Local authority boycotts

February 22nd, 2016 by Peter Oldham QC in Best Value, Decision making and Contracts, Non Judicial Control

A House of Commons briefing paper of 19th February 2016, which can be found here, notes that the Government is introducing new rules and guidance to limit the extent to which local authorities in England and Wales can use boycotts in their procurement and pensions investment policies.

On procurement, the Government has published Procurement Policy Note 01/16 on 17th February 2016 here which says:-

“Public procurement should never be used as a tool to boycott tenders from suppliers based in other countries, except where formal legal sanctions, embargoes and restrictions have been put in place by the UK Government.”

On pensions, the briefing paper refers to the DCLG’s consultation on the draft Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 (here), which closed on 19th February 2016, and to proposed guidance from SoS that environmental, social and corporate governance factors in investment decisions should reflect foreign policy.  The power to give guidance is in draft reg 7(1) and an authority’s investment strategy “must be in accordance” with it.

 

 

Redesigning The Library Service

October 26th, 2015 by James Goudie QC in Best Value

The decision of McGowan J in Draper v Lincolnshire County Council [2015] EWHC 2964 (Admin) was with respect to the second challenge Mr Draper brought to the Council’s proposed library changes and the process by which those changes were to be brought into effect.  The first challenge had succeeded, in part, before Collins J, and a second consultation process was commenced.  The second challenge failed.

The Judge followed the definition of a “comprehensive and efficient library service” within the meaning of Section 7 of the Public Libraries and Museums Act 1964 given by Ouseley J in the Brent Libraries case. She observed that before Collins J the fundamental decision to re-design services in an attempt to make savings of £2 million was not challenged. The challenge to the substance of the Council’s proposals did not succeed on grounds of irrationality, for breach of the statutory duty under the 1964 Act or for breach of the public sector equality duty. It was the consultation exercise and the method of considering alternative proposals for the provision of services that was under scrutiny. The Council failed in not being seen to be open to proposals which sought to make the required savings without reducing the number of static libraries provided. One such set of proposals came from Greenwich Leisure Ltd and the Council failed in not treating those proposals as a statutory expression of interest under the Localism Act 2011.

The second consultation period closed without challenge. The Council accepted one expression of interest as a qualifying one satisfying the statutory requirements, but rejected two others, because they did not meet those requirements.  The Council then duly commenced a procurement exercise.

There were 3 grounds for the second challenge. First, it was alleged that the second consultation process was flawed. This was on the basis that it failed adequately to deal with alternative proposals.  Second, it was alleged that the procurement exercise was flawed.  Third, it was alleged that the Council had failed to comply with its “best value” duty, under Section 3 of the Local Government Act 1999.

McGowan J rejected the first challenge upon analysis of the consultation document. It made clear that, although the Council had a preferred option, it was looking at and for alternatives, provided that they were within the budgetary limits. It was not challenged, or even complained about, when it was published.  She said (paragraph 26) that a consultation document “has to achieve an acceptable minimum standard” but “it is not a counsel of perfection”.

On procurement, the Judge accepted that the Council was bound only to conduct a procurement exercise for those services it was seeking to procure.

Finally, the Judge (paragraph 32) described the “best value” duty as a duty to seek improvement, that is a duty to seek to achieve a target. It is an obligation to try.  It is not an absolute duty to succeed in that attempt.

The Judge observed (paragraph 35) that it is not for the Court to place itself in the position of decision maker and to say that a particular issue, if decided in a different way might have brought about greater savings and/or an enhanced service. How the Council goes about seeking to try to achieve the “improvement” is a matter for the expert judgment of the Council. The report to the Executive was lengthy and detailed. It set out the issues, canvassed options and by reference to the financial information and the details of the various proposals made a recommendation. It drew on the expertise of the officers of the Council. The Executive then considered the matter and reached a decision. It was not for the Court to audit that process.

 

PFI Contract

July 23rd, 2015 by James Goudie QC in Best Value

In Portsmouth City Council v Ensign Highways Ltd [2015] EWHC 1969 (TCC) interpreted a PFI Contract between a local authority and a service provider and considered whether it is to be implied that the authority as a best value authority must act in good faith when dealing with breaches by the service provider. In the action the Council sought declarations in relation to the performance of certain of its obligations under a long term PFI Contract made with Ensign. The dispute was about the manner of awarding Service Points by PCC for breaches by Ensign of its obligations under the Contract, which concerns the long term rehabilitation, maintenance and operation of the Council’s highway network.

