Local Government Lawyer Home Page


Sharpe Edge Webpage Banner

Welcome to Sharpe Edge, Sharpe Pritchard’s local government legal hub on Local Government Lawyer.

Sharpe Edge features news, views and analysis from our team of specialist local government lawyers working at the heart of the latest legal developments. Sharpe Edge platform is also the only place where local government lawyers can get e-access to two law books by our Head of Local Government Rob Hann: The Guide to Local Authority Charging and Trading Powers (‘LACAT’) and The Guide to Local Authority Companies and Partnerships (‘LACAP’).

 

                                                                                                  

Slide background

Standing to bring a procurement challenge

A Technology & Construction Court judge recently ruled that a consortium bringing a procurement claim was not an economic operator under the Public Contracts Regulations 2015 and would have had no chance of winning a hypothetical procurement. Colin Ricciardello analyses the judge's reasoning.

In a trial of two preliminary issues in Community R4C Ltd v Gloucestershire County Council [2020] EWHC 1803 (TCC) the Court held that a consortium was not an Economic Operator under the Public Contracts Regulations 2015 (PCR 2015).  Even if it was, in a hypothetical tender the consortium would not have had the financial standing to pass a hypothetical PQQ or have had the relevant experience to pass.  The second preliminary issue concerned a time bar defence under Regulation 92(2) of the PCR 2015.

Background

In 2013 following a competitive procedure under the PCR 2015 in 2009, Gloucestershire County Council (“the County Council”) entered into a waste disposal contract. In 2016 the County Council entered into a similar contract with the same contractor. Both concerned energy from municipal waste. The County Council maintained that the 2016 contract was a lawful modification of the 2013 contract undertaken in accordance with the machinery under the 2013 contract and, therefore, did not require a separate procurement. The consortium disagreed and contended that the 2016 contract was not a lawful modification of the 2013 contract (as it changed the economic balance in favour of the contractor) and it was a new one which should have been the subject of its own competitive procedure.

The Community R4C Ltd (“CR4C”) sought damages on the grounds that it suffered the risk of loss in that had there been a tender for the 2016 contract, it would have formed a consortium and that entity would have had a substantial chance of winning a hypothetical procurement for that contract.

Loss of a chance damages (on the balance of probabilities) are available in procurement challenges since PCR 2015 allows for risk of a loss claims flowing from a breach of a duty owed to economic operators under the PCR 2015– most notably under Regulations 18 and 89.  Under Regulation 91 (“Enforcement of duties through the Court”) a breach of duty owed is actionable by “…any economic operator which, in consequence , suffers , or risks suffering ,loss or damage”. The loss of the chance of winning has to be “real” or “substantial” as opposed to “fanciful” or “speculative” (see paragraph 125 of the judgement).

First Preliminary Issue – (i) Contracting Authorities owe duties to Economic Operators

Economic operators are defined at Regulation 2 of PCR 2015 as “Any person or public entity or group of such persons and entities, including any temporary association of undertakings, which offers the execution of works or work, the supply of product or the provision of the services on the market”.

In determining the first preliminary issue, and analysing the cause of action, the Court decided that it must assume the scenario of competitive dialogue taking place in and about 2015/2016 for what became the award of the 2016 contract. On the hypothetical chronology, the PQQ stage commenced in October or November 2015, and the hypothetical PQQ assessment date was 15 January 2016. However, and crucially, CR4C did not exist at the time of the initial 2009 procurement; it was set up as an informal association around July 2015 and (most importantly) it was registered as a community benefit society in February 2016. As such, CR4C did not have a legal personality when the hypothetical procurement started in 2015 or when the hypothetical PQQ assessment took place. All of these factors played into a two stage inquiry that a claimant is firstly required to establish a material interest in a procurement ( by asserting a missed opportunity) before it can establish that it is protected by “…the extended concept of harm”. (Paragraph 135 and 136 of the judgement).

It was held that: the Regulation 2 definition required the execution of works or supply of services on the market to be at least occasional and the consortium as a whole needed to have a presence ; the PCR provided remedies to those who actually offered work, products or services and not to the putative who are only able to say that they would like to be given the opportunity to offer – “If the duty were to be extended to those whose “operations” were merely putative , rather than real, then that would open the class of potential claimants to pretty much anyone, no matter how slim the prospects might be of the claimant then establishing in the litigation a lost chance…” (Paragraph 149 of the judgement).

