Lifting the suspension

Three cases have now come before the courts where a contracting authority has sought to have an automatic suspension of a contract lifted. Martin Vincent reviews the rulings.

With the advent of the Public Contracts Regulations 2009 there has been an automatic injunction preventing a contracting authority entering into a contract where proceedings have been commenced by a dissatisfied tenderer before a contract is concluded. Clearly, this has proved a major impediment to the work of the contracting authority involved and so we are now seeing proceedings being brought to lift the automatic injunction. It is important to stress that these hearings relate to the injunction’s existence, although in considering this the court must consider if the case has any merit.

The High Court has decided that in considering an application to lift the automatic suspension it should apply the principles and practice established in a case usually referred to as American Cyanamid. This case set out two questions to be considered:

1. Whether there is a serious question to be tried: this will depend on the circumstances of a particular case; for example if the claim is time barred.
2. Whether "the balance of convenience lies in favour of granting or refusing interlocutory relief": the governing principle in the second question involves consideration of whether damages are an adequate remedy for the party in whose favour the interim injunction might be granted or continued. It is legitimate for the court to take into account on the balance of convenience exercise the public interest and the impact of others.

It is probably best to illustrate the point with examples. We have had three recently:

The Halo Trust v The Secretary of State for International Development

DFID has been funding mine clearance work in Cambodia. This work has historically been conducted by The Halo Trust (Halo) and the Mines Advisory Group (MAG).

In July 2010, Framework Agreements were award to Halo, MAG and G4S plc. These provided that the companies may be required to supply specified services by way of separate "calldown contracts". The three framework suppliers would be invited to bid for country-specific contracts under the Framework Agreement.

On 22 September 2010, DFID invited Halo, MAG and G4S to tender for work in Cambodia and Laos. All three tendered for Cambodia but Halo did not tender for Laos. The tender documents set out the evaluation criteria and weightings that would be applied.

On 1 October 2010, DFID wrote to all three tenderers stating that the primary purpose for the funding allocated through the tendering exercise was to “support the achievement of development actions through mine action” and explained how funding would be allocated for “development actions”. Halo wrote back to DFID alleging that this information constituted a fundamental change and introduced a new criterion for assessment of the bids.

Following evaluation of the bids, DFID decided to award the contract to MAG and informed Halo that it had been unsuccessful. Halo launched proceedings, claiming that the information provided did not satisfy DFID's transparency obligations under the 2006 Regulations.

DFID issued an application to lift the automatic suspension on its ability to award the contract to MAG.

Whether there is a serious question to be tried

On the circumstances of this case, many of Halo’s claims would be time barred. The High Court, therefore, concluded that Halo had not passed the first American Cyanamid test as it had not shown that there was a serious issue to be tried.

Whether "the balance of convenience lies in favour of granting or refusing interlocutory relief"

In this case, even if it had concluded that there was a serious issue to be tried, the High Court would have found that the balance of convenience was such that DFID should not be restrained from entering into the proposed contract with MAG as there was a public interest in DFID being able to pursue its lawful policy.

Therefore, the High Court concluded that the restraint on DFID's ability to place the Cambodian contract with MAG should be brought to an end.

Indigo Services (UK) Limited v The Colchester Institute Corporation

In May 2010, the Colchester Institute Corporation (the College) advertised in OJEU a contract for the provision of cleaning services at its two sites.

Five bidders, including Indigo, pre-qualified and were invited to tender for the contract. Following evaluation of the bids, Indigo was the third placed bidder and brought proceedings before the High Court to challenge the procurement decision. Subsequently the College applied to the court to lift the automatic injunction.

In deciding whether to lift the injunction the High Court noted case law to the effect that a court may be reluctant to grant an injunction that is likely to cause irremediable prejudice to the defendant, third parties and the wider public unless it is satisfied that the chances that it will turn out to have been wrongly granted are low.

Whether there is a serious question to be tried

Indigo's main complaints relate to the scoring methodology set out in the invitation to tender (ITT) and how it was applied. The ITT stated that each question would be scored from 0-5 and it explained what the award of certain points meant: 0 = non compliant, 1= poor, 3 = acceptable, 4= very good and 5= exceptional. Indigo complained that the markers of the tenders applied a mark of 2 in a number of cases, although this was not expressly provided for in the scoring system. Further, they used decimal fraction marks (for example 3.5) in a number of cases. Indigo claimed that this constituted a departure from the stated scoring methodology.

The court accepted that there is a serious issue to be tried as to whether Indigo has suffered, or is threatened by, loss of a more than fanciful chance of obtaining the contract.

Whether "the balance of convenience lies in favour of granting or refusing interlocutory relief"

The High Court found that to deprive the College of cleaning services would force closure of its site. This would affect the interests of students and the wider public interest in the proper and continued provision of further and higher education.

As a result, the High Court concluded that the prejudicial impact on the College and the wider public of continuing the standstill far outweighs any prejudice which may be caused by Indigo. Accordingly, the High Court made the order sought by the College an lifted the injunction.

Exel Europe Ltd v University Hospitals Coventry & Warwickshire NHS Trust

The trust had decided to relinquish the management of a procurement organisation it had run for itself and other trusts. It announced that it was considering a public private partnership with a company. A business transfer and framework procurement process was later started. It was to involve a framework agreement with a single operator.

Exel and another company were invited to tender. Exel, thinking that an agreement had already been reached with the other company, withdrew from the process. As a result, the competitor was the only company to submit a tender and the trust decided to award it the framework agreement.

Exel issued proceedings seeking to set aside the trust's decision. The trust was required refrain from entering into the contract during the proceedings and applied to the court to have that restriction lifted.

Whether there is a serious question to be tried

Exel had to show that there was a serious issue to be tried, however as their claim had been brought over three months after it had withdrawn from the tender process any cause of action would be time barred. It was also difficult to see that Exel could raise causes of action arising after it had withdrawn, it was also difficult to see that it then remained a "service provider" within reg.4, which is defined as a person who would have wished to have been awarded the contract. There was a serious issue, however, in relation to the complaint that the trust's discussions with the competitor had given that company an unfair advantage.

Whether "the balance of convenience lies in favour of granting or refusing interlocutory relief"

The court allowed the application to lift the injunction, citing balance of convenience, public interest and the fact that damages would be an adequate remedy.

Comment

Although, so far, contracting authorities have succeeded in applications to have the injunction lifted it is important to stress that each case will be decided on its merits by applying the American Cyanamid tests. For example, it would be difficult to see the court allowing the lifting of the injunction where the claimant would have a significant prospect of succeeding with an ineffectiveness application.

It is also important to note that the lifting of the injunction (with subsequent award of the contract) merely transforms the challenger’s claim into one for monetary compensation.

Martin Vincent is head of education and procurement at Mace & Jones. He can be contacted on 0161 214 0500 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..