Procurement In A Nutshell – automatic suspension and Light Touch

What’s new?

The recent case illustrates how the court viewed the issue of automatic suspension in relation to a Light Touch contract.

Please click here for the case report.

The background

As you will remember from our previous nutshells, Regulation 95 of the PCRs places an automatic suspension on the award of a contract by a Contracting Authority where a claim is brought before the contract is entered into.

This case looks again at the issues relating to a Contracting Authority’s (‘CA’) attempt to lift this suspension and the factors taken into consideration by the Court. The case also raises issues about another topic pertinent to CA’s conflicts of interests.

The facts

In June 2015, the CA advertised a contract and issued invitations to tender, for the provision of substance misuse treatment and harm reduction services for substance users, a “Light Touch” contract.

A not-for-profit community interest company was established for the sole purpose of providing these services to the contracting authority and had been the incumbent provider since 2008. Its existing contract was entered into on 1 August 2013 and was due to expire on 1 January 2016.

The company responded to the invitation to tender for the new contract but on 19 October 2015, they were told that their bid had been unsuccessful and that the contract was to be awarded to the winning bidder.

Proceedings were brought by the company to challenge the decision to award the contract to the winning bidder. They alleged that the procurement process breached the 2015 Regulations and claimed:

• The CA breached Regulation 24 of the PCRs by failing to take any measures to effectively prevent, identify and remedy a conflict of interest involving a member of the contracting authority’s evaluation panel, who had responsibility for managing the company’s existing contract and had been the subject of complaints by the company.
• The CA failed to follow published award criteria and/or applied undisclosed criteria and acted in a discriminatory manner and/or committed manifest errors in the scoring of the bids (in particular due to inconsistent marking, misinterpretation or misunderstanding of the bid and ignoring aspects of the bid).

The CA applied for the suspension of the award of the contract to be lifted. It argued, in particular, that there was an urgent need to lift the suspension to protect the public interests of vulnerable service users.

The decision

The High Court applied the American Cyanamid principles in determining whether to lift the suspension. Readers of our nutshell will remember the recent procurement cases on this issue (for example, Bristol Missing Link Ltd and Solent NHS Trust). This is a two stage test:

• To identify whether or not there is a serious issued to be tried.
• If there is a serious issue, to assess the balance of convenience.

The Court concluded that there were serious issues to be tried, namely the alleged conflict of interest between the company and the member on the evaluation panel and the alleged unfairness in scoring.

The Court held that Regulation 24 is very broad and is intended to cover conflicts other than those that are financial or economic. They said it was arguable however that the contracting authority failed effectively to prevent, identify and remedy conflicts of interest in allowing the evaluator to be on the evaluation panel.

The Court applied the “balance of convenience” test and refused to lift the suspension because:

• There is a public interest in local authorities complying with EU procurement law.
• There was no evidence that the contracting authority would suffer any loss as a result of maintaining the suspension.
• The service as it was currently operating did not create a risk to the lives of substance misusers in the area.
• The Court did not accept that the company’s financial position was so precarious that it would not be able to provide the services in the meantime as long as they received payment.
• Damages would not be an adequate remedy for the company as the company would not be in a position to continue with the claim if the suspension was lifted and it would suffer harm given that the company was established solely for the purpose of providing services to the contracting authority.
• This trial could be expedited and therefore full consideration of the issues could take place quickly.

Why is it important?

This case is notable in that the High Court has refused to lift an automatic suspension to allow the award of a contract for services relating to important public health services.

It is in contrast to the decision in Solent NHS Trust v Hampshire County Council [2015] where the court decided it was in the public interest to lift the suspension to allow new and improved services to be implemented as soon as possible.

This will be of interest to all CAs involved in awarding Light Touch contracts.

This is also the first time that an application for lifting the automatic suspension has been considered under the PCRs, rather than the 2006 Public Contracts Regulations, although the substantive provisions have remained unchanged.

Additionally, the case gives some insight into Regulation 24 and how CAs should deal with conflicts of interest.

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.