Public procurement: How NOT to use a framework agreement

As one of only a few such cases dealing with these issues, the recent case of Consultant Connect v NHS Bath [1] will therefore be of significant interest to all public procurement practitioners, contracting authorities and public sector suppliers. The case demonstrates clearly how not to conduct a procurement exercise or use a framework agreement.  It is a useful reminder that the overarching duties of equal treatment and fairness apply in all procurement exercises, whether under a framework agreement or not. Frameworks cannot be used to hide conduct which would otherwise be unlawful.

In addition, in the case, the defendant contracting authorities disclosed a lot of damaging documentary evidence showing an intention to favour an incumbent supplier.  It therefore serves as a warning generally about the dangers of emails, which can be disclosable in any litigation. Consultant Connect v NHS Bath is also a reminder to be alert to the risk of contracting authorities acting in a way which favours incumbent suppliers, and highlights the serious consequences which can arise if the rules are not followed.

The key points from the decision are outlined below. In general, they reflect the fundamental principles of public procurement law and practice. Read the full article to understand what happened in the case and to obtain comprehensive legal and practical advice. Or, select the issues which are of most interest to you by clicking on the various sub-headings.

• Public procurement and challenging a call-off
• Use of specifications in public procurement
• Mini-competitions/call-offs in public procurement
• Public procurement and market engagement
• Conflict of interest/bias in the public procurement process
• Ineffectiveness, contract shortening and civil penalties in public procurement
• What happened in Consultant Connect v NHS Bath?
• How we can help with public procurement

Public procurement and challenging a call-off

1. Contractors who are not a member of a framework can still challenge the award of a call-off contract, but may have difficulty showing that any breach of the rules caused them loss.
2. If a procurement exercise comprised a genuine use of a framework then there would be no risk of loss to non-members, who would therefore have no claim, even if there had been unfairness to members. However, where (as was the case here) the procurement exercise involved non-members, there was a risk of loss.
3. Damages reflected Connect’s lost chance of winning the contract notwithstanding that the defendants said Connect did not meet their technical requirements. The court found that the most likely scenario if the rules had been followed was a fair competition between Connect and Cinapsis, and possibly others.
4. The court went further and found that Connect had a 50% chance of winning in such a competition. It seemingly accepted Connect’s evidence that it would have adapted its service offerings in order to meet the specification in the same way it had for other NHS trusts previously.

Use of specifications in public procurement

5. The services supplied by an incumbent supplier can be used to help frame a specification, provided it is done objectively, to ensure that the authority’s needs are met.
6. Specifications should not be designed to ensure that only the incumbent supplier can meet it.

Mini-competitions/call-offs in public procurement

7. Authorities should not exclude framework members from a mini-competition because they cannot provide a service if that service is not a “must” requirement.
8. Where there is more than one member of a framework, a mini-competition should not proceed with only one competitor competing against the requirements of the authority; other members should be given the opportunity to tender.
9. Negotiating and using pricing which bears little resemblance to the pricing matrix required by the framework agreement is likely to be a forbidden substantial modification, even if the overall amount which became payable was similar to what would have been payable under the framework pricing. Here the framework agreement envisaged a price based on the number of users but the call-off was for an enterprise licence per NHS service, and so was on the wrong side of the line.
10. Regulation 18 [2], which prohibits designing a procurement with the intention of excluding it from the scope of the Public Contract Regulations 2015 or of artificially narrowing competition, applies to the decision to use a framework and mini-competitions, and not only to the design of the competition to become a member of the framework itself. In this case, Mr Justice Kerr stated, “Where a winner is picked by means of a covertly competitive process outside of the framework, and then using the framework without genuine competition, there is plenty of scope for the proposition that regulation 18(2) and (3) (and indeed regulation 18(1)) are not complied with”.

