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Recent months have seen a steady stream of procurement litigation as the courts develop and refine their approach to the automatic suspension rules. Also, a spate of litigation against the Legal Services Commission has seen the courts take a tough line and make clear the onus is firmly on bidders to get complete tenders lodged on time. There are also recent (upcoming in Scotland) changes to the rules as a result of the Bribery Act 2011 which is now in force.

Bribery Act Takes Effect

With effect from 1 July 2011, Regulation 23(1) of the Public Contracts Regulations 2006, which apply in England, Wales, and Northern Ireland, has been amended to take account of the Bribery Act 2010. Regulation 23(1) sets out a list of convictions which result in compulsory disbarment from public contract opportunities. The Bribery Act offences of bribing another person and bribing a foreign public official have been added to this list. It is understood that similar amendments will be made to the Public Contracts (Scotland) Regulations 2006 in the near future. Although it is unlikely that there will be any convictions in the first few months following implementation of the Bribery Act, procurement documents issued after July should be updated to include a question regarding Bribery Act convictions.

The Bribery Act also introduces a corporate offence of failing to prevent bribery, where a bribery offence is committed by an associated person performing services for or on behalf of the company. This offence has not been included in the list of convictions which result in mandatory exclusion. However, under Regulation 23(2), contracting authorities have discretion to exclude bidders who have been convicted of a criminal offence relating to the conduct of their business or profession. This could include a corporate conviction for failure to prevent bribery.

Click here to view The Bribery Act 2010 (Consequential Amendments) Order 2011.

For further information about how the Bribery Act 2010 may affect your business and the procedures and diligence you will be required to demonstrate you have in place please contact Catriona Munro or Dawn Demellweek.

Automatic Suspension - One Lifted, One Remains in Place

Two recent cases from Northern Ireland against the Department for Employment and Learning ("the Department") have shed further light on how the courts will tackle applications to lift the automatic suspension preventing contract award which now kicks in when a court challenge is made.

Rutledge Recruitment and Training v
Department for Employment and Learning
This case involved a contract for the provision of training and employment services. Rutledge was the incumbent and had been providing the "New Deal" under a contract entered into in 2007 which had since been extended several times. A replacement contract called "Steps to Work" was tendered in 2009. Rutledge submitted the most economically advantageous tender. However, the Department decided not to award the advertised contract and instead chose to extend the existing New Deal contract. In March 2011, the Department again advertised a contract to provide the Steps to Work programme. This time, Rutledge was unsuccessful and challenged on six grounds, including illegality in the non-award of the 2009 contract, unfairness and errors in the evaluation process. The challenge had the effect of requiring the Department to refrain from awarding the contract, but it applied to the High Court of Northern Ireland for the suspension to be lifted.

McCloskey J concurred with the approach taken by the English courts in previous cases (see our February 2011 Update), and applied the interim injunction principles set down in the American Cyanamid case. He concluded that none of the grounds of complaint raised a serious issue to be tried. With that established, it was not necessary to address other matters, but he nonetheless observed that there was a compelling need to award the Steps to Work contract, given that the Foyle area was the last area in the UK to use New Deal and that Steps to Work had a higher success rate. The unsatisfactory nature of the status quo, combined with the time it was likely to take for the case to come to trial would outweigh any issues raised by the claimant.

Click here to read Rutledge Recruitment and Training Limited v Department for Employment and Learning and Department of Finance and Personnel judgment of 5 July 2011.

First4Skills v Department for Employment and Learning
There was a different outcome in this case where the Department applied to lift the suspension, but the judge ruled against them. The contract in question was for the provision of training services. First4Skills had omitted to include a required spreadsheet when submitting its bid which was therefore rejected by the Department. First4Skills claimed that the rejection was not proportionate. Its claim was bolstered by the fact that the Department had used language which seemed to suggest that the spreadsheet would not be scored as part of either selection or award criteria. In addition, there was evidence suggesting that the Department had allowed some bidders to provide missing information as part of a clarification process. The judge held that there was a serious issue to be tried. He also commented that the balance of convenience was marginally in favour of First4Skills given that it had offered a cross-undertaking in damages and that the case would be concluded before the contract start date.

