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Remedies


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

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


November 16, 2017 11:44 AM | Posted by Prandy, Helen | Permalink

Spoiler alert - the following blog will mention Brexit several times.

A frequent query we see through our portal and at our seminars is what is going to happen to public procurement law post Brexit.  The answer we invariably give is “No-one really knows” and with the seemingly intractable issues of the ‘divorce bill’, citizens’ rights and the Irish border still seemingly no nearer to resolution and it looking likely that Britain will miss the latest ultimatum to advance to trade talks with the EU 27 any time soon public procurement law is the last thing (probably) on the minds of Mrs May, Mr Davies and their plethora of officials.

One of the things the Brexiters have been very keen on is the idea of ‘taking back control’.  In legal matters this means ousting the jurisdiction of the European Court of Justice and reinstating the sovereignty of the Supreme Court. 

Post Brexit no-one currently knows what the trade options are but one which is possible, and touted at the time of the Referendum,  is a position similar to that of Norway which is within a free trade area (the EEA) but not part of the EU.  Those countries submit to the jurisdiction of the EFTA court which is equivalent to the ECJ.

Not so long ago the Supreme Court found that to establish a claim in damages for breach of the procurement rules a “sufficiently serious breach” was required (see our blog post here).  However the EFTA court has just found that there is no requirement to show the gravity of a breach in order to recover damages for breach of the EEA rules on public procurement.

So if, at some time in the future, the UK adopts the trade rules of the EEA, or something similar, in order to facilitate trade with the EU 27 will it be this decision of the EFTA court which allows a claim for damages or the contrary decision of the Supreme Court?

Like many Brexit related issues this one may take years to work out but it highlights that wherever we go with public procurement in the future the devil may, as always, be in the detail.

You can read the judgment here: Fosen-Linjen AS and AtB AS (Case E-16/16)(EFTA Court 2016/16)

Posted by

 

Helen Prandy, 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.

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

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.

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.

January 26, 2015 11:33 AM | Posted by Prandy, Helen | Permalink

Remedies - Move On, Nothing to See Here

Last time in our "Countdown to Law-nch" series we were looking at how the draft Public Contracts Regulations 2015 (the "Regulations") might affect the construction industry in particular. This week we have been considering Remedies for procurement breaches, where it seems that the status quo is set to be maintained.

Clearly the Brussels’ legislators felt they had done enough to shake up the landscape of procurement remedies when they passed the EU Remedies Directive in 2007 because the new Directives adopted by the EU last year and due to be implemented by the Public Contracts Regulations 2015 change nothing. The only difference is that the draft Regulations now find a proper place for Remedies and Regulation 47A-P is all now to be found in Part 3 beginning at Regulation 85 and running to Regulation 104.

This is not surprising but is perhaps an opportunity missed to grapple with some of the issues that have arisen (certainly in this jurisdiction) about the automatic suspension (see my blog post on this dated 19 November 2014) and the apparent toothlessness of the ineffectiveness remedy.

So is it a case of “move on nothing to see here” or is there anything for procurement litigators to get excited about in the new Regulations?

There are a few points that it will be worth keeping an eye on although it may take a while before we start to see them take shape. For example, Teckal type situations have been a popular source of litigation across the EU so it will be interesting to see how the codification of Teckal principles work and whether they bring greater clarity. That other famous bugbear of procurement lawyers-Pressetext-has also been codified and it will be interesting again to see if that minimises disputes in this area. Perhaps it will launch a new raft of cases. I have already heard it suggested that Regulation 73 requiring termination provisions to be included might give grounds for a claim if contracting authorities fail to terminate a contract where a substantial modification has taken place.

Teckal and Pressetext are familiar but the Regulations also give rise to a whole raft of potential new areas of dispute. Regulation 57 relating to exclusion looks particularly fraught with issues. What does demonstration by “any appropriate means” mean? What does establishment by a judicial or administrative decision “of final and binding effect” mean? What are “sufficiently plausible indications” Of course, some of this wording may not survive the consultation process but it seems likely that it will given the preference not to ‘gold plate’. In any event there is also the minefield of the “Self cleaning mechanisms and whether a bidder has done enough to prevent exclusion.

So, whilst there is nothing particularly to see in the Remedies themselves potential sources for challenge, old and new, still abound in the new Regulations.

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.
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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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.

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).
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.

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.

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.
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, .

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.

December 24, 2009 8:37 AM | Posted by Calder, Kevin | Permalink

The OGC has published detailed guidance on the new Remedies Directive, in three parts:

  • Part 1: About the rule change, including transitional provisions
  • Part 2: The new rules on the standstill period (including additional guidance on the level of detail to be included in award notification letters)
  • Part 3: The new remedies rules
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.
December 7, 2009 3:11 PM | Posted by Beresford-Jones, Jenny | Permalink

The amended Remedies Directive comes into force on 20 December 2009. The new rules include more detail on the content of award decision notices sent to bidders, and a new power for courts to make public contracts ineffective in certain circumstances. These changes are being introduced via amendments to The Public Contracts Regulations 2006.

While it is clear that new procurements commenced on or after 20 December will be fully subject to the new rules, it is less obvious what is required of procurements that have already been started (but not yet finished) before 20 December.

It’s true that the UK regulations do state that "nothing in these Regulations affects any contract award procedure commenced before 20th December 2009”. The difficulty, however, is that the parent EC Directive from which these amendments come, and which takes precedence over them in terms of legal force, contains no transitional provisions at all, simply stating that “Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 20 December 2009.”

There must therefore be a risk for contracting authorities which conduct debriefs along the old lines after 20 December in reliance on the transitional provisions in the Regulations that a disgruntled supplier will allege that the Directive requires the standstill and review element to be run along the new lines after 20 December, even for procurement processes that were commenced before that date.

Contracting authorities may decide the safest option is to run all debriefs in accordance with the new rules after 20 December, regardless of whether they are strictly required to do so by the letter of the UK Regulations. This may the best option where there are relatively few suppliers who need to receive the new, more detailed award decision notices. Where there are a large number, though, this may not be an attractive route to take.

November 12, 2009 5:49 PM | Posted by Calder, Kevin | Permalink

The UK legislation implementing the Remedies Directive for the procurement of goods and services was published today. The Public Contracts (Amendment) Regulations 2009 come into force for procurements commenced on or following 20 December 2009.

Changes in the final version include clarity around the information required to be given to unsuccessful suppliers.

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