The Contract incorporated a regime for awarding Service Points for breaches by Ensign of its obligations under the Contract. Schedule 17 to the Agreement contained a table which set out a large number of Default Events for which Service Points could be awarded and, against each Default Event, a “Maximum Event Value”. The Maximum Event Value for each Default Event originally consisted of a single figure between 1 and 10. It was common ground that, until about December 2013, the Council treated the figures for the Maximum Event Value as the upper limit of a range. Accordingly, where the Maximum Event Value was greater than 1, the number of Service Points awarded would depend on the Council’s view of the gravity of the breach.

The Council assessed and awarded Service Points on a monthly basis and, initially, the system was operated in a manner that seemed to be regarded as satisfactory by both parties. However, after a few years cuts in central government funding to local authorities began to take their toll. In 2012 The Council began to form the view that if the Contract continued to be operated in the same manner for the remainder of its term it would become unaffordable. The Council embarked on a strategy of awarding Ensign large amounts of Service Points in order to force it to accede to the Council’s commercial demands in a renegotiation of the Contract. This involved, amongst other things, awarding the maximum amount of Service Points for every default, refusing to communicate with Ensign in relation to breaches, finding breaches in areas which Ensign might find hard to remedy and storing up Service Points over several months so that Ensign could be “ambushed” with a large award of Service Points at one fell swoop.

Ensign notified the Council that it intended to refer the dispute about the award of Service Points to Expert Determination in accordance with the terms of the Contract. The Expert issued a detailed and careful Determination in which she concluded, in fairly trenchant terms, that the Council had acted in bad faith, without mutual co-operation and unfairly. However, she did not conclude that Ensign’s performance was always as it should have been: her conclusion was that in general it was delivering the required service but that the Contract did not really provide any means of achieving long-term improvements. In addition, it seems that there was a view within the Council that the performance standards required under the Contract were unnecessarily high, and that it was therefore an unnecessary luxury.

The Council of course was under the “best value” duty imposed upon it by Section 3 in Part I of the Local Government Act 1999. Clause 44 of the Contract is concerned with best value and best value reviews. The Council relied strongly on the decision of the Court of Appeal in Mid Essex Hospital Services NHS Trust v Compass Group [2013] BLR 265.

Edwards-Stuart J in the Portsmouth case observed that failure of highway maintenance can take many forms. He concluded on the Service Points issue as follows:-

“70. … It does not in my view make commercial sense to have a system which requires the authority to impose the same number of points irrespective of the gravity or duration of the breach. In the absence of any specific indications to the contrary, one would expect the parties to have agreed a system that provided or permitted some flexibility in relation to the number of points to be awarded for any particular breach. …

71. I agree that the word “maximum” is a word with a clear meaning – namely, the upper limit of a range. It is therefore an inappropriate word to include in the heading of a column containing numbers if those numbers were intended to be single values, rather than the upper limit of a range. On PCC’s approach, the word simply has to be ignored.

72. In my view, the use of the word “Maximum” in the heading to the column showing the number of points was not the result of a drafting error but was there for a purpose. That purpose was to permit the PCC Representative, within the range provided for in the schedule, to award an appropriate number of points having regard to the gravity of the breach.”

“76. I therefore conclude that the Service Point values set out in Schedule 17 are maximum values that can be awarded for a particular breach and are not fixed “tariffs” that are to be applied irrespective of the gravity of the breach in question.”

As to the extent of the duty of good faith, the Judge began by observing as follows:-

“81. … It is clear to me that, in the context of this Agreement, PCC could not discharge its Best Value Duty unless it was in a position to negotiate improvements to the Service that might operate to Ensign’s financial detriment in circumstances where Ensign was obliged to discuss such changes in good faith – in other words, by giving proper and careful consideration to PCC’s needs and statutory obligations and balancing those against its own commercial interests. That, it seems to me, is the reason why, at least for the purposes of clause 44, Ensign is required by clause 44.4.1 to deal fairly, in good faith and in mutual co-operation with PCC. Since a duty of good faith is not usually implied into commercial contracts under English law, save in certain particular types of contract, it is necessary to provide for an express duty in appropriate terms. That is what clause 44.4.1 does.”

The Judge, however, rejected Ensign’s submission that the clause 44.4.1 duty applied to the Contract as a whole.  Nonetheless, he concluded, at paragraph 112, that when awarding Service Points (under clause 24) the Council was subject to an implied term, as follows:-

“When assessing the number of Service Points to be awarded under clause 24.2.1(c) of the Agreement, PCC’s Representative is to act honestly and on proper grounds and not in a manner that is arbitrary, irrational or capricious.”

