Claimant obtains a suspension of a live procurement with no cross-undertaking in damages

A public authority has been ordered to halt a procurement mid-competition, without the challenger giving a cross-undertaking in damages. The Court also expressly linked the 'sufficiently serious' test to the test for an injunction.

13 October 2022

Summary

A Court has ordered an injunction effectively ‘pausing’ a healthcare competition currently being run by NHS England, following bid submissions and during the evaluation stage. The Court also refused to order that the challenger (Inhealth Intelligence) give a ‘cross-undertaking’ to cover the damages of NHS England which would flow from the suspension to the procurement should the challenger’s claim fail at trial. The contract in question concerns Child Health Information Services (CHIS), effectively collation and retention of health records for every child, for the Greater Manchester, Midlands (West) and East of England areas. Inhealth is an incumbent provider of CHI services in other areas of the UK. The value of the claim is stated as being in excess of £6M.

The principle reason the Court refused to order this cross-undertaking in damages was because NHS England had voluntarily entered into a ‘consent order’ with the challenger by which it had voluntarily agreed to pause the competition during an expedited trial process, now due to be heard in January 2023. It was only after doing so that it then sought to persuade the Court that it should order the challenger to give the ‘cross-undertaking’.

The Court refused on two grounds. Firstly, although it rarely arises in practice, the Court does not actually have the power to order a party to give a cross-undertaking in damages. A Court can refuse to grant an injunction unless a suitable undertaking is given; but it cannot actually force a challenger to give an undertaking it does not want to give. Secondly, the parties had voluntarily agreed to a pause in the procurement, and expedition of the litigation, without the challenger giving an undertaking. The challenger had therefore 'got what it came for' without being asked to give an undertaking. In those circumstances, the Court concluded it would 'not be right' to impose an undertaking. 

A challenge to a ‘live’ procurement

It is relatively rare to see challenges to procurements which are still ongoing. It is more usual to see challenges following the sending by the Authority of the ‘Award Letter’, when a would-be challenger is told it has lost, and therefore seeks to overturn that outcome. However, this case is a useful reminder that waiting that long may result in the claim being time barred due to the 30 day ‘limitation period’ for procurement claims.

In this case, the challenger had little choice but to bring its claim when it did. The underlying facts are that it was told it was disqualified, and NHS England would therefore not even start to evaluate its tender, because of a procedural error in the way the challenger had uploaded its final tender to the e-portal for the procurement. In essence, it had uploaded to the right documents, but not to the right folders within the e-portal. NHS England are arguing this is sufficient grounds for disqualification as the competition rules are clear on exactly where documents should be uploaded. The Inhealth is arguing its tender should have been evaluated. These are the issues to be determined at a substantive liability trial in January 2023.

As such, the challenger had to challenge at Court within 30 days of being told that its tender would not be evaluated. It did so. A further difference in challenges to live procurements, is that the challenger may also have to apply for an injunction, rather than being given an automatic one like when challenging post award notice.

Court expressly links the test for suspension and the 'sufficiently serious' test

Several months ago this might have been reviewed as a ‘niche point’. However, following the Court’s decision in Braceurself, the 'sufficiently serious' test is very much in focus. In Braceurself, the Court found the Claimant had no right to damages, despite it establishing at trial that it should have won the procurement. This was because the contracting authority’s breach of procurement law was not 'sufficiently serious'. We analyse that decision here.

There is a live issue about how this ‘sufficiently serious’ test should be reconciled with the ‘American Cynamid’ test which the Court applies when deciding whether to allow an automatic suspension to continue (as in ‘post-Award’ challenges) or where the challenger applies for an injunction to be instated (as in this case). In particular, a key part of that test is for the Court to ask: 'Would damages be an adequate remedy for the Claimant if the suspension were lifted and they succeeded at trial?' If damages would be an adequate eventual remedy then the injunction should be lifted / not granted. However, this is a difficult question to answer at an injunction stage if there is a risk that, if the Claimant does succeed at trial, the Court could still decide no damages are payable because the breach of procurement law was not 'sufficiently serious'.

That is, in effect, one of the arguments which Braceurself made in the High Court. However, the Court rejected Braceurself’s argument that awarding it no damages was an 'unjust and incoherent' outcome, notwithstanding that the Court’s decision to lift the automatic suspension had hinged on the Court’s finding that (applying the ‘American Cynamid’ test) damages would be an adequate remedy for the Claimant. Had the suspension remained in place and the Claimant succeeded at trial (as it did) then it could have been awarded the contract; now Braceurself had been left without the contract or damages.

An interesting feature of the judgment in the Inhealth Intelligence case, is that the Court appears to recognise the issue which has been created by the mismatch between the two tests. It also appeared to acknowledge that in many cases both the challenger and the authority might actually prefer the suspension to remain in place rather than convert this to a ‘damages only’ claim. For the challenger this is principally because often it would rather have the contract than damages; for the authority this is because of the 'pay twice' risk of having to pay the entity to whom it actually awarded the contract, as well as (if it loses at trial) the challenger.

In considering whether damages would be an adequate remedy, the Court noted:

'Damages… are not always what an aggrieved bidder wishes to obtain. This is for at least two reasons. Firstly, it might be difficult for such a bidder to obtain an award for damages, given the requirement for there to have been a sufficiently serious breach by the contracting authority….

The second reason is that an economic operator may indeed want, for a wide variety of commercial considerations, to be the winning bidder, rather than have damages. Some commercial organisations may prefer to conduct the economic operations that are the subject of the procurement rather than be excluded, or lose, with a competitor enjoying the profits of the operation in question….

Equally, a contracting authority may prefer to avoid exposure to a damages claim. Here, NHS England is a major provider of services, and has a very large annual budget. That public money is provided to supply healthcare and associated services, and sums paid out as damages to disgruntled bidders in litigation are, by definition, not being expended on the primary purpose of the NHS.'

What next?

We have noted that in the last four weeks there have been at least three substantive new ‘post-Award’ legal challenges triggering the automatic suspension (Amey Community v SoS for Defence, Falck UK ambulance Services v King’s College Hospital NHS Trust, and APCOA Parking v Southend Council), Braceurself may also be appealed. All are primarily post-Award challenges to scoring, and at least one is a case (like Braceurself) where a small change in score would change the overall outcome of who ought to have won. Any of these may result in the Court imminently having to address the live issue of how the ‘sufficiently serious’ test should be reconciled with the ‘American Cynamid’ test, given the apparent mismatch between the tests.

The judgment can be found here.

This article was written by Lloyd Nail and Richard Binns.

Key contact

Richard Binns

Richard Binns Partner

  • Dispute Resolution
  • Procurement Disputes
  • Healthcare

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