The case took place in unusual circumstances, First4Skills was not the only bidder to challenge the procurement process and the court had already refused to overturn the prohibition on awarding this contract in the context of an application to lift the prohibition brought in the other bidder's case. The judge felt that the Department was misconceived in bringing the second application against First4Skills because the moratorium on awarding the contract was not specific to individual plaintiffs, but applied to the procedure as a whole. Therefore it should be unnecessary to bring more than one application.

The cases apply the approach taken recently by the English High Court in applications to lift an automatic suspension, but also demonstrate that the suspension will be maintained in appropriate circumstances.

Click here to read First4Skills v Department for Employment and Learning, judgment of 30 June 2011.

Problems with Submitting Tenders

There have recently been a flurry of cases in relation to erroneous tender submissions, in which the courts have adopted the position that it is for bidders to ensure submissions are made in accordance with instructions and that contracting authorities cannot be required to consider submissions that fail to comply.

R (on the application of Harrow Solicitors &
Advocates) v Legal Services Commission
Harrow had its tender rejected because it failed to meet the minimum score required to be eligible for immigration work under the framework being established. Responding to a question as to whether it offered drop-in sessions, Harrow answered "no" resulting in it scoring 0 for the question, rather than the 2 points available had it answered 'yes'. Harrow did, in fact, offer drop-in sessions and had simply answered the question incorrectly. It appealed its rejection, arguing that the contracting authority was acting unreasonably and disproportionately by refusing to amend Harrow's score having received an explanation.

The court rejected the appeal noting that the contracting authority had an obligation to ensure that all bidders are treated equally. Furthermore, it considered it would breach the principles of equal treatment and good administration if a tenderer was permitted to change its submission after the deadline. Any exercise of discretion by a contracting authority to seek clarification of a tender submission must not amount to a change in the bid.

Click here to read R (on the application of Harrow Solicitors & Advocates) v Legal Services Commission, judgment of 28 April 2011.

R (on the application of Hoole & Co)
v Legal Services Commission
In this case, Hoole's bid was scored down on a number of questions for which it had failed to submit a response. Hoole argued that it had prepared responses to those questions, which were visible on the screen. However, when Hoole viewed the print version of its draft submission, the responses to those questions were blank. Hoole nevertheless submitted its bid assuming that the version it alleged was correct on the screen would be the version submitted to the LSC. Hoole was marked down for failing to provide responses to these questions and failed to win the contract.

Hoole appealed arguing that there were technical issues with the portal which caused its responses to be wiped. The Court held that Hoole could not illustrate to the court that there had been a technical issue with the portal, nor could it illustrate that it had submitted responses to those questions. Having noticed that the print-out had not recorded the information, Hoole ought to have availed itself of the available technical support to confirm that its tender submission had been submitted correctly in accordance with the clear guidance provided by the contracting authority. The contracting authority was under no duty to alert Hoole of the defects in its tender submission so to allow it to amend and improve its bid by providing the information it had originally intended to supply. The appeal was rejected.

Click here to read R (on the application of Hoole & Co) v Legal Services Commission, judgment of 15 April 2011.

R (on the application of All About Rights
Law Practice) v Legal Services Commission
In the final case on this topic, the tenderer made its submission via an electronic portal. However, the tenderer was eliminated from the process as the Tender Information Form - a required element of the tender submission - was mistakenly uploaded as a blank page. The tenderer disputed its elimination arguing that the LSC ought to have allowed it to submit the form following the deadline and, had it been allowed to do so, it would have been awarded the contract. The Court found that the tender instructions were clear that to be compliant tenders (including the Tender Information Form) required to be complete and submitted by the deadline. Responsibility for ensuring this was done lay with bidders. The court saw no good reason, with regard to the principles of equal treatment and proportionality, for allowing one bidder to submit additional information following the deadline, where that additional information was a key feature of the tender process. To do so would be unjust to other bidders who were bound to the same tender conditions and made no such mistake.

Click here to read R (on the application of All About Rights Law Practice) v Legal Services Commission, judgment of 14 April 2011.

