UK: Procurement Case Law Update: Beware Of Getting What You Ask For

Last Updated: 5 September 2011
Article by Euan McSherry

The Decision of Lord Glennie in the case of Elekta Limited v The Common Services Agency (2011) CSOH 107 addresses some interesting aspects of public procurement challenges; challenges which appear to be on the increase following the late 2009 amendments to the Public Contracts (Scotland) Regulations 2006 ("the Regulations").

In terms of remedies, the major change to the previous Regulations is that there is no longer the need for a challenger to obtain an interim order to prevent a contract from being entered into. The procurement process will automatically be suspended as soon as proceedings challenging the contract award have been served on the contracting authority. The contracting authority must then apply to the court to set aside the automatic suspension.

Often the contracting authority will seek to have the suspensions set aside which is what happened in Elekta. Where there is a compelling case and a consideration of the parties' positions favours the unsuccessful bidder, the court should be persuaded to continue the automatic suspension until a substantive hearing. However, if the contracting authority succeeds in having the suspension lifted, the unsuccessful bidder is likely to have expended time and money only to see the contract being entered into with the successful bidder, will have an award of expenses made against them and will be left with an action for damages where their case, on the face of it, was not compelling. This is what appears to have occurred in the Elekta case.

In Elekta the Defender was the Common Services Agency ("CSA"), better known as NHS Scotland. The CSA is a contracting authority in terms of the Regulations. The estimated value of the contract was in the region of £21m which was above the relevant threshold. The CSA adopted the open procedure for seeking tenders from interested parties and an OJEU notice was advertised on 5 November 2010. The contract was for a range of radiotherapy equipment for five cancer centres within NHS Scotland which included a radiotherapy management system ("RMS"). Following the raising of proceedings CSA were automatically suspended from awarding the contract to the successful bidder. CSA applied to the court to set aside the suspension on the basis that there had not been a breach of the Regulations.

In brief, Elektra complained that, by making it a requirement of the tender that the equipment to be supplied must be compatible with the existing RMS – previously supplied by the successful bidder – and which, the Pursuer alleged, could only be supplied by the successful bidder, the terms of the invitation to tender ("ITT") made it impossible for any bidder other than the successful bidder to tender successfully. This was the case because it was a mandatory requirement of the ITT, or at least a requirement which heavily weighted in the scoring system so as to make it practically impossible to succeed unless the bidder complied with it, that the equipment supplied was to be compatible with the existing system.

Lord Glennie's Opinion referred to the findings in the European cases of Concordia Bus Finland Oy, Ab v Helsingen Kaupunki and EVN AG v Austria. The salient point taken from these cases was that the contracting authority must be entitled to decide what the subject matter of procurement is or, to put it another way, it must be entitled to decide on the functional requirements it wishes to satisfy. The fact that the criteria included in the ITT can only be satisfied by one bidder, or a limited range of bidders, does not of itself contravene the principle of equality. The inclusion of these criteria can only be considered discriminatory if they cannot be justified objectively have regard to the characteristics of the contract and the needs of the contracting authority. Provided that the contracting authority complies with the requirements of EC law, they are free, not only to choose the criteria for awarding the contract, but also to determine the weighting of such criteria, provided that the weighting enables an overall evaluation to be made of the criteria applied in order to identify the most economically advantageous bidder.

Elektra argued, among other points, that the contracting authority was under a strict duty to define its functional requirements in a way which enabled effective competition to take place and did not effectively reserve the contract to one supplier. Unfortunately for Elektra Lord Glennie rejected this submission and emphasised that it was for the Defender as the contracting authority to decide what it wants. Elektra did not seek to challenge the criteria adopted by CSA on the grounds that these were not objectively justifiable. Elektra did not put before the court details of the sort of tender that they would have made had they been allowed to tender on the basis of replacing the RMS.

The second complaint made by Elekta was about the stipulation that there should be a single provider of the equipment to the five centres. Lord Glennie dismissed this argument, with reference to the reasoning set out above, on the basis that it was up to the contracting authority to decide what its procurement requirements are and how to frame them.

Lord Glennie stated that, when considering whether to grant an interim order where the negative consequences of such an order are likely to outweigh the benefits, the Court should have regard to certain factors set out in the Regulations. He concluded that in the case of a body such as a health service, it must be in the public interest that, if the challenge has no reasonable chance of success, the procurement exercise should be allowed to go ahead without having to wait until the end of the challenge proceedings. The strength of the challenge was often a very important factor. If Elekta had shown a reasonable prospect of success, then Lord Glennie might have been inclined to refuse to grant the order. He would have had to have considered to the adequacy of damages, although not as a conclusive factor. He would also have had to consider the question of timing, for example, if there was a prospect of this matter going to a full evidential hearing, then possibly an appeal, before the proceedings were resolved. Lord Glennie also commented that he felt that there was some force in the points made by CSA that this was a procurement exercise which needed to be implemented straight away. Lord Glennie concluded that Elekta's case was a very weak one with no reasonable prospect of success and he granted an order setting aside the suspension from entering into the contract with the successful bidder.

While, in general, unsuccessful bidders may challenge a procurement process and have this suspended with relative ease, it is always advisable to ensure that the strength and weaknesses of the challenge has been properly considered prior to going into Court.

At Biggart Baillie our experienced procurement team provides specialist advice and practical support on dealing with challenges to procurement procedures and award decisions. Further our market leading expertise in non-contentious procurement law covers everything a client needs to deliver large and small scale public procurements without falling foul of the advertising and award procedures set down by the UK Regulations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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