 

Best Value Inspection

November 18th, 2014 by James Goudie QC in Best Value

As is well known, Part 1 of the Local Government Act 1999 (“LGA 1999”) relates to “Best Value”.  Section 3 imposes the general duty.  Section 3(1) provides that a “best value authority” must make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness.  As Underhill LJ observed in R (Nash) v Barnet LBC  [2013] EWHC 1067 (Admin), [2013] LGR 515, at paragraph 69(1), the core subject matter of the substantive best value duty is “the way in which” the authority’s functions are exercised; and that is “very general language” which connotes high-level choices about how, as a matter of principle and approach, the authority goes about performing its functions.

Sections 10-15 inclusive of LGA 1999 relate to best value inspections.  Section 10(1) authorises the Secretary of State (“the SoS”) to appoint a person to carry out an inspection of a specified best value authority’s “compliance” with the requirements of Part 1 of LGA 1999 in relation to specified functions.  Section 11 sets out the Inspector’s powers and duties.  Section 13 relates to Reports.  Section 15 gives the SoS further powers.

Pursuant to Section 10, the SoS decided that best value inspection should be carried out in the case of Tower Hamlets LBC.  On 14 November 2014 an attempt by the authority to bring a judicial review challenge against the SoS failed.  Goss J ruled that detailed reasons were not required, especially in the context of confidential material that had been received and where the authority already knew what the issues were and could not credibly claim to be in the dark.

 

Performance Indicators (WALES)

October 24th, 2012 by James Goudie QC in Best Value

The Local Government (Performance Indicators) (Wales) Order 2012, SI 2012/2539 (W.278) specifies performance indicators for the purpose of s8 in Part 1 of the Local Government Wales Measure 2009, by reference to which Welsh county and county boroughs’ performances will fall to be measured from 1 April 2013. Such “improvement authorities” must make arrangements to exercise their functions so that any applicable performance standard is met. The Order identifies by reference to Schedules which indicators will be used to measure the performance of which functions: Social Services, Housing, Education, Waste Management, Transport and Culture and Sport.

 

Public Procurement

August 17th, 2012 by Joseph Barrett in Best Value

R (A) v Chief Constable of B Constabulary [2012] EWHC 2141 (Admin)

Introduction

1.     This case addresses the circumstances in which the Courts will impose a public law duty of procedural fairness etc. when public bodies are carrying out procurement activities. This is particularly significant in cases where the Public Contract Regulations 2006 do not apply e.g. where there is no significant cross-border interest in the relevant contract, and the only available remedy is judicial review. The judgment supports the view that the fact that a public body is exercising statutory powers in conducting a procurement/entering into a contract should be treated as sufficient to activate the Court’s supervisory judicial review jurisdiction.

Case summary

2.     The Claimant (“C”) was a sole trader who provided vehicle hire, breakdown and recovery services etc. C had provided these services to the Defendant for many years, originally on his own account and latterly as a sub-contractor. 

3.     In 2010, the Defendant entered a new contract with FMG Ltd. FMG engaged C as a sub-contractor.  

4.     While C’s contract was thus with FMG, rather than the Defendant, it contained terms governing C’s relationship with the Defendant. The terms included a requirement that C’s employees must be security cleared. If an employee failed the vetting there was no contractual requirement on the Defendant to provide (even cursory) reasons, or give C an opportunity to make representations. 

5.     C failed the security vetting and consequently could not perform the contract. The Defendant would not disclose the reason for the failure. C made a subject access request under the DPA 1998, but this provided no new information. 

6.     C sought judicial review, contending that the Defendant was exercising public powers in vetting him for security clearance and hence owed him a public law duty to act fairly. He argued that there was no good reason why the police should not give some indication of the basis of their concerns, allow him an opportunity to respond and then, if the refusal was maintained, give him some explanation.  

7.     C relied on the fact that under the general police policy, “best practice” required as a minimum that the reason for refusal of security clearance should be given, even to non-police personnel, unless there were legitimate grounds for not doing so. 

8.     The Defendant argued that the matter was not justiciable. While the Defendant was a public body it was not exercising statutory powers in deciding whether to grant security clearance to C. The context was a contractual one, the decision being the exercise of a power under the  sub-contract between C and FMG. 

9.     It was submitted that the security vetting of C did not involve a public function because the vetting was not performed for the good of the public at large but rather was an operational or management function intended to secure the efficient operation of a contractual obligation. In the contractual and commercial context in which the matter arose, the Defendant did not owe any public law duty to C. 

10.  In the alternative, even if there was a duty of fairness, the Defendant was not obliged to disclose the basis upon which it was minded to refuse security clearance, or to explain, even briefly, the reason for the refusal. Security vetting inevitably involved sensitive matters. In this case, the decision was based upon police intelligence, which came from three police forces and over 20 different sources. Where decisions were based on sensitive intelligence information the duty of fairness required no more than that the decision maker acted honestly and without bias or caprice. 

