015” analyses worldwide healthcare expenditure and concludes that 6.19% of total health expenditure is lost to fraud and error.

The report was featured on the BBC News, suggesting that the NHS could be losing up to £5.7bn a year from its £100bn budget to fraud and error.

The report highlighted NHS procurement as an area of concern. Despite NHS procurement expenditure reported to be £21.9 billion for 2013/2014 there has never been a successful NHS loss measurement exercise undertaken to look at procurement expenditure losses.

The report cites the procurement fraud perpetrated by two NHS Managers, John Leigh and Deborah Hancox. They masterminded a 5-year procurement fraud worth £229,000 against a health authority in the North West and were jailed for five years in total in November 2014.

The report notes that applying the global rate of 4.57% for fraud loss alone (i.e. excluding loss through error) the NHS could be losing £1bn per year to procurement fraud.

The report states that fraud is mostly found to be where goods and services are under-provided in terms of quality, or quantity, or overcharged. It also refers to instances of goods and services not being provided at all and cites the key weakness in procuring generally as being a lack of consistent data and communications between those procuring goods or services, those receiving or benefiting from them, and those paying for them. No comments are made in the report regarding actions intended to reduce competition, supplier bias, cartels, corruption, kickbacks or collusion in the procurement process.

The report has been dismissed by a Department of Health spokesperson stating, “We do not recognise the figures in this highly speculative report which is full of inconsistencies.”

In any event, procurement fraud (and indeed all fraud) reduces the budget available for front line services. Whilst NHS Protect has achieved some high profile successes securing a criminal conviction can take many years with the standard of proof in criminal cases being “beyond reasonable doubt”.

Fraudsters can however be pursued in the civil courts. Whilst cogent proof is required in a civil fraud claim, the standard of proof is lower, being “the balance of probabilities”. Therefore criminal and civil options should be carefully considered at the outset of any fraud investigation and NHS bodies may increasingly focus their efforts on fraud prevention and look to the civil courts for a positive outcome.

The Mills & Reeve fraud team's flyer contains further details of our recent work in the fraud investigation field and sets out examples of the fraud-related issues we can help you with.

September 9, 2015 10:54 AM | Posted by Prandy, Helen | Permalink

Unless your summer holidays were spent on an internship in Brussels it is just possible that you have missed out on some of this summer’s ‘blockbuster’ decisions. So here’s a recap of the top 5 cases you may have missed:

1.     “That which can be asserted without evidence, can be dismissed without evidence”- Woods Building Services v Milton Keynes Council 14 July 2015. (Part 1)

This summer’s most interesting decision was the unfortunate case of Milton Keynes’ council’s procurement for asbestos removal and re-instatement services. This is a ‘must see’ not because there was a clear, but unacknowledged, conflict of interest on the part of one of the evaluators, nor because the winning bid had (allegedly) benefited from plagiarised material. The use of undisclosed criteria was noted but the main interest here was firstly that in concluding that there had been ‘manifest error’ in the evaluation and scoring of bids the court substituted its own view of what marks should have been awarded and secondly that the complete failure of the evaluation to record the reasons for the actual marks awarded left the contracting authority with no evidence of why it had done what it had done.

Although it is very unusual to see a court substituting its judgment for that of the evaluators it clearly felt that the errors were so obvious that it was entitled to do so. A major factor in this must have been the absence of any contemporaneous record of how the evaluation conclusions had been reached and it highlights (again) the absolute importance of keeping contemporaneous records of the conclusions reached during the evaluation process.

2.     “The only true wisdom is knowing you know nothing”- Fox Building & Engineering Ltd v The Department of Finance And Personnel 17 June 2015

This was a challenge in Northern Ireland relating to the issue of abnormally low bids. The Claimant suspected that a winning bid had not priced all the items in the pricing schedule (or had done so at purely nominal amounts) producing an unsustainably low bid. However, as is typical in procurement claims the information to ascertain this was solely in the contracting authority’s possession. The court was concerned here with balancing the need for the Claimant to see documents which might prove its claim early on in proceedings and preventing a ‘fishing expedition’ for documents to bolster an otherwise weak claim. The court agreed that early disclosure was appropriate here having determined that there was a reasonably arguable prima facie case. However, wholescale disclosure was not permitted. Instead, a confidentiality ring was agreed with a restriction permitting a record of the nominal bidding to be disclosed rather than whole documents.

3.     “Don’t find fault, find a remedy”- Woods Building Services v Milton Keynes Council 14 July 2015 (Part 2)

Unlike Hollywood you do not have to wait a further year for the sequel in procurement law. Having found that the Council had committed ‘manifest errors’ in its evaluation of the winning bid for asbestos removal (see above) the court then had to consider the appropriate remedy.
Following judgment, it was agreed that the original decision by the Council would be set aside and that the formal record should show the court-adjusted scores. The court also declared that the Woods’ tender was the most economically advantageous. However, Woods also sought an order that it should be awarded the contract or alternatively damages.

It is common to see Claimants asking for an order that they be awarded the contract in place of the ‘winning’ bidder. However, Woods had not initially sought such a remedy and the court considered that it could not grant a remedy that had not been requested. More significantly, the Regulations applicable to remedies had not identified contract award as a possible outcome. This did not necessarily rule it out but a mandatory injunction to award the contract would require exceptional circumstances in order to be justified. No such exceptional circumstances applied here. Moreover, the tender evaluation process had been found to be flawed so it would be inappropriate to award a contract arising out of such a flawed process.

The court concluded that damages would be an adequate remedy but deferred any decision on assessment of those damages until after the re-run procurement.

4.     “Uncontrolled variation is the enemy of quality”- Edenred (UK Group) Ltd v HM Treasury 1 July 2015

This case is too complicated to summarise into a few lines. The essence of the decision, however, is that is possible to vary or modify an existing contract and that it is possible to provide for this in the initial procurement documents although it would require close scrutiny of the OJEU notice, procurement documents and subsequent contract.

The point of greatest general interest arising from the case, however, was that it was accepted that the 2015 Regulations apply to the proposed modification despite the fact that the original procurement was under the old Regulations and that the challenge had been brought under the old Regulations. The decision to apply the 2015 Regulations to a variation/modification which would take place after February 2015 was consistent with Cabinet Office guidance at the time the Regulations were brought in although that guidance had no obvious basis in law. We understand that it was conceded by the government before the Supreme Court that the 2015 Regulations should apply and no legal argument was heard on the point.

5 .    “No secrecy no business”- Sally Ballan v Information Commissioner August 2015

We posted a separate blog about this case on 14 August. The decision is noteworthy because it maintained confidentiality in bids from a long-concluded procurement process and held that the protection of commercial interests exemption under the Freedom of Information Act included the commercial interests of the contracting authority itself.

August 14, 2015 9:37 AM | Posted by Prandy, Helen | Permalink
Although August is a traditionally quiet month in courts and tribunals it can still produce a noteworthy decision which can sometimes be over-looked in the general holiday atmosphere. Such a case is the decision of the First-Tier Tribunal on an appeal against the Information Commissioner’s decision not to allow disclosure of a successful bid in a procurement process for the delivery of a “Leisure Management System”.

The surprising factor in this decision is that the tender process had concluded in 2012 and it was generally thought to be the case (confirmed by other decisions from the Information Commissioner) that the more time that had passed since the procurement the more difficult it was to resist disclosure.

The Appellant had originally requested sight of the winning bid ‘without prices’ in order to get a better idea, she said, of what a winning bid would look like so that she could improve her own bid in the future. The Council had refused to disclose the information relying on the exemption at section 43(2) of FOIA that disclosure would prejudice their own and the bidder’s commercial interests. The Information Commissioner agreed and that led to the appeal.

The Appeal Tribunal unanimously agreed with the Information Commissioner’s decision to uphold the Council’s refusal to disclose the bid. It concluded that:

• Disclosing the requested information would prejudice the Council’s commercial interests as showing how a winning bidder presented its material and answered questions would demonstrate how the Council distinguished between bids and therefore undermined the competitiveness of future tender exercises.

• Disclosing the requested information would prejudice the bidder’s interests because information on how a bid was presented and the added value that may have been offered would place that bidder at a commercial disadvantage in the future.

In addition the Tribunal specifically made the point that the commercial sensitivity of bids was unaffected by the remaining duration of the current contract nor how far in the past the bid had been prepared. It concluded:

“If a prospective tenderer were to be able to review its competitor’s previous bid documents including trade secrets, this could inhibit competitive tendering and reduce the number of bidders willing to participate which would not be in the Council’s interest.”

It then went on to consider whether it was in the public interest to allow the exemption. Whilst it accepted that there should be transparency and accountability in decision making these principles were not significantly advanced by the information requested especially as Appellant had received detailed debrief information at the time.

Indeed the Tribunal considered that there were strong public interests in not disclosing the requested information including:

• That potential private sector tenderers should not be discouraged from submitting tenders for fear that their commercially confidential information will be released as this may affect the quality of tenders.

• There was a public interest in maintaining an efficient competitive market for these services.

Unanimously, therefore the disclosure of the information sought under FOIA was refused.

This case is useful for both bidders and Contracting Authorities to be aware of when dealing with a request for disclosure of information under FOIA. Whilst there are some contradictory decisions from the Information Commissioner and the First-Tier Tribunal it is clear that in appropriate cases there is scope to refuse disclosure of bids even some time after the event and that the facts of each case should be considered carefully where a commercial exemption may apply. It is also important as it highlights that prejudice can arise not just to the bidder but also the Contracting Authority.

For those interested in reading more the full citation is Sally Ballan v Information Commissioner EA/2015/0021.
July 31, 2015 5:39 PM | Posted by Beresford-Jones, Jenny | Permalink

Alexis Tsipras isn’t the only Greek thorn in the side of Europe at the moment; Greek ICT service provider European Dynamics (“ED”) has been litigating again, and, sadly for them, the European Court has said “OXI”.

The Publications Office of the EU ran tenders for several computing services frameworks, using a “cascade” system to select winners. ED was unsuccessful and brought a claim. While the case obviously turned on its own facts, the judgment does read as a kind of textbook guide to common procurement litigation flashpoints, given that ED made just about every allegation in the book of procurement challenges:

• The contracting authority chose the wrong award criteria (and confused it with selection criteria) and so the most economically advantageous tender was not in fact selected;
• The contracting authority misapplied the award criteria and made a manifest error in how it assessed it;
• The contracting authority breached transparency obligations by failing to disclose documents or give adequate reasons why the challenger was unsuccessful;
• The contracting authority breached transparency obligations by introducing new award criteria that the bidders were unaware of; and
• The contracting authority mishandled the process of seeking clarifications from bidders so a rival got an unfair advantage.

In Greece, they say “Τα μάτια σου δεκατέσσερα!” or, in our alphabet, “Ta matia sou thekatessera!”. The phrase literally means “Your eyes fourteen!”, but the closest expression in English is probably “Keep your eyes peeled!” Contracting authorities certainly need to make sure that their procurement processes will stand up to increasing scrutiny from potential challengers in an arena which is becoming ever more litigious.

You can read the judgment here: Case T-536/11

November 19, 2014 5:10 PM | Posted by Prandy, Helen | Permalink

I realised that I probably needed to get out more when I became absurdly excited over an instruction that referenced American Cyanamid as the original owner of one of the product formulations I had been asked to consider. To any litigator, American Cyanamid is not just “one of America’s top manufacturing companies during the 1970s” (it says in Wikipedia) but the case concerning the criteria on which English courts will grant injunctive relief and it is always exciting to be in the presence of something so significant no matter how tangential your involvement.

So what exactly is American Cyanamid? Essentially it is a legal test which involves a two stage process of considering if there is a serious issue to be tried and, if so, the balance of convenience in granting an injunction or not. In considering the balance of convenience the question of whether damages might be an adequate remedy is one of the factors to be taken into account.

The American Cyanamid test was the basis on which, pre 2009, the English courts considered whether or not to grant an injunction to a disappointed bidder who wanted to stop what it considered to be an unlawful procurement process at least until such time as the merits of its challenge could be considered.

In 2007 the EU introduced the Remedies Directive 2007/66/EC and this was transposed into English law by amending the Public Contract Regulations 2006 (“the Regulations”). Those amendments came into force in 2009.

Once again, cue considerable excitement from procurement lawyers because the effect of the Directive and Regulations was to impose what amounted to an automatic injunction whenever a claim was issued. To mitigate the effect of that the Regulations provided for contracting authorities to be able to apply to the court to lift the automatic suspension.

We had to wait a year to find out the basis on which the court would consider the application to lift the automatic suspension but in the very first case, Indigo Services v Colchester Institute, in December 2010 the court adopted the American Cyanamid test. This was widely taken up in the flood of cases that came afterwards and in every single case the automatic suspension was lifted. Only in Northern Ireland did the courts occasionally agree that the suspension should continue.

The more decisions lifting the automatic suspension the greater the disquiet in some quarters that the remedy provided for by the Directive was not actually being properly implemented in England & Wales and that, in particular, the use of the American Cyanamid test deprived claimants of an effective remedy.

In 2014 this debate seems finally to have come to a head. Indeed it has seen some very eminent procurement practitioners tie themselves in knots. Whilst perfectly proper it was amusing to see Mr Justice Akenhead’s comments in a recent case that Michael Bowsher QC was arguing the exact opposite of his submission in a case a matter of weeks earlier that American Cyanamid was the appropriate test.

However, it always seemed to me that those who felt that American Cyanamid was too inflexible to give an adequate remedy under the Directive were misreading the test and in particular the position on the adequacy of damages. It has always been the case that the question of whether damages are an adequate remedy was only ever one factor in the more holistic approach required in considering the balance of convenience. Whereas some had come to see the American Cyanamid test as depending solely on whether damages were an adequate remedy it has always been much more nuanced than that.

The debate in England & Wales about American Cyanamid had been fuelled by a decision in Ireland, the only other common law jurisdiction in Europe, which held that the American Cyanamid test did not give proper effect to the Directive.

In addition during 2013 and 2014 the tide on lifting the automatic suspension, if not exactly turning, is, at least moving slightly. There have been cases (notably Covanta Energy Ltd v Merseyside Waste Disposal Authority; NATS (Services) Ltd v Gatwick Airport Authority and Edenred (UK Group) Limited), where the automatic suspension has remained in place albeit an expedited trial has been ordered. However, and despite the efforts of some very eminent lawyers in this area, there is no sign of the English courts being prepared to relinquish American Cyanamid as the appropriate test.

So as we prepare to leave 2014 what is the court’s current thinking on applications to lift the automatic suspension?

It is obviously important to say that each case depends to a large degree on its own facts. Subject to that caveat, however, here is where I think we have got to:

  • The American Cyanamid test will remain the test against which an application to lift the suspension is judged. It is true that no higher court has yet considered this but a number of high calibre judges in the Technology & Construction court support it and in doing so they have focused on the overall balance of convenience and not just the adequacy of damages. At the moment, it is difficult to see an economic operator prepared to pursue this as a matter of principle to a higher court.
  • For contracting authorities lifting the automatic suspension is no longer a foregone conclusion. In particular:
    • If the procurement has already taken a long time (in Covanta the procurement had begun in 2006);
    • If there is no immediate impact to public services or the safety of a section of society (compare a change in the scope of a contract for the administration of childcare [Edenred] with the operational capacity of the Army and safety of soldiers [NP Aerospace Ltd v Ministry of Defence]);
    •  If there might be a substantial reputational impact on the losing bidder (NATS);
    • If a decision that the procurement was unlawful would render the basis on which damages might be calculated just too hypothetical for any realistic assessment to take place (Covanta and NATS); or
    • If an expedited trial can be agreed and organised (Covanta; NATS and Edenred),

then there is at least a reasonable chance that the automatic stay will be allowed to continue.

However, there remains one other vexed issue and that is the question of the so-called cross-undertaking in damages. That is a binding undertaking to the court by the economic operator that in the event the automatic suspension continues until trial but the claim is ultimately unsuccessful it will pay any damages incurred by the contracting authority as a result of not being able to let the contract. In some cases, this is a potential exposure of many millions and is naturally a deterrent where a challenge is being considered and perhaps so much so that it effectively deprives the economic operator of a remedy.

I think the position on this is much more problematic than the use of American Cyanamid and I do expect that we may hear more about this in 2015.

