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Public Procurement 2018 Case Law Review

on Tuesday, 08 January 2019.

We have highlighted the most important procurement law cases from 2018 and summarised the key issues to keep you up to date with the latest developments.

 

Case

Subject Matter and Why it is Important

1

Faraday Development Ltd v West Berkshire Council and another

Development agreements

Arguably the most significant case in 2018 for a number of reasons. The Court of Appeal overturned the High Court decision that a development agreement did not amount to a public works contract, on the basis that the way it was drafted gave rise to a contingent obligation to develop. This case has wider ramifications as it makes it more difficult to structure development deals as land transactions outside the scope of the Public Contracts Regulations 2015 ("PCR").

The Court also provided guidance on the requirements for a valid 'Voluntary Transparency Notice' (or VEAT Notice) in order to take advantage of the shorter timescales for disgruntled bidders to  challenge procurement decisions. Following a finding that the VEAT notice was flawed, this is the first English case when a court has made an order for ineffectiveness.

2

Lancashire Care NHS Foundation Trust v Lancashire County Council

Tender evaluation and audit trail for scoring

The Court quashed a contract award decision as the contracting authority was unable to provide sufficient reasons for the scores awarded to each bidder and could not therefore justify the contract award decision. This case emphasises the need to ensure that notes of tender evaluation are of high quality and can provide a paper trail to justify the scores awarded to the bidders.

3

MLS (Overseas) Ltd v Secretary of State for Defence

Use of transparent criteria

The contracting authority failed to specify the effect of a 'pass/fail' criteria and as a result was considered to have unlawfully excluded a bidder from the procurement process. This case clarifies that where criteria include 'pass/fail' requirements the consequences of a 'fail' must be stated explicitly. Bidders will not be deemed to understand that a 'fail' results in tender exclusion.

4

Casertana Costruzioni Srl v Ministero delle Infrastrutture e dei Trasporti - Provveditorato Interregionale per le opere pubbliche della Campania e del Molise Azienda Regionale Campana per la Difesa del Suolo - A.R.CA.DI.S.

Reliance on consortium bidders to satisfy selection criteria

A bidder was not permitted to replace a member of its consortium after the deadline for receipt of tenders, where the bidder was relying upon the member to satisfy a mandatory element of the selection criteria. The Court held the contracting authority was correct not to allow the consortium to amend its bid as this would amount to a substantial change to the tender and would breach the principles of equal treatment and non-discrimination (in favour of the consortium).

5

Ocean Outdoor UK v Hammersmith & Fulham

Concession contracts

This case considers whether an arrangement to grant a lease for advertising infrastructure could amount to a services concession contract (under the Concession Contracts Regulations 2016 (CCR)). The Court determined that the arrangement was a disposal of an interest in land that did not amount to a services concession. There are relatively few cases dealing with the extent to which the CCR applies and the court provided helpful guidance on the application of the concession rules.

6

Vakakis Kai Syner Gates v European Commission

Conflict of interest

The Court determined that the contracting authority failed to properly investigate and take appropriate steps in relation to an apparent conflict of interest where a consultant involved in the pre-procurement stage, was also a member of the consortium awarded the contract.

7

SRCL Ltd v The National Health Service Commissioning Board

Treatment of abnormally low tenders

This case provides guidance on the correct approach to assessing whether a bid should be considered to be an abnormally low tender.

8

Šiaulių regiono atliekų tvarkymo centras, 'Ecoservice projektai' UAB, formerly 'Specializuotas transportas' UAB, and interveners

Bidder conflict of interest

This case provides clarification on the duties imposed on bidders where an apparent conflict of interest arises between two bidders participating in the same procurement. There is no general obligation on bidders to disclose links to another organisation that is independently participating in the same procurement process (eg 'sister companies'), unless there is a requirement to do so in the tender documents.


Faraday Development Ltd v West Berkshire Council and another

Read more here.


