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Public Procurement Update: Summer/Autumn 2023

Walker Morris is experienced in dealing with a wide range of public law issues including procurement law. The firm is also regularly instructed to provide advice on an urgent basis on procurement challenges and judicial reviews. In this update, commercial dispute resolution and public procurement specialists Lynsey Oakdene and Kathryn Vickers summarise developments since our last update. We cover:

  • Public procurement case law developments
    • Time limits
    • Adequacy of damages: Impact on third parties
    • Adequacy of damages: Non-availability of damages award
    • Adequacy of damages: Expedited trial
    • Beware tender submission deadlines
    • In-term contract modifications
    • Sub-contractor standing
A close up image of two rolled magazines. A visual metaphor for changing documents, and the topic of this piece, a public procurement update

Changes to public procurement law

The post-Brexit Procurement Bill, which will transform the UK’s public procurement regime, is in the final stages of the legislative process. The House of Lords is currently at the stage of considering the Commons’ amendments, with the next sitting date scheduled for 24 October 2023. Consideration of amendments is the final stage before a Bill is passed and becomes law. See this research briefing prepared by the House of Commons Library on the Bill’s progress ahead of its third reading in the Commons on 13 June 2023.

The “go-live” date for the new regime is now planned for October 2024 (it was previously late 2023). There will be a minimum 6-month advance notice period and the current legislative framework will continue to apply until “go-live”.

The government has already started consulting on the various secondary legislation needed to bring some elements of the Bill and the wider regime into effect. This first part, which closed on 28 July 2023, referred mainly to areas of the Bill which require lists, calculations, or further definitions to be used in practice. The second part, which closed on 25 August 2023, covered the transparency provisions and notices that will be used by contracting authorities to fulfil their legal requirements under the new Act, and also information on transitional arrangements.

The government recently confirmed the launch dates for its various learning and development materials for the new regime:

  • ‘Knowledge Drops’ will launch in November 2023. Aimed at everyone, these are on-demand video resources of approximately 40 minutes providing an overview of all the changes.
  • Self-guided e-learning, the core learning and development product, will launch in March 2024. This will give a comprehensive grounding of knowledge and understanding of the new regime, comprising 10 1-hour modules and concluding with a Skilled Practitioner Certification.
  • A 3-day virtual course of interactive deep-dive webinars, led by subject matter experts, will launch in May 2024. This will provide a deeper insight across the full spectrum of legislative change.

‘Communities of Practice’ will also launch in May 2024. They will provide a system of collective critical inquiry and reflection into the regime changes.

To register your interest for our 2024 Procurement Bill webinar programme to keep up to date on developments and learn more about what you need to know before “go-live” sign up here.

We reported in our previous Public Procurement Update that the government was planning to completely overhaul the body of UK domestic law known as retained EU law through the Retained EU Law (Revocation and Reform) Bill, now an Act. In a welcome move, the government substantially rowed back on those plans and the laws that will now be revoked at the end of 2023 are largely defunct and unnecessary, and much fewer in number. The government has said that, together, the recently passed Financial Services and Markets Act and the Procurement Bill/Act will revoke around a further 500 pieces of retained EU law.

Changes to public procurement obligations came into force on 25 May 2023 (26 May 2023 in Wales) as a result of the UK’s new free trade agreements with Australia and New Zealand. The Cabinet Office published this Procurement Policy Note setting out the changes and the Welsh Government published this Welsh Procurement Policy Note with respect to devolved Welsh authorities. Note that although the amendments arise from these particular free trade agreements, they apply to all procurements going forward, and not just those involving Australian and New Zealand suppliers.

In other news, the Social Partnership and Public Procurement (Wales) Act was passed: “Public bodies will be required to deliver socially responsible procurement, which means putting environmental, social, economic and cultural well-being at the heart of an £8bn annual procurement spend”.

Public procurement case law developments

The decision in Boxxe v The Secretary of State for Justice [1] covers a number of important practice points. The Secretary of State (SoS) was successful in applying for the lifting of the automatic suspension put in place in relation to a competition for a contract to provide digital and AV equipment for use in the courts. Boxxe, the unsuccessful tenderer, challenged the scoring of the pricing for the cost of storage and applied for an expedited trial.

Time limits

The SoS’ submission on the question of whether there was a serious issue to be tried centred on Boxxe’s claim being out of time. Boxxe received the decision notice on 13 December 2022 and issued its claim on 12 January 2023. Under Regulation 92 of the Public Contracts Regulations 2015 (PCR) proceedings must be started within 30 days beginning with the date when the economic operator first knew or ought to have known that grounds for starting the proceedings had arisen.