Public procurement and market engagement

11. Assessing the relative qualities of candidates and their pricing without the candidates’ knowledge goes beyond permitted market testing.
12. Market testing should be undertaken in a transparent way with any suppliers involved knowing exactly what is expected of them and what any information they provide will be used for. There should be appropriate protection: (i) for confidential information; and (ii) against the risk of the competition being distorted.
13. In Consultant Connect v NHS Bath, a supplier presentation process was not permitted market testing because: (a) one of the defendants clearly had a preferred supplier, Cinapsis, and the purpose of the exercise was found to be to eliminate other suppliers and persuade the other Defendants to appoint Cinapsis preferably without any competition; (b) the candidates were scored without their knowledge; and (c) in breach of confidence, information from Connect’s presentation was provided to an employee of the defendant who had been deliberately excluded from the presentation due to his preference for Cinapsis. Later that day, that employee provided advice to Cinapsis which the judge found was intended to help Cinapsis win the contract. The exercise was therefore not market testing. It distorted competition and breached the rules of non-discrimination and transparency

Conflict of interest/bias in the public procurement process

14. A conflict of interest does not arise when employees of an authority have experience of a supplier’s service provision and admire it. However, a “personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement procedure” [3] may arise if/ when they start to act in a way which favours that supplier.
15. It may therefore not be appropriate for anyone who has strong feelings about any particular supplier to have any involvement at all in the procurement process. Authorities should consider excluding day-to-day supplier contacts and known ‘champions’ from the public procurement process altogether.

Ineffectiveness, contract shortening and civil penalties in public procurement

16. The first ground for ineffectiveness, where a contract notice hasn’t been published, only applies to a case where an authority chooses to use a procedure which requires a contract notice but doesn’t publish one. It was open to the defendants in Consultant Connect v NHS Bath to use a procedure which didn’t require a contract notice, so the first ground didn’t apply here.
17. The fact that there was only one competitor in the mini-competition and that the framework pricing was departed from meant that the contract was not based on the same or more precisely formulated terms in or referred to in the framework agreement. This breach of Regulation 33 meant that the third ground for ineffectiveness was made out.
18. However, the adverse impact on patient care and disruption to hospital admission decisions which would be caused by an abrupt end to the services supplied by Cinapsis meant that there were overriding reasons relating to a general interest why the contract should be maintained. It was therefore shortened rather than declared ineffective, so that Connect and other suppliers could have a fair opportunity to tender for the service earlier than they otherwise would have. This gives a useful indicator of the circumstances which might persuade a court to shorten a contract rather than declare it ineffective.
19. Civil penalties were appropriate in view of the serious nature of the defendants’ conduct. The fact that they depleted public resources, even in a healthcare context, was not considered to be a good enough reason for the penalty to be only nominal.
20. The level of penalties in this case could therefore offer guidance on what might be ordered in other cases. £10,000 was ordered against the most serious offender, whose clear purpose in the public procurement process had been to have Cinapsis appointed.  £8,000 was awarded against the body which had acted disingenuously towards Connect and ignored warnings about whether the process was appropriate.  £4,000 was awarded against the body whose failing was not to insist on a lawful and fair competition.

What happened in Consultant Connect v NHS Bath?

The key facts of the case were:

• The defendant contracting authorities wanted to procure a new electronic communications system
• The claimant, Connect, had a contract to supply services relevant to the procurement at three hospitals in the area
• The winning contractor, Cinapsis, was the incumbent supplier to NHS Gloucestershire, who used a description of the services provided by Cinapsis as the starting point for their technical requirements
• The defendants asked Connect and two other companies to make presentations regarding their offerings in November 2020, purportedly on the basis that the defendants were undertaking permitted “pre-market testing”
• One defendant scored the presentations but Connect had not been made aware of this and the criteria and scoring methodology used were vague
• Another defendant consulted suppliers on a previously tendered NHS-wide framework agreement and decided that only Cinapsis could meet their requirements
• The defendants purported to hold a mini-competition under the framework but with Cinapsis as the only competitor. They proceeded to negotiate directly with Cinapsis and awarded the contract to it
• Connect was not a member of the framework, having decided not to tender for it on the basis that they thought the low contract value (£3 million) indicated that it would only relate to the replacement of pagers and not to wider electronic communication systems

How we can help with public procurement

Walker Morris’ procurement experts Kathryn Vickers and Lynsey Oakdene advise on all aspects of public procurement, including issues arising in connection with the award of a framework, whether a framework agreement can be used for a particular project, amendments to call-off terms and public procurement challenges and disputes. Please contact Kathryn or Lynsey for further information, advice or assistance.

[1] Consultant Connect Limited v (1) NHS Bath and North East Somerset, Swindon and Wiltshire Integrated Care Board, (2) NHS Gloucestershire Integrated Care Board and (3) NHS Bristol, North Somerset and South Gloucestershire Integrated Care Board [2022] EWHC 2037 (TCC)

[2] of the Public Contracts Regulations 2015

[3] Regulation 24(2), Public Contracts Regulations 2015