Judge sets out why local authority was ordered to pay damages in procurement dispute

The reasons why Leeds City Council was ordered to pay damages to housing services provider Mears for breaching the procurement rules have emerged following the publication of Mr Justice Ramsey’s judgment in full at the end of last month.

It was revealed in February this year that the High Court judge had found in Mears’ favour. Mr Justice Ramsey ruled that the authority should pay damages as a result of the breach but declined to require Leeds to re-run the process.

The case of Mears Ltd v Leeds City Council (No2) [2011] EWHC 1031 TCC related to a public procurement run by the authority known as the Leeds Housing Arms Length Management Organisation Procurement 2011. It was carried out under a competitive dialogue procedure pursuant to Regulation 18 of the Public Contracts Regulations 2006.

Mears was one of the tendering contractors for lots 1 and 4 of the procurement, covering capital improvement refurbishment works for social housing in the Leeds area.

Mears was told by the council on 2 July 2010 that it had been unsuccessful. The company then sued Leeds, alleging that the authority had breached the 2006 Regulations.

In December 2010 Mr Justice Ramsey ruled that certain parts of Mears’ claim should be struck out for being time-barred. However, he also ordered that the council should disclose – via a confidentiality ring – the model answers prepared by Leeds for the purpose of evaluating tenders.

Mr Justice Ramsey has now ruled that:

• By failing to notify the tenderers of the weighting which it intended to apply in evaluating the individual sections in the Evaluation Table of the Invitation to Participate in Competitive Dialogue (ITPD), Leeds breached both the transparency provision in Regulation 4(3) and the express provision as to weighting in Regulation 30(3)
• There was no such breach in relation to the reference to innovation in the scores of 8, 9 and 10 in the Scoring Table or in the reference in the score of 10 to responses “being capable of exceeding expectations”
• The breach in relation to weighting could have affected the preparation of the tender and Mears suffered a risk of loss because of the loss of a chance of being one of the three tenderers who were selected to go through to the next round
• There was a limited breach of Regulations 4(3) and 30(3) in relation to the model answers but no risk of loss “as Mears would not have been successful in proceeding to the next round and their risk of loss comes into realms of being fanciful on this aspect”
• The submission that Mears’ claim under Regulation 4(3) in respect of the model answers was out of time under Regulation 47(7)(b) was rejected
• The breach of the Regulations in respect of weighting means that Mears had lost the chance of being included as one of the three tenderers. The possible remedies under Regulation 47(8)(b) were therefore setting aside the decision as to which tenderers succeeded at the ITPD stage or an order for damages or both
• The question of remedy depended on the exercise of discretion based on a balance between the public interest in Leeds proceeding with the award of contract and the private harm to Mears by not having the chance to be included in the next stage of the tender, taking account of the underlying principle that public tenders should be carried out in compliance with the Regulations. “In my judgment, overall, the balance lies in favour of limiting the remedy to damages and not setting aside the procedure,” the judge said.

Mr Justice Ramsey therefore awarded damages to be assessed.

Philip Hoult

Read Mills & Reeve's analysis of what the case means for contracting authorities: Weighty matters