It came down to the key question of whether the date of receipt of the decision notice is included or excluded from the 30-day calculation. Despite having been presented with “what appears to be a formidable line of authority” by the SoS’ counsel, the judge said it would be inappropriate to give in to the temptation to decide the matter finally in the context of the application for lifting the suspension, and that the matter was not so clear cut as to conclude that there was not a serious issue to be tried. Ultimate determination of the issue should follow fuller argument which would no doubt take place in an upcoming strike out application.

Pending clarification from the court, this serves as a cautionary reminder of the need to act quickly in procurement challenges to avoid being caught out by the short 30-day time period for bringing a claim and the current uncertainty surrounding the calculation.

Time limits also came under scrutiny In Altiatech v Birmingham City Council [2]. The defendant authority ended a contract with Altiatech for the provision of cyber security software using a termination for convenience clause. No reasons were given, and a direct award was issued to another provider. Altiatech ultimately brought a claim challenging the award. It alleged breach by the authority of its equal treatment and transparency obligations under Regulation 18 of the PCR, in particular its duties not to structure a procurement such that it would favour or disfavour particular economic operators.

The authority applied to strike out the claim, including on the basis that the claim form was issued more than 30 days after Altiatech had acquired, or should have acquired, the relevant knowledge about the claim, and so it was time-barred. Having reviewed the pre-action correspondence between the parties, the court decided it was only when the authority disclosed the reason why it had ended the contract (an issue with one of its own staff members which resulted in a reset of the authority’s cyber strategy and associated procurement decisions) that Altiatech was able to come to an informed view as to whether it had a claim and it was appropriate to bring the proceedings [3].

The court said the relevant information was obviously highly material; so material, that the authority had decided effectively to stonewall Altiatech’s request for an explanation until it felt that it had to, in an attempt, as it hoped, to forestall proceedings and bring the matter to a close. The information provided as to reasons wasn’t simply further evidence to support the claim. It contained an essential fact that enabled Altiatech to plead its case. Parties need to keep in mind that the courts will pay close attention to the contents of pre-action correspondence when deciding when the claimant had the requisite knowledge to trigger the 30-day time limit.

The authority also argued that the particulars of claim were served out of time. The court confirmed that, for proceedings under the PCR, the combined effect of the relevant Regulation and Civil Procedure Rule was that the particulars must be served within 7 days of issue of the claim form.

In this case, the court granted relief from sanction and extended the time for service of the particulars retrospectively. Among other things, it didn’t consider a delay of 15 days to be sufficiently serious or significant, given that the authority didn’t raise the point until almost 2 months after the correct service date. Significantly, the court noted that what might have enabled the whole action to have started much earlier was if the authority had been open at the outset about the underlying reason for its actions. Its reluctance to explain its position led to a delay of much more than 15 days. The fact that if the relief isn’t granted the claimant would lose the entire claim is a point which a claimant can (and did make here) on the question of proportionality. Not to grant relief from sanctions where the court had upheld that the claim form was served in time would be grossly disproportionate because it would deprive Altiatech of a claim of some substance [4].

Adequacy of damages: Impact on third parties

Turning back to Boxxe, one of the grounds Boxxe used to try to persuade the court that damages would not be an adequate remedy was the impact on its key sub-contractor. While the court accepted that the impact on the interests of third parties, who do not have a reliable remedy in damages in their own right, is a materially relevant factor that it both can and should take into account in its overall assessment, on the question of the adequacy of damages it was clear that the sub-contractor’s position was irrelevant and should not be taken into account. In addition, the sub-contractor could have started its own claim as a second claimant to the action.

Adequacy of damages: Non-availability of damages award

The SoS asserted in its defence that the alleged breach was not sufficiently serious to justify a damages award. Boxxe argued that the fact the SoS had chosen to make that assertion gave rise to the risk that, even if Boxxe’s allegations of breach were made out, there would be no damages award. The SoS couldn’t have it both ways: contending both that damages would be an adequate remedy, and that as a matter of principle damages should not be available. It was pointed out that the risk of failing to resist the lifting of suspension and then receiving no damages award became a reality recently in Braceurself v NHS England [5].

While the judge said it couldn’t be right that every time this “sufficiently serious” question was in issue, damages would automatically be rendered inadequate for the purposes of considering whether to lift a suspension, it was recognised that having established breach, causation and loss, the unsuccessful tenderer is still potentially left without an effective remedy.

