Abandonment of Procurement

June 4th, 2019

One of the issues in Amey Highways Ltd v West Sussex Council (2019) EWHC 1291 (TCC) was whether or not the Council had lawfully abandoned a procurement.  Stuart-Smith J stated relevant general principles as follows:

(1) A contracting authority has a broad discretion in assessing the factors to be taken into account for the purpose of deciding to award a contract following an invitation to tender and therefore in respect of any decision not to award a contract and abandon a procurement.

(2) The exercise of that discretion is not limited to exceptional cases or has necessarily to be based on serious grounds.

(3) There is no implied obligation under the Public Contracts Directive or the Regulations to carry the award procedure to its conclusion.

(4) Neither the Directive nor the Regulations contain any specific provision concerning the substantive or formal conditions for the decision not to award a contract/to abandon a procurement, but, the decision is subject to the fundamental rules of Community law, and in particular to the principles laid down by the EC Treaty on the right of establishment and the freedom to provide services.

(5) The duty to notify reasons in the Directive and the Regulations is dictated precisely by concern to ensure a minimum level of transparency in the contract-awarding procedures and hence compliance with the principle of equal treatment.

(6) The Courts of Member States must be able to determine the lawfulness of a decision to abandon a procurement, and it is contrary to the provision of the Remedies Directive to limit the review of the legality of the decision to mere examination of whether it was arbitrary.

(7) A contracting authority has power to abandon a procurement without contract award when it discovers after examining and comparing the tenders that, because of the errors committed in its preliminary assessment, the content of the invitation to tender makes it impossible for it to accept the most economically advantageous tender, provided that, when it adopts such a decision, it complies with the fundamental rules of Community law on public procurement such as the principle of equal treatment.

(8) EU law permits Member States to provide in their legislation for the possibility to withdraw an invitation to tender on grounds which may be based on reasons which reflect inter alia the assessment as to whether it is expedient, from the point of view of the public interest, to carry an award procedure to its conclusion, having regard, amongst other things, to any change that may arise in the economic context or factual circumstances, or indeed the needs of the contracting authority concerned. The grounds for such a decision may also relate to there being an insufficient degree of competition, due to the fact that, at the conclusion of the award procedure in question, only one tenderer was qualified to perform the contract.

As to the effect of an abandonment on a claim, Stuart-Smith J said:-

“51. The Council’s submission, in outline, is that bidders in PCR procurements have no right or legitimate expectation to be awarded a public contract or to be compensated for tender costs if a procurement does not lead to a public contract award being concluded.

52. The Council goes on to submit that the legal effect (or consequences) of a lawful abandonment decision is a matter of statutory interpretation of the PCR, having appropriate regard to relevant public law principles. Where a contracting authority decides that a procurement should be abandoned and an invitation to tender withdrawn, no public contract will ever be awarded pursuant to the withdrawn process and the tender rules that the withdrawn process entailed are no longer of any legal status or effect. …”

“54. The Council goes on to submit that it is a necessary pre-condition to a claim for beach of EU procurement law, whether pursued as a judicial review or under the PCR, that there is (or remains) an extant procurement to challenge, and a public contract to be awarded.

55. I am unable to accept the Council’s analysis and submissions for two broad reasons. First, they are based upon a false view of the nature of a claim for damages pursuant to the PCR and wrongly equate a private law claim for damages under the PCR with a claim for a public law remedy such as judicial review. Second, they fail to draw any distinction between claims that are inchoate or unenforceable before the abandonment of a procurement and claims that have crystallised into an accrued cause of action.

