Public Procurement Update: Winter 2022/23

Latest on the UK’s post-Brexit Procurement Bill

The much-anticipated Procurement Bill, designed to reform the UK’s public procurement regime post-Brexit, is continuing its journey through the parliamentary stages. The Bill moved from the House of Lords to the House of Commons on 14 December 2022 and is now at committee stage, where it will be examined in detail line by line. A call for evidence, which sets out the aims of the Bill and its key features, was issued on 10 January 2023. The Public Bill Committee is expected to report by 23 February 2023. This House of Commons Library briefing summarises the Bill’s progress to date.

In anticipation of the Bill becoming law and the new public procurement regime taking effect, the government published a planning and preparation checklist, outlining the steps contracting authorities can take to help prepare for the upcoming changes. It covers initial actions in the four key areas of: policies and processes; systems; people; and transition.

The Cabinet Office has said it will provide a comprehensive learning and development programme to support contracting authorities operating within the new regime and to help them understand what’s changing from the current system. In October 2022 it provided an update on its learning and development package. The plan is for the package to be made available once the law is clear – after the Act is passed and the supporting regulations have been made. As we explained in our previous update, a minimum of six months’ notice will be given before “go-live”. This won’t be until late 2023 at the earliest.

On 9 January 2023, the government published a guidance document Benefits for Prospective Suppliers to the Public Sector, setting out how the new regime will deliver a range of benefits for suppliers of all sizes wishing to do business and deliver contracts for the public sector. It covers: commercial pipelines; preliminary market engagement; invitation to tender; supplier registration and bidding; procurement; feedback if the bid is unsuccessful; and contract management.

The Welsh Government has also developed a pre-implementation checklist to help contracting authorities in Wales prepare for both the Procurement Bill and the Social Partnership and Public Procurement (Wales) Bill.

Note that the existing legislation applies until the “go-live” date, and will also continue to apply to procurements started under the old rules. Related to this, a Retained EU Law (Revocation and Reform) Bill is also currently making its way through the parliamentary stages. The aim is to completely overhaul the body of UK domestic law known as retained EU law – EU legislation which was effectively copied over to the UK statute book to avoid the Brexit ‘cliff edge’. Unless steps are taken to retain it, it could be gone at the earliest by 31 December 2023.

As existing public procurement legislation (including the Public Contracts Regulations 2015 (PCR), Utilities Contracts Regulations 2016 (UCR) and Concession Contracts Regulations 2016) is largely drawn from EU Directives, this is an area that will need to be watched. It’s hoped that steps will be taken to preserve the status quo to avoid any disruption and uncertainty surrounding the functioning and continued applicability of this existing legislation.

A new subsidy control regime

One issue that can come up in public procurement projects is subsidy control (formerly ‘state aid’). In another post-Brexit development, the UK now has a new subsidy control regime in the form of the Subsidy Control Act 2022. The Act came into force on 4 January 2023. Our recent briefing explains the new rules and offers practical insight for public authorities and potential recipients of public sector support.

Public procurement case law developments

Automatic suspension

In Medequip Assistive Technology v Kensington & Chelsea [1]
the court directed the lifting of the automatic suspension preventing the defendant from awarding the contract to the successful bidder. The claimant narrowly succeeded in arguing that damages would not be an adequate remedy. It was alleged that the defendant had determined the procurement process on the basis of unpublished criteria. This meant that quantifying any damages would involve a degree of speculation. However, looking at matters in the round, the court concluded that the balance of convenience clearly lay in favour of lifting the suspension.

An application for expedition of the claim was refused. In circumstances where the suspension had been lifted and where the risk that damages would not be an adequate remedy for the claimant was “modest at its highest”, there was no real need for urgency to warrant an expedited trial.

Practice Plus v NHS Commissioning Board [2] also concerned the lifting of an automatic suspension. In this case, one of the claimant’s arguments was that damages would not be an adequate remedy because the nature of a probable future NHS procurement regime, where contracts for the provision of the services in question may never be subject to competitive procurement, would present a difficulty in assessing damages. The court rejected that argument, noting among other things that the alleged loss was “extremely speculative”.