Judgment 

Statutory underpinning and non-justiciability 

11.  Kenneth Parker J emphatically rejected the non-justiciability argument. The tender process and sub-contract with A had  “a strong and necessary statutory underpinning” because it facilitated the Defendant’s exercise of its statutory powers in relation to the seizure, recovery and retention of vehicles. 

Public function (identifying the ‘additional/sufficient public law element’) 

12.  Security vetting was a public function, carried out in the public interest, to ensure that those non-police personnel working with the police were fit and proper persons to do so. This was confirmed by the existence of centrally determined police policies on the issue. If the Defendant failed to conduct such vetting, it would be guilty of a public law wrong that would sound in judicial review. 

13.  Thus, there was a sufficient “public law element” to found a claim for judicial review. 

General principles for determining when contract award decisions are subject to JR 

14.  Interestingly, Kenneth Parker J specifically referred to and endorsed the analysis of the application of judicial review to public bodies’ contracting activities advanced by Professor Stephen Bailey ([2007] PL 444–463). As is well known, Professor Bailey argues that judicial review should generally be available in respect of any exercise of statutory powers by statutory bodies, even where such exercises take the form of entering private law arrangements such as contracts.  

15.  He contends that the requirement for an additional “public law element” should only be necessary were the question arises whether a non-statutory body is, or is not, subject to judicial review. This is the analysis that was endorsed by Elias J (as he then was) in R (Molinaro) v Kensington RLBC [2002] LGR 336 at §65. 

16.  Kenneth Parker J noted that if the Defendant’s submission was correct in respect of justiciability,  it could refuse security clearance for a wholly improper reason, unrelated to the need to promote the public interest. Public bodies were subject to the supervisory jurisdiction of the Court and were not, as a matter of principle, free to act ‘as unfairly’ as private entities. 

Contract cannot narrow the scope of the public law duty of fairness 

17.  Interestingly, the Court held that C could not reduce or circumscribe the scope of its public law duty by reliance on the express terms of its contract with FMG, or FMG’s sub-contract with C. Thus, the fact that the sub-contract provided that no reasons for refusal would be forthcoming did not assist the Defendant. 

The (limited) content of the duty – the “ultra precautionary” approach 

18.  Perhaps predictably, C fared less well in regard to the content of the duty of fairness that was owed in the particular circumstances of the case. 

19.  In the Judge’s view, the sensitivity of the subject matter meant that the Defendant was not required to establish that it had reasonable grounds for believing that C had committed, or was connected to, a criminal offence. 

20.  If the police have any basis for suspecting that a person might have been, or might be presently or might in the future be, implicated, even innocently, in activities that could be considered criminal, or might be associated, again even innocently, with criminal elements, it would be justified in refusing security clearance. The Defendant was entitled to adopt an “ultra precautionary standard”. 

21.  Consequently, it would not be appropriate to require the police to disclose in advance to the subject of the security vetting any basis for a contemplated refusal of clearance. There was no requirement of prior notice or an opportunity to make representations. 

22.  While a blanket policy of refusal to provide any information could not be justified, the decision as to what (if any) information could be shared in a particular case would be one for the expert judgment of the Defendant. The Court would only intervene in exceptional circumstances. 

Comment 

23.  The cases concerning when a contract award decision will attract the application of judicial review principles have long been in an uncertain, and unsatisfactory, state. A number of decisions support the view that the fact that a public body exercises statutory or public powers in entering into a procurement or contract is not, without more, sufficient to trigger the availability of judicial review. It has frequently been stated that some further, additional, ‘public law element’ must be made out. 

24.  It is submitted that this approach is unsound in principle and has created undesirable uncertainty and incoherence in the law. As a basic proposition, an act of a public body exercising statutory powers should be subject to the Court’s supervisory jurisdiction. Concerns relating to the risk of prejudicing public bodies in their dealings with private sector economic operators and usurping their role in decision-making can be addressed by carefully defining the nature and content of the public law duties that apply in the particular context, as the present case in fact demonstrates. 

25.  It is to be welcomed that, following the judgment of Elias LJ in Molinaro, another experienced and highly respected administrative court judge has indicated that a simplified and more principled analysis can be applied in this area.