These cases serve to highlight the importance to bidders of ensuring that their tenders are submitted correctly, on time and in accordance with the tender instructions and provide a strong hint that, usually, the courts will have little sympathy for bidders. They also highlight the potential risks to which a contracting authority would be exposed if it bent the tender rules to allow a bidder to remedy an error after the deadline.

Disclosure of Rival Bids During Challenges

A recent judgment clarifies the approach the Scottish courts will take when a bidder seeks disclosure of the winning bid during a court challenge to a tender process. Healthcare at Home Ltd ("HaH"), a private healthcare provider, challenged a tender process run by National Procurement ("NP") on behalf of the NHS, which aimed to establish a single-supplier framework agreement for dispensing and delivery services for the breast cancer treatment, Herceptin.

HaH tendered, but in May 2010 was advised that BUPA had won the tender. HaH was provided with details of the scoring process applied by NP and was told that its tender had been evaluated as scoring 89.06%, but BUPA had been awarded a score of 90.48%. HaH brought proceedings to challenge the decision to award the framework agreement to BUPA. It argued in particular, that errors, breaching the procurement rules, were made in the assessment of HaH's tender.

HaH sought disclosure of BUPA's bid, but BUPA considered that certain items were commercially confidential and should not be disclosed to one of its competitors. HaH applied to the Court of Session for a ruling. The Court considered that it was required to balance BUPA's right to confidentiality against the need for the dispute between HaH and NP to be disposed of fairly. While there is a public interest in maintaining commercial confidentiality, there is also a public interest in the open administration of justice.

The Court considered that BUPA's claim for confidentiality was not particularly strong, for three reasons:

The documents did not contain any highly sensitive technical or scientific information. Although not essential for a successful confidentiality claim, there is a scale of information ranging from that of the highest commercial sensitivity, to that of limited sensitivity. BUPA would no doubt prefer that its tender documents not be disclosed to competitors, but the information in the bid fell towards the lower end of the scale of sensitivity;

When submitting its tender BUPA had not advised NP that disclosure of any part of its tender would be likely substantially to prejudice BUPA's commercial interest (the invitation to tender had specifically requested this be done). Although not conclusive, this weighed against BUPA's argument for confidentiality;

Notwithstanding that a docquet on some of BUPA's tender documents stated that they were strictly confidential and not be disclosed without BUPA's permission, this fell well short of the written notice required by the invitation to tender. Furthermore, many of the memoranda appeared to be compiled from publicly available material and best practice. Any supplier working in this sector would be likely to have prepared such documents. Potential commercial prejudice from disclosure of this information appeared to be minimal.

The Court ordered disclosure of 20 out of 23 documents requested by HaH. The remaining three documents were regarded as "sufficiently confidential" and not to be disclosed. 

The case tends to confirm a trend seen in recent English cases that the courts will generally be sceptical of claims for confidentiality in procurement proceedings.

Click here to read Healthcare at Home vs Common Services Agency, judgment of 1 February 2011.

Specifications - Favouring Particular Bidders?

In a second piece of Scottish health sector litigation, the Court of Session recently ruled on a challenge brought by Elekta, a supplier of radiotherapy equipment, against the decision of the Common Services Agency ("CSA"), purchasing on behalf of five Health Boards, to specify a technical standard which it alleged could only be met by one supplier. Four of the five Health Boards operated a software system for patient treatment plans called "ARIA". The specification required the radiography equipment sought be fully compatible with ARIA software. The only supplier who could meet this requirement was the supplier of ARIA software.

The judge concluded that the fact that the CSA had specified a requirement which could only be met by one supplier did not breach the procurement rules, unless that requirement could not be objectively justified. In this case, the justification was that hospitals wished to purchase equipment compatible with existing systems.

Click here to read Elekta Limited v The Common Services Agency, judgment of 16 June 2011.

How Long to Wait Before Bringing a Claim?

There have been several recent cases addressing the question of when the three month time limit starts to run for the purposes of bringing a procurement claim. We reported on the High Court decision in SITA UK Limited v Greater Manchester Waste Disposal Authority in our August 2010 Update. In that case, Mann J considered that it is not sufficient to start the clock ticking that the claimant simply has knowledge of the facts underlying the infringement, the claimant must also have knowledge that the facts indicate that there has been an infringement.

