What do the Westminster and Good Law Project cases tell us about the courts’ attitude to procurement post-Covid? Léonie Cowen explains.
Two interesting recent cases, one a local authority case (Westminster City Council v Sports and Leisure Management Ltd  EWHC 98 (TC) (22nd January 2021) and the second against the Secretary of State for Health and Social Care (SoS) (R v Secretary of State for Health and Social Care ex parte Good Law Project Ltd and Ors  EWHC 346 (Admin) (18th February) have provided valuable guidance about the Courts’ approach to the impact of Covid on public contracts.
In Westminster, a case about the interpretation of a contract to establish where Covid losses fell, it was held that the case turned entirely on the meaning of the contract. In Good Law it was confirmed that Covid does not provide a defence against failure to publish awards under regulation 50 of the Public Contracts Regulations 2015 (PCR).
The losses arose because of the statutory requirement to close leisure centres and the social distancing requirements when they were able to open. These are specific change of law because they apply only to a specific and limited group of services and are defined as such in the contract.
The main issue was whether it was the Council or the Contractor who suffered the loss. Does the contract mean that the Contractor should not be worse off as a result of the specific change of law, the approach alleged by the Contractor to be industry standard? This principle was disputed by the Council.
It was held that there is no ‘inexorable’ logic pointing in favour or against either party’s construction of the relevant clauses or that losses arising from specific change of law should fall on the Council. On the negotiated terms, it was held that the management fee could never fall below zero and because of this that the Council was never obliged to pay the Contractor. The fee could be waived (which is what happened) and the Council might choose agree to pay a lump sum to the Contractor by way of further compensation.
It was also accepted by the parties that the contract is a concession contract because the Contractor ‘is entitled to keep the’ income from customers. This is the legal position even though the contract was advertised as a as a public contract under the PCR.
The most important lesson and conclusion from this case is that precise contract drafting is essential. This case must have cost the parties a considerable amount of money as each party was represented by Leading Counsel from specialist public sector procurement chambers and there was a Junior as well for the Council. The contract continues so it is my assumption there will be continuing damage to the parties’ relationships.
There are also some subsidiary points of significance. The government’s public procurement notes on supplier relief were not relevant to the issues being considered. The court looked at the contract drafting not any wider issues. Government guidance needs to be understood as just that, non statutory guidance.
This was a judicial review which has received more widespread publicity than Westminster. It was against the SoS and the sums at stake were much larger. This blog focusses on the key procurement points which were considered, the extent of the failure by the SoS under the Public Contracts Regulations 2015 (PCR) and the implications although there were other issues, including particularly who had the status to seek judicial review.
The SoS was very late in publication of a substantial number of post Covid awards valued at many millions, possibly into billions. There is no precision on this as the numbers of failures to publish and the amounts were not clear at the date of the judgment.
It was held that the SoS is obliged to publish contract award notices for above threshold awards (under regulation 50) of the PCR within 30 days of the award. These notices should contain the information required by Part D of Annex 5. The pandemic does not provide a legitimate reason to delay or fail to publish because there are no exceptions to the requirement within the PCR. The provisions in regulation 32 (2) c) allow for contracting authority to negotiate and award contracts without publication of a call to competition if the awards are urgent as defined, namely it is strictly necessary to do so because of unforeseen circumstances but regulation 50 requirements are important to enable the public to be aware of and challenge the awards. It was argued successfully that without post award publication no-one would necessarily be able to find out about these contracts. In addition to the PCR failure, the SoS did not follow the Government’s own transparency policy.
The Judge said that ‘the history of the proceedings is unedifying’ and ‘the lion share of the blame’ was with the SoS. The judgment identifies that the SoS’s officials claimed that the breaches were ‘technical’ in view of the extraordinary circumstances of the pandemic and that publication would take place as soon as practical. His officials eventually accepted that a significant number of notices were not published within the statutory time limit. The Judge also noted that the reason for the failure to comply with the Government’s own transparency policy was an excuse not a justification and was unlawful.
The SoS also challenged the standing of the claimants to bring the proceedings, unsuccessfully in the case of the Good Law Project though successfully in the case of three MPs.
It was held that the obligations imposed by regulation 50, the Transparency Policy and its principles ‘serve a vital public function’ no less important during a pandemic because the public was entitled to see who the ‘vast quantities of public money on pandemic-related procurement’ was going to. This was important for competitors, the public and the National Audit Office. It was further held that a mandatory order to comply was not needed as there was now substantial compliance but a declaration of illegality was justified because this was not a single breach. If these notices had been published in time together with the contract provisions, the claimant could have scrutinised them and raised any issues with the NAO or in Parliament within the time scales provided.
However, this is not the end of the matter because there is separate litigation by the Good Law Project to be decided in May challenging the legality of the contracts.
We all expected a slew of cases arising from Covid and I am sure there will be many more. As identified, one of these will be on the legality of the contracts for personal protective equipment. I hope it will provide some useful guidance on the meaning and extent of the urgency provisions in regulation 32 (2) c) as at present there is very limited guidance on the meaning of this (only a short Scottish case, Salt International Ltd v The Scottish Ministers  CSIH 85)).
These two cases are on their face about different matters. However, there is a connection because both are important in demonstrating that public bodies and their contractors cannot use Covid as a way of avoiding their legal and contractual obligations. The cases confirm that when the courts come to consider the impact of the pandemic world they do so via a careful consideration of the law and of contractual terms. Covid cannot be used as a successful excuse to avoid legal and contractual obligations.
Léonie Cowen is principal of Léonie Cowen & Associates, a leading local government lawyer and procurement specialist with extensive expertise in all aspects of public procurement and concessions. Her specialisms include social care, leisure and culture.
She has recently published A Practical Guide to Local Authority Leisure Contracts in England and Wales in the Time of Covid-19, Brexit and Beyond.
© Léonie Cowen