In this case, the SoS was prepared to give an undertaking not to pursue its assertion on the sufficiently serious point if it was ultimately established that a breach or breaches took place but for which, had they not occurred, the contract would have been awarded to Boxxe rather than the successful tenderer. The judge said this was a sensible way to cut through the issue and found that damages would be an adequate remedy.

Adequacy of damages: Expedited trial

The SoS argued that the existence of a potential trial date shouldn’t be taken into account as any part of the assessment of the adequacy of damages, while Boxxe argued that the question of adequacy of damages shouldn’t be determinative. The judge was urged to apply a modified American Cyanamid test of the type used in judicial review proceedings, where once it’s established that there’s a serious issue to be tried, the court moves immediately to consider the overall balance of convenience. The judge disagreed. There was nothing on the facts of the case to allow a finding that the conclusion reached on adequacy of damages was not determinative of the success of the application to lift the suspension.

While the court’s ability to accommodate an expedited trial may provide a pragmatic solution where matters are finely balanced, that balancing exercise doesn’t arise in circumstances where it’s clear that damages are an adequate remedy. The judge said it mustn’t be forgotten that the decision in Draeger Safety UK v London Fire Commissioner [6] was made in the context of a finding that damages were arguably not adequate.

The judge nevertheless went on briefly to consider whether damages would be an adequate remedy for the SoS, and the balance of convenience. Among other things, if the suspension wasn’t lifted, with or without an expedited trial, the SoS would sustain losses caused by the ongoing delays which were real and could not be compensated for by damages.

Beware tender submission deadlines

InHealth Intelligence v NHS England [7] is a stark warning to tenderers to make sure that the contracting authority’s submission rules and deadlines are strictly adhered to, and that tender submissions are not left to the last minute. In this case, the claimant was excluded from the procurement because its bid was uploaded to the stipulated e-portal in the wrong place and the mistake wasn’t rectified in time, so it missed the deadline. The claimant challenged the decision to exclude it.

The challenge failed. Regulation 18(1) of the PCR sets out the fundamental principles of procurement: “Contracting authorities shall treat economic operators equally and without discrimination and shall act in a transparent and proportionate manner.” The judge considered that, however clear the wording of an invitation to tender, a residual discretion will always exist to waive non-compliance with the requirements if it’s necessary to do so to ensure equality, transparency, and proportionality of the procedure as a whole, and doing so doesn’t offend against those principles. The starting point is that deadlines are to be respected. There may be exceptional circumstances, such as the fault of the contracting authority, which justify the admission of a late tender or missing documents.

In this case, the decision to exclude the claimant was not manifestly flawed or irrational. The claimant had failed to comply with the clearly stated deadline for reasons which were its own fault. The consequences of failing to submit a compliant bid by the deadline were clearly spelt out and understood. Caused by a series of minor human errors and having left the submission process to the last moment, there was nothing exceptional about the claimant’s inability to submit the bid in accordance with the requirements, and nothing happened to justify waiving the clear rules. There was a very significant risk, as the defendant concluded having properly investigated the events, that if it decided to waive the rules, that decision would itself constitute a failure to comply with the requirements of equality and transparency.

In-term contract modifications

The decision in James Waste Management v Essex County Council [8] provides important clarification of the law dealing with in-term public contract modifications. The court considered whether the defendant authority’s modification of a waste handling contract with Veolia was “substantial” and therefore impermissible under Regulation 72 of the PCR. The answer was no.

As an initial point, the court said that the “gateways” in Regulation 72(1)(a)-(f) should be interpreted narrowly because they amount to derogations from the general rule set out in Regulation 72(9) that a new procurement procedure is required for in-term modifications of public contracts or framework agreements. The defendant authority only has to succeed on any one gateway to disapply this general rule. While the gateways are to be interpreted narrowly, the burden is on the claimant to establish on the balance of probabilities that the gateway relied on by the authority doesn’t apply.

In this case, there was no material difference in character in the contract, caused by the modification. Neither was there a basis for concluding that the modification considerably extended the contract’s scope – “considerably” should be interpreted in a common-sense way. The test in Regulation 72(8)(b)(ii) is whether there was a real (as opposed to fanciful) prospect that the other tenderer would now have won. The court also failed to see how the modification was such as to change the economic balance of the contract as a whole in favour of Veolia. Where a different payment mechanism has to be adopted (for example, where the remunerative scheme in the original contract cannot simply be applied to the services or supplies contemplated by the modification) “reasonable compensation” is the appropriate yardstick by which to judge a price increase.

