Arrested development

Ireland and Northern Ireland have been a fertile source of cases for procurement law practitioners. Jack Hayward examines the latest judgment, where a Government department was found to have breached the regulations.

In the Northern Irish Queens Bench Division Mr Justice McCloskey has emerged as a judge who is clearly keen to implement the spirit as well as the letter of the Public Sector Directive 2004/18EU and the implementing Public Contract Regulations. Recently he decided two important cases in the area; Resource (NI) Limited v Northern Ireland Courts and Tribunals Service, and Rutledge Recruitment and Training v Department for Enterprise and Learning.

Earlier this month saw his latest decision in the case of Easycoach Ltd v Department for Regional Development [2012] NIQB 10. The Department for Regional Development held a procurement exercise to select providers of pre-bookable transport services for people with disabilities in four geographic areas using the Open procedure. At the end of the process it proposed to award three contracts to a company called Quinns and the final one to Out and About Enterprises Limited. Easycoach’s bid was rejected.

Easycoach brought an action alleging that the contract selection criteria lacked objectivity and transparency and that the two successful bidders did not satisfy the selection criteria.

Easycoach had a number of grounds for complaint including the use of selection criteria. Bidders were asked to provide details of a “relevant project” similar “in nature and scale to the services”.

The Court observed that there was no particularity in what the contracting authority was asking for and no benchmarks, minimum thresholds, project volumes, characteristics, duration or value specified. The evaluators were left to form opinions effectively based on the experience and expertise each possessed.

Most lawyers would agree that reading reported cases is frequently not a particularly engaging pastime. However, this case is well worth the effort. As the arguments unravel it is apparent that all the parties are at fault to some to a greater or lesser extent.

The main thrust of Easycoach’s claim was:

• A structural challenge to certain aspects of the contract selection criteria grounded on a complaint of lack of objectivity and/or transparency.
• A contention that the two successful bidders did not in fact satisfy the contract selection criteria in certain respects, giving rise to a manifest error on the part of the Department and/or a violation of the principle of equality of treatment.

Once proceedings had been issued the defendant Department was granted a stay of the proceedings for a finite period, of one month's duration, to enable the Department to conduct a "Due Diligence" exercise, if it chose to do so. The court did not make any mandatory order. In thus ruling, it was apparent to the court that if the Department chose to conduct this exercise, the Plaintiff would make detailed representations, supported by relevant evidence, to the effect that the two winning bidders did not achieve compliance with some of the contract selection criteria.

Evidence produced to the Court relating to this exercise was scanty in the extreme and the Department’s conclusion was to affirm the original award decisions. Easycoach then, with the Court’s consent, expanded its Statement of Claim to include six freestanding complaints:

1. Unlawfully formulated selection criteria, due to lack of objectivity and/or lack of transparency;
2. Lack of transparency and/or manifest error in the Department's application of the selection criteria;
3. Manifest error and/or inequality of treatment in concluding that Quinns satisfied one of the mandatory requirements (concerning one aspect of vehicle licences);
4. Manifest error in the application of the selection criteria to Quinns and "Out and About", in varying respects;
5. With specific reference to the "due diligence" exercise, the commission/perpetuation of the same manifest errors;
6. Breach of an implied contract, the terms whereof were that the Department would evaluate the Plaintiff's bid fairly and would not decide to award the contracts to bidders whose tenders were demonstrably replete with false representations.

Unusually the judgment contains a copy of the amended Statement of Claim in an appendix.

The judge decided in respect of the six grounds as follows:

Ground one

Easycoach failed to establish that in consequence of the breach of duty in play it had suffered, or risked suffering, loss or damage thus this breach of duty was not actionable.

Ground two

The evaluation tools were unpublished, inaccessible and manifestly lacking in transparency. The court described them as nebulous and incomprehensible. It held that the evaluation tools appear to have been devised ad hoc. They also suffered from the additional vice of encouraging the formation and application of subjective, intuitive judgment at the expense of clearly formulated objective standards.

In summary, for this combination of reasons, the court concluded that the approach of the assessment panel at the selection stage clearly infringed the principle of transparency. The court considered that this particular failure had to be viewed through the prism of the transparency principle, rather than the doctrine of manifest error.

