Procurement in a Nutshell – Court rules that automatic suspension should remain in place
1st February, 2019
A recent procurement challenge has seen the High Court refuse to lift the automatic suspension which had entered into force following proceedings being issued in respect of a Contracting Authority's decision to award a contract. After considering the circumstances, the Court reached its conclusion finding that the balance of convenience lay in favour of the Claimant.
The dispute concerned a procurement exercise undertaken by NHS Surrey Downs CCG (the “Contracting Authority”) to appoint a provider of adult community services in the NHS Surrey Downs area. Prior to the procurement process, the incumbent provider of the services was Central Surrey Health Limited (the “Claimant”).
The only bidder for the contract was a consortium (the “Consortium) led by the Epsom and St Helier University Hospital NHS Trust which included the Claimant.
The Consortium’s bid was accepted subject to a number of pre-conditions which included the fact that there would have to be a binding contractual joint venture agreement between the members of the Consortium so as to govern it.
However, problems emerged between the Claimant and the Consortium and it transpired that it would be impossible for such an agreement to be reached.
These difficulties were explained to the Contracting Authority and, upon the realisation that they could not be resolved, the Contracting Authority agreed to enter into the contract with the Consortium under amended terms so that the Consortium no longer included the Claimant.
Consequently, the Claimant alleged that their removal from the Consortium amounted to a material alteration of the successful bid and, on this basis, the Contracting Authority had breached its obligations of transparency and equal treatment of economic operators as set out under Regulation 76 (2) of the Public Contracts Regulations 2015.
In deciding whether or not to lift the automatic suspension or let it remain in place, the Court applied the well-established principles as set out in the American Cyanamid case i.e.:
- 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 Court held that the allegation that there had been a material variation of the successful bid as well as the suggestion that the Contracting Authority had contravened its duties of equal treatment and transparency, both constituted serious issues.
Additionally, the Court highlighted that it did not “consider that this is a case is so obviously weak, albeit one that discloses a serious issue to be tried, which includes a real prospect of success so far as [the Claimant’s] claims are concerned”.
It is important to note this latter point, as the Court confirmed that the serious issue test would not be satisfied in circumstances where there was a serious issue but there was no real prospect of success for a party looking to have the automatic suspension lifted.
Were damages an adequate remedy?
The Court noted that the Claimant had never actually submitted a costed bid meaning that it would be particularly difficult to quantify the financial implications of lifting the suspension and awarding the contract to the Consortium.
Additionally, it was also recognised that the Claimant’s reputation, as well as the other contracts which it delivers, would be adversely affected if the contract were awarded to the Consortium in a manner which could not be compensated through damages.
Consequently, when taking into account these factors, the Court concluded that damages would not be an adequate remedy for the Claimant if the suspension period were lifted.
On the other hand, in relation to the question of whether damages would be an adequate remedy for the Contracting Authority if the suspension remained in place, a number of arguments were proposed suggesting that there would be an “unquantifiable loss due to delay in the introduction of patient benefits planned in the new contract”.
However, in dismissing each of these points the Court highlighted that the automatic suspension would only remain in place for three months, thus limiting the detriment which would be suffered by the Contracting Authority if the suspension were not lifted. Furthermore, the suggestions that the Consortium’s financial return from the contract would be lessened were also incorrect – the suspension would only delay profits being received by the Consortium.
As such, on this basis the Court concluded that damages would be an appropriate remedy for the Contracting Authority if the automatic suspension period remained in place and the Consortium was subsequently successful and awarded the contract.
Where did the balance of convenience lay?
After having found that damages would not be an adequate remedy for the Claimant if the suspension were lifted and they were subsequently successful at trial, it is not unsurprising that the Court held that the balance of convenience strongly favoured the maintenance of the status quo until the trial took place.
Why is this important?
In a number of our recent Nutshells we have commented on decisions in which the Court has found in favour of lifting the automatic suspension due to the negative effects which would be suffered if the suspension were to remain in place. In this instance however, it is interesting to see the Court’s rationale behind allowing the suspension to remain in place. In particular, it is noticeable that a great deal of weight was attached to the finding that lifting the suspension could have significantly impacted on the Claimant as a business, as well as the community as a whole.
How can I find out more?
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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