The Court of Appeal issued its judgment in SITA's appeal in February 2011. It considered whether the High Court judge had erred in deciding that SITA's claim was out of time. SITA had argued that it did not have sufficient information to bring a claim before July 2009. This argument turned on whether SITA had sufficient knowledge at an earlier date. However, SITA had written a letter before action on 27 May 2009 and the court held that if SITA had enough information to write such a letter, it had enough information to bring its claim at that date

Click here to read SITA UK Limited v Greater Manchester Waste Disposal Authority, judgment of 24 February 2011.

Harry Yearsley Limited v Secretary of State for Justice involved a challenge to a 2009 Ministry of Justice tender process for the supply of frozen food to prisons. The contract was to be awarded on the basis of the most economically advantageous tender, with the quality element scored against questions in the invitation to tender and the price element assessed by e-auction. The contract was awarded in June 2009. In April 2010, Harry Yearsley raised a claim on a number of grounds, including lack of compliance with specification, material changes to the contract, errors in the weighing of criteria, inadequate debrief and that, although the procurement documents suggested that the Ministry of Justice was seeking the best combination of quality and price, in fact quality had been used only as a threshold criterion for admission to the e-auction and the contract had been unlawfully awarded on a lowest price basis.

The Ministry of Justice applied to the High Court for strike out and/or summary judgment on the basis that the proceedings were out of time and that Harry Yearsley had not suffered any loss or damage as a result of the alleged breaches. Harry Yearsley justified the delay on the grounds that it had not become aware of the alleged breaches until February 2010. However, the Court, following the decision in SITA UK Limited v Greater Manchester Waste Disposal Authority (above), found that in October 2009 Harry Yearsley had knowledge both of the facts of the alleged breach and of the legal issues with the e-auction, and found those parts of the claim to be out of time. The other elements of the claim have been allowed to proceed to trial.

Click here to read Harry Yearsley Limited v Secretary of State for Justice, judgment of 12 May 2011.

Mermec UK Ltd v Network Rail concerned a challenge by a potential supplier of an automatic rail inspection system against Network Rail's decision to reject its bid. Mermec complained about the adequacy of debrief provided by Network Rail and alleged incorrect scoring. Mermec was notified that it had not been awarded the tender on 23rd September 2010. It wrote to Network Rail on 30 September and the parties met on 14 October. The claim was served on 30 December 2010. Mermec argued that it did not have sufficient information to bring a claim until after the meeting of 14 October. The court held that the letter of 30 September demonstrated that Mermec did have enough information to bring a claim at that time; the three month limitation period had therefore expired. Mermec's request that the court extend the limitation period was also rejected because it had not provided a good reason for this. Mermec also argued that time should not start running until the end of the ten day standstill period, but the judge held that this argument was inconsistent with the wording of the Regulations.

Click here to read Mermec UK Ltd v Network Rail, judgment of 19 July 2011.

These cases are likely to discourage lengthy discussions between bidders and contracting authorities where there is a potential problem with a procurement process. Rather, bidders are more likely to bring claims to court at an earlier stage in order to avoid time bar problems. The cases once again reinforce the need for bidders to raise queries as soon as they are aware of a potential infringement rather than risk waiting for the outcome of the tender process.

Seminar on Abnormally Low Bids

In the current economic climate, we have seen an increase in questions regarding bids that might be regarded as abnormally low or unsustainable. How can a purchaser ensure that the bids it receives are sustainable? What can bidders do if they are undercut by an unusually low bid?

Find out the rules, and get your questions answered at the breakfast seminars being held in our Edinburgh office on Thursday 8 September and in our Glasgow office on Tuesday 13 September.

Click here to book a place for Edinburgh seminar.

Click here to book a place for Glasgow seminar.

Contact Us

If you think your business or organisation may be affected by any of the above, or if you have any other questions, please contact:

Catriona Munro
Partner
0141 271 5696
catriona.munro@mms.co.uk

David McGowan
Associate
0141 271 5737
david.mcgowan@mms.co.uk 

Michael Dean
Partner
0141 271 5730
michael.dean@mms.co.uk

This briefing is written as a general guide only. It is not intended to contain definitive legal advice which should be sought as appropriate in relation to any particular matter.