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

Icons HouseA 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 House

Thurrock Council & Another v Adams & Ors [2022] EWHC 1324 (QB)

William Rose, Partner at Sharpe Pritchard LLP, has successfully acted for Thurrock Council and Essex County Council in obtaining a ‘first of its kind’ injunction against individuals connected with the protest group Just Stop Oil.
Icons Date

The Adjudication Part 3: The Response and Further Submissions 9 June 2022

David Owens and James Goldthorpe look at the responding party's response and further submissions during adjudication.
Icons House

A renewable future: focusing energy solutions at a local level

Natasha Barlow and Steve Gummer discuss the 'Energy Trilemma' and how it is playing out at a local level.
Icons Date

Procurement Bill – Initial impressions from the first draft

Juli Lau and Sophie Mcfie-Hyland outline their initial impressions from the first draft of the Procurement Bill.
Icons Hazard

Let’s paint the town green! Government plans for green homes

Laura Campbell discusses the change urgently needed in towns and cities to make the landscape greener.
Icons House

The Queen’s Speech in Brief

The number of Bills which affect public sector clients is greater than usual – and the government have got straight off the starting blocks by publishing some of them already.
Icons Hazard

Refurbishment and Retrofitting: In with the old, out with the new!

Sharpe Pritchard analyse the challenge of decarbonising the construction sector.
Icons House

NET ZERO – What obligations are there on the UK to achieve it?

Radhika Devesher takes a look at the legal duty to achieve net-zero placed upon the UK.
Icons House

Championing green goals through public buying

Juli Lau considers how public purchasing power can be used to champion Net Zero goals, and how public procurement might be used as another driver for change.
Icons Hazard

Top Tips for Local Authority Lawyers advising on Data Protection Matters

Charlotte Smith and Hannah Peto set out some of their top tips to consider when advising on data protection matters.
Icons Court

The Cost of Freedom of Information – The Council’s Failure to Advise

Charlotte Smith and Nadia Ahmed summarise the case and judgement of Moss v Royal Borough of Kingston-upon-Thames and another (NJ/2018/007).
Rob Hann Photoshop

Ask the Author

These are frequently asked questions to Rob Hann from colleagues in Local Government via the Sharpe Pritchard ‘Ask-the-Author' facility concerning the subject matter of his books on local authority companies, partnerships, charging and trading.
Icons Court

A call to review public contracts with Russian suppliers

Juli Lau and Gonzalo Puertas discuss the first official document to consider public sector contracts with companies linked to the Russian and Belarusian state regimes, issued by the Cabinet Office.
Icons Date

A New NEC Option to tackle greenwashing in the construction industry

Allan Owen and Sophie Drysdale discuss 'greenwashing' in the construction industry and a new secondary option clause X29 for its NEC4 suite of contracts developed by NEC.
Icons House

The Pathway to the Future – The Road Map for Employment Tribunals

David Leach discusses and outlines the road map of the planned changes for modernising the Tribunals in 2022 and 2023 released by The Presidents of the Employment Tribunals.
Icons House

Farrar Out

Clare Mendelle and James Goldthorpe discuss how the insolvency of Farrar Construction leads to clarity from the Courts on dealing with an insolvent contractor under JCT.
Icons House

The UK government has this week introduced the Economic Crime (Transparency and Enforcement) Bill

Peter Collins and Sophie Pilcher discuss the Economic Crime (Transparency and Enforcement) Bill introduced by the UK Government this week.
Icons Hazard

A sweet truth for selectivity

Steve Gummer and Gonzalo Puertas discuss a case that concerns an application for judicial review seeking to challenge a decision to introduce a zero-duty autonomous tariff quota (“ATQ”) of 260,000 metric tonnes of raw cane sugar for refining.
Icons House

Adjudication 101: Introduction and Overview

Michael Comba traces the origins of adjudication and considers why the process was introduced, who it is aimed towards and how construction contracts must include certain provisions.
Icons Date

New Government Guidance on PFI Expiry

Rob Hann, Head of Local Government at Sharpe Pritchard, takes a look at new guidance on PFI expiry recently published by the IPA to help public bodies wrestle with the complexities of transition they will face as these contracts reach full term.
Icons Hazard

Three new Levels to ‘level up’ Local Government in England?

Rob Hann, Sharpe Pritchard’s Head of local government, takes a look at the new proposals under the Government’s Levelling Up White Paper to facilitate devolution to remaining regions of local government in England which are currently without a Mayoral Combined Authority.
Icons Hazard

Will employers still be able to use the practice of ‘fire and rehire’ in 2022?

Christian Grierson and Julie Bann discuss a recent case in which the High Court has granted an injunction preventing Tesco from using the controversial employment practice of ‘fire and rehire’.
Icons Hazard

Progress on Climate Change action plans in Local Government

Stephen Cirell discusses the progress on climate change and renewable energy action plans within Local Government.
<a href=

Witches’ hats, sexist comments, and a £2 million pay-out

Julie Bann and Christian Grierson discuss a case in which a finance specialist has won over £2 million in compensation, after claims of sex discrimination and unequal pay.
Icons Hazard

Stuck in traffic?

High Court rules “VIP Lanes” For PPE contracts breached fundamental procurement law principles, in latest Judicial Review victory for the Good Law Project.
<a href=

Local Authority Sports and Leisure provision – Challenges Post-Covid19

With the unique circumstances posed by the Covid 19 pandemic and temporary closures of Council-sponsored sports and leisure facilities, Rob Hann, Sharpe Pritchard’s Head of Local Government outlines some of the challenges the sector faces.
<a href=

Bucking the Trend on Specific Performance Buckinghamshire Council v FCC Buckinghamshire Limited

Clare Mendelle and James Hughes highlight the wide definition of Third-Party Income and the measures the courts are prepared to take to enforce the terms of longstanding contracts, by analysing the Buckinghamshire Council v FCC Buckinghamshire Limited case.
<a href=

The Government’s response to the Transforming Public Procurement consultation: what will change and what will not?

Juli Lau, Colin Ricciardiello, Beth Edwards and Natasha Barlow analyse the Government’s response to the Transforming Public Procurement consultation.
<a href=

Momentum for Heat Network Roll Out Gathers Pace

Steve Gummer discusses the increased momentum for a Heat Network Rollout.
Icons Hazard

Unconscious Bias, Discrimination and a Warning to Public Sector Employers

Christian Grierson and Julie Bann discuss two employment tribunal judgements, which provide a stark warning to public sector employers about unconscious bias and discrimination.
Icons Hazard

Levelling up – A new opportunity for further devolution in England?

Rob Hann explores the Government's 'levelling up' policy and looks at whether it is an opportunity for further devolution in England.
Slide background