56. It is correct in principle that decisions taken by a contracting authority in the course of a subsisting procurement may in an appropriate case engage public law principles so as to give rise to public law review and remedies. Equally, I accept as a general principle that an entitlement to public law review of a decision may fall away if the decision is withdrawn, so that typically no public law remedy may be available after its withdrawal. However, to assert that decisions taken in the course of a procurement only engage public law principles and remedies is as wrong as it was wrong in Chandler to assert that only private law principles and remedies were engaged. To the contrary, Energy Solutions establishes that the liability to pay damages for breach of duties owed under the PCR is best regarded as a breach of statutory duty but subject to Frankovich conditions. The same act may simultaneously have the characteristics of a public law act that is susceptible to public law remedies and also be a breach of a private law duty that gives rise to what is acknowledged to be a private law remedy.

57. … the private law remedy of an award of damages may subsist whether or not public law remedies are still available.

58. There is, in my judgment, nothing in the terms of the PCR which either expressly or by necessary implication requires the imposition of a limitation upon the availability of an award of damages where the Court is satisfied that the statutory criteria for an award are met. …

59. Turning to the significance of an accrued cause of action, I accept that lawfully withdrawing a procurement may prevent private law claims from coming into existence thereafter. The broad discretion may therefore be useful in a wide range of circumstances, which (without limitation) may include those where the contracting authority recognises that (a) pursuing the procurement to the award of a contract would mean awarding a contract that was not the most economically advantageous or (b) taking the procurement to the award of a contract would not be expedient from the point of view of the public interest. To these established examples I would add that the discretion should allow a contracting authority to withdraw a procurement if it becomes apparent that continuing with the process means that the authority will act in breach of duty in such a way as enables an economic operator to bring a private law claim or a suitably interested party to bring a public law claim against it. All of these examples may be said to fall within the risk that tenderers accept because they know of the broad discretion and the absence of any implied obligation to carry the award procedure to its conclusion.

60. The question at issue is whether a lawful abandonment, in addition to the useful consequences outlined above, has the effect of depriving an economic operator of an accrued cause of action where, before the procurement is abandoned, a breach of duty by the authority can be proved to have caused the economic operator loss or damage.

61. An accrued cause of action is fundamentally different from an inchoate claim that might become enforceable at some future date. It is axiomatic that an accrued cause of action may be regarded as property, as an asset, as capable of having present value, and as being capable of being auctioned, assigned (for value or otherwise) and in some cases inherited or barred by limitation: … Putting matters another way, there is a fundamental difference between the effect of Abandonment Decision being (a) to prevent further causes of action accruing in the future (which is uncontroversial) or (b) to deprive an economic operator of a cause of action which already exists and which he is entitled to enforce before the decision is taken. There are no terms of the PCR which expressly or by necessary implication mandate this second, more radical, effect. Furthermore, I see no basis in public law principles, public policy more generally or the purposes underlying and embodied in the PCR that mandates the result for which the Council contends. In particular, the principle of equal treatment, which underlies the directives on procedures for the award of public contracts, does not require the cancellation of an existing accrued cause of action as a consequence of withdrawing a procurement before a contract is concluded. Although tenderers are taken to accept the risk that a contracting authority may in some circumstances lawfully decide not to award a contract, there is no obvious basis for asserting that they also accept the additional risk that, if that happens, they will be deprived of accrued causes of action that are in existence at the time of the decision not to take the procurement to a contractual end-point.”

Stuart-Smith J then considered ECJ authorities, and (at paras 68-73 inclusive) Apcoa Parking (UK) Ltd v City of Westminster (2010) EWHC 943 (QB). He concluded, with respect to Apcoa:-

“73. …  in my judgment, Apcoa provides no support for a submission that any accrued cause of action would have ceased to exist or to be enforceable by reason of the termination of the first procurement in that case.”

Stuart-Smith J concluded generally with respect to the authorities that none of them supported the proposition for which the Council contended.  He said:-

“78. Drawing these strands together, I consider that the acknowledged broad discretion has considerable value even without the cancellation of accrued causes of action for which the Council contends. In principle, the inherent nature of an accrued cause of action means that the power to cancel an accrued cause of action by the termination of a procurement requires either clear statutory sanction or cogent policy justification or binding prior authority, each of which is lacking.”

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