 

Public Procurement

July 30th, 2012 by Joseph Barrett in Best Value

Turning Point Limited v Norfolk County Council [2012] EWHC 2121 (TCC)

  1. This is the first case to consider the 30-day limitation period that now applies to claims under r.47D of the Public Contracts Regulations 2006 (“the Regulations”). It confirms that, notwithstanding the very short period of time the Regulations now allow claimants, the Courts will enforce the limitation period strictly and that good reason will need to be established for any extension.
  2. The judgment also provides helpful guidance on: (i) the circumstances in which contracting authorities can exclude bids that are subject to qualifications or caveats; (ii) whether there is an obligation to seek ‘clarification’ of qualifications; and (iii) the scope of the obligations on contracting authorities that might arise in implied contract.
  3. Norfolk tendered a five-year contract for various drug and alcohol treatment services. The ITT expressly stated that the procurement would be conducted using the restricted procedure.
  4. The PQQ provided that Norfolk’s only contractual obligation would be to comply with statutory requirements i.e. the Regulations. It also stated that TUPE was expected to apply and that workers currently providing the service would likely transfer to the successful bidder, with resulting pensions and redundancy costs.
  5. The ITT stated that it might not include all information that tenderers require and that Norfolk would have the right to exclude bids that did not comply with its terms. In regard to TUPE (and related pensions and redundancy costs), the ITT required tenderers to include adequate financial provision for such liabilities in the pricing of their bids. It also explicitly stated that no qualifications, caveats or variant bids would be accepted.
  6. On 20 December 2011, Norfolk provided TPL with various TUPE information for those employees expected to transfer. TPL regarded the information as insufficient and submitted some 20 clarification requests. Norfolk’s responses broadly refused to provide further information.
  7. TPL was concerned that in formulating its bid it did not have the information necessary to estimate what its likely TUPE and redundancy costs would be e.g. dates of birth, match between specific job roles/locations and the information given and the redundancy policies of existing providers etc.
  8. Consequently, when TPL submitted its tender on 9 February 2012, it included a note in its pricing section stating that because of the ‘lack of full and complete TUPE information’ its bid was priced on the basis that there would be no TUPE/redundancy costs.
  9. On 12 March 2012, Norfolk wrote to TPL informing it that its tender had been excluded because it included a non-compliant qualification. Norfolk subsequently confirmed that if TPL submitted an unqualified bid at the same price it would have won the contract.
  10. TFL issued proceedings on 28 March 2012. In addition to its claim under the Regulations it also asserted the existence of an implied contract that included an obligation to treat its tender ‘fairly’.
  11. Norfolk sought strike out/summary judgment on grounds of: (i) limitation; and (ii) no arguable case.
  12. Akenhead J formed the ‘clear’ view that that the complaint about the inadequacy of TUPE information was barred by the 30-day limitation period: §36.
  13. TPL must have had knowledge of the relevant breach, failure to disclose sufficient information, by the time it submitted its tender on 9 February 2011 (at the latest). Knowledge of the alleged breach had probably crystallised by 19 January 2012, more than 10 weeks before the Claim Form was issued.
  14. The Court firmly rejected the suggestion that Norfolk was subject to any implied obligation to continue to provide further information to bidders after tenders had been submitted. It was noted that no such requirement applies under the Regulations and it could not be said to be necessary to imply such an obligation in contract: §36(f).
  15. TPL contended that if the 30-day limitation period had expired, then the Court should exercise its jurisdiction under r.47D(4) to extend time. The Court refused to do so.
  16. Akenhead J held that TPL had not demonstrated ‘good reason’. On the facts, it was likely that TPL was aware of timing issues during the procurement process. The fact that the requested extension was for a relatively short period of time, said to be 14 days, was not a ‘good reason’. The statutory limitation period was 30-days, not 30- days plus a further ‘short and reasonable’ period.
  17. For circumstances to constitute a valid ‘good reason’ they will usually be something that is beyond the claimant’s control. Examples could include significant illness or detention of members of the bid team: §37.