Lancashire Care NHS Foundation Trust v Lancashire County Council

This case concerned a procurement procedure under the 'light touch regime' for the provision of public health nursing services in Lancashire for patients between 0-19 years of age. The result of the procurement was extremely close, with only two marks separating the bidders. The Council failed (both during the procurement process and at trial) to justify the scores awarded to each of the bidders. The Court set aside the Council's decision on the grounds that it was unable to assess whether the Council had made a 'manifest error' when evaluating tenders.

The case provides valuable guidance on the high standards expected of contracting authorities when providing reasons for the award decision.

  • The panel had reached agreement on the moderated scores, however there was no clear record of the reasoning that led each evaluator to approve the final score. The notes listed advantages and disadvantages in bullet point form without indicating which factors were decisive in allocating the score. The reasoning was inconsistent/conflicting without providing clarification of the outcome of the discussion.
  • Moderation notes must contain a 'full, transparent and fair summary of the discussion that led to the consensus scores'. It is not necessary to record a verbatim record of every point made in moderation, but the notes must record the ultimate reason for awarding the consensus score to each bidder.
  • Individual evaluators score sheets will not be adequate evidence, particularly where an evaluator's view shifts based on the discussions held in the moderation meeting. The reasons for the award of a score must reflect the discussions at the moderation meeting.

MLS (Overseas) Ltd v Secretary of State for Defence

A bidder challenged a decision by the contracting authority to exclude it on the basis of a failure to meet a pass/fail threshold. One of the 'non-scored' criteria required bidders to demonstrate how they would ensure a safe working environment in their supply chain. This was assessed on a 'pass'/'fail' basis, however the Invitation to Tender ("ITT") did not specify the consequences of a 'fail' and did not specify that bidders could or would be excluded from the procurement. The contracting authority excluded a bidder (that would otherwise had been selected as the most economically advantageous bidder) on the basis of its response to this question.

The Court held that the ITT failed to inform bidders expressly or impliedly that a fail could result in a mandatory or discretionary exclusion from the procurement process. Nor did the ITT specify that the 'pass' requirements were minimum standards that all bidders must satisfy. Additionally the evaluation criteria did not indicate that this criteria would be used to assess which tender was the most economically advantageous tender.

This case highlights the importance of expressly stating how every aspect of tenders will be evaluated. It is not enough to assume that bidders will understand that a pass/fail requirement will (or could) result in the tender being excluded. It is also essential to specify what is required of bidders in order to achieve a 'pass' (which the contracting authority had done in this case).


Casertana Costruzioni Srl v Ministero delle Infrastrutture e dei Trasporti - Provveditorato Interregionale per le opere pubbliche della Campania e del Molise Azienda Regionale Campana per la Difesa del Suolo - A.R.CA.DI.S.

The ruling confirms that where any member of a consortium loses a qualification and becomes non-compliant with a selection criterion after the deadline for receipt of tenders, allowing the consortium to amend its tender to rely on the capacity of another entity would amount to a substantial modification to the tender. This would consequently infringe the principles of equal treatment and non-discrimination.

Although the case was heard under Directive 2004/18 (which underpins the Public Contracts Regulations 2006) the case will still be of relevance as to the application of the general procurement principles. It should be noted that the 'new' Public Contracts Regulations 2015 contains a provision (Regulation 63(4)) concerning the replacement of consortium members that do not satisfy selection criteria or grounds for exclusion, however it does not specify at which point in the procedure these rights can be exercised.

The facts are as follows: in a tendering procedure for the award of a contract for the design, planning and execution of works for sewage and purification infrastructures, tenderers were required to demonstrate their technical and professional ability by presenting a recognised certificate corresponding to the nature and value of the contract works. One bidding consortium relied on the certificate of a third party. An issue arose as to whether that consortium ought to have been excluded from the tendering procedure because the third party it had relied on had ceased to be eligible for the relevant certification. The consortium member lost accreditation after the deadline for receipt of tenders but before bids had been evaluated. The Court determined that the contracting authority, in order to preserve equal treatment among the bidders, was correct not to allow the consortium to replace the consortium member (and thus the consortium could not be awarded the contract).


