procurement case law, remedies and complex procurement...

Procurement case law, remedies and

complex procurement procedures

including procurement innovationNathan Holden, Freeths

Mark Gudgeon, Freeths

Bethan Lloyd, Geldards

Jonathan Griffiths, Geldards

Clare Hardy, Geldards

4 December 2018

Complexities & pitfalls in procurement

Nathan Holden

Partner

28 November 2018

www.emlawshare.co.uk

Complexities & pitfalls in

procurement

• Background

– Challenges

– Awareness

– Aggressive litigation

– Confidentiality – is there any?


Particular issues that arise

• Frameworks

• Dynamic Purchasing Systems

• The competitive procedure with negotiation

• Concessions

• Development Agreements


Frameworks

• Regulations 33 / 72 PCR 2015

• 4 year duration and call-off terms:

• “Exceptional cases duly justified”

• Who can enter into contracts? (Inverclyde Case -

[2015] CSOH 169 – 1 December 2015)

• Pricing basis

• Eligibility of parties to take part

• Substantial variations?


Dynamic Purchasing Systems

• r.34 PCR 2015:

– agree who qualifies as eligible

– 30 days

– Cannot charge a fee – some may try to!

– Electronic based

– Criteria for products

– Award must follow rules – mini-tender


Competitive Procedure with

Negotiation• Weird hybrid?

• “Minimum requirements” and “evaluation criteria”

remain constant throughout!

• Ability to down select during negotiation phase


What is a concession?

• 2016 Regulations

• Which services?

• Waltham Forest case – Bailiff Services [2016]

EWHC 771 (TTC) (6 April 2016)

• Use of land for advertising purposes? – Ocean

Outdoor v LBHF [2018] EWHC 2508


Development agreement – is it

a procurement?

• Property transaction not a procurement (r.10(b)

PCR 2015)

• Faraday v West Berkshire [2016] EWHC 2166

(Admin) 26 August 2016 – no positive obligation?

• Faraday v West Berkshire [2018] EWCA Civ 2532

(the sequel!)

– “acting unlawfully in the future”

– Use of VTNs

– Civil Penalty (£1)


Can we avoid a procurement

competition?• Land transaction?

• Joint venturing (bodies governed by public law) –

LLP (Peters v Haringey (2017) or LTD?

• When does the “exclusive rights” exemption (r.32

PCR) apply?

• S106 TCPA 1990 obligations (R (Midlands Co-op)

v Birmingham CC) [2012] EWHC 620


What is a “Contract for

Pecuniary Interest”?

• Financing?

• Defraying of other charges?

• IBA v Azienda [C-606/17]


Abnormally low pricing?

• A real issue?

• r.69 PCR 2015 – if a tender appears to be

“abnormally low”, a duty to investigate

• Ask questions

• May disqualify if no adequate response

• So what is an “ALT”? – Northern Ireland

Government formula – 15% differential = deemed

ALT unless a satisfactory explanation

• Relates to a breach of law or state aid?


Avoiding Procurement

Challenges – Lessons from

Recent Caselaw

Bethan Lloyd, Partner, Geldards


• A well planned procurement and carefully drafted

procurement documents reduce the scope for

challenge

• A well organized and disciplined evaluation

process also reduces the scope for challenge

Introduction


Formulating technical

specifications• Regulation 42 PCR 2015

– Equal access of economic operators

– No unjustified obstacles to competition

– Methods:

• Performance or functional requirements

• Reference to technical specifications ‘or equivalent’

• A mixture

– Specific make or source only in exceptional circumstances,

and specify ‘or equivalent’ – strictly interpreted



specificationsRoche Lietuva case (C-413/17, October 2018)

• Hire of diagnostic medical equipment and related

services

• Argument technical specifications were so specific

they were adapted to the product characteristics

of particular manufacturers

• Question: what is the extent of the discretion to

describe either the technical characteristics of a

medical device or the way in which it functions?



specificationsRoche Lietuva case (cont.)

•CJEU said contracting authorities have a wide margin of

discretion

•No hierarchy amongst methods for formulating technical

specifications

•However

– Consider principles of equal treatment, non-

discrimination and transparency

– The more detailed the specification, the greater the

risk of favouring products of a particular

manufacturer



specificationsRoche Lietuva case (cont.)

– Recital 74 – avoid mirroring characteristics of

supplies / services / works offered by a particular

economic operator; tenders should be able to

reflect diversity of technical specifications in the

market

– Level of detail in the specification must observe the

principle of proportionality – is that level of detail

necessary to achieve the desired objectives?

– In public health sector, a greater margin of

discretion as regards proportionality


Time for demonstrating equivalence

VAR, Srl v Iveco Orecchia SpA (CJEU, July 2018)

• Spare parts for buses – originals from

manufacturer, or equivalents

• Contracting authority required certificate of

equivalence to be presented at time of first

delivery, rather than with tender


Time for demonstrating equivalence

VAR, Srl v Iveco Orecchia SpA (cont.)