While this determined the application to lift the suspension in the defendant’s favour, the court nevertheless went on to consider whether damages would be an adequate remedy for the defendant were the suspension to remain in place, and where the balance of convenience lay. It concluded that, if the defendant was wrongly prevented by the suspension from entering into the new contracts, the interference with its public functions could not be compensated in damages. In addition, any increased burdens on the NHS as a result of delay in entering into the contracts was a cost incapable of calculation. The highly speculative nature of the matters relied on by the claimant, set against the thoroughly non-pecuniary relevant disadvantage to the defendant, indicated a very strong balance in favour of removing the suspension.

Both of these decisions demonstrate that the courts continue to lift suspensions on the grounds that damages are an adequate remedy (or, at least in the case of Medequip, that the risk of damages being inadequate is “modest at its highest”) despite the outcome of the recent Braceurself decision, where damages weren’t awarded at trial even though the court found the claimant should have won and the automatic suspension was lifted on the basis that damages would be adequate.

Suspension of the procurement exercise

InHealth Intelligence v NHS England [3] concerned a procurement challenge, this time unusually not to the outcome of the competition, but to the way it was run. The claimant was excluded from the competition because its bid was uploaded to the stipulated e-portal in the wrong place and the mistake wasn’t rectified in time so it missed the deadline. The claimant applied for relief, including damages, in respect of the decision not to allow it to participate. It also applied for interim relief seeking to suspend the whole procurement competition until the claim was heard.

Ultimately, the parties agreed not to proceed with the suspension application because they could live with the delay until trial. After they had agreed this, the defendant asked the court to order the claimant to provide an undertaking in damages as part of the timetable to trial. The court refused for two reasons. Firstly, while such an undertaking can be sought as a condition of granting relief, the court does not have the power to order a party to give an undertaking. Secondly, the parties had freely agreed between them that the procurement competition would be paused pending trial.

The court confirmed that, had the suspension application gone ahead, as with an application to lift an automatic suspension, adequacy of damages would have been a material consideration in deciding whether to suspend the competition. Perhaps in a nod to the issues with Braceurself (although it wasn’t directly mentioned in the judgment) the court noted, however, that damages are not always what an aggrieved bidder wishes to obtain.

One of the reasons for this is that it might be difficult for the bidder to obtain an award of damages, given the requirement for there to have been a sufficiently serious breach by the contracting authority. Other reasons are that an economic operator may want, for a wide variety of commercial considerations, to be the winning bidder rather than have damages. Equally, a contracting authority may prefer to delay the contract in order to avoid exposure to a damages claim in respect of a claimant’s lost profit, in addition to the price payable under the contract. It was against that background that the parties in this case looked for a way forwards that did not involve contesting the claimant’s suspension application.

Time limits

Siemens Mobility v HS2 [4] serves as a cautionary reminder of the importance of complying with time limits for bringing procurement challenges. As with the equivalent provision in the PCR, under section 107(2) of the UCR proceedings must be started within 30 days beginning with the date when the economic operator first knew or ought to have known that grounds for starting the proceedings had arisen. The court reiterated the following case law principles as to the degree of knowledge required:

• The standard is knowledge of the facts which apparently clearly indicate, though they need not absolutely prove, an infringement.

• What is needed is knowledge of material which does more than give rise to suspicion of a breach of the Regulations, but there can be the requisite knowledge even if the potential claimant is far from certain of success.

• To answer the question whether the facts of which a potential claimant was aware were such as to “apparently clearly indicate” a breach of duty by the contracting authority requires consideration of: the nature of the procurement exercise; the nature of the particular breach alleged; and the nature and extent of the particular factual material.

• The court focuses on what the potential claimant knew at the relevant time and not on what it did not know.

• The withholding of information by the potential defendant will not prevent the running of time if the potential claimant otherwise has the requisite knowledge, but it will be relevant if such withholding means that the potential claimant does not in fact have such knowledge.

• What is required is knowledge of the breach of the particular duty but not of all the particulars of that breach.

• If the allegations are on proper analysis different breaches of the same duty then a potential claimant has the requisite knowledge when it knows or ought to have known of facts clearly indicating a breach of that duty.

• The time period is not extended simply by the potential claimant learning at a later stage of further separate breaches of the same duty even if they occurred before or after the breaches already known. If, however, the potential claimant learns of facts indicating a breach of a different duty then it may be the position that time begins to run anew in respect of a claim alleging a breach of that duty.