Ocean Outdoor UK v Hammersmith & Fulham

The Technology and Construction Court (TCC), ruled in this case that the granting of leases for the operation of media advertising screens, did not amount to the letting of services concession contracts under the Concession Contracts Regulations 2016 [SI 2016/273] ("the Regulations").

Key points to note included: the advertising services were not provided on the local authority's behalf; the advertising was not required, or provided, for the local authority; the new leases did not provide a service for the benefit of local authority or its residents - factors that would be key, and integral to, the establishment of a concessions contract.

An essential requirement of a concessions contract is that it should be a contract for pecuniary interest. This would mean the contractor assuming a direct or indirect obligation to carry out services which are the subject of the contract, in addition to the contract being legally enforceable. The new leases in this case imposed no legal obligation to carry out a service, but rather permitted the contractor to use the advertising space. The court concluded there was no 'contract for pecuniary interest' and that the transaction concerned the sale of an interest in land which is not subject to the Concession Regulations 2016.

The facts are as follows: the local authority owned 2 sites containing advertising towers. It held a competitive bidding process to award leases to a company who would be permitted (ie not obliged) to sell advertising space on the towers. The lessee would be responsible for all maintenance of the towers and the advertising infrastructure. The local authority deemed the transaction, and the resultant contract, to be solely an interest in land deal - as confirmed by the Court - and thus falling outside the Regulations.


Vakakis Kai Syner Gates v European Commission

In this case, the European Commission, commenced a tendering  procedure, which led to the award of a public service contract with a view to establishing a national food authority in Albania. Company A was part of a consortium which was awarded the contract. An unsuccessful bidder challenged the contract award decision, claiming that there had been a conflict of interest in the tendering procedure and therefore the contracting authority had committed an act of 'maladministration.'

Mr P, who was one of Company A's experts, was asked to provide the contracting authority with information in the pre-procurement phase to assist with the preparation of the tendering procedure. In particular, Mr P helped draft the terms of reference (ie the invitation to tender, the "ITT"). Once the final 8 bidders had been shortlisted (which included the consortium containing Company A), three candidates in the procurement informed the contracting authority that Mr P's involvement constituted a conflict of interest and the contracting authority were obliged to investigate.

The contracting authority sought clarification from the consortium containing Company A. The response stated that Mr P's contribution to the ITT was restricted to providing general information only and the information that was provided by Mr P was available to all candidates, and therefore there was no distortion of competition. The consortium clarified that, although Mr P had been appointed the project manager, this had only happened after the publication of the shortlist of candidates. The contracting authority accepted the response and Company A's consortium were ultimately awarded the contract.

The General Court held that the investigation carried out by the contracting authority was not adequate. As a result, 2 unlawful acts were committed:  they had not carried out adequate checks following the statements made by Company A and Mr P and also failed to properly investigate the alleged conflict of interests. As the contracting authority had not carried out an adequate investigation, this amounted to an infringement of the requirement to ensure equal treatment of tenderers. The contracting authority was required to pay damages to the applicant for loss of opportunity and the costs of tendering.

The Court commented that in all tender processes, the contracting authority is required to determine and verify whether there are real risks of any occurrence that might distort the competition. If such a risk arises the contracting authority must then act with due diligence on the basis of all relevant information, to ensure that the tenderers are all treated equally or expelled from the process where necessary.


SRCL Ltd v The National Health Service Commissioning Board

Read more here.


Šiaulių regiono atliekų tvarkymo centras, 'Ecoservice projektai' UAB, formerly 'Specializuotas transportas' UAB, and interveners

To date there has been relatively little caselaw on conflict of interest. A case in May 2018, involving a tender for waste collection and transport services in Lithuania, has highlighted the importance of making express provision in procurement documentation to try and stop a conflict of interest arising in the first place.

The case concerned a conflict of interest at bidder level. Bids were received by two commercial organisations who, it was subsequently discovered, were under common control. The European Court at first instance ruled that the general EU principle of transparency did not go as far as requiring the bidders to disclose the links between the companies. A mere finding of joint control was not sufficient evidence that the bids were not autonomous and independent.


For more information, please contact Stephanie Rickard, Head of our Procurement and State Aid team on 0117 314 5675.