Virgin have, following the decision of the Department for
Transport to award the West Coast franchise to FirstGroup, lodged
proceedings challenging the award. The precise basis of the claim
is unclear but it is reported that the application seeks judicial
review of DfT's decision.
Tendering procedures are primarily governed by the EU Public
Sector Directive 2004/18 as implemented in the UK by the Public
Contracts Regulations 2006. These rules impose duties
of non-discrimination and transparency of dealings on government
departments and public authorities awarding substantial contracts,
and will be highly relevant to any claim.
According to these rules, after notification of a bid being
unsuccessful, the Department must wait for 10 days before it can
enter into a contract in order to give any unsuccessful tenderer an
opportunity to challenge the decision. Where legal challenges
are raised during this standstill period, the contract award is
automatically suspended until such time as the court orders it
should be lifted (on application by the authority) or the legal
challenge is otherwise disposed of.
Courts are generally reluctant to second guess the judgement of
the panel regarding the application of evaluation criteria save in
cases of manifest error. Where the challenge is on the basis
that the successful tender appears to be abnormally low (or not
credible), as the law stands, it appears unlikely that an authority
would be obliged to investigate and/or reject tenders on such
Where a court finds in favour of a complainant after the
contract has been signed then it may award damages. Reported
damages awards have been rare in the UK but cases have settled out
of court and amounts recovered can be substantial. Damages
are available in respect of bid costs, loss of opportunity and/or
loss of profit if the claimant proves he would have won the
contract but for the breach - or had a substantial chance of
winning it, damages being reduced proportionally in such a
In this instance, the contract with FirstGroup has not been
signed so if Virgin's challenge is successful or DfT takes the
view that there have been irregularities in its contract award
procedure, the contract award procedure would be conducted
afresh. This would be likely to involve a fresh
An option open to DfT for ensuring continuity of service pending
the resolution of any dispute would be the conclusion of an interim
contract with Virgin for a short period of time on grounds of
urgency. If this is done one would expect a Notice to be published
in the Official Journal of the European Union giving notice of this
(probably a 'VEAT' notice) and a 10 day standstill period
for any challenge to be raised.
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