Which brings me back finally to the title of this piece and the unexpected similarity between American Cyanamid and Bruce Forsythe. Obvious really: both were big stars and much talked about in the 1970s; silently ticking along but pretty much unnoticed in the 1980s and 1990s and then suddenly back with a bang and the centre of attention again in the twenty-first century. Whether the similarities go beyond that is Strictly a question for the reader.

October 20, 2014 5:00 PM | Posted by Smith, Ruth | Permalink
Here at Mills & Reeve, the procurement team is gearing up for the biggest shake up of procurement law in a decade, the introduction of the Public Contracts Regulations 2015 next year. As part of our preparations, we'll blog each week on a different aspect of the draft Regulations, highlighting as we go those interesting or quirky aspects which we think need extra thought or which might prove to be a future bone of contention.

This week we've been looking at the "light touch" regime, which is destined to completely replace the current Part B Services regime, for some service contracts that are valued at over 750,000 Euros. As anticipated, the draft Regulations published on 19 September take a very minimalist approach, and the light touch regime is actually featherlight. Although there's a new requirement for either an OJEU notice or PIN, the contracting authority is then free to design whatever procurement process it chooses, provided this doesn’t offend against principles of transparency and equal treatment.

So far so good, now here's the twist. Draft Regulation 76(4) allows a contracting authority to depart from what it stated it would do in the contract notice and decide to run the procurement differently. This is provided that it considers it is still acting transparently, that its actions will not result in unequal treatment, and that it has made a written record of how and why these conclusions have been reached.

The aim here was almost certainly simply to achieve the greatest possible flexibility, but we can see legal fog on the horizon for both the contracting authority and bidders. For the contracting authority, it may be left wondering when and how this flexibility can be used in practice, whether it has properly addressed issues of transparency and equal treatment, and whether its actions and justifications will stand up to scrutiny. For bidders, if the contracting authority hasn't got it right, they'll no doubt be confused about the procurement process which is actually being followed. Combine all of this with the ability of bidders to use Freedom of Information Act requests to establish whether the contracting authority did indeed properly consider (and document) transparency and equal treatment issues before departing from the advertised process, and you have a fertile source of potential procurement dispute and challenge.

Of course the regulations are not yet in final form, so it is a game of 'wait and see' as to whether draft Regulation 76(4) makes the final cut.

Next week in our Procurement Regulations 2015 - Ready For Law-nch? series, we'll be looking at the uncomfortable relationship between the Public Contracts Regulations 2015 and the NHS (Procurement, Patient Choice and Competition) Regulations 2013 and asking whether the two can ever work together in harmony.
October 17, 2014 4:16 PM | Posted by Prandy, Helen | Permalink
Luckily the title of this blog does not refer to a holiday nightmare but to that rare thing from the English courts….a decision NOT to lift the automatic suspension where a procurement decision has been challenged.

As readers will know under the Public Contract Regulations 2006 (as amended) a suspension of the procurement exercise arises automatically where legal proceedings are issued for breach of the Regulations. The same mechanism exists under the Utilities Contract Regulations 2006. Although in this case there was a dispute over whether the Utilities Contract Regulations applied, for the purpose of this blog the focus was on what test should be applied by the court when considering an application to lift the automatic suspension.

The automatic suspension provided for in the EU Remedies Directive 2007/66 (“the Directive”) which was implemented by the Regulations has since it was first considered by the English courts in Indigo Services v Colchester Institute been interpreted in accordance with the existing case law on injunctions and in particular the leading case of American Cyanamid Co v Ethicon Limited.

American Cyanamid lays down a two fold test for considering whether an injunction should be granted and those tests have been used by the English courts to consider whether or not an automatic suspension should be lifted. Firstly the courts will look at whether there is a serious issue to be tried and secondly where the ‘balance of convenience’ lies. A significant factor in ‘balance of convenience’ is whether damages would be an adequate remedy.

There has been some disquiet in procurement circles that the American Cyanamid test fails properly to take account of the text of the Directive and that its application in English cases (where the courts have invariably lifted the automatic suspension) has effectively deprived disgruntled bidders of a remedy.

While that issue has not been definitively decided the court did expressly conclude that the principles of the American Cyanamid test were sufficiently flexible to allow a proper consideration and application of the Directive. So, until such time as a case is appealed it seems the American Cyanamid test is here to stay on applications to lift the automatic suspension.

In relation to this case the court concluded that there was a serious issue to be tried. Looking at the balance of convenience it concluded that for the claimant damages would not be an adequate remedy. If the claimant established its allegations that undisclosed, irrational and inappropriate criteria had been used in the procurement then it would be very difficult for the court to calculate damages as it could not assess what chance had been lost and what the impact might have been on the process had rational and appropriate criteria been used. By contrast, the impact in damages on Gatwick of not yet being able to award the contract would be easily quantifiable.

The court also took into account that this was a 10 year contract and that the opportunity at Gatwick was unique. There had already been a substantial delay in the procurement process and there would be a substantial impact on the claimant’s reputation, goodwill and business if it lost the contract.

In those circumstances, the court would not lift the automatic suspension but did order an expedited trial which, we understand, will be before the end of this year.

A matter of days after this judgment what might be termed ‘normal service’ was resumed by the courts when it lifted the automatic suspension in a case involving the Ministry of Defence. A major factor in that decision was that a delay in awarding the contract could have a serious impact on the training and operational capability of the Army.

Comment

I think we are beginning to see to see a difference in approach between what might be characterised as purely commercial contracts such as the one at Gatwick and critical services impacting the safety or health of people as in the case of the Ministry of Defence.

In the former category courts may now be taking a more purposive view and recognising that lifting the suspension deprives litigants of a remedy at an early stage without a full and proper consideration of the merits. In the latter category, however, a view seems to be emerging that the public interest in maintaining a vital service outweighs the public interest in ensuring that litigants will have the full suite of remedies provided by the Directive.

There also appears to increasing attention from the courts on more general competition issues where procurement law is considered particularly in the context of the Utilities Contracts Regulations. In this case a very substantial factor in the decision appears to have been the length of the contract and the uniqueness of the opportunity. Our blog post of 26 March 2014 on the Luton airport case (Hobson’s Choice-Public Procurement gets a competition law makeover) highlights some of these competition issues in more detail.

NATS (Services) Ltd v Gatwick Airport Ltd [2014] EWHC 3133 (TCC)

 

NP Aerospace Ltd v Ministry of Defence [2014] EWHC 2741 (TCC)

 

September 24, 2014 4:37 PM | Posted by Beresford-Jones, Jenny | Permalink
Summary

The recent case of Italian Interior Ministry v Fastweb SpA (Case C-19/13) highlights the limited protection that the VEAT notice route can offer to contracting authorities wishing to make direct awards without following an OJEU process. A grey area remains around whether the protection of a VEAT notice will be available where the contracting authority genuinely, but mistakenly, considers it was entitled to award the contract without notice. It shows that the safe harbour will only be 'safe' to the extent that the legal justification for the direct award is in itself sound and ready to stand up to the increased scrutiny that the publication of the VEAT notice may well invite. In short, it does offer a safe harbour, but only where the waters are relatively calm already. If the legal justification is not robust, the use of the VEAT route may well create more problems than it solves; it should not be used as a port in a storm.

Read more …

In legal-speak, the phrase “safe harbour” has a particular meaning; it is a provision of a statute or a regulation specifying that certain conduct is expressly deemed not to offend against a given rule.

A good example of a safe harbour is found in the Public Contracts Regulations 2006 (the ‘Regulations’). The Regulations allow claimants to apply to the court for a “declaration of ineffectiveness” of a public contract, in circumstances where that public contract was directly awarded without any OJEU notice. This is to protect the market against the awarding of public contracts without transparency and competition, one of the principal ills that procurement law is designed to prevent.

Regulation 47K provides a ‘safe harbour’ within which contracting authorities may take shelter from this kind of claim. To qualify, a contracting authority must:

• “consider” that it was entitled to award the contract without a notice; and

• publish a “voluntary ex-ante transparency notice” indicating that it intends to sign the contract (a ‘VEAT notice’); and

• observe a standstill period.

If these conditions are satisfied a claimant will not be able to claim a declaration of ineffectiveness on the basis that an OJEU notice was not published, the legislators taking the view that the VEAT notice answers the requirement for transparency and the standstill period the requirement for the opportunity for scrutiny and review.

The Regulations do not elaborate further on the “consideration” that must be given in order to satisfy the first condition. It seems reasonably clear that if the contracting authority actually knows that an OJEU notice is required but instead goes down the VEAT notice route, then the test in the first condition will be failed as the contracting authority could not be said to have considered it was entitled to award the contract directly without a notice. However, will the test also be failed where the contracting authority does in good faith consider it is entitled to do so, but is mistaken?

The Regulations specify the content and form of the VEAT notice; it must amongst other things include a justification of the decision to award the contract without prior publication of an OJEU notice. However, the Regulations do not of themselves impose an obligation on the contracting authority to act in good faith, and they state neither how robust this justification must be, nor the consequences for this safe harbour if the justification turns out to be insufficient or wrong. And it was these grey areas that the European Court of Justice had to look at in this case (while this was an Italian case, the Italian regulations are of course derived from the same Remedies Directive as our Regulations).

The facts of the case were simple – the Ministry entered into a contract with a supplier and, on its expiry, renewed the contract using the negotiated procedure without a notice route (on the grounds that for technical reasons or due to exclusive rights only the current supplier could perform the contract). It published a VEAT notice containing this justification, and held a standstill period. Another supplier, Fastweb (the claimant in the case) brought an action in the Italian court, which decided that the conditions for using the negotiated procedure without notice had not been met and that the Ministry had relied on this route due to expediency rather than for any genuine technical reasons. However, said the Italian court, it was not permitted to issue a declaration of ineffectiveness as a remedy, because the Ministry had issued a VEAT notice and held a standstill period. Fastweb countered that the VEAT notice safe harbour route merely gave the court a discretion or option not to declare ineffectiveness, after weighing up the general and individual interests involved, and that, depending on the outcome of that balancing act, a declaration of ineffectiveness could still be made. The Italian court referred the case to the European Court for guidance on these points.

The European Court decided that:

• if the three conditions of the VEAT notice route were compliantly followed, then the national court must allow the safe harbour to operate and could not choose to impose a declaration of ineffectiveness in any event; the safe harbour could not be treated as optional where all the conditions were met;

• it was for the national court to determine on the facts whether the conditions had all been met, including the condition that the contracting authority “considered” that it had been entitled to award the contract directly without a notice;

• the national courts must as part of their role as review body scrutinize the justifications to ensure that the contracting authority had acted “diligently” and that the justification used was valid, particularly as the “negotiated without notice” route is a derogation from the procurement rules generally and as such is to be strictly and narrowly interpreted. It is for the national court to decide whether the justification used in the VEAT notice stands up and the contracting authority can therefore be said to have “considered” itself entitled to make a direct award. The court stopped short of ruling that the protection of a VEAT notice should always be available in the event of a genuine but mistaken belief that a direct award was permitted; instead it will be for the national court to assess how “diligent” the contracting authority was in formulating that genuine, if mistaken, belief.

What does seem clear is that the protection of a VEAT notice route will not be available where the contracting authority acts in bad faith, in full knowledge that a direct award of the contract is not permitted. Potentially, the protection will also be unavailable where the contracting authority lacks proper diligence in considering whether a direct award is permitted, regardless of whether it acts in good faith or not.
August 12, 2014 7:20 AM | Posted by Smith, Ruth | Permalink

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May 21, 2014 12:20 PM | Posted by Beresford-Jones, Jenny | Permalink
Readers will be aware that under UK law, generally, a procurement challenge can only be brought if it is made within 30 days of the date the claimant first had knowledge (or ought to have first had that knowledge) of the breach being complained of. The principle behind the setting of this time limit is the creation of what the courts refer to as "legal certainty" - or, in layman's terms, the fact that it would be unjust to require contracting authorities and suppliers to enter into contracts with a perpetual possibility that further legal challenges might emerge out of the woodwork. The time limit's role is therefore to balance the interests of both potential challengers and the contracting parties; to allow for review and challenge but also to guarantee legal certainty after the expiry of the time period.

Having said that, applying this principle is not always straightforward, as a recent judgment from the European court demonstrates. In this case, the contracting authority in the Puglia region of Italy (the "CA") ran a competition for a four-year contract to clean and maintain its sewage systems. The contract fell within the scope of the Utilities Directive. In July 2011, the CA announced a decision to award the contract to a consortium and to permit early performance of the contract, pending checks that each member of the consortium met the stated requirements (after which its contract award decision would take effect). In October 2011 the winning consortium notified the CA that one of its members had pulled out, but that, otherwise, it still met all the requirements. On 17 April 2012 the CA authorised the withdrawal of the consortium member and concluded the contract. The third-placed bidder brought a challenge on 17 May 2012, on two grounds:

• Firstly, that the decision to approve the reduced consortium was unlawful, because this altered one of the essential elements that were decisive in the adoption of the original award decision;

• Secondly, that the second placed bidder should have been excluded as one of its consortium members had failed to declare a conviction for a criminal offence.

The Italian government referred the case to the European court.

The CA and the winning consortium argued that the challenge on both grounds was out of time and also, for the first ground, questioned the relevance of the referral, arguing that the complaint only concerned the "second" decision to award the contract to the reduced consortium; even if this decision was overturned, it would not affect the status of the consortium as successful bidder in the original award decision. Note that, like the UK, Italian law prescribed a 30 day limitation period for bringing a procurement claim.

The Court held that the authorisation of the change in composition of the consortium (i.e. the potential breach) was an event which happened after the original award decision had been made and after the expiry of the “original” 30-day period for bringing an action as prescribed by the Italian legislation. It was not therefore possible for the challenging bidder to have been aware of this change via the communication of the original award decision plus reasons or via replies received in response to any debrief request.

The Court therefore judged that the 30 day period must start to run again, from the date on which the tenderer receives notification of the decision authorising the change in the consortium or the date on which it became aware of that decision. The Court considered whether this approach would offend against the principle of securing “legal certainty” (as discussed above) but decided this was not an issue as the authorisation took place before the final conclusion of the contract between the CA and the reduced consortium.

In relation to the second ground for the claim, the Court ruled that the alleged declaration must have been made prior to the original award decision and that the claimant, via the debrief requirements of the Remedies Directive and on the basis of the information it could have obtained through the exercise of ordinary diligence, should have been in a position to raise any claim within the “original” 30 day period starting with notification of the “original” contract award decision. A claim outside this period should only be permitted where this allowed under national law.

The case does not represent new law, rather the Court simply applied the usual test i.e. the time period for bringing a procurement challenge starts to run from the date of knowledge of the breach. If a breach occurs after the award decision has been made and communicated, time will run from the date the claimant knew or ought to have known of the later breach - not from the date of the original award decision.

Contracting authorities should therefore take care, and unsuccessful bidders remain vigilant, in the period between notification of the award decision and contract conclusion. Breaches of procurement law in this period are just as susceptible to challenge as those leading up to communication of the award decision, and will trigger a new 30 day limitation period.

You can read the judgment here Case C-161/13 Idrodinamica Spurgo Velox srl v Acquedotto Pugliese SpA
March 26, 2014 3:46 PM | Posted by Prandy, Helen | Permalink

Here in Cambridge there are many memorials to Thomas Hobson, the city innkeeper who used to tell customers that they could have any horse as long as it was the one closest to the stable door, an option which became known as Hobson's choice. Exhausted passengers arriving at Luton airport might have felt the same about their bus service to London had the basis on which the contracts were awarded not been successfully challenged recently in an interesting way from a public procurement perspective.

Although the principles behind the Public Contracts Regulations and Utilities Contracts Regulations (both) 2006 are to facilitate competition throughout the European Union, public procurement and general competition law are usually regarded as two quite separate regimes which, historically, have rarely had an impact on each other. In particular, competition law only applies to 'undertakings', that is, bodies engaged in economic activity generally involving competition on a market, and will look at how undertakings operate in the market including whether those that enjoy a dominant position, abuse that position to influence the market. In contrast, procurement law applies to public bodies or utilities who, depending on their activity, may or may not be treated as an undertaking for competition law purposes.

Increasingly, however, bodies subject to procurement law may also be undertakings (and this is especially the case in the utility sector) and a High Court judgment at the end of January 2014 shows how a competition law claim in the context of a procurement exercise might arise.