In short: at the time of the hypothetical procurement CR4C did not have a legal personality and it did not offer works or services within the meaning of Regulation 2 and so it was not an Economic Operator under the PCR 2015 . Whilst the persons who made up the consortium may have had a common interest at the time of the hypothetical procurement, they were not bound together in any recognisable legal way until registration in February 2016. Practically that meant it could not complete the mandatory requirements of the PQQ – date of registration, address, VAT number registered number. (See paragraph 204 of the judgement).

A CR4C argument that to come within Regulation 91 there is lower threshold test than the balance of probability was rejected  – there was no “…watering down of the test of actionability under the Regulations, so that a claimant is not even subject to the civil burden of proof in doing so” . (Paragraph 122 of the judgement).

First Preliminary Issue – (ii) would CR4C have passed the hypothetical PQQ under Regulation 58?

Holding that CR4C was not an Economic Operator was enough to determine the first preliminary issue in favour of the County Council so CR4C had no standing to bring a claim under the PCR 2015. Nevertheless, the Court usefully went on to consider whether CR4C could have passed the hypothetical PQQ stage – if it did not then it would not have had a substantial chance of going on to win the hypothetical procurement. This exercise involved the use of a shadow PQQ (being the 2009 PQQ) and adopt the PQQ assessment date as 15th January 2016.

The Court held that there was no chance that the members of CR4C passing the financial standing requirements – either individually or collectively.

Further, the 2009 PQQ required demonstration of technical ability and track record through major capital infrastructure projects in the previous five years. On the evidence it was held that CR4C did not have the track record and could not have achieved the required number of marks to pass the technical experience PQQ stage. CR4C tried to meet this deficiency by saying it in 2015 it would have included other potential partners over and above the three consortium members but there was no commitment between those members and the potential ones. That approach of potential rather than actual members was rejected as being “proof” of resources under Regulation 60(3) and Regulation 63 – reliance on capacity of other entities.

Second Preliminary Issue – Time Bar /Limitation

The judgment referred to the test of knowledge for the purposes of starting time to commence proceedings under Regulation 92 by reference to Sita UK Ltd. V Greater Manchester Waste Disposal Authority [2011] EWCA Civ 156. The requisite knowledge was “…of the facts which apparently clearly indicate, though they need not absolutely prove, an infringement”.

On the facts the Court held that CR4C only had the requisite knowledge for Regulation 92 purposes when the County Council released information in December 2018 under FOIA concerning capital expenditure and to decide  otherwise would entail time starting to run because CR4C may have gained the requisite knowledge by reverse engineering figures from information available to it before the FOIA disclosure.

Conclusions

The judgment: continues (sensibly in the writer’s view) to resist the expansion of interest in a public contract for the purposes of standing to bring procurement challenges [1]; confirms that there is no lower threshold of simply proving a risk of loss and the usual balance of probabilities burden applies. It also illustrates and illuminates how the Court effectively handles the “what if” scenarios in loss of a chance cases. The judgement also examines the seldom visited permissible scope of proof of appropriate means in Regulations 60(3) and reliance on capacity of others in Regulation 63.

Colin Ricciardello is a partner at Sharpe Pritchard. He can be contacted on 020 7061 5925 or This email address is being protected from spambots. You need JavaScript enabled to view it..

[1] See R (Wylde) v Waverley BC [2017] EWHC 466 (Admin) on the class of persons who are entitled to bring a claim for judicial review in a procurement and AEW Europe LLP v Basingstoke & Deane BC [2019] EWHC 2050 (TCC) concerning the available scope for an economic operator to seek a declaration of ineffectiveness.

For further insight and resources on local government legal issues from Sharpe Pritchard, please visit the SharpeEdge page by clicking on the banner below.

sharpe edge 600x100

This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email This email address is being protected from spambots. You need JavaScript enabled to view it.

LACAT BookFREE download!

A Guide to Local Authority Charging and Trading Powers

Written and edited by Sharpe Pritchard’s Head of Local Government, Rob Hann,

A Guide to Local Authority Charging and Trading Powers covers:

• Updated charging powers compendium          • Commercial trading options

• Teckal ‘public to public’                                    • Localism Act

FREE DOWNLOAD

LACAT BookAvailable to buy:

A Guide to Local Authority Companies and Partnerships

An invaluable, comprehensive toolkit for lawyers, law firms and others advising
on or participating in Local Authority Companies and Partnerships”

- Local Authority Chief Executive

BUY NOW

  More Articles

Icons Court

The importance of due process, communication and fairness in employee conduct investigations – what you need to know.