• Decided: contracting authority must require proof

of equivalence to be submitted with tender

• This is to ensure all bidders in a position of

equality when tenders evaluated

• Discretion as to means used to show equivalence

– but must be a meaningful assessment, which

goes no further than necessary


Pass/fail requirements

MLS (Overseas) Ltd v Sec of State for Defence

(TCC, 2017 and 2018)

• Claimant scored best on quality and price, but lost

because it failed Q6.3 about safety culture

• Claim upheld – ITT did not make clear a fail on

Q6.3 would result in disqualification

– Q6.3 not included in evaluation criteria

– Worked examples did not illustrate effect of

failing Q6.3



MLS (Overseas) Ltd v Sec of State for Defence

(cont.)

– Other areas which could result in

disqualification were highlighted in bold, but

Q6.3 was not

– No explanation in ITT of consequence of failing

Q6.3

– No statement a pass on Q6.3 was necessary

for tender to be technically compliant



MLS (Overseas) Ltd v Sec of State for Defence (cont.)

• Tips:

– Clear and express statement of what a fail means

– Make it clear whether it leads to a mandatory or

discretionary exclusion

– Consider illustrating a fail in a worked example

– Consistent use of bold text and other markers

• Very claimant friendly judgment!


Disqualification for failure to meet

technical threshold score

Montte SL v Musikene (Case 546/16, CJEU)

• Open procedure to buy musical equipment

• Two stages:

– First stage – technical evaluation and minimum

score of 70% to go on to second stage

– Second stage – overall evaluation based on

combined price and technical scores, with a

50/50 split




Montte SL v Musikene (cont.)

• Decided:

– Can exclude for failure to meet minimum score

on technical, even if this means that bidder’s

price is not evaluated at all

– Multi-stage approach permitted even if it results

in a dramatic reduction in number of bidders at

second stage – if there are concerns about lack

of competition, contracting authority can

abandon the procedure and start again




Montte SL v Musikene (cont.)

• Comments:

– Criterion for elimination of bidders should be an

absolute criterion (e.g. failure to achieve 70%)

rather than a criterion which involves comparing

bidders (e.g. top 5 scorers on technical go through)

– Elimination of lowest price bidder at stage one may

affect the result at stage two if the price scoring is

by reference to lowest compliant bid

– Make it clear the scoring on price only takes

account of the pricing of compliant bids



technical threshold scoreMontte SL v Musikene (cont.)

• Comments:

– Minimum technical score can enable more keen competition

on price by giving price a higher weighting, without running

the risk that the winning bid will be very cheap but poor

quality

– Does not work so well in reverse: weight technical highly,

with:

• a cap on price – this is OK

• exclusion for any bid with a price which exceeds more

than twice the lowest bid – not OK, not sufficiently

transparent as bidders do not know what the winning bid

will be


Neutralising incumbent advantage

Amplexor Luxembourg Sarl v European Commission (Case T-

211/17)

• Contract to publish procurement notices in Official Journal

• Incumbent was one of three winners, but would only get a 0.3%

payment on top of contract price, the other two winners would get

3%

• The 3% was intended to finance implementation costs during

transition phase and was intended to restore equal treatment of

bidders

• Contract had specific legal and technical requirements, meaning

that an investment of resources would be required



Amplexor Luxembourg Sarl v European Commission (cont.)

• Reasoning:

– No obligation to neutralise all incumbent advantages –

potentially contrary to interests of contracting authority (cost

and effort)

– A balance to be struck between interests involved

– Incumbent advantage must be neutralised only to the extent:

• It is technically easy to effect

• It is economically acceptable

• It does not infringe rights of incumbent or other bidders




• Case suggests that contracting authority may need to allow

bidders other than the incumbent a transition phase with extra

payment if they need to invest resources to adapt to the

particular requirements of the contract

• Important that the extra remuneration is not arbitrary or excessive

(court compared it to other contracts)

• Important to ensure higher remuneration will not allow a new

supplier to subsidise the operational phase of the contract




• Here the ‘particular requirements’ were legal and technical

requirements specific to Official Journal publications

• Comment: may be more difficult in other cases to tell the

difference between ‘particular requirements’ which can be treated

as an incumbent advantage which justifies a paid for transition

phase and merely something which requires the supplier to have

particular resources or know-how

• If it is just resources and know-how, these are something the

bidder should ‘bring to the table’, and should be tested at the

selection stage




• Comment:

– An extra payment will always be ‘technically easy’

