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Lancashire Care NHS Foundation Trust, Blackpool Teaching Hospitals NHS Foundation Trust v Lancashire County Council [2018] EWHC 200 (TCC)


Thursday, July 26, 2018

The claimants in this challenge were the incumbent providers of public health and nursing services. When the contract came up for renewal the Council awarded the contract to another provider (Virgin Care). When challenged, the Council sought to have the automatic suspension on concluding the contract lifted. The Court examined the principles for granting such relief under the Public Contracts Regulations 2015, which incorporated the test laid out in the American Cyanamid case, namely whether damages would be an adequate remedy for the claimants and whether or not the balance of convenience lay with granting the order to lift the automatic suspension or not.

The Court held, firstly, that since a claimant no longer had an automatic right to damages on account of the decision of the Supreme Court in Nuclear Decommissioning Agency v Energy Solutions EU Ltd. [2017] UKSC 34, but had to prove that losses incurred were sufficiently serious, it was impossible to tell at an interlocutory stage whether or not damages would be an adequate remedy. Secondly, the Court ruled that the balance of convenience lay overwhelmingly with the claimants. This was because any unsuccessful incumbent provider would face inevitable reorganisation of its business as a result and such reorganisation would very often involve redundancies. Moreover lifting the automatic suspension would also result in the loss of senior staff who currently managed the services. Thus the automatic suspension was not lifted.

Following an expedited trial, the substantive judgement relating to the challenge of the award was handed down on 22 June 2018. The court held for the claimants, finding that the Council’s reasons for awarding the contract to Virgin Care were insufficient in law. This was primarily due to inconsistency in, and an overall lack of, properly recorded notes of the evaluation procedure.

Commission v Austria (Imprimerie d’État) C-187/16
In this case Austria claimed that the direct award of contracts (i.e. without following a tender procedure) for the printing of passports, driving licenses and other official documents to the former national printing office (since privatised) was necessitated on grounds of national security/essential national interest, in particular on the grounds that national security necessitates:

  1. centralised performance of the printing;
  2. a contractor with its production and storage facilities in Austria to ensure that the Austrian government could inspect the premises;
  3. guaranteed provision of the documentation; and
  4. a trustworthy contractor

The Court held that although Austria had identified legitimate security interests, it had not demonstrated that those security objectives could not have been obtained through a competitive tendering procedure. In particular the Court held that contractual safeguards would be sufficient to ensure secure and uninterrupted production of the documentation, even if the undertaking awarded the contract were established outside Austria. The Court did however acknowledge that Member States were entitled to impose “particularly high requirements for the suitability and reliability of contractors” given the sensitive nature of the documentation in question.

Vakakis kai Synergates v Commission T-292/15
The applicant in this case initiated proceedings seeking damages for loss of opportunity regarding the award of a contract for the “Consolidation of the Food Safety System in Albania” by the EU Delegation to Albania (the “Contracting Authority”). The applicant alleged that there was a conflict of interest in that the specialist hired by the Contracting Authority to prepare the Terms of Reference for the tendering procedure was an employee of the successful tenderer.

While the Contracting Authority took some steps to clarify the role of the specialist hired to prepare the Terms of Reference, the Court found that the Contracting Authority failed to adequately inquire into the involvement of the specialist in drafting the Terms of Reference. The Court held that “it is incumbent on the contracting authority, firstly, to ensure … respect for the principle of equal treatment and, secondly, to determine on a case-by-case basis and following a detailed evaluation whether a person or candidate is in a situation of a conflict of interests prior to the decision whether to exclude it from the tendering procedure and to proceed with the award of the contract.”

The Contracting Authority’s failure to investigate and determine whether a conflict of interest situation arose was found to constitute an irregularity that was classified as a substantially serious infringement of the rule of law intended to confer rights on individuals. The Court held that the applicant was entitled to damages for loss of opportunity and for the expenses incurred in the tender process. The Court did not however accept the applicant’s evaluation of quantum and directed that the Commission and the applicant engage with one another and agree an appropriate amount together.

Tirkkonen Case C-9/17
Finland established a Rural Development Programme under the auspices of the Agency for Rural Affairs (the “Agency”). As part of this programme, a tender procedure was launched to conclude contracts for a panel of agricultural consultants. Finnish farmers who fulfilled certain criteria would be able to seek the advices of a consultant from the panel and the Agency would subsidise these advices. Entry to the advisory panel was subject to applicants passing a two-stage tender procedure. At the first stage, all applicants who met the experience and qualification requirements automatically passed. The second stage consisted of an examination and those who scored enough marks would be admitted to the panel.

Ms Tirkkonen failed the first stage on account of a clerical error on her application. She requested an opportunity to amend this and resubmit, which request was refused. She then challenged the decision. In the course of her challenge she alleged that the tender process constituted a licensing scheme which was not covered by the concept of a public contract, and as such did not fall under public procurement law.

The Court held that the scheme did not constitute a public contract within the meaning of Directive 2004/18. Since the Agency “makes no selection among the admissible tenders” and “confines itself to ensuring that qualitative criteria are respected,” and since “the contracting authority has not referred to any award criteria for the purpose of comparing and classifying admissible tenders” the contract could not be a public contract under the Directive. Without an element of competition and comparison between tenderers a contract will not fall under public procurement law.

Lloyd’s of London v Agenzia Regionale per la Protezione dell’Ambiente della Calabria C-144/17
In this case Lloyd’s challenged a series of decisions to exclude two of its Italian syndicates from a tender by the contracting authority on the basis that the same General Representative of Lloyd’s for Italy had signed both tender documents, an alleged violation of an Italian law which prohibited multiple tenderers with the same “single decision-making centre” from entering the same tender.

The Court acknowledged that Directive 2004/18 does not preclude Member States from establishing rules to ensure the observance of the principles of equal treatment and transparency with regard to public procurement and that the Italian law in question was intended to promote transparency and equal treatment by preventing collusion between tenderers.

However, the Court held that since it is the concern of EU law to ensure the widest possible participation by tenderers, automatic exclusion of tenderers was disproportionate in that it went beyond what was necessary to prevent collusion by raising an “irrebuttable presumption of mutual interference.”Contracting authorities were required to examine the available evidence in order to determine whether or not there was, in fact, any collusion between tenderers.


Author

Kerri Crossen

PARTNER


Jean-Anne Young

SENIOR ASSOCIATE

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