22 February 2018

Contrary to a recent trend, the court has upheld an automatic suspension in a procurement challenge. Such suspensions prevent the contract being signed until after the trial so that the right bidder has a chance of being awarded the contract if an error has been made. The court has ordered an expedited trial that will review the legality of the decision reached by the authority without any contract award taking place. We discuss the key points below.

Position before the Lancashire case

  • The current trend has been for authorities to be confident of having an automatic suspension lifted by the court, but will have to be prepared to 'pay twice' in damages in the event that flaws in the procurement process are later found at trial – both to the successful, appointed bidder and the challenging bidder.
  • Barring fairly extreme circumstances, for example a charity that may suffer catastrophic consequences if the contract was allowed to proceed before a full trial (as in the Bristol Missing Link case), the court usually considers that damages are an adequate remedy for bidders in most cases and the contract should be allowed to proceed. The automatic suspension is usually lifted by the court.

The latest case: Lancashire Care NHS Foundation Trust & Blackpool Teaching hospitals NHS Foundation Trust v Lancashire County Council [2018] EWHC 200 (TCC)

  • The case involves the 0-19 Healthy Child Programme in Lancashire and in particular Lot 1 (Public Health Nursing Services). The contract for Lot 1 is worth approximately £104 million over five years and represented the majority of the value of the programme as a whole. A new provider was named the preferred bidder following the procurement process.
  • The tender was under the Light Touch Regime of the Public Contracts Regulations 2015.
  • Both the claimants (two NHS foundation trusts) and the defendants were public bodies. The defendant council applied to the court to lift the automatic suspension imposed by virtue of the NHS trusts issuing court proceedings so that it could sign its contract with the successful private sector bidder for Lot 1.
  • The court applied the usual American Cyanamid test. (1) Is there a serious issue to be tried; (2) Are damages an adequate remedy for the bidder/claimant? (3) If damages are not an adequate remedy, where does the balance of convenience lie (including consideration of the public interest)?
  • The application was decided on the basis that damages would not be an adequate remedy for the NHS trusts. The court came to this conclusion on the evidence provided by the trusts that they would need to restructure their operations (having only recently done so) should they not win and this would potentially impact healthcare as a whole in the region.
  • The judge also placed weight on evidence that other contracts for children’s health services would potentially be affected as skilled staff would be lost. The court said that these are precisely the sort of things that cannot be compensated for by damages.
  • The above contrasts with a string of recent cases which have all come to the conclusion that damages are an adequate remedy including where similar evidence was provided on the effect on the commercial operations of the bidder. The fact that the claimants are NHS trusts with wider public health considerations appears to be a distinguishing factor.
  • Also in the court's consideration in this case:
  • All the parties are from the public sector and if the suspension was lifted it would possibly involve damages being paid by one public body to another. The court said whilst not determinative, this could not be ignored.
  • The defendant council did not ask for a cross undertaking in damages (i.e. a payment of damages by the trusts to the council if the suspension is upheld but the council successfully defends the trial) given the claimants were NHS trusts.
  • The ‘sufficiently serious breach’ test for damages (which has recently been explained by the Supreme Court in EnergySolutions v NDA) arguably creates a higher threshold for damages (and therefore arguably a reduced ability for a bidder to obtain this remedy). The court considered that this may be a relevant factor in suspension applications (adequacy of damages) but did not provide further guidance on it as the detail did not arise in this case.

What does this mean for authorities and bidders?

The case bucks the trend and proves that the court is willing to uphold suspensions not just in extreme circumstances.

The case is however unusual in that both the claimants and the defendant are from the public sector (each being part of the NHS) and the two claimants are NHS foundation trusts. A more common dynamic in procurement cases generally is where a private sector bidder seeks to challenge a proposed award by a public sector (or utility) authority.

It will be interesting to see whether this case is part of a wider trend towards reviewing award decisions swiftly with suspension in place (rather than effectively converting procurement challenges into damages actions), or is limited to its specific facts. It will also be interesting to see whether the twin issues of adequacy of damages and the factual application of the sufficiently serious test arise again in argument in future cases at High Court and/or appeal level and what weight the court will place on this potentially difficult balancing act.

How can Burges Salmon help?

We advise bidders and authorities on the procurement process and challenges to awards. For more information, please contact our specialist procurement disputes team.

Key contact

Chris Jackson

Chris Jackson Partner

  • Infrastructure
  • Procurement and State Aid
  • Transport

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