Procurement in a nutshell – public interest considerations and the automatic suspension

What’s new?

The facts

The Council ran a procurement for the supply of an integrated CCTV and automatic number plate recognition system and for related maintenance services under the Public Contract Regulations 2006 (the Regulations). Five bidders prequalified.

At the conclusion of the procedure, the Council announced the successful bidder.

The bidder who came second in the Council’s assessment of tenders challenged the Council’s decision, stating that the successful bidder’s system used technology which made its bid non-compliant with the technical specification and that the Council had taken into account unidentified criteria in assessing the bids.

The contract award was therefore automatically suspended under the Regulations.

The Council applied for the automatic suspension to be lifted.

The decision

As covered in our previous nutshell on this issue, Automatic Suspension, Contracting Authorities like the Council can apply to have the suspension lifted under regulation 47(H) of the Regulations and the court will apply the test in American Cyanamid in determining the application.

The Court will assess whether there is a serious issue to be tried, whether damages would be an adequate remedy and where the balance of convenience lies. These provisions are replicated under regulations 95 and 96 of the Public Contracts Regulations 2015.

The High Court granted the Council’s application to lift the automatic suspension.

In reaching its decision, the High Court considered the influence of public interest considerations when applying the American Cyanamid principles, in light of decisions made in recent case law, including in Edenred v HM Treasury [2014] and Bristol Missing Link Ltd v Bristol City Council [2015] (for further information on the Edenred case, please see our previous nutshell available here), and where the “importance of the remedy of review” was considered.

In both of these cases, the Court maintained the automatic suspensions, noting the public interest in ensuring Contracting Authorities complied with the law and the fact that both decisions could be dealt with quickly by way of expedited trials i.e. there was no need to lift the suspension as a decision on each challenge was available reasonably quickly.

In this case, the Court questioned whether the “importance of the remedy of review” should be a separate step in applying the American Cyanamid test before considering the relative weightings of the advantages and disadvantages to both parties in lifting and/or maintaining the suspension. It concluded that, where damages could be an adequate remedy, the fact that a prompt trial could be held or a final decision could be made would not, in itself, justify maintaining a suspension.

The Court also looked at loss of reputation to an unsuccessful bidder and found that damages for loss of chance will not, of itself, be evidence that those damages are an inadequate remedy.

On the loss of a commercial contract, the issue is whether the loss would reduce that company’s profitability in a way that is not identified by the normal principles for which damages are awarded.

On the facts, the Court considered that damages were an adequate remedy for the unsuccessful bidder, notwithstanding the fact that they might be difficult to assess, and therefore the suspension should be lifted.

Why is it important?

This case is significant as the American Cyanamid principles are brought into a wider public interest consideration. The judgment considers the relevance of public interest considerations, the significance of difficulties in assessing damages for loss of chance, and the circumstances in which the loss of reputation of the unsuccessful bidder should lead to a finding that damages are an inadequate remedy.

How can I find out more?

If you have any queries on the issues raised or on any aspect of procurement, please contact us via our procurement hotline on 0191 204 4464.