• Formal correspondence by or on behalf of a potential claimant is likely to be seen as demonstrating that party’s state of knowledge at least to the extent of precluding a contention that it lacked such knowledge as appears to be demonstrated by that correspondence.

• Where it can’t be said that a claimant knew of facts that apparently clearly indicated an infringement, the question will become whether the claimant should have known of such facts. A claimant will have constructive knowledge if, upon reasonable enquiries, it should have discovered the alleged infringement.

• In considering the enquiries which reasonably should have been made and the inferences which reasonably should have been drawn, the court will assess this from the viewpoint of a ‘reasonably well-informed tenderer’. The answer will inevitably be fact-specific. Much will depend on the circumstances of the particular procurement exercise. It will be necessary, among others, to have regard to the subject-matter of the exercise; to the sums at stake; to the nature of the utility or other public body engaged in the exercise; to the nature of the potential causes of concern potentially triggering the proposed enquiries; and to the ease or difficulty with which answers can be expected to be obtained.

Scoring

In Bromcom Computers v United Learning Trust [5], the court found that four separate types of breach by the defendant academy trust during a procurement exercise for the award of a contract to supply a management information system were collectively sufficiently serious to justify a damages award. If it hadn’t been for the breaches, the claimant would have won the bid by a much more significant margin than it had lost by. In its analysis, the court said it wasn’t possible to compare this case to one in which there was one minor breach that was excusable (i.e. Braceurself), even if the breaches were not as numerous as in the Energy Solutions case [6]. Among other things, the averaging methodology used to calculate the bidders’ scores breached the defendant’s obligation to act transparently, requiring it to give reasons for the scores it made. This was a serious infringement of a fundamental principle.

The bid documents in this case had to be submitted by email. The court found that the defendant permitting use of a ‘drop box’ to which the successful bidder still had access breached some of the PCR’s technical requirements, i.e. that the tools and devices used must at least guarantee that: the exact time and date of the receipt of tenders, requests to participate and the submission of plans and projects can be determined precisely; and it may be reasonably ensured that no-one can have access to the transmitted data prior to expiry of the submission deadline. The court noted that the solution would be to have a secure e-portal or to require expressly that all tender documents have to be submitted as attachments to the underlying email.

Round-up of other public procurement news

• The government published Procurement Policy Note PPN 03/22, which provides updated guidance on data protection legislation impacting government procurement.

• PPN 01/23 provides guidance for in-scope organisations on how to publish procurement information on Contracts Finder.

• The Public Contracts (Amendment) Regulations 2022 came into force on 20 December 2022. They effectively reinstate the previous contract value thresholds which trigger obligations under Chapter 8 of the PCR in respect of contracts of central government authorities, sub-central contracting authorities or NHS Trusts. They also provide that NHS Foundation Trusts are to be treated in the same way as NHS Trusts for the purposes of Chapter 8. Amendment regulations made in 2021 provided that the threshold amounts were inclusive of VAT, which effectively lowered the threshold values and resulted in an increased burden for in-scope contracting authorities.

• Ofcom fined telecoms equipment provider Sepura £1.5 million for a breach of competition law, after the company exchanged commercially sensitive information with competitor Motorola about pricing intentions during a procurement process for a contract to supply communications devices to the emergency services.

Need advice or assistance on public procurement issues?

If you need advice or assistance, or have queries concerning any of the points raised in this public procurement update, please contact Lynsey or Kathryn, who will be very happy to help.

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[1] Medequip Assistive Technology Limited v The Mayor and Burgesses of the Royal Borough of Kensington and Chelsea [2022] EWHC 3293 (TCC)

[2] Practice Plus Group Health and Rehabilitation Services Limited v NHS Commissioning Board [2022] EWHC 2082 (TCC)

[3] InHealth Intelligence Limited v NHS England [2022] EWHC 2471 (TCC)

[4] Siemens Mobility Limited v High Speed Two (HS2) Limited [2022] EWHC 2451 (TCC)

[5] Bromcom Computers plc v United Learning Trust and another [2022] EWHC 3262 (TCC)

[6] Energy Solutions EU Limited v Nuclear Decommissioning Authority [2017] UKSC 34