Ground three

This mandatory requirement was to be assessed by the Department on a pass/fail basis, involving no element of evaluative judgment or discretion. The court held that a manifest error on the part of the Department had been established. Given that the selection panel members were, for reasons unexplained, deprived of access to the relevant segment of the tenders, the clearly demonstrated commission of a manifest error in this respect is unsurprising.

Ground four

The court upheld this ground for a variety of reasons. One of these related to regulation 25(3) [provisions relating to consortiums etc]. This a common area of concern for contracting authorities. In this case the court took the view that the construction of Regulation 25(3) which it adopted is that where a bidder (or, as the case may be, a group of economic operators under Regulation 28) relies on the capacities of other entities, it must prove to the contracting authority that "… the resources necessary to perform the contract will be available …".

In the judge’s view there is nothing in the language of either the Directive or the Regulations to support the view that this requirement is triggered only where the contracting authority proactively requests the financial information concerned. Accordingly, the Department's assessment to the contrary is vitiated by clearly demonstrated manifest error.

Ground five

The main submission advanced on behalf of the Department was that the "due diligence" phase was not governed by the 2006 Regulations, thereby confounding this discrete ground of challenge.

The judge commented: “Neither resort to the Directive nor the Regulations equips the court with a ready answer to the Department's contentions. Moreover, it appears that the issue has not previously been the subject of judicial decision. ‘Due diligence’ appears to constitute an exercise conducted post-contract award decision by many public authorities in cases to which the EU procurement regime applies.

“Moreover, it is an issue of direct interest to the court since, as the present case illustrates, it has implications for case management and has the potential for the court to be seised simultaneously of a claim under the 2006 Regulations and a parallel claim for judicial review. The issue is, therefore, one of some little importance.’

The court considered it necessary to look at this aspect of the claim through the lens of Regulation 26 of the 2006 Regulations. The reason for this is that, by virtue of Regulation 26, the Department was specifically empowered to require any bidder to provide information supplementing the information provided in accordance with Regulations 23, 24 or 25 or to clarify such information. The qualifying condition specified in Regulation 26 is that the further information sought must relate to the matters specified in Regulations 23, 24 or 25.

In the present context, the operative provision is Regulation 25, which relates directly to the selection criteria formulated by the Department. When the Plaintiff made its written representations to the Department following the initiation of these proceedings, the focus thereof was, fundamentally, Quinns' ability to satisfy the selection criteria.

The Department's assessment was that, on its face, this constituted "credible and substantial information which cast doubt in the successful tenders”. The judge stated: “In these circumstances, I consider that, if lawfully empowered to do so, the Department had ample grounds for exercising its power under Regulation 26. When the Department brought the Plaintiff's allegations to the attention of Quinns, inviting the provision of further information and representations, it was not expressly or consciously operating under the aegis of Regulation 26. This I consider irrelevant.

“The critical question is whether, post-contract award decision, the Department was at liberty to lawfully exercise the discretionary power contained in Regulation 26 and, properly analysed, objectively did so. On behalf of the Department, it was submitted that, as a matter of law, it was not acting under Regulation 26 and was not empowered to do so at this late stage.”

In summary this discrete ground of the claim failed.

Ground six

One of the key pieces of evidence on which this submission turned was a letter from Quinns' accountants which the Court found was quite unsatisfactory, begging a series of questions.

Throughout the process, the Department either appears to have been unaware of the competition rule that all bidders provide "full supporting evidence" or was disinclined (for whatever reason) to exercise its power under Regulation 26 or, as a further alternative, was simply not alert to the facility thereby provided.

The Department's supine acceptance of virtually everything claimed and asserted by Quinns was the very antithesis of what was required of them in the particular circumstances, namely a critical, probing and challenging mindset.

The court held that during the "due diligence" phase the relationship between the parties was governed by an implied contract behoving the Department to act with appropriate fairness to the Plaintiff and that this contractual term was duly breached and, further, inequality of treatment ensued, to the benefit of Quinns and the detriment of the Plaintiff.

Furthermore, insofar as any implied contract between the Plaintiff and the Department imposed on the latter a duty of comprehensive and thorough enquiry and therefore the court found that a clear breach had occurred.

All in all an interesting case not least because of the various example of poor practice exhibited and also because of the consideration of points of procurement practice such as consortium bids which frequently cause difficulty.

Jack Hayward is a consultant procurement solicitor and editor of the Public Procurement Page. He can be contacted by This email address is being protected from spambots. You need JavaScript enabled to view it..