Procurement in a nutshell: The need for clarity in procurement processes (Part 2)
22nd June, 2018
In January we published a Nutshell on the High Court's judgment in the expedited proceedings between MLS (Overseas) Limited ("the Claimant"), the Secretary of State for Defence ("the Defendant") and SC Shipping Consultants Associated Limited ("the Interested Party").
Please click here to view the previous nutshell.
In this week’s Nutshell, we examine the High Court’s subsequent judgment in which it considered the following applications for relief as made by the Claimant:
- A declaration that the procurement was carried out unlawfully;
- An order setting aside the decision to award the contract to the Interested Party; and
- An order requiring the Defendant to amend its decision to award the contract to the Claimant.
What were the Court’s previous findings?
Following the retendering of logistical support services for the Ministry of Defence, the Claimant, who was the incumbent provider of the service, challenged the lawfulness of the procurement process after it failed to win the contract and the Interested Party was declared the winner.
Consequently, a claim was brought on two grounds and the Claimant was successful on the basis that the Invitation to Tender did not specify the consequences of a “fail” score for an individual question. In this regard, the Court held that the Defendant had breached its obligations of transparency and equal treatment as set out by the Defence and Security Public Contracts Regulations 2011 i.e. those governing the procurement.
The subsequent judgment
In the most recent proceedings, the Court was concerned solely with applications for relief as made by the Claimant and whether it was entitled to any remedy following a finding of unlawfulness against the Defendant.
In doing so, the Court carried out an in-depth analysis of Regulation 58 of the 2011 Regulations which provides that, where there has been a breach of the obligations as set out by the Regulations, and the contract has not been entered into, the Court has the power to:
- Order the setting aside of the decision or action concerned;
- Order the Contracting Authority to amend any document; and / or
- Award damages to an economic operator which has suffered loss or damage as a consequence of the breach.
Unsurprisingly, and in keeping with the previous judgment, the Court held that the Claimant was entitled to a declaration that the Defendant had unlawfully rejected its original tender on the basis that:
“The Reasonable Tenderer would not understand whether or how a “fail” score against the response to Question 6.3 would, or could, result in a rejection of the tender. Accordingly the [Defendant] acted unlawfully”.
However, the Claimant and the Interested Party disagreed over the applications for orders setting aside the contract to the Interested Party and requiring that the Defendant amend its decision awarding the contract to the Claimant – with the Interested Party arguing that the remedy should be confined to damages.
In determining the appropriate remedy, and ultimately deciding that the contract should be awarded to the Claimant, the court paid due regard to previous case law which stated:
“the court has a discretion as to the appropriate remedy. In a given case, in exercising that discretion, the court must pay regard to the need for the Regulations to be applied and to the availability for that purpose of the remedy to set aside the relevant action or decision, as well as the availability of damages.”
Additionally, the Court noted that the following factors were relevant in influencing it to come to the conclusion that damages were not satisfactory and the contract should be awarded to the Claimant:
- There was “strong public interest” in allowing the contract to be awarded without the delay and expense of a fresh procurement exercise;
- The Defendant had indicated that it was, in principle, content with entering into a contract with the Claimant;
- The impact of the breach of the Regulations was both “serious and obvious”;
- It would be very difficult to assess the quantum of loss in order to award damages; and
- The Interested Party would, in reality, suffer “little, or no, prejudice if the decision were set aside”.
Why is this important?
The case clearly illustrates the considerations of the Court in deciding on the appropriate remedy in certain instances where a breach of the relevant procurement Regulations has taken place. Consequently, the judgment serves as a reminder to Contracting Authorities that ambiguity in tender documents should be limited as much as possible in order to minimise the likelihood of a successful challenge being brought.
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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