  18. The Judge formed the ‘clearest view’ that TPL’s note must be treated as a qualification or caveat to its bid. To assess its effect, the note had to be construed objectively as a potential contractual document. TPL’s subjective intention was therefore irrelevant. The effect of the note was that TPL had not accepted that it would be liable for redundancy costs and that these costs would therefore fall to Norfolk. Under the ITT, it was therefore entirely legitimate to exclude the bid: §39.
  19. There was no obligation in the circumstances to seek ‘clarification’:
    (1) the ITT clearly precluded qualifications and the note plainly breached that prohibition. Such rules were common, inherently fair and operated to ensure a level-playing field for other bidders;
    (2) the ITT did not include an express power to seek clarifications in respect of the pricing section;
    (3) there was no implied power or obligation to seek clarification in regard to a qualification on price. Seeking clarification in this context would create a risk of non-transparency, risk alerting the bidder that its tender was receiving serious consideration and create the opportunity for abusive conduct; and
    (4) the Tideland case was concerned with obvious or formal errors such as transposition, formatting or obvious arithmetical mistakes. It could not assist a bidder who submitted a significant qualification on a voluntary commercial basis: §40.
  20. It was arguable that the terms of the ITT created an implied contract, at least to comply with statutory obligations and the ITT’s express terms. However, the express reference to the Regulations precluded any reliance on further ‘implied’ obligations, such as a general duty to act ‘fairly’: §41.
  21. It followed that the claim should be struck out.CommentThe current approach to the 30-day limitation period
  22. We now have a judgment that considers the proper approach to limitation under the new 30-day regime. The Court here adopted a strict approach, notwithstanding the very short term of the statutory limitation period. The approach previously adopted to limitation, and possible extensions of time, under the old three-month regime will continue to be applied with minimal (if any) alteration. This is so notwithstanding the very significant reduction in the time available to challengers in which to issue proceedings. The judgment also indicates that arguments based on the fact that a claim is ‘just a little’ out of time will generally receive short shrift.
  23. In tandem with the strict approach currently being applied to determining the point in time from which limitation will begin to run (i.e. when a potential challenger first has the opportunity to apprehend the fact of non-compliance with the Regulations, rather than the point when it is appreciated that this is likely to cause loss), this analysis presents a formidable obstacle for many potential challengers.
  24. Even for a sophisticated commercial operator that is familiar with the scheme of the Regulations and the possibility of legal challenge, 30 days is not a great deal of time in which to properly investigate a potential breach, obtain appropriate expert advice, make decisions internally and get proceedings on foot. Realistically, many less well- resourced (and savvy) organisations (including many SMEs) are in practice likely to find themselves unable to exercise their legal rights.
  25. For obvious pragmatic reasons, this is welcome news for contracting authorities. However, viewed objectively, it may be questionable whether the current 30-day limitation period (and the rigour with which it is being judicially applied) is consistent with the object and purpose of the Regulations and the requirement of effectiveness under EU law.
  26. For example, it is interesting to speculate as to whether striking out a challenge with strong prima facie merits that is issued shortly outside the limitation period, perhaps because of the complexity of the underlying factual matrix, is defensible.‘No qualification/caveat/variant’ provisions
  27. The judgment also provides a strong endorsement of the use of ‘no qualification’ or ‘no variant’ provisions in ITTs. This will also be welcomed by contracting authorities.Tender clarifications
  28. While Akenhead J’s analysis regarding the use of clarification must be read in light of the fact that the case concerned an impermissible qualification, a number of the features of his reasoning would appear to be of wider application to clarification more generally. In particular:
    (1) it will always be important to consider whether the ITT actually confers a power or duty to seek clarifications upon the contracting authority; and
    (2) because seeking clarifications necessarily poses the risk of abusive conduct and breaches of the principle of transparency, some weighty countervailing factors will need to be demonstrated to justify any asserted right or obligation to take such steps.Implied contract ‘fairness’ obligations
  29. Finally, the judgment follows a line of recent decisions in holding that where a procurement is subject to the Regulations, or adopts their requirements by incorporation, there will be little scope for asserting implied contractual obligations going beyond the content of those provisions.