In Arriva the Shires Ltd v London Luton Airport ("Arriva") the company which operates Luton airport (a utility for the purpose of the Utilities Contracts Regulations) was looking to award a concession to operate the coach service between the airport and London. The concession was extremely lucrative and the Claimant was the incumbent provider. The concession included a 7 year exclusivity on the route plus a right of first refusal over new routes. Unfortunately for the Claimant it lost out on the award of the contract by a process which, to public procurement lawyers at least, looks very far from ideal.

For the purpose of the trial the Defendant accepted the assumption that it had a dominant position in the relevant market for the supply of facilities at the airport. The claim was brought on under two main grounds: (1) Abusive conduct relating to the tender process and (2) Abusive conduct arising from the terms of the concession.

As far as the tender process was concerned, it was also recognised that this was a concession and therefore outside the scope of the Regulations so although there were many aspects of the tender process which would have been considered unfair in the context of a traditional public procurement the judge found no fundamental issue describing it simply as "perhaps less than fair". The judge's conclusion on this point appears to have been heavily influenced by the Claimant's bid being so far behind the winning bid that the defects in the tender process could not have changed the outcome, and thus that the Claimant had suffered no loss.

However, in relation to the terms of the concession, and in particular the 7 year period of exclusivity, the judge made a clear finding that this amounted to an abuse of dominant position, that there was a clear distortive effect on the market, that the process had inappropriately emphasised the return to the Defendant rather than the benefit to consumers and that there was no objective justification for the grant of exclusivity over a period of seven years. It is worth noting that under the new Concessions Directive which has been approved by the EU and is awaiting implementation in the UK that the benchmark for the length of a concession contract is 5 years unless a longer period would reasonably be required by the concessionaire to recoup its investment. 7 years therefore looks out of line with what the EU considers to be 'best practice' on concession contracts.

The case is a timely reminder of the need to consider whether competition law issues may be relevant when organising a tender process. This will particularly be the case for utilities, public bodies who are competing in the market and when considering the award of a concession. It raises three key points:

Firstly, because one of the bases of complaint in Arriva was the fairness of the tender process, the case indicates that the conduct of tenders may be scrutinised under the prohibition on abuse of dominant position.

Secondly, at least for now while we wait for the new Concessions Directive to come into force, the tendering of concessions may be more prone to competition law principles than a 'standard' procurement.

Thirdly, the judge in this case appeared to be strongly influenced by the evidence (relevant to competition claims) of the benefit to consumers and whether this was secured by the granting of an exclusive concession for such a long period. He considered that in this case, bids should have been evaluated on the basis of consumer benefit rather than the financial return to the Defendant. This may mean that, where competition law does bite on the award of a concession, the evaluation of tenders and the terms of the concession should address the benefit to consumers.

So competition law is yet another factor which may need to be kept in mind both if you are an undertaking/contracting authority planning a procurement or a bidder who feels it has been unfairly excluded from a market.

December 13, 2013 11:21 AM | Posted by Prandy, Helen | Permalink

Disappointed bidders in public procurement exercises have often resorted to the Freedom of Information Act (“FOIA”) to try to obtain information which may assist them in bringing a claim. Indeed, anyone is entitled to request information from a public authority which could relate to a variety of different procurements for a variety of different reasons, including purely collateral reasons like checking the proper performance of a separate contract.

Tender documentation and bids normally make it clear that information is provided in confidence but some information is more confidential than others. A contractor may not mind disclosing how many full-time employees it has but would be more concerned that information such as pricing, unit costs and discounts does not become generally available.

There is an exemption under section 43 of FOIA which allows the non-disclosure of information which would prejudice commercial interests. However the exemption only applies if there is deemed to be no public interest in wider disclosure.

In a case recently before the First Tier Tribunal, a local authority had already been ordered to disclose price and discount information by the Information Commissioner on the grounds that it was felt to be in the public interest to disclose it. When the decision was appealed, the Council somewhat ingeniously changed its defence to claim an exemption under section 41.

Section 41 protects information from disclosure when doing so would constitute an actionable breach of confidence. The court was satisfied that the test for breach of confidence could be established in relation to the pricing information. On public interest, the court considered that there must be specific factors in favour of disclosure which outweigh the public interest in the maintenance of confidentiality. Here, there was no evidence of any criticism of the tender process or that it had been carried out improperly or that the public had been misled. On the other side, there was a considerable public interest in being able to carry out the tender process effectively and maintaining a duty of confidence. Accordingly disclosure was refused.

The case is interesting because it suggests that the section 41 exemption might be a more effective protection of confidential information than section 43.

Telford & Wrekin Council v Information Commissioner and Honarmond (EA/2013/0035)

December 11, 2013 4:35 PM | Posted by Prandy, Helen | Permalink
Hard on the heels of the Danish case referred to in our last blog post comes the unfortunate tale of Mr Nadarajah, a sole legal practitioner who operated under the title All About Rights Law Practice.

This case had come before the courts before in April 2011 when Mr Nadarajah had brought a claim for judicial review against the Legal Services Commission (“LSC”) following its rejection of his tender to provide publicly funded legal services. Mr Nadarajah was a shoo-in for the tender as his was the only firm in the relevant geographical area which specialised in mental health. "Get the tender in: Get the contract" or so at least Mr Nadarajah must have thought.

However, on 10 June 2010, the LSC had written to him informing him that the tender had been rejected because a mandatory form had been submitted blank.

When Mr Nadarajah challenged this decision, the High Court held that the LSC had acted lawfully and in the legitimate exercise of its discretion by rejecting the tender. The submission of the mandatory form was a key feature of the process and fairness to all tenderers as well as equal treatment required the insistence that the form be completed.

However, some time later, pursuant to a request under FOIA, it became clear that some aspects of the LSC’s evidence in the original judicial review had been wrong and following an appeal the matter was remitted to the High Court to consider again. In particular it focused on:

• Whether the decision to reject the tender was proportionate; and
• Whether there had been any inequality of treatment.

In deciding that the decision to reject the tender was reasonable and proportionate the court considered the following:

• That completion of the form was mandatory. Indeed it was the only mandatory document in the tender submission.
• It had been made clear in the tender documentation that no alteration could take place after the closing deadline.
• Allowing the completed form to be submitted would be tantamount to allowing a new bid.
• The fact that Mr Nadarajah had been ‘guaranteed’ to win did not render the rejection disproportionate. There was always competition which might be affected by allowing the bid.

In relation to equality of treatment the court found that the appropriate comparators were those firms who had also submitted a blank form. All of those bidders had had their bids rejected. Accordingly, the court found that there had been no inequality of treatment.

It is clear from this case that the court is prepared to support a contracting authority which rejects a non-compliant bid. So how do we reconcile this decision with the decision of the ECJ in our previous blog?
There are perhaps 3 points of critical difference:

• Firstly, the Danish case was at PQQ not ITT stage.
• Secondly, in the Danish case the missing balance sheets were part of the background but were not new information. By contrast the information required in Mr Nadarajah’s blank form was absolutely critical to the assessment of the bid and was information created specifically for the purpose of the bid.
• Finally, the LSC tender documents expressly stated that no alteration or amendment to bids would be allowed once the deadline had expired. The Danish documents contained no such requirement.

As we said in our last blog, where the contract documents contain a mandatory requirement the bidder must be extra careful to submit a compliant bid as the contracting authority will have little or no flexibility to request clarification.

All About Rights Law Practice, R (on the application of) v The Lord Chancellor [2013] EWHC 3461 (Admin), judgment of 15 November 2013
October 10, 2013 10:07 AM | Posted by Prandy, Helen | Permalink
It seems that there are still some procurement exercises underway which were begun before the implementation of the Remedies Directive in 2009. A procurement by Merseyside Waste Disposal Authority (“MWDA”) was one of those procurements. Beginning in July 2006 and following a competitive dialogue procedure MWDA was only in a position to award its contract in August 2013. That contract was very substantial with a value of over £1 billion.

The losing bidder after this protracted process was Coventa and it took legal proceedings to prevent the award of the contract to the winning bidder.

Two questions arose:

• Did the automatic suspension provisions of the Remedies Directive apply to a procurement begun before the Directive was implemented? and
• If not, could the court award an injunction?

To cut a long but interesting story short, the Court concluded that the Remedies Directive did not apply and automatic suspension did not arise when proceedings were issued.

Having reached that decision the Court the had to consider whether or not to give Coventa the equivalent remedy by granting an injunction.

As readers will be aware the criteria for awarding an injunction were established in the American Cyanamid case. They involve looking at (1) whether there is a serious issue to be tried, (2) whether damages are an adequate remedy and (3) where the balance of convenience lies.

In this case it was acknowledged that there was a serious issue to be tried as something had clearly gone very wrong with the competitive dialogue procedure.

As to damages, the court is not averse to finding that they can be an adequate remedy even when the calculation is complicated and somewhat hypothetical but in this case there were so many allegations of breach and so many examples given of alleged miscommunication and confusion that it would be impossible to ascertain what damages arose as a result of which breach.

On the other hand, the potential damage to MWDA caused by a short further delay while the court investigated the procurement was easily quantifiable and could be dealt with by obtaining a cross undertaking in damages from Coventa.

On balance of convenience the Court took into account:
• the fact that if damages were awarded these would have to be met by the taxpayer who would effectively pay twice for the service (to the winning bidder for running the contract and to compensate Coventa);
• the fact that with an expedited trial in approximately 9 months the additional delay arising from an injunction was minimal in the context of the procurement overall;
• the fact that whilst there would be some environmental impact to the delay this was also small in the overall context of the time it had taken to procure the contract.

Accordingly, granting the injunction for what was a relatively short time in the context of the case involved the least risk of injustice.

This case is interesting because had the 2009 Regulations applied the Court would effectively have maintained the automatic suspension under Regulation 47G. This would have been the first time a Court in England & Wales would have been prepared to make such an order so it does give some insight into the thinking the Court may apply when considering an application under 47H.

However this case is very fact specific. It was critical that:
• there seemed at least to be a strong prima facie case that the procurement had gone wrong;
• Covanta were required to give a cross undertaking in damages; and
• The length of time an injunction might be in force was minimal by comparison with the length of time it had taken to complete the procurement.

Case reference: Covanta Energy Ltd v Merseyside Waste Disposal Authority [2013] EWHC 2922 (TCC)
July 29, 2013 4:27 PM | Posted by Beresford-Jones, Jenny | Permalink

In the recent case of Nationwide Gritting Services Ltd v The Scottish Ministers [2013], the Scottish court had to consider whether a claim was out of time or not. The case turned on the question of whether a "suspicion" by the claimant that the contracting authority was in breach of procurement law was sufficent to start the clock running on the limitation period for bringing a procurement challenge (in this case, brought under the older regime, the limitation period was 3 months from the date that the claimant knew (or should have known) of the breach; now, it is of course 30 days from that point).

In 2010, the claimant contacted the contracting authority, Transport Scotland, and offered to supply grit to de-ice roads in Scotland. Transport Scotland did not pursue the matter. After a passage of some time, on 27 April 2012 the claimant heard rumours in the market that Transport Scotland had purchased and was storing grit. On 30 April 2012 the claimant asked Transport Scotland for details of the tendering process for this purchase and, having got no response, it sent a reminder email on 18 May 2012, saying it was considering legal action. Transport Scotland replied on 30 May 2012 saying that it had procured the grit under the negotiated procedure without a notice “for reasons of extreme urgency”.

On 28 August 2012, the claimant brought a claim that this was not justified and that a full procurement process should have been followed. Transport Scotland argued that the claim was out of time and that the claimant had had grounds to bring the claim before 28 May 2012 (being the date three months prior to the date the claimant actually issued the claim). The court disagreed and held that, prior to 30 May 2012, when Transport Scotland confirmed it had indeed let the contract without a competition, the claimant only had suspicions and did not have the requisite amount of knowledge to start the clock ticking. Prior to that point, for all the claimant knew, the supply of grit might have been made under a legitimate procurement process. As such, the claim was (just) in time.

Having enjoyed a three month limitation period in the wake of the Uniplex case, claimants are now operating within a more challenging environment, following the recent reduction in the limitation period to 30 days. This is a relatively short period of time during which a claimant needs to gather the evidence about the breach and make the decision to take legal action, and prepare the claim form. Another very recent case we've blogged on, Corelogic Ltd v Bristol City Council [2013], has starkly demonstrated the unwillingness of the Court to allow claimants to amend a claim form to add new claims after issuing it. This case against Transport Scotland, however, is a nugget of good news for claimants, as it underlines the fact that the clock will only start to tick once it is possible for the claimant to have knowledge of an actual breach. A "mere suspicion" is insufficient.

July 25, 2013 7:47 PM | Posted by Prandy, Helen | Permalink
In April this year I blogged on the case of Roche Diagnostics Ltd v The Mid Yorkshire Hospitals NHS Trust in which the court allowed applications for specific and pre-action disclosure of documents against the contracting authority provided these were tightly focused and relevant to the decision being challenged. Such an application was allowed in order to redress the balance of information where bidders generally have access to very little information before they must bring proceedings for breach of the Regulations.

What was clear from Roche, however, is that the court will not allow generalised requests for documents of only marginal relevance and this has been reiterated in the recent case of Pearson Driving Assessments Ltd v The Minister for the Cabinet [2013] EWHC 2082 (TCC). In Pearson the bidder was facing an application by the contracting authority to lift the automatic suspension. It had already been agreed between the parties that certain documents were relevant and that disclosure of them would be given very soon after the application to lift the suspension. However, Pearson sought disclosure of these documents prior to the application to lift the suspension because they considered that it would help them to establish that there was a 'serious issue to be tried' one of the key questions the court must consider in deciding whether or not to lift the automatic suspension.

Notwithstanding that the documents sought were acknowledged to be relevant and would be disclosed soon after the hearing in any event the High Court refused the application for early disclosure on the basis that they were not necessary to enable Pearson to establish that there was a serious issue to be tried.

The decision shows that while the court is mindful of the need to be fair and to give the Claimant access to documents which are necessary to establish its claim it will only make early orders on disclosure where the documents sought are necessary. It will not sanction a random fishing expedition and will look forensically at what is being sought before making any order.
July 25, 2013 11:17 AM | Posted by Prandy, Helen | Permalink
All procurement practitioners know that you only have 30 days from the date of knowledge of a potential breach to bring a claim under the Public Contract Regulations ("the Regulations") and now also for judicial review. To protect the position it has become common practice to issue a short Claim Form within the 30 day period leaving the claim to be set out in detail in the Particulars of Claim. Indeed this is often the only way to proceed as the information needed to fully plead the claim has not necessarily been disclosed.

However, the High Court has recently given a very stark warning that causes of action not included in the basic Claim Form may not be brought outside the 30 day limitation period potentially depriving bidders with only half the story when they issue the proceedings of their strongest claim.

To understand this point it is important to understand that the court will not allow 'new' causes of action brought after the expiry of the basic limitation period unless the party can show that the new cause of action arises out of the same facts or substantially the same facts as those already in issue in the proceedings. The basic limitation period for procurement claims is 30 days.

In Corelogic Ltd v Bristol City Council [2013] EWHC 2088 (TCC) Corelogic issued a Claim Form alleging inadequate provision of post-tender (my emphasis) information. However, several weeks after issuing Corelogic sought to amend the Claim Form to allege manifest errors in the assessment of the tender and the use of undisclosed award criteria. Both of these allegations related to matters which took place during the tender process.

The High Court held that these allegations were new claims as they related to the conduct of the tender and not to the failures post tender which had been the original source of complaint. Accordingly, they were outside the primary limitation period and unless Corelogic could persuade the court that they arose out of the same or substantially the same facts as the matters alleged in the original Claim Form the amendment to include them would not be allowed. Unfortunately for Corelogic the court considered that as the existing claim related to matters post tender and the amended claim related to matters during the tender they did not arise out of substantially the same facts.

The amendment was not allowed and as a result Corelogice were deprived of what may have been a better and much stronger claim albeit they might seek redress by way of a claim for professional negligence against their lawyers.

The case is a warning that the need for haste in issuing proceedings for breach of the Regulations should not compromise the drafting of the Claim Form to ensure that it covers not just known claims but potential claims which might come to light as more information inevitably emerges.
June 28, 2013 9:53 PM | Posted by Beresford-Jones, Jenny | Permalink

Readers will be aware that The Public Contracts Regulations 2006 (the "Regulations") provide a mechanism by which the running of a procurement process and the decisions taken within it can be challenged by bidders and/or others with an interest in the outcome. Because contracting authorities are public bodies, their decisions taken in a procurement context will often also be amenable to judicial review, a route often taken where the claimant is perhaps a disatisfied end user of service that has been outsourced, rather than a bidder within the process. For example, we reported recently on the Virgin Care/Devon County Council/Devon PCT case where an end user challenged a decision to outsource children's health services to Virgin Care.