Sub-contractor standing

In International Game Technology v Gambling Commission [9] Lord Justice Coulson undertook an in-depth analysis of the proper approach to interpreting UK legislation which transposes EU legislation in order to answer the question of whether only an unsuccessful bidder has standing to pursue a claim for breach of the PCR or if a proposed sub-contractor to an unsuccessful bidder is able to do so. The claimants in the case were sub-contractors to Camelot which had been unsuccessful in its bid to continue with the National Lottery concession but which had withdrawn its own challenge of the procurement exercise when it was purchased by the successful bidder. His conclusion was that subject to one minor exception, only unsuccessful bidders have standing to pursue a procurement claim and therefore sub-contractors are not able to pursue a claim. The exception arises from the EU Grossmann case [10] which confirmed that economic operators who have not submitted a bid may still be able to pursue a claim if they had wanted to submit a bid but could not do so as a result of discriminatory specifications in the tender documents. Of course, the short limitation period for procurement claims means that in most cases such claims would be brought before any bids have been submitted at all.

Procurement Policy Notes (PPNs)

In addition to the PPN mentioned above concerning the UK’s new free trade agreements, the Cabinet Office has also published the following PPNs since our last Public Procurement Update:

  • PPN 03/23 updates the Selection Questionnaire and accompanying statutory guidance and replaces PPN 08/16. The revised standard selection questions applied from 1 June 2023.
  • PPN 02/23 concerns tackling modern slavery in government supply chains. It’s accompanied by separate guidance and a quick reference guide.
  • PPN 06/23 sets out which organisations are in-scope of the Commercial Playbooks and how their principles should be applied.
  • PPN 04/23 and various accompanying materials provide updated guidance on procuring steel in government contracts. It replaces PPN 11/16.
  • PPN 07/23 sets out details of the recently updated Government Security Classifications Policy. The Policy applies to any information or data that is created, processed, stored or managed as part of a government contract.
  • PPN 08/23 on using standard contracts. Three standard contracts have been published for use by government departments and other public sector organisations as part of their commercial activity.
  • PPN 09/23 sets out the actions organisations should take to identify and mitigate cyber threats, along with resources to support implementation.

Updated Administrative Court Guide

The court has issued a new Administrative Court Guide which applies to all judicial review cases, including any which relate to the award of public contracts. The content is broadly the same as the previous 2022 version but now includes:

  • A new section on anonymity, orders for non-disclosure and open justice confirming the principles which will be applied when considering whether to derogate from the primary position of open justice and providing possible wording to use in such orders. Confidentiality and non-disclosure are often important in procurement cases.
  • New commentary on the circumstances in which a defendant or interested party may be entitled to make submissions even where they have not filed Detailed Grounds of Resistance and on the court’s powers to allow evidence where there is a dispute of fact and/or to restrict evidence to avoid unnecessary publicising of irrelevant material.
  • A new section on applying to attend a hearing remotely.

Need advice or assistance on public procurement issues?

If you need advice or assistance, or have queries concerning any of the points raised in this Public Procurement Update, please contact Lynsey or Kathryn, who will be very happy to help.

Sign up here to Dispute Resolution to receive our regular Public Procurement Updates.

 

[1] Boxxe Limited v The Secretary of State for Justice [2023] EWHC 533 (TCC)

[2] Altiatech Limited v Birmingham City Council [2023] EWHC 1371 (TCC)

[3] Following the test laid down in Uniplex (UK) Limited v NHS Business Services Authority [2020] 2 CMLR 47

[4] While the authority was unsuccessful in relation to these points on time limits, the court did strike out Altiatech’s claims alleging a breach of Regulation 24 of the PCR and for a “declaration of ineffectiveness”.

[5] See our earlier briefing

[6] See our earlier briefings on this topic

[7] InHealth Intelligence Limited v NHS England [2023] EWHC 352 (TCC)

[8] James Waste Management LLP v Essex County Council [2023] EWHC 1157 (TCC)

[9] International Game Technology PLC and others v Gambling Commission [2023] EWHC 1961 (TCC)

[10] Grossmann Air Service Bedarfsluftfahrunternehmen GmBH & Co v Austria (Case C-230/02)

Lynsey
Oakdene

Director

Dispute Resolution

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Kathryn
Vickers

Director

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