Julie Bann and James Hughes discuss the importance of fairness in employee conduct investigations, taking a look at the London Borough of Hammersmith and Fulham -v- Mr S Keable case.
<a href=

Becoming More Inclusive: VAT and the Public Procurement (Agreement on Government Procurement) (Thresholds) (Amendment) Regulations 2021

Juli Lau, Natasha Barlow and Beth Edwards examine the recently published Public Procurement Regulations 2021, focussing upon amendments to the thresholds within various procurement regimes.
<a href=

The LADs are Alright

Laura Campbell discusses liquidated damages in construction contracts, focussing upon the long-running Triple Point saga which ended in the Supreme Court this year.
<a href=

Procurement Policy Note 08/21

Juli Lau and Beth Edwards outline Procurement Policy Note 08/21, recently published by the Cabinet office.
Icons Court

Hard Times: Improving Air Quality with Clean Air Zones

Rob Hann and James Goldthorpe examine the introduction of Clean Air Zones to improve air quality across the UK.
<a href=

Autumn Budget Spending Review 2021 – What Public Bodies Need To Know

Rob Hann and James Hughes examine the Autumn Budget Spending Review 2021, looking at what Public Bodies need to know.
<a href=

Net Zero – What’s new for local authorities?

Steve Gummer and Sophie Drysdale look at two major climate publications: the Heat and Buildings Strategy and the Net Zero Strategy.
Icons Hazard

Jumping to conclusions: Final Statements, liquidated damages and material breaches of natural justice

Michael Comba looks at a recent Technology and Construction Court case that provides useful guidance on the JCT’s procedural requirements on disputing Final Statements.
Icons Court

Three times one equals one: Several disputed payment applications amount to a single dispute

Michael Comba considers a case in which the High Court dismissed an employer’s argument that an adjudicator lacked jurisdiction because the referral concerned three separate payment applications and, therefore, comprised three separate disputes.
<a href=

Warm feelings or hot air: the Heat and Buildings Strategy and Heat Networks

This week the government published its Heat and Buildings Strategy (Strategy). This contained vital innovations and essential step changes in terms of how heating is provided, writes Steve Gummer.
<a href=

Procurement reforms: update from Cabinet Office

Rob Hann, Nicola Sumner and Juli Lau assess the Cabinet Office's update on the progress of the government's public procurement reforms.
Icons Court

Bond, Performance Bond. Delivering value for the Public Sector?

Justin Mendelle examines whether public sector clients achieve value for money from the provision of performance bonds.
Icons Hazard

Not so personal messages: R. (on the application of Good Law Project Ltd) v Secretary of State for Health and Social Care and Abingdon Health Plc [2021] EWHC 2595 (TCC)

Nicola Sumner, Juli Lau and Beth Edwards look at The Good Law Project's challenge of the direct award by the Secretary of State for Health and Social Care of three contracts for the production and supply of rapid Covid-19 antibody tests (the “Contracts”).
<a href=

Insolvency – Termination and Beyond

Rachel Murray-Smith and Clare Mendelle consider the potential warning signs of, and the compliant manner for dealing with, contractor insolvency.
Icons Court

Settlement agreements – waiving Personal Injury claims

In the case of Farnham-Oliver v RM Educational Resources LTD, the Queen’s Bench Division of the High Court allowed a Personal Injury claim (“PI claim”) to be pursued by an employee against his former employer despite the parties signing a Settlement Agreement in respect of an Employment Tribunal claim on the same issue. Julie Bann and James Hughes report.
Icons Hazard

Mandatory Vaccination for Care Home Workers in England – Update

Rachel Murray-Smith and Francesca Gallagher look at the detail of the government's guidance on compulsory vaccination for care staff.
<a href=

Make your mind up! Liquidated Damages clause upheld despite Employer’s challenge

In the recent case of Eco World Ballymore (EWB) v Dobler[1] , an Employer took the unusual position of challenging their own entitlement to liquidated damages (LDs) on the ground that the LDs provision constituted an unenforceable penalty clause. Clare Mendelle and James Goldthorpe investigate.
<a href=

Are Collateral Warranties Construction Contracts? Timing is Key.

