Procurement in a Nutshell – Contracting Authority had not breached duty of equal treatment

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The case

The matter proceeded to Court after the Claimant, Abbvie Ltd, a manufacturer of pharmaceutical products, challenged two aspects of the rules governing the procurement which it claimed amounted to a breach of the duty of equal treatment as set out by Regulation 18 (1) of the Public Contracts Regulations 2015.

The first such aspect to be challenged was what was known as the “dummy price mechanism”.  Under this mechanism, where a bidder did not produce a drug in respect of a particular genotype of Hepatitis C, the dummy price mechanism would impute a price in respect of that bidder.  In this regard, the Claimant sought to argue that this conferred an unfair advantage on a bidder who was unable to supply part of a market when compared to a bidder which could.

The second ground of challenge related to what was known as the “unmetered access model”.  Under this model, a fixed fee was paid by the Contracting Authority in return for the treatment of a set number of patients which a supplier had committed to treat.  However, once again the Claimant sought to challenge this as having breached the duty of equal treatment given that the failure by one bidder to treat the number of patients that it had committed to meant that other bidders would be required to supply treatment to patients exceeding the number that it had committed to treat, without any additional compensation or remuneration.

The judgment

In relation to the suggestion that the use of the dummy price mechanism had breached the duty of equal treatment, the Court emphasised that Contracting Authorities are afforded a particularly wide margin of discretion in designing and setting award criteria.

Additionally, when considering the facts of the case, the Court noted that because the nature of the bidders was incomparable (i.e. not all parties could produce the same drugs) there was no prima facie breach of the equal treatment principle through the use of the dummy price mechanism.  The fact that one bidder could fare better than a rival under a particular model did not necessarily amount to a breach of the equal treatment principle.

However, despite the above finding, the Court emphasised that a Contracting Authority “cannot apply any differential treatment it desires if such treatment is arbitrary or excessive [and] is intended to unduly favour one bidder over another and/or does not enable the [Contracting Authority] to determine the most economically advantageous tender”.

Similarly, in relation to the unmetered access model, the Court held that there had been no inequality in treatment as it was “quite clear that this was a situation where all suppliers were in a comparable position and were subject to the same rules”.  The fact that certain treatments were more popular than others, thus resulting in a greater demand for those treatments, did not mean that the two were not comparable for the purposes of a tendering exercise because the same tender rules applied to all suppliers.

Why is this important?

Despite having somewhat complex facts, the case serves as a very useful reminder to Contracting Authorities of the duty to treat all tenderers equally.  Although Contracting Authorities possess a degree of autonomy in deciding the specific award criteria that they wish to apply, they must be sure this does not excessively or arbitrarily favour one tenderer or prevents the Contracting Authority from determining the most economically advantageous tender.

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.