Local authorities, procurement and not profit organisations

June 2nd, 2016 by Peter Oldham QC

Local authorities often procure contracts from non-profit organisations (NPOs). Assume an NPO brings a claim under the Public Contracts Regulations 2015 claiming that something went wrong in a procurement, such that there is an automatic suspension preventing the contract being entered into. Say the authority then applies to Court to set the suspension aside.  How does the American Cyanamid test apply where the claimant is an NPO?  In A v B TCC 27 May 2016, the Technology & Construction Court returned to this question.

Readers will recall that on an application to lift the suspension under the PCR, Cyanamid means that the Court will consider whether there is a serious issue to be tried; whether damages are an insufficient remedy; and whether the balance of convenience lies with maintaining the suspension. The modern trend is to see the adequacy of damages as one of the factors relevant to the balance of convenience, rather than as a separate stage.

In Bristol Missing Link Ltd v Bristol City Council [2015] PRST 1470, the claimant was an NPO providing domestic violence and abuse support services to the local authority. Its tender made no allowance for any profit, so that damages would be nominal at most. The suspension was not lifted. Coulson J said at [55]:-

 “In my view, a non-profit-making organisation, which has bid for a contract making no allowance for profit at all, and a minimal amount for overheads, is entitled to say that, in such circumstances, damages would not be an adequate remedy.”

In A v B, the claimant was an NHS trust, and so also an NPO.  The defendant was a procuring CCG. On the CCG’s application to set aside the suspension, Stuart-Smith J distinguished Bristol. He said that the mere fact that the Trust was an NPO did not mean that damages would be an inadequate remedy.  Moreover in Bristol, the claimant’s business stood to be wiped out if it lost the tender.  Here by contrast, the Trust stood to lose only 10% of its work.  After considering other factors relevant to the balance of convenience, the judge set the suspension aside.

So the first point to take away is that merely because the claimant is an NPO will not mean that it gets over the hurdle of showing that damages would be an insufficient remedy. As ever, it is a question of fact.

And as to that, the Courts have recently made it clear that, on an application to discharge the suspension, simple assertions, by either party, about where the balance of convenience lies will not be enough to make their case. Solid evidence is normally needed e.g. OpenView Ltd v Merton LBC [2015] BLR 735; Counted4 CIC v Sunderland CC 164 Con LR 230. And that’s the second point to take away.

Peter Oldham QC


Comments are closed.