We have recently had the written judgment in a similar case, R (on the application of Maria Stella Nash) v Barnet London Borough Council & (1) Capita Plc (2) EC Harris LLP (3) Capita Symonds (Interested Parties) [2013], in which the claimant objected to the Council's decision to outsoure a wide range of its services to the private sector. She argued that there had been a failure to consult and a breach of the council's duty under s.149 of the Equality Act 2010. The case hinged on whether the claim had been brought within the required time limits, or not.

A judicial review claim must (until 1 July 2013, when the rules change; see below) be made "… not later than 3 months after the grounds to make the claim first arose". This raised the interesting question for the court in this case of when exactly the grounds “first arose”, given that, as in many procurement processes, the contracting authority’s decision to outsource the services could be said to have been made in various stages. 

The Claimant argued that the grounds first arose when the Council actually awarded the contract to Capita and others, and therefore that the claim was within the 3 month time limit. Barnet on the other hand argued the claimant was challenging the decision to outsource the services in itself, rather than the identity of the winning bidder, and that therefore the grounds had first arisen when Barnet commenced the procurement in back in 2011. Therefore the claim was out of time.

The court favoured the Council's argument, perhaps being influenced by the fact that it and the winning bidders had already made substantial financial investment in the process. The court noted that, when deciding when time starts to run when decisions are made in stages, the court will ask whether the earlier decision is merely a "preliminary or provisional foreshadowing of the later decision" (which will not be sufficient to start the clock running), or alternatively, whether "the earlier and later decisions are distinct, each addressing what are substantially different stages in a process" (in which case the earlier decision will be the relevant decision for the question of when "grounds first arose"). This judgment is good news for contracting authorities, as it presumably makes it more likely that judical review applications will be found to be out of time.

Readers should also note that on 1 July 2013 new time limits apply, such that the time limit for a judicial review claim in respect of a decision governed by Regulations will be 30 days from the date when the grounds for the claim first arose, thus harmonizing the time limits for a judicial review claim in the procurement context with those for a procurement challenge under the Regulations.

April 24, 2013 5:59 PM | Posted by Helen Prandy | Permalink

One of the commonest queries we receive from disappointed bidders is “how can I get hold of the documents I need to know whether it is worth bringing a claim”. This is a perennial problem for those wishing to challenge an award particularly if they are to meet the time limits for challenges set out in the Regulations. Whilst a FOIA request can unlock some information the statutory scheme gives contracting authorities enough time to legitimately drag their feet until the time limits for issuing proceedings under the Regulations has passed.

In a recent case before the High Court, the judge ruled that an aggrieved bidder could obtain early disclosure of specific documents which might enable it to take an informed view of the evaluation process and for pre action disclosure of documents relating to the letting of an interim contract.

An application for specific disclosure identifies particular documents or categories of documents which are regarded as critical to the case and asks for those to be made available as soon as possible. As a matter of principle the court recognised that a Claimant in a procurement case is in a uniquely difficult position compared to the Defendant because it simply does not know what happened in the evaluation of its tender. The court found that in general terms the Claimant ought to be provided promptly with the essential information and documentation relating to the evaluation process. However the court was also keen to ensure that a balance was struck between those cases where the Claimant has a prima facie case and those where it does not. The request for disclosure should be focussed rather than a ‘fishing exercise’.

In an application for pre-action disclosure a party may ask for disclosure of documents to enable it to consider if it has a case or not. A court may order pre action disclosure if it is fair to do so and it may assist the parties to avoid litigation or save cost. Where there are concerns about confidentiality (for example, because the documents requested include information relating to the successful bidder’s bid or which might otherwise prejudice commercial interests or fair competition) it is common to establish a “confidentiality ring” into which the documents are disclosed and to which only specified individuals have access usually lawyers, counsel and other key advisors).

The court allowed both applications, at least in part, and ordered the Defendant to disclose documents. Indeed, in relation to the request for pre action disclosure the court commented that it had been surprising that access to basic information had not been given voluntarily. There were no confidentiality difficulties presented by disclosure as the parties had already agreed that a confidentiality ring should be established.

The important lesson here for contracting authorities is that it is rarely sensible to sit on relevant information and force the Claimant to incur legal costs to pursue it. Firstly, the more open you are the better chance you have of persuading a Claimant not to make a challenge and avoiding the costs of litigation. Secondly, public authorities have a duty of candour so should generally be more open in their dealings than a private party might be. Thirdly, the information requested will almost certainly come out anyway either by way of a request under FOIA or in the course of litigation. Refusing disclosure really serves no purpose if you wish to avoid scrutiny of your decisions. Finally, going to court and arguing about disclosure is expensive and if a court takes the view that disclosure should have been given voluntarily a party could be heavily penalised in costs.

For those interested in learning more the full case reference is Roche Diagnostics Ltd v The Mid Yorkshire Hospitals NHS Trust [2013] EWHC 933 (TCC)

February 18, 2013 12:16 PM | Posted by Beresford-Jones, Jenny | Permalink

Readers of this blog may remember from 2010 the interesting case involving Leeds City Council and developer Montpellier Estates. At the 2010 initial hearing, the judge decided that the bidder had a claim that ought to be heard at full trial. The main trial was held recently, and judgment in favour of the Council was handed down in early February. 

In this case, Leeds City Council was looking to develop an arena on a site in the city and sought bids. £20 million of public sector "gap" funding was available. The council separately, and outside of the procurement process, considered a "Plan B" proposal, whereby the Council would develop the land itself in the event that this alternative offered better value for money. During the procurement process, market conditions worsened as the 2008 credit crunch took hold, meaning that it was increasingly difficult to make any development scheme viable with gap funding at £20 million. The Council decided to abandon the procurement process and instead resort to Plan B. It was common ground between the parties that it did so in accordance with the rules on abandonment.

Montpellier Estates Limited ("MEL") was one of the bidders in that competition. It brought several claims, including a claim in deceit and a breach of implied contract claim. For our purposes, the most interesting element of this long judgment is the section on MEL's claims under the public procurement regulations in which it alleged that the parallel development of the "Plan B" proposal introduced a new public sector comparator evaluation criterion into the process, in an untransparent manner. It argued that this was a development relevant to the process, of which bidders were not made fully aware, breaching the requirement to run the procurement in a transparent way. The Council's duty to behave in a transparent manner applied to every facet of a procurement process, including whether there were developments taking place outside the process which could affect it.

Leeds City Council, on the other hand, argued that the fact that a public body might judge vfm by using a public sector comparator ought to have been obvious to any reasonable bidder. It also argued that the duty to act transparently applies to the process of selecting the most economically advantageous bid only, and does not extend to other questions, for example, whether the process should be continued or abandoned, or whether an alternative solution may be explored in parallel.

The judge decided in Leeds' favour, holding that "Plan B" was not a competitor bid in the procurement process, nor was it an evaluation criterion. It was merely a comparator which had a legitimate purpose of assisting the Council to decide whether the competition should continue or be abandoned. The documentation stated that comparison with the public sector comparator was "an internal evaluation process and is intended to evaluate bids commercially in terms of the value for money these present. It is not intended to be used to deselect any bidder. … The analysis will assist in understanding the quality of bids to date and enable [the Council] to determine how the competition should move forward".

As such, MEL's claim failed. Even had it succeeded, it would have been out of time since it was made more than three months after MEL had knowledge of the alleged breaches.

The judgement provides comfort to contracting authorities that the courts, in the absence of deceit or sham and provided that the requirements of the regulations are followed, will support the discretion of a contracting authority to abandon a procurement or to explore alternative solutions. It also confirms that the courts will not treat public sector comparators as evaluation criteria, where these are used to assist the contracting authority in deciding whether the competition should continue or alternatively be abandoned in favour of an in-house solution.
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February 18, 2013 12:16 PM | Posted by Beresford-Jones, Jenny | Permalink

Readers of this blog may remember from 2010 the interesting case involving Leeds City Council and developer Montpellier Estates. At the 2010 initial hearing, the judge decided that the bidder had a claim that ought to be heard at full trial. The main trial was held recently, and judgment in favour of the Council was handed down in early February. 

In this case, Leeds City Council was looking to develop an arena on a site in the city and sought bids. £20 million of public sector "gap" funding was available. The council separately, and outside of the procurement process, considered a "Plan B" proposal, whereby the Council would develop the land itself in the event that this alternative offered better value for money. During the procurement process, market conditions worsened as the 2008 credit crunch took hold, meaning that it was increasingly difficult to make any development scheme viable with gap funding at £20 million. The Council decided to abandon the procurement process and instead resort to Plan B. It was common ground between the parties that it did so in accordance with the rules on abandonment.

Montpellier Estates Limited ("MEL") was one of the bidders in that competition. It brought several claims, including a claim in deceit and a breach of implied contract claim. For our purposes, the most interesting element of this long judgment is the section on MEL's claims under the public procurement regulations in which it alleged that the parallel development of the "Plan B" proposal introduced a new public sector comparator evaluation criterion into the process, in an untransparent manner. It argued that this was a development relevant to the process, of which bidders were not made fully aware, breaching the requirement to run the procurement in a transparent way. The Council's duty to behave in a transparent manner applied to every facet of a procurement process, including whether there were developments taking place outside the process which could affect it.

Leeds City Council, on the other hand, argued that the fact that a public body might judge vfm by using a public sector comparator ought to have been obvious to any reasonable bidder. It also argued that the duty to act transparently applies to the process of selecting the most economically advantageous bid only, and does not extend to other questions, for example, whether the process should be continued or abandoned, or whether an alternative solution may be explored in parallel.

The judge decided in Leeds' favour, holding that "Plan B" was not a competitor bid in the procurement process, nor was it an evaluation criterion. It was merely a comparator which had a legitimate purpose of assisting the Council to decide whether the competition should continue or be abandoned. The documentation stated that comparison with the public sector comparator was "an internal evaluation process and is intended to evaluate bids commercially in terms of the value for money these present. It is not intended to be used to deselect any bidder. … The analysis will assist in understanding the quality of bids to date and enable [the Council] to determine how the competition should move forward".

As such, MEL's claim failed. Even had it succeeded, it would have been out of time since it was made more than three months after MEL had knowledge of the alleged breaches.

The judgement provides comfort to contracting authorities that the courts, in the absence of deceit or sham and provided that the requirements of the regulations are followed, will support the discretion of a contracting authority to abandon a procurement or to explore alternative solutions. It also confirms that the courts will not treat public sector comparators as evaluation criteria, where these are used to assist the contracting authority in deciding whether the competition should continue or alternatively be abandoned in favour of an in-house solution.
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February 8, 2013 8:59 AM | Posted by Smith, Ruth | Permalink
Had the Government pressed ahead with its reforms, we would have seen a new franchising system, whereby a single exam board had the monopoly to run the new English Baccalaureate Certificates (EBC) for a particular subject area for a period of 5 years.

So does such an approach in principle raise EU procurement concerns? There is discussion in the House of Commons Education Committee’s report of the distinction between a “contract” and a franchise “relationship”; the point being made by the Committee that if classified as the former (which the committee suspected) then EU procurement law would come in to play.

But we understand the Government had always intended to advertise and hold an open competition for each franchise; which Ofqual would then award according to objective and transparent criteria. So classification as a public services contract (which being education would be for Part B services) or even a public services concession ought not to have been such a major concern. Such a process, if followed correctly and carefully, would be consistent with any EU procurement or EU Treaty obligations applicable to Part B contracts or concessions.

We suspect the risks posed by the pace and radical nature of the reform and its impact on the existing market were the real reason for the u-turn. Creating a monopoly in a market which has previously been highly competitive inevitably heightens the risk of legal challenge (as winners have a lot to gain but equally losers a lot to lose). Irrespective of its merits, a legal challenge to a Government process or decision (whether on EU procurement grounds, judicial review or otherwise) will at best cause disruption and delay and at worst the cancellation of the process altogether. With recent judicial review challenges such as the West Coast mainline still reverberating, and lessons to be learned about how mistakes can be made when seeking to introduce major change in over ambitious timescales, it is perhaps not surprising that the Government made the decision it did.
January 28, 2013 6:40 PM | Posted by Smith, Ruth | Permalink
Can the Court impose a requirement for a cross undertaking in damages before it has heard an application to lift an automatic suspension? That was the question the Court in Northern Ireland had to consider in Lowry Brothers Ltd and Wilson v Northern Ireland Water Ltd [2012]

The case concerned separate actions brought by each of two unsuccessful bidders, both bidding for appointment to Northern Ireland Water’s capital delivery framework for water and sewerage works. Their claims were brought under the Utilities Contracts Regulations 2006.

As proceedings were started before any appointments had been made to the framework, the automatic suspension preventing the utility from entering into the contract was triggered. The utility applied to the Court for an order lifting the automatic suspension and a date for the hearing set. A preliminary hearing was also arranged, to take place approximately 6 weeks in advance of the application hearing date.

During the preliminary hearing the utility raised the question of whether the claimants should be required to provide a cross undertaking in damages. The utility argued that the delay in entering into the framework would impact significantly on the delivery of infrastructure improvements and would also have major cost implications (including additional procurement costs). It also argued, in the event its application to lift the suspension succeeded, it would be uncompensated for the loss suffered in the intervening period (i.e. the period whilst the suspension was in force) and that the claimant should therefore be at risk during this period.

Despite the utility’s arguments, and even in the absence of any evidence submitted by the claimants, the Court was not prepared to impose a cross undertaking in damages on the claimants at the preliminary hearing stage. In fact it considered that it was not even open to the Court to do this. In reaching its decision, the Court's analysis of the relevant provisions in the Regulations (and in particular Regulations 45H(1) and 45H(3)), was that an undertaking in damages could only be imposed within the framework of an order of the Court. The preliminary hearing stage was not a time "when [the Court was deciding] whether to make an order" for the purposes of Regulations 45H (as this fell to be decided at the later hearing when the utility's application to lift the automatic suspension would be considered). Further, the imposition of an undertaking was a discretionary power and the Court, in exercising such discretion, was obliged to take into account all material factors and be as fully informed as possible. Although the process for the utility's application to lift the automatic suspension had begun, it was too early to consider imposing an undertaking in damages, or any other condition, on the claimants. The Court did not have sufficient evidence to make an informed decision and engage in a proper exercise of judicial discretion.

We will have to wait and see whether the English Courts echo the approach taken by the Court in Northern Ireland when considering the timing of requests for cross undertakings in damages or if they have more sympathy for the utility or contracting authority's position. It certainly emphasises the need to move quickly in making an application to lift an automatic suspension and to seek an early hearing date.

A further question, which will no doubt be the subject of future litigation is whether, if a Court rejects an application to lift an automatic suspension on condition that a cross undertaking in damages be given, can it require a cross undertaking to be retrospective and so cover the period from when the automatic suspension was first triggered? This would certainly help to rectify the risk to the utility or contracting authority of suffering uncompensated losses if the Court orders the suspension be maintained. However, it would not assist where an order to lift the suspension is made (because the losses arising whilst the suspension was in force will remain).
January 16, 2013 1:16 PM | Posted by Beresford-Jones, Jenny | Permalink
In December, the Laidlaw enquiry into the handling of the West Coast franchise procurement published its final report. The Department for Transport (“DfT”) unfortunately did not come out of the saga very well, and the report contains some salutary lessons for contracting authorities to take away if they wish to avoid similar embarrassment in the future.

The key problem with the process was around the sizing of the subordinated loan facility (“SLF”) that the DFT required the parent company of each bidder’s group to provide. Rail franchise operators depend upon revenue from ticket sales and therefore are particularly exposed to general economic conditions which influence passenger numbers. These loan facilities functioned like parent company guarantees - the DfT would be able to call upon them in the event that the franchise operator found itself unable to make the necessary payments to the DfT under the terms of the franchise.

The Report found that there was a lack of transparency about how the required level for the SLF would be determined. As a result bidders were unable to predict the SLF level required in respect of their bid. Guidance was offered by the DfT but it was inadequate. Further, officials departed from the guidance when applying the methodology to determine the necessary size of the SLF in relation to each bid. In particular, in some cases, extraneous factors were taken into account that were not contemplated by the guidance, meaning that bidders were in fact not treated equally. Readers will remember that the core principle of treating bidders transparently, equally and in a non-discriminatory manner lies at the heart of the procurement regime.