 

Public Procurement

July 16th, 2012 by Joseph Barrett in Best Value

Re. David Connolly’s Application for Judicial Review [2012] NICA 18 (12 June 2012):

1.     The Northern Ireland Court of Appeal held that a shareholder and director of a disappointed tenderer cannot use judicial review to have a ‘second-bite’ at challenging a procurement process where the tendering company has previously litigated a claim under the Public Contracts Regulations 2006 (“the Regulations”) in respect of the same procurement.

2.     In 2010, the Department of Regional Development (“DRR”) awarded Traffic Signs and Equipment Limited (“TS”) two (out of a total of twenty one) contracts for the supply of traffic signs. TS was dissatisfied and brought proceedings under the Regulations.

3.     The Court held that if the procurement award criteria had been properly applied TS would have been awarded three further contracts. Accordingly, DRR’s decision in respect of those three contracts was set aside. However, TS’s challenge to the award of the remaining 15 contracts was rejected.

4.     Mr Connolly was a shareholder and director of TS. Rather than TS appealing the decision under the Regulations, Mr Connolly tried to bring judicial review proceedings in respect of the award of the remaining 15 contracts.

5.     The Court held that Mr Connolly was not entitled to pursue a remedy via judicial review.

6.     If TS was dissatisfied with the Court’s decision in respect of its claim under the Regulations it should have appealed. It had not done so: [26]

7.     The substance of the issues that Mr Connolly wished to raise under judicial review was effectively identical to the subject-matter of TS’s claim under the Regulations. Res judicata and the doctrine of former recovery prevented the re-litigation of the same issues: [26]

8.     While the English Court of Appeal’s judgment in Chandler tentatively supported the view that a third party with sufficient interest could seek judicial review for breach of the Regulations, there was ‘considerable force’ in the argument that no such remedy should be available to an economic operator that had a statutory remedy under the Regulations: [28]

9.     Mr Connolly’s only interest in the proceedings, as a shareholder and director of TS, was not a sufficient interest to maintain an application for judicial review: [29]

Comment

10.  It would be surprising if an economic operator could have a second-bite at the cherry, by re-litigating a failed procurement challenge under the Regulations via judicial review, simply by having a shareholder (or some other connected party) issue the judicial review application in his or her own name.

11.  The judgment highlights that there remains scope for doubt about the two obiter dicta statements in Chandler to the effect that: (i) non-compliance with the Regulations is a true ‘public law wrong’ that in principle should be susceptible to judicial review; and (ii) third parties should have a remedy in judicial review for such breaches, despite the fact that in enacting the Regulations Parliament has prescribed that only economic operators should be granted a right of challenge.

Shetland Line (1984) Limited v Scottish Ministers [2012] CSOH 99 (29 May 2012)

12.  The Scottish Court of Session allowed an application to lift an automatic stay, holding that the grounds of challenge were weak and the balance of convenience favoured allowing the contracting authority to enter into the proposed contract.

13.  Shetland Line (“SL”) advanced two grounds of challenge against the Scottish Ministers’ decision to award a contract for ferry services in the north of Scotland to a rival operator, Serco, following a competitive dialogue process. The proceedings arose from the Scottish Ministers’ application to lift the automatic stay.

14.  SL brought two grounds of challenge.

15.  First, that the ITT breached the Regulations and general Treaty principles by failing to prescribe what level of ferry service, and thus resources, tenderers would be required to provide under the contract. This lead to Serco winning the procurement with a proposal that provided a significantly lower level of service coverage than that proposed by SL, at considerably lower cost.

16.  The ITT stated that proposals must be able to meet ‘anticipated future demand’. It included historical data about usage, but did not prescribe any minimum level of expected future service. Bidders were therefore required to form their own view about what level of service would be necessary in future.

17.  SL asserted that the level of service postulated in Serco’s bid would not be sufficient to meet the level of freight needs described in the ITT. The Scottish Ministers were therefore said to have breached the Regulations by accepting a non-compliant bid. Relatively extensive witness evidence was advanced in support of the assertion that the solution proposed by Serco would not prove sufficient.

18.  Second, for similar reasons, it was claimed that the ITT breached the requirement to specify the contract requirements against which bids would be assessed with sufficient objectivity and precision. It was said that the approach adopted effectively left it open to bidders to define the service that would be provided.

19.  These alleged breaches were said to have prevented equal competition and thus breached the obligations of transparency, equality of treatment and non-discrimination.

20.  The Court rejected both grounds.

21.  The appropriate standard of review to a challenge of this sort was manifest error. The Judge held that it would be “quite wrong for it to trespass on the jurisdiction clearly given to the contracting authority to exercise a broad discretionary judgment as to the identification of the most economically advantageous bid”: [26]

22.  One of the main factual grounds of the challenge was incorrect, in that Serco did provide a standby vessel to cover the risk of breakdown or accident. This undermined the assertion that its proposal was insufficient to meet the contracting authority’s needs: [27]

23.  It was (or should have been) obvious to all bidders from the ITT that: (i) there was no absolute requirement as to the details of the service to be provided, and (ii) it was up to each bidder to frame their proposal using their expertise and experience, in the context that the emphasis would be on efficiency rather than maximisation of freight capacity: [28]

24.  Demand is not static and is subject to multiple variables, including the effect of competition. It was thus difficult to claim a priori that the successful bid would not be sufficient to satisfy such demand as might exist in future: [29]

25.  The requirement that proposals met “current and anticipated demand” was sufficiently precise to allow the bidders to determine the subject matter of the contract and the authority to award it. There was nothing objectionable in asking bidders to identify the appropriate number of vessels, schedules, capacity, etc. and allowing the contracting authority to assess them and select the most economically advantageous tender. The whole purpose of the competitive dialogue procedure is to cater for circumstances where it is not appropriate for the contracting authority to be specific about the technical means necessary to satisfy its needs or objectives: [30]

26.  It would be surprising if compliance with the competitive dialogue procedure required the kind of detailed specification asserted by SL. This was particularly so where there could be no certainty about the future demand for freight capacity and freight sailings which any new operator would experience: [32]

27.  There was no requirement for the Scottish Ministers to be more specific in describing the contract requirements. This was because of: (i) the uncertainties and complexity of the contact; (ii) the scope for imaginative and individual proposals; and (iii) the indefinite nature of the content of the most economically advantageous tender.

