Abandoned procurements and legal challenges

A recent judgment dealt in detail with the implications of abandonment of a procurement and the effect of an abandonment decision on an existing claim. Deborah Ramshaw reports.

In Amey Highways Limited and West Sussex County Council [2019] EWHC 1291 (TCC) the council had undertaken a competitive dialogue process to select a provider of highways maintenance services. Amey were unsuccessful in that competition by a difference in score of 0.03% against the winning bidder, Ringway.

Amey brought a claim against the council (First Action) and alleged its score should have been higher and so it would have won the contract had the council complied with its legal obligations. The council sought to strike out the First Action but failed to do so (see case report [2018] EWHC 1976 (TCC)). In those circumstances (and as has happened in a number of cases we have dealt with where a public body faces potentially lengthy and expensive litigation) the council gave notice of abandonment of the procurement in August 2018.

Amey issued a further claim (Second Action) against the council challenging the lawfulness of the abandonment decision.

The Court helpfully reiterated the general principles in connection with abandonment:

• A contracting authority has a broad discretion (provided it acts proportionately and non-discriminatory) in determining whether to award or abandon
• The exercise of that discretion is not limited to exceptional cases, nor does it need to be necessarily based on serious grounds
• There is no implied obligation under the Public Contracts Regulations 2015 (PCR) to carry an award procedure to its conclusion
• However, a decision to abandon is subject to the general Treaty principles
• The duty to notify the reasons for abandonment under the PCR is there to ensure compliance with these principles
• Finally, the Court must be able to review the lawfulness of the abandonment decision.

Given the “wafer thin” margin between the scores of Amey and Ringway the Court found that if Amey’s score under the First Action was revised upwards at all then its score would be higher than Ringway and Amey would have been the successful bidder. The Court found that the council had never publicly accepted that it had made any mistake in the procurement “but it was entirely realistic in accepting from the outset that the First Action raised real legal risk”.

On the evidence that it heard the Court accepted that the council took the position that it was too great a risk for the council to enter into the contract with Ringway (the automatic suspension had been lifted) and to litigate the resulting damages claim with Amey. Amey claimed that the abandonment decision was taken to bring the First Action to an end to deprive Amey of their remedies and so the decision was unlawful.

Amey argued that the council had exercised “its broad power to terminate a procurement with the sole purpose of removing a claim brought by an economic operator against it arising out of its conduct of the procurement”.

On the basis of the evidence (which was detailed and included both oral and written evidence given to the Court and again highlights the importance of a detailed audit trail covering all decisions made regarding a procurement) the Court found that whilst it accepted that the council hoped and intended that abandoning the procurement would have the effect of terminating the First Action, it did not believe that abandonment was bound to have that effect.

In summary, the Court found that the council’s decision to abandon was lawful but that decision did not bring the First Action to an end.

In the council’s favour the Court found that the decision to abandon was a rational attempt to preserve public funds and noted that the factors considered by the council had included:

• Attempting to avoid the “double bind” of contracting with Ringway and litigating the Amey claim
• Taking into account potential costs saved if the First Action could not be disposed of
• Taking into account additional costs incurred by not entering into the contract with Ringway (interim measures would be required to deal with maintenance)
• Taking into account the need to secure the provision of critical services over the winter period
• Taking into account the possibility of developing a more advantageous solution on a re-procurement.

However, the Court held that there was a fundamental difference between the effect of an abandonment decision being to prevent future claims and depriving a bidder of a remedy where a cause of action already existed.  In this case the decision to abandon had no effect on the First Action because that cause of action had “accrued” before the abandonment decision was made: Amey should not be deprived of its right to seek damages where, before abandonment, a breach of the PCR can be proved to have caused loss or damage.

This case is of interest for a number of reasons:

• it reminds us of the requirements to ensure abandonment decisions are made lawfully and not in breach of the Treaty principles;
• it sets out some of the reasons that a Court may consider to be rational reasons for abandonment (though each case will be fact specific);
• it shows the importance of detailed records and audit trail which allowed the council to show that the decision and the decision-making process to abandon were lawful;
• where a decision is made to abandon and a claim has been made before that decision then the abandonment will not extinguish that claim. This is an important factor that contracting authorities will need to consider when a claim has been made and one of the options available to the authority is to abandon the process;
• this decision confirms the position that contracting authorities cannot “put the genie back in the bottle” by abandoning a process which is being challenged, where a challenger has a live claim for damages arising from a decision taken prior to the abandonment and emphasises the importance of fully documenting the basis on which any decision is made in order that the decision can be defended if necessary.

In future, there may be attempts to apply this decision more widely to decisions to re-wind or re-mark elements of a procurement following challenge, by bidders who are able to show that they would have been successful but for the original unlawful decision leading to the re-wind/re-scoring.

Our advice is that authorities take legal advice before making any decision to abandon, re-wind or re-run a procurement due to challenge by a bidder.

Deborah Ramshaw is a partner at Hempsons.