Clare Mendelle and Anna Sidebottom examine the recently decided case of Toppan v Simply[1], which has provided guidance on when collateral warranties may be considered “construction contracts” under the Housing Grants, Construction and Regeneration Act 1996 and so give the warranty holder the right to adjudicate.
Icons Court

Climate emergency or climate catastrophe?

Rob Hann asks how central & local government departments and councils can work together more effectively to combat the challenges to achieve net zero by 2050.
Icons Court

Big Problems Need Radical Solutions – Time to Play Monopoly with District Heating?

Steve Gummer examines how local authorities might make district heat networks a reality.
<a href=

The Judicial Review and Courts Bill

The Judicial Review and Courts Bill was introduced to the House last week on 21 July 2021. William Rose and Anna Sidebottom discuss the potential impact of the bill.
<a href=

Liquidated damages and termination

Clare Mendelle, Francesca Gallagher and James Goldthorpe provide an outline of the Supreme Court's recent decision in Triple Point Technology vs PTT Public Company Limited.

Mandatory Vaccination for Care Home Workers in England

The Government has announced that people working in care homes in England must be fully vaccinated against Covid-19 from October 2021, unless they have a medical exemption, write Rachel Murray-Smith and Francesca Gallagher.
Icons Court

Transparency in Procurement: Procurement Policy Note (“PPN”) 07/21

Julie Lau, Clare Mendelle and Beth Edwards outline the new regime for publishing procurement notices post-Brexit
Icons Court

When procurement law and contracts for interests in land meet

Colin Ricciardiello provides a case law update examining cases that have examined the overlap between a requirement to procure and a contract for the disposal of an interest in land.
tb w74 h74 crop int a734a5aec8e0dcb7849ee8ebeb84a53d

UK granted data protection adequacy decision

Charlotte Smith summarises the new data protection adequacy decision.

First Impressions on the New Subsidy Control Bill

Last week the Government published its new Subsidy Control Bill. The Bill represents a significant shift in the way in which subsidies are assessed and also provides some clarity about the regime that will replace the EU State aid regime, writes Peter Collins.
Icons Court

Managing new enforcement powers for councils under the Traffic Management Act 2004

Rob Hann considers the recent legislative changes to traffic management in England, including the introduction of Clean Air Zones and widening local authorities enforcement powers for moving traffic offences.
Icons Court

Implementing Net Zero: Taking account of Carbon Reduction Plans in the Procurement of Major Government Contracts

The Government recently published the Procurement Policy Note 06/21. This will require suppliers bidding for major government contracts to provide a Carbon Reduction Plan at the selection stage and commit to achieving Net Zero by 2050, writes Clare Mendelle and James Goldthorpe.
tb w74 h74 crop int a734a5aec8e0dcb7849ee8ebeb84a53d

Public Procurement Update June 2021

On 3 June 2021, the Government issued the National Procurement Policy Statement (NPPS), and the associated Procurement Policy Note (PPN). George Dale explains what each document does.

What a bind: Section 106 planning obligations where there are multiple land interests

Rachel Lee and Christos Paphiti consider whether the case of R (on the application of McLaren) v Woking Borough Council impacts upon local planning authorities (LPAs) ability to properly consider the land interests and parties as regards to performance of specific obligations.
Icons Court

The use of experts only works when everyone plays by the same rules

Colin Ricciardiello looks at the use of expert witnesses in the wake of an important recent decision.
Icons Court

Unlawful Award of Contract

The High Court has ruled that the Minister for the Cabinet Office, Michael Gove, broke the law by giving a contract to a market research company, Public First, who are run by long-time associates of his. Anna Sidebottom, Francesca Gallagher and Clare Mendelle report.
Icons Date

Time after time: extending time for determination of a prior approval application

Rachel Lee and Christos Paphiti examine the time period for determination of Prior Approval (‘PA’) applications and explore how a local authority can extend the time period for determination.
Icons Date

The Cram Slam – Part 26A Restructuring Plans and Commercial Leases

David Nelson looks at the impact on landlords of a controversial High Court decision to allow a restructuring plan for a chain of health clubs.
Icons Court

The limits of an adjudicator's jurisdiction

Dr Paul Hughes and Anna Sidebottom look at the effect of Prater v Sisk [2021] on the ability of an Adjudicator to rely on previous 'out of jurisdiction' decisions between the same parties
Slide background