It is now February 2016 and the Public Contracts Regulations 2015 (PCR 2015) have been in force for almost a year. It takes case law a while to catch up with statute but we are now seeing the first cases coming through where the Court has had to consider the new regulations. An interesting recent example is the case of Counted4 Community Interest Company v Sunderland City Council  EWHC 3898 (TCC) in which the Court for the first time looked at the new Light Touch Regime for health and social services and at Regulation 24 which requires a contracting authority to take active measures to nullify any conflict of interest.
Sunderland City Council was re-procuring a contract for substance misuse support services (the existing contract was due to run out in January 2016) The re-procurement was advertised in June 2015 and as it was for health/social services it fell within scope of the new Light Touch Regime (see Regulation 74 onwards of the PCR 2015). The incumbent provider was Counted4 Community Interest Company (the CIC) a non-for-profit business that was established for the purpose of providing these services to the Council a job which it had been doing since 2008. The judgment does not state this expressly but the CIC may well have been awarded the contract at that time without any advertisement or competition (as was previously permitted under the old now repealed Part B services regime).
The CIC was unsuccessful in its bid to operate the new contract and brought a claim during the standstill period triggering the 'automatic suspension' of the award to the successful bidder (a local NHS Trust). The Council applied to the Court to have the suspension lifted. As such this was not a trial of the substantive alleged procurement breaches by the Council but rather of whether the suspension ought to be maintained until full trial or lifted. In these situations contracting authorities are often anxious to be able to proceed with the award process to ensure continuity of services while the claimant's goal is to prevent the contract being awarded at all and to preserve its chance of ultimately obtaining the work.
American Cyanamid test
When deciding whether to lift or maintain a suspension the Court will apply the test set out in the American Cyanamid case. This test poses a hierarchy of three questions:
- Is there a serious issue to be tried?
- If so would damages be an adequate remedy for either party?
- If not where does the ?balance of convenience? lie? (this would factor in issues such as the public interest in the contract being awarded or suspended).
The CIC's arguments
The CIC argued that the suspension ought to be maintained until a full trial of the alleged procurement breaches could be held. It alleged that the Council had breached its obligations under Regulation 24 to take appropriate measures to identify and prevent a conflict of interest. The CIC had had a very strained relationship with the Council's employee who had been responsible for the contract management of the existing contract. It alleged that the inclusion of this employee on the evaluation panel for the procurement of the new contract amounted to a failure to take steps to nullify a conflict of interest. The CIC also alleged that there were errors during the evaluation stage in how the tenders had been marked and that certain elements of the bid had not been taken into account.
The Council's arguments
The Council arguing that the suspension should be lifted and that it should be allowed to proceed with the award argued that the CIC's case was weak and/or that it raised no serious issue to be tried. It also argued that should the CIC eventually be successful at full trial damages would be an adequate remedy for it and there was therefore no need to stop the contract award process going ahead before the trial. On the other hand the Council argued there was an urgent need to ensure service continuation for vulnerable service users such that damages would not be an adequate remedy to the Council if the suspension were maintained; therefore the public interest lay in allowing the award to proceed.
The Court was required to rule not on the substantive questions of whether the breaches alleged by the CIC had in fact taken place (these are questions for the full trial at a later date) but only of the issue of whether in the interim the suspension of the award should be upheld or lifted.
The Court ruled that the suspension should be maintained. This is a relatively unusual decision. In most cases it proves difficult for the claimant to show that damages would not be an adequate remedy and/or the public interest element brings the Court down on the side of the contracting authority.
In applying the American Cyanamid test the judge came to the following conclusions:
- Evidence provided about the very difficult relationship with the Council employee did suggest that there was at least a serious issue to be tried on the conflict of interest point (although at this stage the Court made no judgment about the substantive complaint)
- Previous case law is authority for the conclusion that where there are allegations about mis-evaluation it is logical to conclude that there is a serious issue to be resolved at full trial.
- Damages would not be an adequate remedy for the CIC given that it was set up solely for the purpose of providing this service to the Council and that were the contract award to go ahead all its specially trained staff (who could not be easily replaced) would TUPE transfer over to the new provider. Significant also was the fact that the CIC would be (financially) unable to pursue the claim were the contract award to proceed.
- The public interest did not tip the balance in favour of allowing the award to proceed. Despite the Council's evidence as to the urgency in order to secure the provision of services the Court was not persuaded that there were any significant problems with the existing contract and on the evidence it did not judge the Council to have been acting with particular urgency over the course of the procurement. Given that an expedited trial of the substantive claims could be held in Spring 2016 the Court was not persuaded that a two or three month delay would be so critical as to tip the balance of convenience in the Council's favour.
This case turns on its own facts to some extent - it unusual for the claimant to be as entirely dependent on the contract in question as CIC was in this case. Because of this relatively uncommon set of facts the CIC here was able to successfully argue that were the suspension to be lifted the new contract awarded and the CIC to go on to win on the substantive claims at full trial then damages would not be adequate compensation. There are not many suppliers who are entirely dependent on one source of business in this way.
That said the judgment is a warning to contracting authorities that the Court will apply the American Cyanamid test on a case by case basis and there are no guarantees that the judgment will go the contracting authority's way.
This case will be an interesting one to look out for when it comes to full trial. It will be interesting to see what the Court has to say about the contracting authorities' obligations around evaluation in the context of a Light Touch regime process to which the full public procurement regime does not apply. It will also be useful to get the Court's view on the conflict of interest point; should the contracting authority in this case have taken clearer steps to nullify the conflict such as ensuring the employee in question was not involved? Watch this space.