The enquiry uncovered several organizational problems with the way the DfT functioned during this procurement. It noted that there had been opportunities within the process to backtrack and address the breaches, and that external advisers had warned the DfT of the legal issues. These opportunities were not taken. Inaccurate internal reporting up the chain of command meant that the senior civil servants and the Minister made the award decision based upon incorrect information. There was inadequate oversight and supervision. The timetable for the procurement was overambitious, given the complexity and novelty of this type of franchise. Inadequate resources were allocated to running the process. The organizational structure of the DfT did not set out clear enough responsibilities and there was confusion as to how those involved in the process were to work together.

There were also technical flaws in the way the DfT employed the model for determining the required SLF levels in relation to bids. Figures output from the model were inaccurate as they were not appropriately inflated. The model employed an “elasticity factor” to assess and take account of the likely relationship between the UK’s GDP and likely ticket revenue. The evaluation team did not use the elasticity factor set out in the guidance but instead chose a different factor. Inconsistent and confusing information was given to bidders about this, and ultimately, the figures output from the model were significantly understated as the model had not been used properly.

The West Coast franchise was of course a particularly complex and novel type of procurement. Nonetheless, the lessons to take away from the debacle do translate across to more ordinary procurement processes too:

• consider the likely complexity and novelty of the requirement/process and ensure appropriate time and resources are allocated, especially around reporting and oversight;
• clearly set out roles and responsibilities;
• provide a clear route for escalation in the event that technical breaches in the procurement come to light; and
• ensure that evaluation teams have full training on how to use evaluation models, particularly where these are complex.
January 14, 2013 2:21 PM | Posted by Prandy, Helen | Permalink
In May 2012 we blogged on the case of R (on the application of Unison) v NHS Wiltshire Primary Care Trust which suggested that judicial review may still provide a remedy for some breaches of the rules relating to public procurement.

There has been a lot more interest around judicial review as a possible remedy in procurement cases in recent times and it is worth noting that in its challenge to the decision of the Secretary of State for Transport over the West Coast main line, Virgin Trains’ primary focus was on judicial review proceedings rather than a claim under the Regulations, although both claims were issued.

The basis of Virgin’s application for judicial review was that the franchise was a services concession contract which is specifically excluded from the Regulations by Regulation 6(2)(m). This argument was based on the fact that the franchise operator was to be remunerated by income from fares rather than through payments made by the Secretary of State.

Although it was excluded from the scope of the Regulations it was argued that the contract was of cross-border interest and therefore subject to the general principles of EU law (such as transparency and non-discrimination) under the Treaty of the Functioning of the European Union. Accordingly the decision was susceptible to judicial review.

It is a shame (for procurement lawyers at least) that this point was never argued before the court by the heavyweight legal teams that the parties had assembled but it does show that judicial review should continue to be considered as an alternative remedy especially as ECJ case law has given a very nuanced interpretation of the definition of a ‘services concession’.

One other point of note on judicial review before we leave it again for the time being and that is the promise by the Coalition to combat ‘abuse’ of the judicial review jurisdiction. Those proposals are currently out for consultation and it is worth noting that one of the suggestions in the consultation is that the time limits for procurement claims under judicial review should be brought in line with those in the Regulations.

One perceived advantage of judicial review is that actions must be started ‘promptly’ but there is technically a long-stop of 3 months, as used to be the case under the Regulations. It is difficult to argue, however, that for procurement claims the time limit should not be standardised to 30 days as with claims under the Regulations. We anticipate that this consultation proposal will probably be implemented fairly quickly.
October 8, 2012 4:31 PM | Posted by Prandy, Helen | Permalink
It is not often that we get to hear about the conduct of claims for breach of The Public Contracts Regulations 2006, so it is useful when an application comes to light which gives a glimpse of the court’s thinking.

On 28 September 2012, the High Court ruled that, as the issues raised in public procurement disputes are concerned with manifest error or unfairness, expert evidence will not generally be admissible or relevant. The court’s purpose in these claims is to review the decision, not to substitute its own view for that of the contracting authority. Accordingly, there are rarely circumstances where expert evidence on what might or might not have happened will be relevant.

The admissibility of expert evidence is not wholly excluded but it will only be permitted where it is required to provide technical explanations or where it will allow the court to reach a conclusion of manifest error.

In the present case, the proposed expert evidence was likely to lead to an exercise where experts effectively re-ran the tender process, commented on each element of the tenders and substituted their own views on the decisions reached.

This guidance is useful because it demonstrates that a challenge under the Regulations is more about process and review than substitution of one view for another. In that respect, it closely mimics judicial review. Leaving to one side the important practical effects of limiting the use of evidence in these cases, it also ensures a substantial saving in cost if experts can be kept out of court and the matters in dispute are tightly defined.

Anyone interested in reading more should search for BY Development Ltd and others v Covent Garden Market Authority [2012] EWHC 2546 (TCC).
August 22, 2012 11:50 AM | Posted by Prandy, Helen | Permalink

When the question “What have the Romans ever done for us?” was posed by the People’s Front of Judea in Monty Python’s Life of Brian there quickly followed a long list of benefits ranging from wine to public order.

And so it might be with Greek IT supplier European Dynamics. Perhaps not as important as a hot water system or public health, European Dynamics' tenacious approach to public procurement litigation over the years does, however, read like a top 10 of procurement basics. So here’s what I think European Dynamics have done for us: 

  1. European Dynamics frequently bid as part of a consortium. The General Court has confirmed that a claim from a single member of a multi-party consortium is admissible as each member is an addressee of the contested decision. 
  2. If the tender documentation specifies a particular requirement for bids then the bid can only be lawfully considered if that requirement is met. European Dynamics have been on both sides of decisions on this. In one case their bid failed because they could not obtain a permit that was a specific requirement of the tender, but they also successfully challenged where a winning bidder submitted a bid by post but could not prove that it had met the requirements of the tender to send the documentation before a particular date or by registered post. Where the winning bidder could not prove that it had posted its bid in accordance with the tender requirements, its bid had to be discounted. 
  3. Qualifying criteria must not be confused with selection criteria and used as part of the assessment of the bid. In December 2011, the General Court upheld European Dynamics’ complaint against the European Commission that, amongst other things, it had evaluated the tender by reference to a summary of services and managed websites. This was deemed to amount to an evaluation of the tenderers’ experience rather than an evaluation of the tenders solely on the basis of the quality of the tender itself. The court added that a criterion based on the tenderers’ experience relates to technical and professional capacity to perform the contract and cannot therefore be aimed at identifying the contract offering the best value for money. 
  4. Provided qualifying criteria are not mixed up with selection criteria then contracting authorities have a broad discretion with regard to the factors to be taken into account for the purposes of taking a decision. European Dynamics have challenged this time and again and have rarely been successful. As recently as April 2012, the General Court confirmed that a contracting authority has the power to choose the selection criteria which it considers best suited to the purpose of the call for tenders provided that the chosen criteria are clear, proportionate to the purpose of the call for tenders, and non discriminatory. Similarly, in March 2010 the General Court found that that contracting authorities were free to choose the criteria on which they proposed to base their award of the contract provided those criteria could be applied objectively and uniformly in order to compare tenders. 
  5. European Dynamics have challenged several times on the basis that incumbents have an unfair advantage. In September 2011, the General Court commented that to the extent that an incumbent contract may have an advantage over other tenderers this was in no way a consequence of any conduct on the part of the contracting authority. Short of excluding bids from incumbents it is almost inevitable that some form of advantage would be conferred on the incumbent because they have been performing the contract up to that point. That did not mean that it could be inferred from the results of a tendering procedure that there had been a breach of the principle of equal treatment. Some further evidence of favouring an incumbent would have to be provided. 
  6. A contracting authority may seek clarification of a bid, and indeed should do so if there is a “particularly obvious” material error in the bid. Where the tender is ambiguous there is no obligation to seek clarification. In any event, an ambiguity can only be clarified where it is easy and simple to remove the ambiguity. Any further than that and there is a risk of straying into alteration of bids. 
  7. An outright win for European Dynamics on this one as the General Court annulled the decision of the European Investment Bank where, amongst other things, the successful bidder had been allowed to alter its bid after evaluation. Following evaluation the winning bid was judged the costliest and so a further meeting with that bidder alone was held, during which the successful bidder was allowed to make alterations to reduce the cost. Following that meeting the contract was entered into. Allowing one bidder to alter its bid in this way was a breach of the principles of equal treatment, non discrimination and transparency. 
  8. Another common complaint by European Dynamics is that it had not been given sufficient information about its own or the winning bid to enable it to challenge a decision. In July 2007 the General Court found that the European Commission had given insufficient information to allow European Dynamics to understand the characteristics and advantages of the successful tender and so to defend its rights. This was following a failure to give any comment on the successful tenderer’s bid when comparative scores were provided. As the successful tenderer had offered a higher price the assessment of the quality of the bid as regards the qualitative award criteria had been the deciding fact and that made the provision of the information all the more necessary. 
  9. It can be difficult to challenge a contracting authority’s assessment of a bid. European Dynamics have repeatedly tried to do this and rarely succeeded. Typical of the usual response of the General Court is that made in September 2011 when it held that contracting authorities have a broad discretion with regard to the factors to be taken into account for the purposes of taking a decision awarding a contract and that review by the court must be limited to checking that the rules governing the procedure and statement of reasons have been complied with, that the facts found are correct and that there has been no manifest error of assessment or misuse of powers.
  10. Finally, although it is no longer necessary for an unsuccessful bidder to seek an injunction to stop a contracting authority from entering into a contract, English courts still look at what are known as ‘American Cyanamid’ principles in deciding whether to lift an automatic suspension. In one of its forays into the English court system European Dynamics found that it can be difficult to obtain an injunction (and now to prevent the lifting of the automatic suspension) because the court will (a) usually consider that damages are an adequate remedy and (b) the balance of convenience lies in securing the service that has been tendered for.

A study in European Dynamics’ course through the courts over the last few years is a study in the basics of procurement law generally. Like the People’s Front of Judea, practitioners might have cause to be more grateful to European Dynamics than they ever thought.

May 16, 2012 6:58 PM | Posted by Prandy, Helen | Permalink

In a recently reported case, the question of the extent to which judicial review proceedings could be used as a challenge to a breach of the Regulations took an interesting turn.

In the case of The Queen (on the application of Unison) v NHS Wiltshire Primary Care Trust and others [2012] EWHC 624 (Admin) a trade union sought judicial review of a decision by the PCT to outsource family health services. The union challenged the decision to outsource without conducting a competitive procurement procedure.

Whilst refusing the application for judicial review in this particular case the judge commented that although there was no reported case of a union seeking a public law remedy in the context of the Regulations there was no reason to suppose that such an application was legally impossible. He could envisage circumstances (although he did not speculate what those might be) in which a breach of the Regulations could so affect the members of a union that there should be a remedy.

It is notable that it is a requirement of judicial review proceedings that the person asking for judicial review must have a 'sufficient interest' in the subject matter to be affected by a decision in some way. Third parties who might have a 'sufficient interest' are not economic operators within the definitions of the Regulations so can only bring a claim by way of judicial review.

In the High Court the judge noted that Unison would need to show that "performance of the competitive tendering procedure might have led to a different outcome that would have a direct impact on it or its members". He further noted that the burden would rest upon an applicant to support such a proposition by some evidence related to the particular facts rather than mere speculative possibilities.

In this particular case he found that Unison could only speculate at what might have happened had a procurement under the Regulations taken place rather than a decision to outsource. There were no identifiable bidders and no details of how a bid might have been formulated. In the circumstances, Unison could not discharge the evidential burden required and accordingly failed in its challenge on that ground.

April 20, 2012 3:29 PM | Posted by Prandy, Helen | Permalink

A timely lesson in how far it is appropriate to stand by a defective procurement process has been thrown up by the recent case in Northern Ireland of Easycoach Ltd v Department for Regional Development.

The Department for Regional Development held a procurement exercise to select providers of pre-bookable transport services for people with disabilities in four geographic areas. At the end of the process it proposed to award 3 contracts to a company called Quinns and the final one to Out and About Enterprises Limited. Easycoach’s bid was rejected.

Easycoach brought an action alleging that the contract selection criteria lacked objectivity and transparency and that, in fact, the two successful bidders did not satisfy the selection criteria.
Easycoach certainly had grounds for complaint in relation to the selection criteria. Bidders were asked to provide details of a “relevant project” similar “in nature and scale to the services”. The court noted that there was no particularity in what the contracting authority was asking for and no benchmarks, minimum thresholds, project volumes, characteristics, duration or value specified. The evaluators were left to form opinions effectively based on the experience and expertise each possessed.

However, the court concluded that all 3 bidders were equally hampered by this vagueness and in any event Easycoach had brought its claim out of time having known of the deficiencies at the date it received the tender documents.

Easycoach were, however, able to prove other deficiencies in the way the selection criteria had been applied. The court in fact described the approach taken by the evaluation panel as “nebulous and incomprehensible”, giving rise to inconsistencies and contradictions. The ad hoc nature of the process encouraged the formation and application of subjective and intuitive judgements and as such was found to be lacking in transparency.

It got worse. Quinns had made it clear in its tender submission that it intended to sub-contract the services. It was a mandatory requirement that those operating the services should have a licence to do so but the evaluation had only considered whether Quinns was licensed and not whether its sub-contractors were. This was a clear failure and yet the contract had been awarded to Quinns.

It got worse. The court found that Quinns had failed to give evidence of reasonably comparable projects, that its tender was manifestly deficient in providing supporting evidence and that a clear falsity had not been identified by the evaluation panel.

It got worse. Out and About, the court found, had demonstrably failed to satisfy any of the four selection criteria.

What is striking about this case is that the court stayed proceedings for a month to allow the Department to carry out a due diligence exercise to verify the successful bidders’ compliance with the tender requirements. At the conclusion of that exercise, however, the Department concluded that the winning tenders were “complete and accurate in all material respects”.

The due diligence exercise gave rise to further arguments by Easycoach firstly that it should be governed by the same principles of equal treatment and transparency as applied to the Regulations or, if not, that there was an implied contract whereby the Department was obliged fairly to assess the allegations against the 2 successful bidders.

The court found that the due diligence exercise was governed by Regulation 26 of the Regulations but, if that was wrong, it went on to say that there was an implied contract requiring the Department to act with appropriate fairness towards Easycoach. However, Easycoach had been treated unfairly, triggered by the information provided, the allegations made by it following the award letter and bringing the claim. The unfairness constituted inadequate enquiry and insufficient scrutiny to the detriment of Easycoach.

Accordingly the contract award decisions were set aside.

On the bare facts of this case it is surprising that the Department reached the conclusions it did and then stuck to them so resolutely. This seems to have troubled the court which commented that where a claim is brought for breach of the Regulations the public authority is not obliged to defend it. There should be a willingness to accept that there may be legitimacy to a challenge and the High Court noted that “in cases where litigation materialises, there is never any shame in acknowledging the commission of an actionable error or errors: au contraire, the public authority sued will be duly commended by the court, will be acting manifestly in the public interest and, further, will thereby ensure that the expenditure of ever shrinking public funds is minimised to a fraction of the amount which materialises when full blown litigation, which in this sphere entails lengthy and expensive trials, eventuates.”

January 24, 2012 4:32 PM | Posted by Prandy, Helen | Permalink

In a presently unreported decision on 20 January 2012 the High Court considered as a preliminary issue whether Eurostar International Limited ("EIL") fell within the definition of a 'contracting authority' for the purposes of the Public Contract Regulations ("PCR"). The case was argued by procurement heavy-weights Michael Bowsher QC and Sarah Hannaford QC and was the subject of a detailed judgment. Although it focused largely on the Utilities Contract Regulations 2006 the judge gave detailed consideration to the definition of 'contracting authority' for the purposes of the PCR in particular what the definition of 'a body governed by public law' should be.

It is worth noting that under the Regulations as enacted in the PCR, but not under the Directive, a 'contracting authority' can only be a body within the UK. Directive 17 on the other hand applies the definition to a body within any Member State. EIL is a joint venture between SNCF (wholly owned by the French government) 55%, LCR (wholly owned by the Secretary of State for Transport) 40% and SNCB (wholly owned by the Belgian government) 5%. It is currently the sole provider of rail services through the Channel Tunnel and over the years has received a substantial amount of State Aid.

