Procurement in a Nutshell – Court finds in favour of lifting automatic suspension
24th September, 2018
In a recent Nutshell we discussed the High Court's refusal to award a summary judgment in favour of the incumbent claimant in DHL Supply Chain Ltd v Secretary of State for Health and Social Care following its unsuccessful tender for the award of a contract.
Click here to view the previous nutshell and here to view the judgment in full.
In addition to this, the Court was also tasked with deciding whether or not to uphold the Defendant’s application that the automatic suspension, imposed under the Public Contracts Regulations 2015 following a challenge being made to the contract’s award, be lifted.
What do the Regulations say?
Regulation 95 of the Public Contracts Regulations 2015 imposes an automatic suspension requiring the Contracting Authority to refrain from entering into the contract where:
- A claim form has been issued in respect of a Contracting Authority’s decision to award the contract;
- The Contracting Authority has become aware that the claim form has been issued and that it relates to that decision; and
- The contract has not been entered into.
Contracting Authorities can apply to have this suspension period brought to an end under Regulation 96 (1) (a). However, in order for the Court to make such a ruling it will apply the test as set out in the American Cyanamid case.
What is the test?
In keeping with previous case law, the Court stated that, when considering whether or not to lift the automatic suspension, it must first establish the following issues:
- Is there a serious issue to be tried?
- If so, would damages be an adequate remedy for the Claimant if the suspension were lifted and it succeeded at trial?
- If not, would damages be an adequate remedy for the Defendant if the suspension remained in place and it succeeded at trial?
- Where there is doubt as to the adequacy of damages for either or both parties, which course of action is likely to carry the least risk of injustice if it transpires that it was wrong, that is, where does the balance of convenience lie?
Was there a serious issue to be tried?
The Defendant agreed that for the purposes of the application there was a serious issue to be tried. As such, and in keeping with the American Cyanamid test, the Court was obliged to go on to consider whether the balance of convenience lay in favour of granting or refusing the application.
Would damages be an adequate remedy for the Claimant if the suspension were lifted and it succeeded at trial?
After analysing the relevant facts, the Court concluded that damages would not be an adequate remedy for the Claimant if the suspension were lifted.
This decision was reached after the Court held that:
- The contract was highly prestigious and amounted to 50% of the Claimant’s work in that particular sector of industry. As such, loss of the contract would adversely affect the Claimant’s reputation as well as its ability to secure other commercial opportunities; additionally
- Lifting the automatic suspension would result in the loss by the Claimant of experienced and senior employees as a result of the TUPE Regulations.
Would damages be an adequate remedy for the Defendant if the suspension remained in place and it succeeded at trial?
On this issue, the Court found that damages would not be an adequate remedy to the Defendant if the suspension remained in place and the Defendant was subsequently successful at trial.
With regard to this, the Court was of the opinion that if the suspension were not lifted the full implementation of the services under the contract would be delayed which would result in significant costs for the NHS.
Furthermore, a delay in implementation would adversely impact the Department for Health and Social Care’s contingency planning for the impacts of Winter and Brexit on its resources. In line with this, the Court held that: “such disruption could not be quantified properly or fairly compensated for by way of damages”.
Where did the balance of convenience lie?
In finding that the balance of convenience lay in favour of lifting the automatic suspension, the Court noted that the “starting point in assessing the balance of convenience is to consider how long the suspension might have to be kept in force” whilst also clarifying that it “may have regard to the public interest when determining the balance of convenience”.
In this instance, the Court was of the opinion that the public interest would be best served by a lifting of the suspension, allowing the timely introduction of the services under the contract as that this would result in:
- Cost savings for the NHS; and
- Operational efficiencies for the NHS.
Why is this important?
The case is a useful indicator of the factors that a Court will take into account when considering an application to lift the automatic suspension. In particular, the Court’s focus on public interest considerations, and the negative effects that would be suffered if the suspension remained in place, highlight that it will not only take into account financial and other business factors.
If you have any queries on the issues raised or on any aspect of procurement, please contact us via our procurement hotline on 0191 204 4464.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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