Cheshire East

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First things first

Trevor Watt considers the lessons to be learned from a recent High Court ruling in relation to preliminary issues in procurement disputes.

Hot on the heels of Draeger Safety v London Fire Commissioner the High Court (Mr Justice Kerr) has again declined to lift the automatic suspension in a procurement dispute because an expedited trial was possible. As well as evidencing the court’s increased willingness to do so, the judgment in Vodafone Limited v (1) Secretary of State for Foreign, Commonwealth and Development Affairs; and (2) The British Council [2021] EWHC 2793 (TCC) contains some interesting observations on trials of preliminary issues in procurement disputes.

The procurement

The case concerned the procurement of a £184m framework agreement for network integration services. The procurement was commenced using the competitive procedure with negotiation (CPN) in accordance with the Public Contracts Regulations 2015 (PCR). The norm in procurements using the CPN is that authorities will negotiate with bidders to improve their initial and subsequent tenders. However, regulation 29(15) of the PCR allows contracting authorities to “award contracts on the basis of initial tenders without negotiation, where they have indicated in the contract notice…that they reserve the possibility of doing so.” The Secretary of State had reserved the possibility of awarding to the winning bidder on the basis of initial tenders (without negotiation), and sought to do just that. Vodafone was one of two unsuccessful bidders. The winning bidder was Fujitsu.

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Vodafone’s challenge

Although Vodafone had scored significantly lower across the board, it argued that the Secretary of State had acted unlawfully in awarding the contract based on initial tenders (“the Decision to Proceed”). This was because, in its initial tender, Fujitsu had failed to meet a minimum quality threshold for one question. The procurement documents made it clear that the Secretary of State had the discretion to exclude a bidder for failing to meet such a threshold, but was not obliged to do so. Vodafone also brought a “conventional scoring challenge” in respect of the evaluation and scoring of tenders. The proceedings triggered the automatic suspension. The Secretary of State applied to lift the suspension. Vodafone applied for an expedited trial of the Decision to Proceed as a preliminary issue.

Application to lift: adequacy of damages

It is common for claimants to argue that the contract in question is uniquely prestigious, meaning that its loss would cause further loss of business (and possibly reputational damage) that could not be quantified in damages. Such arguments rarely succeed, but they did so in this case. What is particularly interesting is that the judge’s conclusion that damages would not be adequate for Vodafone was clearly influenced by the possibility of an early trial of a preliminary issue.

The preliminary issue

The preliminary issue was defined by Vodafone as follows:

Assuming the outcome of the evaluation of tender responses was lawfully undertaken, were the Defendants lawfully entitled to proceed to and award the Framework to Fujitsu on the basis of the Defendants’ evaluation of the Initial Tenders submitted?

Preliminary issues, and the assumptions on which they are based, must be clearly and precisely defined. Vodafone’s definition assumed that the evaluation was lawful (meaning the resulting scores could not be challenged at any trial of the preliminary issue). Plainly this contradicted the “conventional scoring challenge” part of Vodafone’s claim. The Secretary of State argued that the preliminary issue would only resolve the case if Vodafone won. If it lost, there would have to be a second trial on the scoring challenge, which would involve the duplication of evidence, increased cost, and the possibility of inconsistent judgments.

The judge acknowledged that a trial of the preliminary issue was an imperfect solution but was the fairest outcome, with the assumption that the automatic suspension would be lifted if Vodafone failed on the preliminary issue. The judge acknowledged that it was imperfect that Vodafone would be assuming that the evaluation was lawful for the purposes of the preliminary issue, but then asserting that it was unlawful for the (later) trial of its scoring challenge. However, the judge’s view was because the lawfulness of the evaluation would be assumed for the purposes of the preliminary issue, there would be no risk of the two judges hearing the trials making inconsistent findings of fact. The trial of the preliminary issue would be largely based on documents (not live evidence) akin to a judicial review.

Even though the preliminary issue could be tried within a couple of months, the court modified the automatic suspension to allow the Secretary of State to enter into a “conditional contract” with Fujitsu, covering that short interim period.

Comment

As the judge acknowledged, this was an imperfect solution to a difficult problem: how to balance a contracting authority’s need to enter into the contract against an unsuccessful bidder’s need for an effective remedy where the court accepts that damages would not be adequate.

Where a potentially “knockout” argument can be precisely formulated and quickly tried, the court will strive to facilitate such a solution. The judgment is a good example of the court adopting a holistic consideration of applications to lift, in which the “balance of convenience” (which the judge redefined as “the balance of convenience and justice”) influences the consideration of the adequacy of damages, instead of them being considered in isolation. The judge was keen to stress that the court is not only concerned with what is convenient but with what is just.

There is an intriguing reference in paragraph 132 of the judgment to the Government’s Green Paper Transforming Public Procurement. Vodafone argued that there may in future be a legislative preference for maintaining the automatic suspension while a speedy trial is arranged. The judgment does not reveal what Mr Justice Kerr made of that point, but his judgment may well be an indication of how the courts will strive to adapt to what the new world may hold.

Trevor Watt is a Senior Associate at Bevan Brittan.

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