The case was brought by Alstom Transport which argued that EIL was a body 'governed by public law'. It was a body 'governed by public law' because:

  • It has a legal personality; and
  • It is established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; and
  • It is subject to management supervision by other bodies subject to public law.

The first limb of the definition was uncontroversial.

The second limb has two parts. The court was satisfied that EIL did meet needs in the general public interest. The ECJ threshold on this is not high so, in previous cases, the building of an office block in the town centre was considered to be 'meeting needs in the general interest'. The question therefore was whether the activities were of an industrial or commercial nature. The European jurisprudence on this places a good deal of weight on the extent of competition. The more competition there is the more likely the needs would have an industrial or commercial character. Alstom pointed to the fact that EIL was the sole operator through the Channel Tunnel and also to the fact that it had received a very considerable amount of State Aid.

EIL argued that, taken overall, while it was currently the only operator through the tunnel not only were there other options for crossing the Channel but also the market had been de-regulated and that from 2013 Deutsche Bahn would be running a service through the tunnel. Indeed the services EIL were seeking related to the future and to the prospect of that competition.

The judge agreed that it was right to take all the context into account and the future in which competition would increase and on that basis he found that EIL's activities were of an industrial/commercial character. Accordingly on that ground the submission that it fell within the definition of 'contracting authority' failed.

Notwithstanding this the judge also went on to consider whether EIL was subject to management supervision by other bodies subject to public law. It was undoubtedly true that all 3 of the joint venture partners-SNCF, SNCB and LCR were owned or controlled by the governments of Member States. Under the terms of the Directive this would be sufficient to show management supervision by other bodies subject to public law. The judge however took the view that the UK government had quite specifically implemented the Directive in the way that it had in the PCR so that only UK bodies could be considered contracting authorities. Once SNCF was taken out of the equation then it was not possible to argue that EIL was subject to management supervision by other bodies subject to public law.

This case is interesting because the initial reaction is to assume that EIL would not be caught by the PCR. Once you delve deeper into the structure and set up then it was certainly arguable that perhaps it should be and although the judge in this case eventually agreed that the EIL was not a 'contracting authority' it demonstrates that it is always worthwhile to delve a little bit deeper into the structure and activities of a 'contracting authority' if you consider that a challenge may be appropriate.

January 23, 2012 4:52 PM | Posted by Renfree, Robert | Permalink
A recent Court of Appeal decision contains a useful review of the law relating to the award of “concession contracts”, a type of contract excluded from the main operative parts of the procurement regulations. It also considers the extent to which implied duties to consider a tender can be imposed on a contracting authority, where the contract falls outside the scope of the procurement regime.

The case concerned the Ministry of Justice’s decision to award contracts to bailiffs for recovery of unpaid magistrates’ court fines. The MoJ does not pay bailiffs for this service. Their fees are added to the fine and recovered from the defaulter; the bailiff carries the risk of non-recovery. JBW Group were unsuccessful in tendering. They claimed a breach of the procurement regulations and alleged that the MoJ had provided improper assistance to a rival bidder. The MoJ defended the claim on the basis that the contract was a service concession contract.

The judgment summarised the paradigm case of a concession as being:
where the applicant is put in possession of a business opportunity which he can exploit by providing services to third parties and charging them directly for those services. The contractor then bears the risks of running the business which are typically greater than those involved in performing a contract for a fixed fee.”

Whilst Elias LJ commented that he found the question of whether the bailiff contracts were a concession “very difficult”, he nonetheless held that the requirements of a concession were met. Accordingly, the procurement regulations did not apply.

JBW’s alternative argument was that the MoJ was bound by an implied contract to consider all tenders in accordance with EU principles of equality and transparency.

The Court considered this argument in light of the earlier Blackpool Aero Club decision. The Court was prepared to hold an implied contract existed, which imposed duties on the MoJ to consider the tender in good faith, both as a matter of public and private law. However, it was not prepared to impose wider duties such as equality or transparency, since they were not necessary to give efficacy to the implied contract.
November 14, 2011 6:41 PM | Posted by Calder, Kevin | Permalink

Those attending the annual White Paper Conference on procurement law last week were treated to an insight from leading commentators into the likely future direction of procurement law.

Predictions of future developments included:
- an increased focus on value for money and less of a technical and mechanistic approach to interpreting the rules;
- an attempt to breath new life into the competitive dialogue procedure, with reduced (if any) restrictions on its use, and scope for post-tender negotiation;
- the (welcome?) return of the negotiated procedure to mainstream use;
- further increases in the use of electronic procurement, including availability of all tender and contract documentation online earlier in the procurement process; and
- improved training and guidance for those involved in procurement.

Speakers also highlighted the need for clarity about how the government's extensive plans for mutuals would be impacted by the procurement regime. Watch this space!

The White Paper speakers also had some interesting things to say about developments on procurement challenges. Among the views expressed:
- the American Cyanamid test which has been adopted by the courts for dealing with automatic suspension cases is natural to English courts but imposes a real barrier to claimants;
- there may be insufficient weight given to the public interest in getting procurements right as opposed to procuring the service;
- ineffectiveness as a remedy was counter-intuitive to English courts and unlikely to be very…well…effective; and
- there was little prospect of the EU legislation on remedies being amended in the near future given how recently the Remedies Directive has been introduced.

November 8, 2011 11:32 AM | Posted by Prandy, Helen | Permalink

In 2010 Mrs Hossack, the sole principal of a firm of solicitors which has its only office in Northamptonshire submitted a tender to the Legal Services Commission (“LSC”) for a contract to provide publicly funded services in social welfare law from 14 October 2010. The tendering process divided England & Wales into 125 geographical areas and Hossacks tendered for each. The tender documents required, amongst other things, that the prospective service provider should have, at least, a part-time office in each area where services were to be provided.

In making its bids, Hossacks submitted a pro forma containing identical information. That pro forma referred in each case to Wiltshire and contained information specific to that area. In particular it stated (it turned out wrongly) that Hossacks would open a part-time office in Wiltshire.

Accordingly, when it came to submitting a bid for Northamptonshire, where its sole office was situated, the erroneous information that the firm intended to have a part time office there was given.

In July 2011 the LSC rejected all of Hossack’s bids except that for Wiltshire on the grounds that all other tender forms submitted did not relate to the applicable invitations to tender.
So far, not particularly unusual. What was unusual was that rather than bringing a claim under the Public Contract Regulations (“the Regulations”), Hossacks sought leave to bring judicial review proceedings to challenge the LSC’s decision.

The usual counter to such proceedings is that the Regulations provide an alternative remedy in these cases and generally judicial review is only allowed where no other remedy is available.

This was probably accepted when the application for leave to bring judicial review proceedings was rejected on paper. On appeal, this position was certainly accepted by the judge who even indicated a willingness to transfer the claim to the Chancery Division so that it could proceed under the Regulations.

Hossacks maintained however that the Regulations did not give it an alternative remedy and this argument was accepted by the Court of Appeal handing down judgment on 8 July 2011. It allowed an appeal to bring judicial review proceedings in respect of the LSC’s rejection of the tender for the Northampton area.

The Court of Appeal considered whether judicial review was rendered inappropriate by the existence of an alternative statutory remedy in the form of an application under the Regulations and found that it was not. If Hossacks was to succeed in proceedings for judicial review the LSC’s rejection of its tender could be quashed and the LSC asked to reconsider with the possibility that a contract may be awarded at the end of it. It was not clear that the same result could be achieved under the Regulation where there was a risk that the only remedy was damages. Hossacks wanted the contract, not damages.

The judicial review was heard on 27 October 2011 and was rejected for reasons that are interesting but not the main focus of this blog post. What has been interesting is the willingness of the court to accept the argument that the Regulations do not always provide an adequate alternative remedy and that judicial review may be appropriate where the Claimant is seeking, effectively, a second chance at the tender process.

As the case law develops on the Regulations and the courts have so far seemed reluctant to apply the ineffectiveness remedy perhaps judicial review will be used as an option instead to secure a second bite of the cherry.

August 31, 2011 11:33 AM | Posted by Prandy, Helen | Permalink

From 1 October 2011 new Regulations (the Public Procurement (Miscellaneous Amendments) Regulations 2011) will implement the judgment in the Uniplex case into UK law.

In Uniplex the European Court of Justice considered Regulation 47(7) of the Public Contract Regulations and in particular the requirement to bring proceedings for infringement "promptly and in any event within 3 months from the date when grounds for the bringing of proceedings first arose, unless the Court considers there is a good reason for extending the period". This was very much in line with practice in English courts in particular in judicial review cases.

In Uniplex the ECJ held that in order to guarantee the effectiveness of the remedy provided by the EU Remedies Directive:

  • The limitation period for bringing proceedings to establish an infringement or to obtain damages should not start to run until the date on which the potential Claimant knew or ought to have known of the alleged breach of the procurement rules; and
  • That the requirement to bring proceedings promptly, which left the court with a discretion to dismiss an application before the 3 month time limit for bringing a claim had not yet expired, was inconsistent with EU law as it was not precise and made the limitation rules uncertain.

Judgment in Uniplex was handed down in January 2010. In November the Cabinet Office began consulting on the necessary amendments to the Regulations in order to implement it. The conclusion of the consultation was to amend the Regulations so that the time limit for bringing legal proceedings should be 30 days starting from the date of knowledge of the matters which might give rise to a claim but preserving a discretion for the court to extend the period to an absolute maximum of 3 months from the date of knowledge.

Ahead of the formal implementation of Uniplex the courts have ignored the word 'promptly' in Regulation 47(7) thus largely implementing the judgment of the ECJ by default. As a result, the principal battleground has been over the date of knowledge. The Cabinet Office have chosen not to define this any further than the date on which the potential Claimant first knew, or ought to have known, that grounds for starting proceedings had arisen. The leading case on this is Sita UK Limited v Greater Manchester Waste Disposal Authority which held that the time period begins to run when the potential Claimant has knowledge of the basic facts which apparently clearly indicate (although do not necessarily prove) an infringement of the Regulations.

As a result of implementing Uniplex there are some further consequential amendments dealt with in the new Regulations. These include:

  • A provision that for the purposes of the automatic suspension provisions under Regulation 47G6 the claim need only be issued and not served on the contracting authority;
  • The issued claim must, however, be served, within 7 days of issue; and
  • If the contracting authority is in any event aware that proceedings have been issued then the automatic suspension will still apply.

There is also a modification of the requirements for sending standstill notices. It will no longer be necessary to send a standstill notice to all tenderers who submitted an offer. There will be no requirement to send the notice to those economic operators whose tenders have been 'definitively excluded'. A tender has been 'definitively excluded' where that exclusion has either been held to be lawful in proceedings or where the time limits for bringing a claim have already expired

July 21, 2011 5:10 PM | Posted by Beresford-Jones, Jenny | Permalink
Readers will probably be aware that the Remedies Directive made available a new remedy to claimants known as a “declaration of ineffectiveness”. Briefly, this allows the court to overturn an awarded contract in three specific situations:

• Ground one - where the contract was “directly” awarded without notice or appropriate competition
• Ground two - where the contracting authority failed to run a compliant standstill period, which deprived the bidder of the opportunity to suspend the award process prior to award
• Ground three - where the contract was awarded under a framework arrangement and the rules on “mini-competitions” were not followed correctly.

This new regime has its own time limits which are separate from the general time limits for procurement damages claims. In short, a claimant has up to 6 months from the day after the contract was entered into, unless:

• a contract award notice is published in the OJEU; or
• the contracting authority informs the bidder of the award and a summary of the relevant reasons and relative advantages and characteristics of the successful bid.

In the latter two cases, the bidder’s time limit is reduced to 30 days from the day after the notice is published or the reasons given.

Last week the first claim for one of these declarations of ineffectiveness was heard, in the case of Alstom v Eurostar which concerned a contract for the replacement of the Eurostar fleet of trains.

Back in 2010, Alstom had already applied for an injunction to prevent award – this failed and the contract was duly awarded. Alstom therefore turned to the new ineffectiveness regime to try to get the contract overturned. The claim was actually brought under the Utilities Contracts Regulations 2006, which run parallel to the more commonly used Public Contracts Regulations 2006 and contain many of the same provisions, although there are also some key differences.

The contract was awarded using a qualification system, which is provided for in the Utilities Regulations but not in the Public Contracts Regulations. Alstom complained that:

• the qualification notice Eurostar issued was not a “notice” for the purposes of the first ground of ineffectiveness, therefore there had been no notice and the first ground of ineffectiveness was satisfied; and
• the standstill period had not been run correctly and Alstom had been deprived of an opportunity to seek redress for breaches.

The application was again unsuccessful and the contract was upheld. The judgment brings out the following useful pointers as to how the courts are minded to apply these new provisions:

• a qualification notice was a notice for the purposes of the first ground of ineffectiveness. Note that this is a concept particular to the Utilities Regulations and the ineffectiveness provisions in the parallel Public Contracts Regulations clearly state that it is an OJEU contract notice which is required (as opposed to, say, a Prior Information Notice);

• given that Alstom had brought injunction proceedings back in 2010 to try to prevent the award, it could hardly argue that the second ground of ineffectiveness applied now. The fact that it made the application for the injunction demonstrated that, whether or not the standstill period had been correctly run, it had not been deprived of a chance to prevent the award of the contract; and

• the judge applied the 30 day time limit and made some useful observations about the duty to “give reasons” in these situations, saying that this should be done in a short document in order to lessen commercial uncertainty; “it is undesirable to have a limitation period dependent on a long and potentially contentious document”.

April 21, 2011 4:20 PM | Posted by Beresford-Jones, Jenny | Permalink
On Tuesday, judgment was handed down in the interesting case of Mears Limited v Leeds City Council, which concerned a procurement for the maintenance of public housing stock. The case illustrates some of the rocks on which an evaluation process might founder and provides a helpful practical application of the recent line of cases around disclosure of award criteria. It also provides useful guidance on how contracting authorities might best structure evaluation schemes so as to avoid potential breaches of the procurement regulations.

Leeds ran a competitive dialogue process for tenders to maintain its public housing stock. The process contained several stages. The claimant, Mears, was successful in getting through the initial selection phase, but was unsuccessful in reaching the final bid phase. The assessment of the bids involved three elements which would later prove to be contentious:

• an Evaluation Table, divided into several sections, with each section containing several questions. Each overall section was given a weighting, but within each section, no weightings were given to individual questions. Before the bid deadline, a bidder asked for clarification as to how each question would be weighted and was simply referred back to the Evaluation Table itself (in which each section of questions had an overall weighting). The claimant argued that the questions amounted to separate sub-criteria that should have been weighted, and that this was a breach by Leeds.

• internal Scoring Guidance, which suggested that, this being a competitive dialogue process, full marks on certain elements could be reserved for those bids which showed innovation or exceeded the specification in some way. The claimant argued, following the findings in Letting International v London Borough of Newham, that the failure to tell bidders that full marks could only be obtained by exceeding the stated requirements was non-transparent and was therefore a breach of the regulations.

• internal Model Answers, which gave guidance to evaluators as to what might be expected in answers to the questions in the Evaluation Table. The claimant argued that the content of these Model Answers amounted to separate criteria which should have been disclosed.

An interesting precursor to this hearing is that there was a previous trial in January of this year to decide whether the internal Model Answers should be disclosed to the claimant. Mears became aware of the existence of these Model Answers during the feedback stage, when Leeds explained that marks had been lost because “answers do not hit Model Answers”. Leeds then refused to disclose the Model Answers during the feedback stage on the grounds that to do so would defeat the purpose of the procurement and result in identical, “tick box” answers from all the bidders, between which it would then be impossible to distinguish. The court recognised this as a legitimate concern, but also held that it was essential to Mears’ case that Mears had sight of the Model Answers, and ordered disclosure within a “confidentiality ring”, to Mears’ named representative and solicitors only. This illustrates the dangers of unwittingly providing “ammunition” to bidders during the feedback stage (although of course it can always be argued that bidders will have a right to a wide range of information via a Freedom of Information Act request in any case).

Turning back to the recent hearing, the judge first looked back at the leading recent cases around evaluation and summarised the current state of the law. Criteria, sub-criteria and weightings need to be disclosed to bidders upfront in order that bidders can prepare the bid with an understanding as to how it will be assessed and what the contracting authority’s requirements are. There are however a couple of situations where a contracting authority is justified in not disclosing a criterion; first, because it does not, on a reasonable view, introduce different or new criteria, sub-criteria or weightings; or secondly, because it could not have affected the tenders in any event.

