Public contracts can be extremely high value but they are also often costly to tender for. The Public Contracts Regulations 2015 (“PCR”) are in place to protect bidding contractors from unjust contract awards. Those same regulations give broad protection to Councils including allowing them to abandon procurement. In May 2019 the TCC was asked to consider whether or not the abandonment of a procurement process could frustrate a Contractor’s claim following an allegedly unjust contract award.
The dispute was between Amey Highways Limited (“Amey”) and West Sussex County Council (“the Council”) and related to a highways contract that Amey claimed would have earned them some £28 million in profits over its lifetime and had cost them £1 million to prepare the tender. In short, following the procurement process, Ringway scored more highly than Amey and so the Council duly awarded the contract to Ringway. Amey then alleged that there had been errors in scoring such that they (Amey) should actually have scored more highly than Ringway: they issued proceedings. The Council took legal advice and appreciated that litigation with Amey would be expensive both in terms of management time and legal costs. The Council then gave notice that they were terminating the procurement. The Council made no secret of the fact that it was their hope and intention that withdrawing the procurement would defeat Amey’s claim. Amey disputed that fact and the matter came before the TCC.
The relevant parts of the PCR
The relevant parts of the PCR can be paraphrased as follows:
- Regulation 67(1) - contracting authorities are required to base the award of public contracts on the most economically advantageous tender assessed from the point of view of the contracting authority
- Regulation 18(1): Contracting authorities must treat bidders in the procurement equally and without discrimination and shall act in a transparent and proportionate manner
- Regulation 89: the contracting authority is under a duty to comply with the provisions of Parts 2 and 3 of the PCR (which include Regulations 18 and 67) and any enforceable EU obligations in the field of public procurement.
- Regulation 91: a breach of the duty owed in accordance with Regulation 89 is actionable by any economic operator which, in consequence, suffers, or risks suffering, loss or damage. The available remedies where the Court is satisfied that a decision or action taken by a contracting authority was in breach of the duty owed in accordance with regulation 89 depends upon whether a contract has been entered into or not.
- Regulation 97(2): the Court may (a) order the setting aside of the decision or action concerned; (b) order the contracting authority to amend any documents; (c) award damages to an economic operator which has suffered loss or damage as a result of the breach.
- Regulation 98(2): the Court may award damages to an economic operator which has suffered loss or damage as a consequence of the breach. In such a case it does not have the powers it would have under Regulation 97(2)(a) and (b) but has additional powers including, in suitable cases, making a declaration of ineffectiveness and imposing penalties.
The Court’s finding
A number of arguments were put before the Court and the TCC made a number of interesting observations in relation to public and private law remedies. In the interests of brevity this article focuses only on the issue of whether or not the abandonment of a procurement exercise extinguishes a claim for a breach of the PCR during that procurement.
Before we consider that answer it is worth quickly confirming that the TCC concluded that had Amey scored higher than Ringway, the Council would have awarded the contract to Amey. They also concluded that the Council would not have abandoned the process in any event.
The Council submitted that to find in Amey’s favour would be to narrow the broad right of contracting authorities to abandon procurement processes. They submitted that bidders have “no right or legitimate expectation to be awarded a public contract or to be compensated for tender costs if a procurement does not lead to a public contract award being concluded”.
And so to answer the question of whether or not the abandonment extinguished the claim. The answer lies in the timing. The Court distinguished between:
- Abandoning procurement to prevent potential future claims from arising; and
- Abandoning procurement to deprive an economic operator of a cause of action which already exists.
Further, the TCC found that the second category would require a positive mandate under the PCR or cogent policy justification and that no such legal mandate exists.
It therefore follows that the Council’s abandonment of the procurement process failed to automatically extinguish Amey’s existing claim. This does not mean that Amey has won, merely that their claim can now proceed through the Courts (or be settled, or course).
What does this mean for those procuring or bidding for public contracts?
Simply, it means that if a dissatisfied economic operator brings a claim against a contracting authority, the latter cannot simply abandon the procurement process to avoid the claim. It is more important than ever that contracting authorities exercise extreme caution in following the requirements of the PCR.
These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.