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Public procurement challenges: Update on recent cases – July 2019

Business meeting with work on contract Print publication

10/07/2019

Commercial Dispute Resolution specialists Gwendoline Davies and Lynsey Oakdene offer practical advice arising from two recent public procurement challenges.

Why are these cases of interest?

Any organisation which competes for business via public procurement tenders will be aware that the process can be highly complex and often involves the investment of significant time and effort from staff and senior management. In addition, tender outcomes can have a substantial commercial impact for many businesses.  The option to obtain legal redress when things go wrong is, therefore, essential.

The Kenson v Haringey [1] case addresses the crucial components of an application for an interim injunction by an unsuccessful bidder; and Amey v West Sussex [2] asked whether a decision to abandon a procurement had the effect of depriving an unsuccessful bidder of a legal cause of action.

The High Court’s approach in both cases will be of interest to any organisation involved in the submission of public procurement bids and the award of public procurement contracts.

What are the practical implications?

  • Kenson is a cautionary reminder of the need to act promptly, including seeking appropriate legal advice from the outset. This can include adopting the proactive approach of setting up a confidentiality ring (which can facilitate the early sharing of relevant documentation to the benefit of all parties), and/or issuing any necessary court proceedings without delay.
  • Kenson also highlights the need to make out a strong case that the need for an injunction trumps any public interest in permitting the authority’s decision to continue; and the need for claimants to overcome the usual hurdles to injunctive relief in any event [3], including the need to consider whether damages, as opposed to an injunction, might be an adequate remedy.
  • Amey provides useful guidance on the impact of an authority choosing to abandon a procurement and the courts’ approach. A key practical tip is that authorities – in relation to any withdrawal, any procurement process decision, and generally – need to keep a complete and easily retrievable audit trail or may face challenge.
  • Finally, as public procurement tenderers may be said to accept the risk of withdrawal in a variety of circumstances (not least because they know of the broad discretion involved and the absence of any implied obligation on the contracting authority to carry the award procedure to its conclusion), Amey highlights that it is important for disappointed bidders to undertake a thorough analysis of the costs and likely merits of any claim when considering whether to challenge a decision in court.

Kenson Contractors (Benington) Limited v London Borough of Haringey

In this case Kenson applied for an interim injunction to suspend the Council’s decision to award a road improvement contract to Marlborough Highways Limited (MHL). Kenson had come second in the procurement exercise and claimed that its bid had been wrongly scored. The works were to a key route between tube and train stations and Tottenham Hotspur’s new stadium; and the window for completion was short – between the end of one football season and the start of the next.  The Council’s decision was communicated by letter dated 27 March 2019, although Kenson could have discovered that it came second by viewing minutes published on the Council website on 19 March 2019.  Kenson then issued proceedings on 25 April 2019 for judicial review of the Council’s decision.

When considering whether to grant interim relief while a judicial review claim is pending, the court will consider:

  • Whether there is a real issue to be tried. In practice in judicial review claims, that means whether the claim has a more than fanciful prospect of success;
  • Whether the balance of convenience lies in granting the injunction; and
  • Any other factors the court considers to be relevant.

Generally, as there is a strong public interest in permitting a public authority’s decision to continue, applicants for interim relief must make out a strong case.

The court refused Kenson’s application. The following key points arise:

  • There was no good reason for the delay in commencing proceedings. The fact that Easter intervened was no justification. Procurement claims with attendant applications for interim relief are matters which must proceed promptly – all the more so where, as here, the public authority faces time constraints.
  • Kenson compounded its delay by not ensuring all the relevant documents would reach and be seen by the Council’s and MHL’s lawyers at the earliest opportunity.
  • The court concluded that the “real issue to be tried” threshold was just made out. However…
  • …the substantive claim was weak; there was no EU angle here at all as this was not a case where the Public Contracts Regulations 2015 (PCR) applied; and it was unlikely that Kenson would be able to prove causation at trial.
  • There was a strong argument that the case was not justiciable. In reality this was no more than a “nuts and bolts” challenge to the scoring as it affected one commercial bidder in a contract of modest value. It was not suggested that the marking system itself was unlawful or that the Council had acted in breach of any statutory obligation.
  • The court felt that the balance of convenience in this case favoured the Council:
    • Delay caused by any trial and judgment would result in a strong likelihood that works could not be done during a closed season. The delay was too great and was partly contributed by Kenson’s delay in seeking relief.
    • MHL had already invested significant sums in preparatory works.
    • Kenson’s argument that the sort of errors alleged in respect of this procurement exercise could be repeated in another tender where both Kenson and MHL were bidding was misconceived. It was not part of an assessment of a current injunction application to second-guess in a speculative fashion how a separate procurement exercise might be carried out [4].
    • Again, the claim was weak.
    • It could not be said that an injunction in this case would simply maintain the status quo – the contract had been awarded, preparations had already begun and there was an imminent critical start date.
    • If damages were available, then they would be an adequate remedy for Kenson, whose lost profits would be easily calculable.

Amey v West Sussex County Council

Amey issued proceedings against the Council alleging failures in its procurement of a highways contract. The successful bidder (Ringway) bettered Amey’s overall score of 85.48 by just 0.03. Amey alleged that its score should have been higher than Ringway’s and it should have been awarded the contract. Unlike in Kenson, the PCR applied.  The Council then gave notice that it was terminating the procurement and would start again – hoping and intending that withdrawing would defeat any claim that Amey might otherwise have. Amey promptly issued a second set of proceedings challenging the lawfulness and effect of the withdrawal.

The court ruled that the withdrawal had no effect on Amey’s first claim. If and to the extent that Amey was able to prove that it had an accrued cause of action before the withdrawal decision was taken it could pursue its claim for damages. The following points arise from the lengthy and detailed judgment:

  • There was no evidence before the court to cast doubt on the proposition that Amey would have been awarded the contract from on or about 1 July 2018 if it had scored more than 85.51. If that was correct, then all the constituent elements of an accrued cause of action would be in place. The loss of a profitable contract is actionable under the PCR.
  • Amey pleaded in the alternative that it was deprived of a significant chance of winning the contract. The loss of a significant chance of winning is also actionable under the PCR.
  • The PCR do not either expressly or by necessary implication require imposing a limitation upon the availability of an award of damages where the court is satisfied that the statutory criteria for an award are met.
  • The broad discretion to lawfully withdraw a procurement may be useful in a wide range of circumstances. For example, where the public authority recognises that pursuing the procurement would mean awarding a contract that was not the most economically advantageous, or would not be expedient in the public interest; or it becomes apparent that continuing with the process means that the authority will act in such a way as enables a private or public law claim to be brought against it.
  • The inherent nature of an accrued cause of action means that the power to cancel it by the termination of a procurement requires either statutory sanction, policy justification or binding prior authority, each of which was lacking in this case.
  • There was therefore no reason in principle why the Council’s decision to abandon the procurement should have any impact on any accrued cause of action, meaning that the contractor could still bring a claim.

Should you have any queries in relation to any of the points covered in this briefing, or require any assistance, please do not hesitate to contact Gwendoline or Lynsey, who will be very happy to help.

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[1] [2019] EWHC 1230 (Admin)
[2] [2019] EWHC 1291 (TCC)
[3] See Walker Morris’ earlier briefings, from June 2015 and May 2019 for further information and advice about injunctions generally.
[4] Of course, in any separate procurement exercise, if Kenson lost and considered that the Council had acted unlawfully, it could bring a claim accordingly.

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