28.  Competitive dialogue under the Regulations did not deprive the contracting authority of the option of leaving the bidder to assess exactly what should be offered, price it, and then await the evaluation of the contracting authority. If this were not so, contracting authorities would lose the potential of the full benefit of competition between expert bidders, all operating on an equal footing in terms of information and dialogue: [34]

29.  At best, the Claimant therefore had a weak prima facie case: [34]

30.  The balance of convenience, including the public interest and private interests of Serco, favoured lifting the stay: [35]-[39]

Comment

31.  This decision will be welcomed by contracting authorities as affirming the generous margin of flexibility and discretion that is enjoyed under the competitive dialogue procedure. Despite bidders having widely differing interpretations of what the ITT required them to provide, the Court’s view was that the Scottish Ministers were entitled to require parties to make their own projections about future service needs and then decide the winner based on which estimate it regarded as most realistic/advantageous. This was the case notwithstanding the fact that this approach necessarily meant that in one important sense the comparison of bids was not conducted on a ‘like for like’ basis.

32.  It is unlikely that a contracting authority would be permitted to adopt such a relaxed approach to defining contract specifications under the other procedures provided by the Regulations.

 

 

Council Tax and Public Procurement

May 14th, 2012 by James Goudie QC in Best Value, Council Tax and Rates

COUNCIL TAX

In Harrow LBC v Ayiku [2012] EWHC 1200 (Admin) Sales J held that the word “or” in the Council Tax (Exempt Dwellings) Order 1992, art 3 Class N, had a disjunctive meaning, therefore it was sufficient for the non-British spouse of a foreign student to satisfy one or other of the two conditions, namely being prevented from taking paid employment or being prevented from claiming benefits, in order to qualify as a “relevant person” who was exempted from liability to pay council tax.

PUBLIC PROCUREMENT

In Case C-368/10, Commission v Netherlands, Decision on 10 May 2012, the ECJ has reaffirmed, in the context of the supply to and management for a public authority of automatic coffee machines, that “both the principle of equal treatment and the obligation of transparency which flows from it require the subject-matter of each contract and the criteria governing its award to be clearly defined from the beginning of the award procedure … the formulation of the award criteria being such as to allow all reasonably well-informed tenderers exercising ordinary care to know the exact scope thereof and thus to interpret them in the same way”.

 

Public Procurement and Appearance of bias/Delay in Judicial Review

March 30th, 2012 by James Goudie QC in Best Value

Public Procurement

In Case C-599/10, SAG v Upro, the CJEU in a Judgment on 29 March 2012, reiterated (para 40) that the procurement regime “… does not preclude … the correction or amplification of details of a tender where appropriate, on an exceptional basis, particularly when it is clear that they require mere clarification, or to correct obvious material errors, provided that such amendment does not in reality lead to the submission of a new tender”.

However (para 41) on the exercise of the discretion thus enjoyed by the contracting authority, “that authority must treat the various tenderers equally and fairly, in such a way that a request for clarification does not appear unduly to have favoured or disadvantaged the tenderer or tenderers …”.  Moreover (para 42) a request for clarification of a tender may be made only after the contracting authority has looked at all the tenders.  Furthermore (para 43) that request must be sent in an equivalent manner to all undertakings which are in the same situation, unless there is an objectively variable ground capable of justifying different treatment of the tenderers in that regard; and in addition (para 44) that request must relate to all sections of the tender which are imprecise or which do not meet the technical requirements of the tender specifications.

The CJEU also (paras 27-34) addressed issues relating to abnormally low tenders.  Contracting authorities are required to examine the details of tenders which are abnormally low.  For that purpose they are obliged to request the tenderer to furnish the necessary explanations to prove that those tenders are “genuine”.  The existence of a proper exchange of views, at an appropriate time in the procedure for examining tenders, between the contracting authority and the tenderer, to enable the latter to demonstrate that its tender is genuine, constitutes a fundamental requirement, in order to prevent the contracting authority from acting in an arbitrary manner and to ensure healthy competition between undertakings.

Appearance of bias/Delay in judicial review

See R (Berky) v Newport City Council [2012] EWCA Civ 378, in which the Court of Appeal’s holdings included that (1) the decision not to require an environmental statement was not erroneous in law, (2) the appearance of bias on the part of one member of the Planning Committee was not sufficient, absent evidence that the member exercised an undue influence over the other members, to vitiate the Committee’s 8-1 decision, and (3) (by a majority) there had been undue delay leading to prejudice both to other interests and to good administration and relief should be refused.