In the light of this, the judge decided that:

• the unweighted questions in the Evaluation Table did amount to sub-criteria and should have been weighted. Bidders may well have bidded differently had they understood the relative importance of each question. This was therefore a breach by Leeds.

• on the evidence, the Scoring Guidance was guidance only and although it suggested that innovative bids might score top marks, it was not impossible to score full marks without innovation. As such this was not a matter that needed to have been disclosed to bidders. The judge seems to have been influenced by the fact that this was a competitive dialogue process where bidders should expect that a contracting authority is looking for offers of individual and potentially innovative solutions. Perhaps his view would have been different had this been a more simple process under the open or restricted procedures.

• a couple of the Model Answers did amount to undisclosed award criteria and therefore this was a breach by Leeds. But, those two answers excepted, there was no requirement to disclose the Model Answers as the majority of them were not award criteria or sub-criteria and were merely guidance. The judge seems to have accepted that there should not be a general rule to disclose Model Answers as this would create “identikit” bids which it would become impossible to evaluate. However he warned that Model Answers must be scrutinised to ensure that they do not contain award criteria or sub-criteria which have not otherwise been disclosed.

Having established that there had indeed been some breaches by Leeds, the judge went on to consider whether the claimant had actually suffered any loss which needed to be remedied. Leeds argued that Mears would still not have obtained a high enough score to advance further in the process even if the breaches had not taken place. But the judge decided Mears only needed to demonstrate more than a “fanciful chance” of being successful had it had access to the information that Leeds had not disclosed, and decided this test was met.

The judge finally looked at what remedy ought to be given to Mears – the choice being to award damages, or to order the re-running of the procurement, or indeed both – the court having a discretion to decide on a remedy under the procurement regulations. He decided that there was a strong public interest issue, in that Leeds would be left without contracts to maintain its social housing, and on that basis that only damages should be awarded and that the procurement should be allowed to stand.

The case is reassuring to contracting authorities that in general model answers are not disclosable in advance provided they do not introduce new criteria; this has been a troubling question in the light of the recent trend in case law to insist on disclosure of award criteria, sub-criteria and in some cases sub-sub-criteria. Contracting authorities would be well advised to ensure that evaluation aids such as model answers and scoring guides, if they are not to be disclosed, do not contain new criteria and are expressly stated to be for guidance only and not prescriptive. Of more concern to contracting authorities is the fact that the case also demonstrates that, where breaches are established, the claimant does not need to show that it would have definitely won the contract had the breaches not taken place; the "more than a fanciful chance" test is not a great hurdle for a claimant to surmount once a technical breach has been established by the court.
February 17, 2011 11:45 AM | Posted by Beresford-Jones, Jenny | Permalink

The recent decision of the Supreme Court in the case of Risk Management Partners v London Borough of Brent ("RMP v Brent") is good news for contracting authorities as it confirms that the courts are not minded to apply the procurement regime in situations where public bodies genuinely co-operate to perform one of their public functions.  In the current economic climate public bodies are increasingly turning to shared services models to meet their requirements rather than risking the cost and delay that is sometimes associated with running a full procurement process, and this decision is encouraging to shared services arrangements.

In RMP v Brent, the London Borough, together with several similar boroughs, clubbled to together to create a mutual insurance company called London Authorities Mutual Limited (“LAML”), a private company limited by guarantee established and wholly owned by the local authorities concerned. Earlier, Brent had also commenced a procurement process inviting bids from insurance providers, of which RMP was one. When the project to establish LAML became a reality, Brent terminated the procurement process it had been running and entered into a contract directly with LAML with no further competition. RMP brought a claim arguing that this contract should have been opened up to competition.

In its defence, Brent relied on the exemption in the European Teckal case. This dispenses with the requirement to run a procurement where a contracting authority has set up a wholly-owned service provider:

  • over which it exercises a degree of control similar to that which it would have over one of its own departments (the "control" test); and
  • the service provider carries out the essential part of its business with the owner contracting authority/ies (the "function" test).

The Court of Appeal in 2009 upheld RMPs claim that the Teckal exemption did not apply, on the grounds that the necessary degree of control was not established. There were various reasons for this judgment including (1) the governing document of LAML contained conflict of interest provisions preventing an authority from being involved in deciding its own insurance claim, and (2) the company had outsourced the day to day management of the company to private sector providers which the Court of Appeal decided prevented the owner-local authorities from having a decisive influence over the direction of the company.

However the Supreme Court has recently overturned the decision of the lower courts. The key points were:

  • that there was always possibility of 75% of the local authorities "directing" the company via the special resolution procedure. This is a useful insight for contracting authorities which are currently considering how the constitutions of companies should be drafted to fit within the Teckal exemption;
  • the fact that a local authority could not vote in relation to discussion of its own insurance claim did not automatically signify that that local authority did not have the necessary degree of control, in the round and jointly with the other local authority shareholders; and
  • the fact that there were two independent directors was not fatal to the control test either, particularly as this is now a requirement of the FSA.

The Supreme Court really took a purposive view of the procurement law regime when deciding whether to apply the exemption. The purpose of the procurement rules, it said, is to preserve competition and prevent unfair discrimination against bidders. However the regime imposes no positive duty on public bodies to go out the market in every possible case; rather public bodies are totally free to place work in house if they so choose. This given, it would be a nonsense to prevent local authorities from working together to exercise their public functions. This approach echoes the view from Europe, where we are increasingly seeing the European court being prepared to apply the Teckal exemption in cases of genuine co-operation.

However readers should bear in mind that the Teckal test itself has not changed and that it still remains a very narrowly construed exemption. It is unlikely to be of much assistance to any public body wishing (as many do in this economic climate) to set up a company which will be able to generate a new source of profit in from the private sector. Features such as private sector shareholdings or a substantial volume of business transacted with private sector customers are likely to prevent a company qualifying.

December 23, 2010 12:57 PM | Posted by Beresford-Jones, Jenny | Permalink
Earlier in the month, you may have seen our blog post about the first known case of a court lifting an automatic suspension under Regulation 47G, Indigo Services Limited v Colchester Institute Corporation, in which Mills & Reeve acted for the successful contracting authority.

On 21 December, judgment was handed down in Exel Europe Ltd v University Hospitals Coventry & Warwickshire NHS Trust. Following Indigo, this is the second case this month where the court has decided to lift the automatic standstill period imposed by Regulation 47G of the Public Contracts Regulations 2006.

In this latest case, the NHS Trust decided it wanted to transfer to a private sector provider a collaborative procurement hub that it had previously established, called the Healthcare Purchasing Consortium (the “HPC”). The Trust proposed to do this by letting a new, single provider framework agreement for the management and operation of the HPC.

Before advertising the framework, the HPC and the Trust had already had discussions with a company experienced in procuring goods and services for hospitals, HCA International Ltd (“HCA”).

Five bidders, including HCA and the challenger in this case, Exel, were invited to tender. Exel expressed concerns about the lack of information contained in the Invitation to Tender and later withdrew from the process. Only HCA submitted a tender. Later, through a Freedom of Information Act request, Exel discovered that the Trust had previously been in discussions with HCA.

Exel brought a claim on six issues during the standstill period. Under the new regime, the effect of this is to "automatically suspend" the award of the contract until the court has looked at the claim and decided what should be done. The NHS Trust applied to the court strike out the claim and to lift the automatic suspension.

Following the Remedies Directive amendments to the regime in December of last year, there has been some uncertainty as to how the courts would approach the new “automatic suspension”. Previously, when deciding whether to uphold a claim for an injunction preventing a contracting authority from entering into a contract, the courts had applied the test in the landmark case, American Cyanamid. Briefly, this test sets out that the courts will make this decision taking into consideration three factors:

• whether the claimant can show that there is a “serious issue” with the procurement process that ought properly to be examined in a full court hearing; and
• what is the “balance of convenience”, (which usually boils down to the question of whether the contract is in the public interest generally); and
• whether monetary damages would be an adequate remedy for the claimant if the court allows the public body to go ahead and enter into the contract.

Together with the Indigo case, this case shows that the courts are approaching the new automatic suspension regime in very much the same way as they used to approach an application for an injunction during the standstill period. This is welcome clarity and shows that the new regime isn't all that different from the old, in terms of what the claimant has to prove to prevent a contract being awarded.

In this case, Exel was unsuccessful in preventing the NHS Trust from lifting the suspension. The court rejected five of the six “serious issues” Exel put forward (although, interestingly, it did find there was a serious issue to be tried in relation to the discussions with HCA prior to the tender, so contracting authorities would do well to take care in this area).

The court also decided that the NHS Trust had shown that the efficient and economic running of the NHS (in which the HPC played its part) was an important area of the public interest, especially as efficient procurement is essential in helping the NHS to make savings. Many of the HPC’s existing contracts would have had to be put on hold if this procurement process had to be re-run. The judge also that decided that damages would be an adequate remedy for Exel in any event, and therefore that, looking at the three factors in the round, it was clear that the suspension should be lifted.

The case is obviously good news for contracting authorities and it demonstrates the persuasiveness of the public interest test with the courts, provided that a genuine public interest can be proved by the public body.

December 15, 2010 4:34 PM | Posted by Prandy, Helen | Permalink

Further to our earlier blog post, Mills & Reeve have advised the successful party, Colchester Institute, in what we believe to be the first reported case under the Public Contracts (Amendments) Regulations.

In Indigo Services UK Limited v Colchester Institute Corporation [2010] EWHC 3237 (QB) judgment on the contracting authority applying to lift the automatic suspension was handed down on 1 December 2010.

In Indigo, the Defendant contracting authority was re-tendering a cleaning contract which was due to expire on 31 December 2010. Due to the need to re-employ staff and to ensure a smooth handover between contractors at least a month's 'mobilisation period' was required before the new contract could begin and if there was no cleaning provision the Institute would not be able to re-open in January 2011 after its Christmas break.

Indigo were the incumbent bidder. However, they failed to win the newly tendered contract and issued proceedings, before the contract was signed with the successful bidder. The contract could not now be signed and the Institute found itself in a situation where one contract was due to run out, no new contract could be entered into and it could not open to students, staff and members of the general public without that provision in place.

At the hearing on 26 November 2010 before D Donaldson QC sitting as a Deputy High Court Judge it was submitted on behalf of Indigo that the continued suspension was essential because if the Institute were allowed to sign the contract with the successful bidder Indigo would lose its primary remedy: the suspension on signing the contract. Allied to this argument was a submission that what the contracting authority should, and could easily do was extend the existing contract with Indigo whilst it re-ran the procurement. Such an extension need only last a couple of months thereby ensuring that the Institute could re-open after Christmas.

It was further argued that damages would not be an adequate remedy as Indigo’s losses were not easily quantifiable and that the "balance of convenience" (a key, if somewhat nebulous factor, in deciding whether an injunction should be granted) lay with Indigo because the contract could be extended.

The Institute argued that damages were clearly an adequate remedy for Indigo, that it could not extend the contract with Indigo without being in breach of EU law and that the potential harm of an indefinite closure whilst the matter was considered by the court was irreparable. It argued that if the court accepted the solution of simply extending an existing contract to allow a procurement to be re-run this would amount to an "incumbent's charter" whereby a disappointed incumbent bidder could subvert the purpose of the public procurement regime by contract extensions which only an incumbent contractor could benefit from.

The court was content to treat the application as though it was an application for an injunction and applied the legal tests established by American Cyanamid in deciding whether the stay should be lifted.

The decision turned on where the judge considered the balance of convenience lay. Despite a conclusion that there was a serious issue to be tried and that damages may not be an adequate remedy for Indigo he considered that the prejudice that might be suffered by the closure of the Institute, with its impact on a wide section of the public, far outweighed any possible harm to Indigo.
This judgment has been keenly awaited by all those involved in procuring public services as it had been difficult to predict whether the courts might try to develop a new legal framework in order to consider a new remedy or simply apply tried and trusted principles that have applied to injunctions for many years.

Although only the first case Indigo demonstrates a reluctance by the court to depart from those well established principles despite the fact that in doing so disappointed bidders are arguably deprived of the effective new remedy they thought they were getting. Such an outcome, whilst reassuring to public bodies, may not be what the legislators in Brussels intended and could ultimately put the English interpretation of the Directive in conflict with the interpretation favoured in Europe.

A copy of the judgment is available from Monckton Chambers. Philip Moser represented Colchester Institute at the hearing. For further details, please contact of our procurement disputes team.

December 1, 2010 3:56 PM | Posted by Beresford-Jones, Jenny | Permalink

Readers may be aware that the new Remedies Directive (which came into force in December 2009) introduced a new process for challenging a contract award. Claimants are now able to "automatically suspend" the award of a contract simply by issuing a claim form during the standstill period. Such an automatic suspension means that the contracting authority may not award the contract until the court holds a hearing and orders the suspension to be lifted (or otherwise).

Mills & Reeve has recently been acting in what we believe is the first hearing in relation to the automatic suspension process. The supplier, Indigo Services UK Limited, brought a challenge against Colchester Institute Corporation ("Colchester") and suspended the contract award process. Mills & Reeve acted for Colchester, which has succeeded in lifting the automatic suspension imposed by Regulation 47J of The Public Contracts Regulations 2006. No written reasons are available yet as the judgment was given orally in court only this afternoon but we will post again with further details once the text of the judgment becomes available.

For further details, please contact Helen Prandy of our procurement disputes team, .

November 29, 2010 2:27 PM | Posted by Beresford-Jones, Jenny | Permalink
Readers familiar with the Health Sector may know that the Co-operation and Competition Panel ("CCP") exists to regulate procurement by NHS contracting authorities and to ensure that procurement is carried out in accordance with the Principles and Rules of Co-operation and Competition.

The CCP has recently decided that a decision of the North West Specialist Commissioning Team (NWSCT) to award a four year exclusive framework agreement breached the Principles and Rules of Co-operation and Competition (PRCC).

NWSCT ran a procurement process for a four year framework agreement for certain mental health services. The complainant provider was excluded from the process at pre-qualification questionnaire (PQQ) stage due to its financial standing. They were told that the next opportunity to get onto the framework is when it comes up for re-tendering in 2013. All purchases will be made through the framework in the meantime.

The complainant brought a conduct complaint, alleging that NWSCT’s conduct prevents it from competing in the market for four years.

The CCP found three detrimental effects of the arrangement, which are likely to result in material cost to patients and/or taxpayers:

• competition was restricted to those providers who had been appointed to the framework agreement, so there would be limited choice of provider;

• NWSCT would not be able to take advantage of improved services and better value for money, if offered by providers not on the framework; and

• the arrangement deters investment by providers not on the framework and potential new entrants to the market.

Those familiar with the use of framework agreements under the procurement rules may be confused as to why the award of a four year framework (with no opportunity to be appointed to the framework until it expires and is re-tendered), would be anti-competitive. This is, after all, standard procurement practice. The problem, however, lies in the fact that NWSCT stated that no purchases will be made outside of the framework agreement. Guidance on the use of framework agreements makes it clear that whilst frameworks are available for use where they provide value for money, contracting authorities are also free to go elsewhere if they do not. The CCP described the decision not to consider purchasing outside of the framework agreement as “a practice clearly not envisaged” by guidance on the use of frameworks.

NWSCT also did not have any provision for mini-competitions to be held under the framework, further reducing competition between providers of these services.

The CCP felt that these factors, along with NWSCT’s powerful bargaining position, meant that the benefits of using a framework agreement did not, in this case, outweigh the costs that the exclusive arrangement would impose on patients/taxpayers.

The case was decided very much on its particular facts (taking account of the type of services being procured). It does not create a blanket ban on ever using a framework agreement for health services. It is also the case that these services would have been Part B services, and therefore the full force of the Public Contracts Regulations 2006 would not have applied. However, it would be prudent to ensure that in using a framework agreement there is always scope to look beyond that framework, where appropriate, to ensure best quality and value and to ensure that it does not amount to a commitment by the contracting authority that it will only use the providers on the framework.

This case also highlights the need to weigh up both procurement and competition considerations together, to ensure that the procurement route chosen is the most appropriate and will not have an adverse impact on the market. This will not always be an easy assessment.

