Procurement in a nutshell – overturning automatic suspensions

This update outlines the Court’s rationale in making such a decision; setting out the requirements which must be satisfied for an application to be successful.

Sysmex (UK) Ltd v Imperial College Healthcare NHS Trust [2017] EWHC 1824 (TCC)

The case concerned the Trust’s decision to award a pathology services contract to Abbott Laboratories Limited instead of Sysmex who participated as a specialist sub-contractor in a bid led by Roche Diagnostics Limited.

Following their loss, Sysmex sought to challenge the award and, pursuant to Regulation 95 of the Public Contract Regulations 2015 (PCRs), the Trust was prevented from entering into the contract for an undetermined period of time.

Consequently, the Trust applied to the Court under Regulation 96 to lift the automatically imposed suspension.

Regulation 95

Regulation 95 of the PCRs imposes a statutory restriction on a contracting authority from entering into a contract where:

• A claim form has been issued in respect of the decision to award the contract;
• The contracting authority becomes aware of this issuance in relation to their decision to award; and
• The contract has not yet been entered into.

Regulation 96

Regulation 96 of the PCRs allows the Court to make an interim order having the effect of:

• Ending the requirement imposed by Regulation 95;
• Restoring or modifying that requirement;
• Suspending the procedure leading to
  • The award of the contract, or
  • The determination of any contest;
• Suspending the implementation of any decision or action taken by the contracting authority in the course of following such a procedure.

The Court’s approach

In its judgement, the Court maintained its previous approach that for an automatic suspension to be overturned the principles specified in the American Cyanamid case must be satisfied. As such, in order to uphold the Trust’s challenge to the suspension period it had to consider whether:

• There was a serious issue to be tried;
• If there was, whether damages would constitute an adequate remedy; and
• If damages were not an adequate remedy, where did the balance of convenience lie?

Was there a serious issue to be tried?

In this instance, there was general agreement between the parties and the Court that there was a serious issue to be tried.

However, importantly the Court specified that, except for exceptional circumstances, once it had been established that there was a serious issue to be tried, it was inappropriate for this hearing to consider further arguments relating to the merits of each party’s case. Instead such a dispute was relevant to the substantive procurement challenge to be heard at a later date.

Were damages an adequate remedy?

With regard to Sysmex, the Court concluded that due to it being a profit-making organisation and having the ability to calculate its loss of profit as a result of the failure to win the contract, damages would be an adequate remedy.

Likewise, the Court refused to uphold the argument that the loss of the contract had damaged Sysmex’s reputation in a manner which could only be repaired by the subsequent award of the contract, and not by damages.

However, contrary to this, with regard to the Trust, the Court was of the opinion that there was substantial evidence that the refusal to lift the suspension would have a substantial and negative effect on patient and clinical care. In light of this finding, the Court decided to consider where the balance of convenience lay.

Where did the balance lie?

The Court compared the various arguments both in favour of and against lifting the automatic suspension.

In doing so, it paid significant attention to the possible harm that would be caused by a failure to allow the Trust’s claim. In relation to this, it found that in such circumstances “the least risk of injustice” is likely to arise only where the suspension is lifted. Accordingly, human welfare ranked preferentially to financial matters.

Outcome

Consequently, the Court held that the Trust had satisfied the criteria required for the suspension to be lifted and the Trust was able to enter into the contract as first awarded.

Why is this important?

Although the Court was not novel in its approach to dealing with the matter, its judgement provides a useful indicator for parties involved in procurement challenges following a contract’s award.

In particular, the Court emphasised its disapproval of “mini-trials” considering the merits of a case in hearings relating to the lifting of a suspension.

Likewise, the judgement clarified that if a claimant was a profit-making organisation, this would be a “significant factor” against upholding a suspension.

Finally, the Court succinctly reaffirmed the “three pronged” test which must be satisfied for it to lift the automatic suspension imposed under Regulation 95 of the PCRs.

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.