For further information or advice, please contact Fiona Boyse - .
October 4, 2010 3:23 PM | Posted by Beresford-Jones, Jenny | Permalink

Readers of this blog may be aware that the distinction between selection criteria and award criteria has been a hot topic in procurement law recently (together with issues around adequate disclosure of award criteria). The European Lianakis case in 2008 emphasised the importance of ensuring that only criteria aimed at assessing suitability of bidders in general should be used at selection stage, while award criteria ought to evaluate the merits of particular bids in response to a particular requirement.

A couple of recent European decisions against the IT services supplier European Dynamics (“ED”) are therefore interesting given that they cover this distinction between selection and award criteria. The cases are helpful to contracting authorities as they appear to suggest that, while the selection and award stages are distinct and require separate treatment, it is possible to use the same information at both stages, provided it is used in a way appropriate to that particular stage.

The first case concerned a procurement of IT services run by the European Monitoring Centre for Drugs and Drug Addiction ("EMCDDA"). ED claimed that EMCDDA had made a manifest error in confusing its use of selection and award criteria and that it was not entitled to evaluate qualifications and experience at award stage. The judgment is helpful in that it appears to acknowledge that experience and qualifications may be used as award criteria, provided this is done comparatively and in relation to the particular contract being let.

One of the stated award criteria was "technical merit of human resources for the execution of the tasks, 30%". The evaluation committee in this case gave reasons to ED as to why it was unsuccessful – one of these was that, while the system architects ED proposed using had rich academic qualifications, they had limited experience. The court took the view that, given the stated award criterion of "technical merit", EMCDDA was entitled to comparatively evaluate qualifications and experience at award stage; the court certainly did not criticise it for taking this approach. Indeed, the court commented that "the evaluation report does not call into question [ED’s] knowledge or the experience which it has established. During the award stage, those qualities are assessed in the light of the specific proposals made by the applicant regarding the implementation of the defined services".

This is helpful to public bodies as it appears to suggest that a contracting authority may use responses to the same set of criteria (in this case, education and experience) in two ways; (1) at selection stage, to de-select all those not meeting an absolute minimum standard, and (2) at award stage, to look comparatively at how the responses to those criteria score under a particular stated award criterion. The Court held that in applying the criterion relating to technical merit of the human resources, the evaluation committee could clearly take into account the qualifications for and relevant professional experience relating to the required tasks. These did not constitute criteria in their own right but were an inherent part of the stated criteria (and, therefore, it did not matter that qualifications/experience had not been expressly stated as an award criteria in themselves).

The second case concerned a procurement of computer services run by the Publications Office of the EU. ED was unsuccessful and brought a claim against the Commission, claiming that it was criticised for having exceeded the maximum number of pages permitted for best practice documents and that the Publications Office thereby confused award and selection criteria. ED argued that the documents concerned had already been evaluated in the selection procedure and that criteria designed to assess a bidder’s general suitability to perform the contract in question could not be regarded as award criteria.

The Court noted that there must be a distinction between selection criteria and award criteria, which are governed by different rules. However, and interestingly, it found that the assessment of the sub-criterion relating to best practice was different at the two different stages. At the selection stage, the review involved assessment of the technical and professional capacity of the various tenders. However, at the award stage, the review covered compliance with the criterion of the number of pages to be included in the tender. Therefore, if the tender had satisfied the selection criterion as to the content of the best practice documents, there was nothing to prevent the Publications Office from taking into account in its award criteria the fact that the volume of best practice documents exceeded the maximum number of pages requested. This decision again is very helpful as it suggests that the same information can be used in different ways at each of selection and award stage.

It is of course true that all cases turn on their own facts to some extent; the court in these cases may well have been influenced by the fact that the claimant was European Dynamics, which has brought a string of claims in relation to procurements where it has been unsuccessul in the last year or so. Nonetheless, these cases do seem to show the court's willingness to take a common sense approach to selection and award criteria.

July 14, 2010 3:42 PM | Posted by Beresford-Jones, Jenny | Permalink

Readers who have been following public procurement case law will recall that the disclosure of award criteria has featured as a headline topic and major risk area for contracting authorities. The European case of Lianakis held that contracting authorities must generally disclose all award criteria and related sub-criteria, together with percentage weightings attached to each, in the tender documents upfront. This was confirmed in the High Court with the decision in Lettings International v London Borough of Newham, which concerned the same issue. In both of these cases, the public body had disclosed the headline award criteria and weightings but had subsequently decided on sub-criteria during the evaluation, without any disclosure. It has been standard practice since those cases for us to advise clients that the safest course is to always disclose upfront all criteria and sub-criteria together with their weightings.

This new case, Varney v Hertfordshire County Council, heard in the High Court recently, seems to indicate a possible relaxation of the position by the courts. The case concerned a tender for waste management services at 18 sites. The Council ran a restricted procedure procurement process and stated that the contract would be awarded to the “most economically advantageous” tender, with the award criteria being Price (65%) and Customer Satisfaction (35%). There was a PQQ stage, at which the claimant Varney was selected to tender.

The ITT required the bidders to complete “Return Schedules” and submit these with bids. The Return Schedules asked for details of the bidders’ proposals in relation to seventeen different areas, including Customer Service, Dealing with Hazardous Waste, Dealing with Emergencies and Severe Weather Conditions, Site Cleanliness, and many others. At the beginning of each Return Schedule, the Council set out the service level expected in relation to that area, although the relative importance of each of the Return Schedules was not detailed.

Varney argued that each of these Return Schedules amounted to a new award criterion, which should have been disclosed upfront together with relative weightings. The judge disagreed and held that each of the Return Schedules simply dealt with an aspect of either price or customer satisfaction (the two award criteria). The judge on that basis said that “I do not consider that to be a different of new sub-criterion, let alone a separate award criterion”. The judge was careful to state that previous case law would have required disclosure of the Return Schedules had they amounted to new award criteria or sub-criteria. But in this case, they merely amounted to sub-criteria of the award criteria already disclosed and weighted.

This case is obviously helpful for contracting authorities. The judge appears to be minded to distinguish the situation in Lianakis and Lettings International, on the basis that in those cases the undisclosed “sub-criteria” at issue actually amounted to separate award criteria proper. However, in this case, the judge took the view that the Return Schedules were sub-criteria in the proper sense of the word, i.e. merely more detailed aspects of the main award criteria.

The case seems to have turned quite heavily on its own particular facts, and particularly on the credibility of the claimants’ witnesses. The safest course remains for contracting authorities to always disclose award criteria, sub-criteria and their respective weightings. However, the case will be a useful authority to turn to if a contracting authority is ever challenged on disclosure of sub-criteria. If the sub-criteria are merely a detailed facet of the main award criterion, this case will make it more difficult for a challenger to establish a breach.

June 17, 2010 12:04 PM | Posted by Beresford-Jones, Jenny | Permalink

In court proceedings, the parties are typically obliged to make available to the other party all documents that are relevant to the case, regardless of whether they are beneficial or harmful to the disclosing party’s case. In cases concerning public procurement, such documents can be especially sensitive from the contracting authority’s point of view, particularly where tenders may need to be re-run as a result of the claimant’s challenge. Bidders are also likely to be concerned to ensure that their pricing structures and other business secrets are not disclosed to their detriment and to the advantage of a competitor.

The law imposes requirements around confidentiality in the procurement context. Regulation 43 of the Public Contracts Regulations 2006 requires contracting authorities to keep confidential those elements of tenders which bidders have “reasonably designated” as confidential. Behind that regulation there also sits the general “common law” rules on confidentiality, which will impose a general requirement to keep matters confidential if they are of an inherently confidential nature and are disclosed in confidential circumstances. Set against these elements of law, however, is the Freedom of Information Act 2000 (“FOIA”), which is likely to require a public body to disclose information unless it comes within the strict and limited exceptions within that Act.

When procurement challenges come to trial, then, there is often an inherent conflict between the desirability of a full and transparent review on the one hand and the legitimate protection of confidential information and commercial interests on the other.

The issue of what types of document should be made available by public sector bodies to the claimant in public procurement disputes arose in the Technology and Construction Court in April 2010 in the case of Croft House Care Limited and Ors v Durham County Council.

Here the local authority argued that certain types of document were sensitive and if disclosed would compromise their legitimate commercial and public interests and create potential difficulties for them in re-running the tender process, with other documents being confidential to the other tendering parties. The court held that these were not valid grounds to allow the authority to prevent the claimants from inspecting the documents. Certain safeguards were however put in place such that those documents could be redacted to preserve some confidentiality; could only be read in the solicitors’ office; could not be copied; and notes could not even be taken during the inspection.

The court is likely to have to provide such specific direction in future cases, but it is worth bearing in mind that as a last resort, if sensitive documents ultimately do have to be disclosed, conditions to their release can be obtained which provide greater protection to the public body than might otherwise be thought to be the case. Public bodies should always take care to point out in the tender documents that they are subject to the requirements of FOIA and that bidders should take care to designate as confidential any information whose confidentiality they would wish to preserve. It is however sensible to avoid giving bidders any cast-iron guarantees of confidentiality, as circumstances (such as a FOIA request or a court order) may arise which require disclosure and are outside the contracting authority’s control.

April 7, 2010 4:50 PM | Posted by Beresford-Jones, Jenny | Permalink
Readers of this blog will recall that the recent European case of Uniplex has clarified the law on the limitation period for claimants to bring a claim for damages under The Public Contracts Regulations 2006. The Regulations state that the claim must be brought within three months of the date on which grounds for the claim first arose. There was previously a lack of clarity about how the latter date should be arrived at – was it the date of the breach of itself, or rather the date that the claimant obtained knowledge of the breach? The Uniplex decision made it clear that the three month period will only start once the claimant has (or ought to have had) the relevant knowledge.

The recent case of SITA v GMWDA is the first UK case to be decided in the light of the Uniplex ruling. The facts were quite straightforward – GMWDA ran a competition for a massive £3 billion new project which would be the largest of its kind in the UK. In the later stages, Viridor Laing was appointed preferred bidder, with the SITA consortium as reserve bidder. SITA was sent an “unsuccessful bidder” letter accordingly on 18 April 2008. Following nearly a year's delay due to the global credit crunch, GMWDA finally entered into the contract with Viridor on 8 April 2009. Following the award of the contract, there was lengthy correspondence between the parties, in which SITA demanded further information about the procurement process and threatened to commence a claim if this was not provided. SITA alleged that there had been a breach of the Regulations as the final form of the contract had introduced new elements and that SITA ought have been brought back into the competition accordingly.

On 27 August 2009, SITA commenced its claim. GWMDA argued that SITA was outside the three month window in which to bring a claim – the date the “grounds” arose was no later than the date the contract was entered into, which was 8 April 2009. The limitation period therefore ended on 7 July 2009 and SITA was out of time.

SITA’s answer to this argument was that it did not know whether it had actually suffered an actionable loss, until it possessed the information it obtained during the correspondence with GMWDA after 8 April 2009.

The High Court disagreed and ruled that a claimant is fixed with knowledge from the time it knows of the breach, regardless of whether any loss is also apparent at that point. It decided this not least in the interests of legal certainty, because the judge thought it easier to date a breach than to date loss arising from it (lack of legal certainty was what the ECJ criticized in the 2006 Regulations in the Uniplex decision).

This decision was good news for contracting authorities as it shows that bidders do not have a carte blanche to “sit on their hands” but rather they must bring a claim as soon as they have knowledge of a breach, regardless of whether any loss/damage is yet apparent. The case does turn on its own facts to some extent - it is likely that, in most procurement claims, the challenger will become aware of both the fact of the breach and the loss/damage at the same time.

March 4, 2010 11:01 AM | Posted by Beresford-Jones, Jenny | Permalink
Norwich City Council has been in the news lately; reports are that a High Court injunction has been granted against it, preventing it from entering into a contract for the maintenance of its public housing. Reports state that Norwich C.C. is now having to find £1 million a month to obtain an interim solution pending the full trial of the issues, expected to be held this summer. This is bad news for Norwich C.C. which was already having to save £8 million in the budget for this year.

According to the press, the existing contract was worth around £34 million a year. When it came up for renewal, the challenger, Morrison Facilities Services Limited (MFS) submitted a bid of around £23 million. However, it was pipped to the post by the £17 million bid of Connaught PLC. The MFS bid and the other bids received were all around 25% to 33% higher than the Connaught bid.

There is no formal definition of an abnormally low bid; contracting authorities will have to assess each bid on a case by case basis. Further, there is no express duty to reject an abnormally low bid, although Regulation 30(6) gives contracting authorities a right to do so, following proper investigation. Although no transcript of the interim hearing is available, it seems that MFS’s case was based on the argument that the failure to properly investigate a suspiciously low bid amounted to a breach of the fundamental EC Treaty provisions around equality of treatment, transparency and non-discrimination, also enshrined in Regulation 4.

Given the tough economic times, contracting authorities are likely to be receiving a greater number of low bids from bidders desperate to get a foot in the door. This case shows that contracting authorities will do well to be on their guard; if a contracting authority intends to award a contract to a very low bidder, it should make sure that proper investigation does take place and that there are objectively reasonable reasons for the low value of the bid.

February 2, 2010 1:38 PM | Posted by Beresford-Jones, Jenny | Permalink

Last week the European Court of Justice gave judgment in the Uniplex case.

As many of you will be aware, Regulation 47 of the Public Contracts Regulations 2006 provides that challengers must bring a claim for damages "promptly" and in any event within three months of the date on which the grounds for the claim first arose. Until this judgment, it has been unclear how the requirement to begin a claim "promptly" fits together with that three month period. There have also been questions about "the date on which grounds for the claim first arose" - does this mean the date of the breach itself, for example, or alternatively does it refer to the date that the challenger became aware of the breach?

The judgment is helpful in two ways. It confirms that:

1) the period for bringing proceedings should start to run from the date on which the claimant knew, or ought to have known, of the alleged breach.

2) the wording in Regulation 47 which allows a court to dismiss an action brought within 3 months on the grounds that it is not brought "promptly" breaches the principles of certainty and effectiveness and is not compatible with the Remedies Directive. Challengers are entitled to the full three months in which to bring their claim.
 
This is of course in relation to a straightforward damages claim; claims for ineffectiveness have different limitation periods and must be brought within 30 days of the date the contract was awarded, or within six months where the contracting authority does not notify bidders of the award or advertise it.

Alongside the recent changes brought in by the Remedies Directive, this case is likely to give further encouragement to suppliers wishing to bring a claim in the courts.

December 23, 2009 12:07 PM | Posted by Beresford-Jones, Jenny | Permalink
Earlier this month the Scottish court gave an interesting judgment in the case of Sidey Ltd v Clackmannanshire Council & Anor. Readers will probably be aware that recent amendments to the Public Contracts Regulations 2006 have implemented the EC Remedies Directive in the UK and given the courts a power to declare public contracts “ineffective” in certain cases where there has been a breach of the procurement rules.

This Scottish decision shows that the courts may well exercise the power to declare public contract “ineffective”, even where the public contract was entered into before 20 December 2009, notwithstanding the fact that the new rules are stated not to have any effect on procurement processes commenced before 20 December 2009.

Briefly, in this case, the contracting authority voluntarily followed a procurement process, even though the contract was actually below the threshold for the application of the Regulations. There were breaches at the evaluation stage, and Sidey Ltd brought a challenge. The court upheld the challenge and ruled that the contract should be set aside, because no standstill provisions had been observed and therefore Sidey Ltd had had no opportunity to seek redress for the technical breach. As such, the court made its judgment as if the Remedies Directive were already in force.

It is true that the court was probably heavily influenced by the fact that the contracting authority admitted that there had been manifest errors at the evaluation stage which had led to the wrong result. Nonetheless the case does show that contracting authorities should not simply assume that the transitional provisions to the new rules will automatically protect public contracts dating from prior to 20 December. It also shows that if contracting authorities opt to follow a procurement process on a voluntary basis, then the courts are likely to treat the contract as if the rules applied in full.
November 10, 2009 4:29 PM | Posted by Beresford-Jones, Jenny | Permalink
In the recent case of Deane Public Works Ltd v Northern Ireland Water, the High Court in Northern Ireland ruled that a contracting authority was entitled to exclude a bidder who filled in a PQQ with details of experience that was older than that which had been requested by the contracting authority.

Northern Ireland Water simply excluded this bidder, without attempting to clarify. At the same same time it did clarify two points with two other bidders, both of which were manifest errors rather than information about an out-of-date project.

The court held that the public body was right not to obtain clarification from the offending bidder – because to do so would have constituted an infringement of the principle of equal treatment.
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