– What does ‘economically acceptable’ mean? Presumably,

that it is not arbitrary or excessive, and that it will not be used

to subsidise the operational phase


Inherent de facto advantage

Proof IT SIA v European Institute for Gender Equality (Case T-

10/17, General Court)

• Reaffirms the inherent de facto advantage

• Unless the incumbent is excluded from the procurement

altogether, it is inevitable incumbent will have an advantage

• Court noted that the advantage was not the consequence of any

conduct on the part of the contracting authority

• Allegation award criteria interpreted in a way which meant

incumbent could benefit from its knowledge of performing current

contract not proven on the facts


Standstill Feedback:

Reasons for Rejection and

Requests for Further Information

– Recent Developments

Jonathan Griffiths, Partner, Geldards28th November 2018


• An area where advice is regularly requested and

a popular ground for challenge

• Two recent cases give useful guidance

Introduction


Regulation 86 Decision Notice

• award criteria

• identity of the successful tenderer

• reasons for the decision including the:

• characteristics and relative advantages of the

successful tenderer

• score of the winning bidder and recipient

• when standstill will end / contract awarded

Background


• Strabag Benelux v Council [2003] - approved an

explanation that bidder ranked highly on quality but

was unsuccessful because of its price

• Brinks Security Luxembourg v Commission

[2009] – where a formal scoring system exists, an

unsuccessful tenderer should be provided with a

breakdown of its scores as compared with the

successful tenderer. Where the reasons for the

scores are still not clear, a narrative explaining the

scores may still be needed

Background: Earlier cases of note


• Evropaiki Dynamiki v Court of Justice [2008] -

scores and brief narratives should be sufficient.

However, there should be sufficient information for

the unsuccessful bidder to determine whether a

decision is well founded, to assert its rights before

the court and for the court to exercise its

supervisory jurisdiction.

Background: Earlier cases of note


• Healthcare at Home Ltd v the Common

Services Agency [2014] – an emphasis on

providing reasons and reasoning

• Crown Commercial Services – “contracting

authorities should release the full breakdown of

scores against each criterion and sub-criterion,

and support this with a narrative explanation of

why the winner scored more heavily in the

relevant areas.”


• A breakdown of scores on a question by question

basis

• A rationale for the scores awarded on a question by

question basis

• Copies of the individual evaluators’ notes

• Minutes of all evaluation and/or moderation meetings

• Copy of the evaluation report

• Copy of the winning bidder’s tender

Aggressive requests for disclosure

during the standstill period


• “the contracting authority cannot be required to

communicate to an unsuccessful tenderer, first, in

addition to the reasons for rejecting its tender, a

detailed summary of how each detail of its tender

was taken into account when the tender was

evaluated and secondly, ….. a detailed

comparative analysis of the successful tender and

of the unsuccessful tender.”

EUIPO v European Dynamics

Luxembourg SA


• No requirement to :

• Disclose a full copy of the evaluation report

• Weight sub-criteria or attach specific weighting

to every positive or negative comment (i.e. can

evaluate in the round)

• However if sub-criteria are weighted, sub-scores

should be awarded and disclosed

• Reasons should be provided even when the

unsuccessful tenderer scores highest on

quality

EUIPO v European Dynamics

Luxembourg SA


Lancashire NHS Foundation

Trust v Lancashire CCShortcomings in the evaluation and

moderation process

• An inconsistent approach to moderation

• Poor record of discussion

• The meeting notes contained conflicting points

with no attribution to individuals or

reconciliation

• The panel compared competing tenders

where scores were different


• It is not enough to simply list factors (e.g. negative

and positive points)

• Must give a full and transparent account of the

reasons for particular scores

• Where a panel of markers reach consensus

scores, the stated reasons should explain the

reasons for panel consensus.

Lancashire NHS Foundation Trust

v Lancashire CC


Lancarshire NHS Foundation

Trust v Lancashire CC• no obligation to disclose the notes of a moderation

meeting but …..

• It is not necessary to keep a complete record of what

is said during a moderation meeting, or a

comprehensive note of every point that was made

but…

• “a procurement in which the contracting authority

cannot explain why it awarded the scores which

it did fails the most basic standard of

transparency”.


• Importance of the 3 Ps

• The evaluation meeting is key to providing

adequate feedback and preventing disputes

• Structured approach to evaluating and consensus

scoring

• All scoring must be undertaken by reference to

the criteria and methodology in the ITT.

• Ensure that the reasons given to bidders provide

a clear rationale for the scores given

Summary & Conclusions


Summary & Conclusions

• Transparency requires that the scores awarded are

disclosed

• Where the reasons provided are adequate, there is no

reason to disclose minutes of the moderation meeting

but do keep an accurate (but not verbatim) record just

in case

• If adequate reasons are given and Regulation 86 has

been complied with, consider sticking to your guns in

the face of demands for further justification

Public procurement challenges –

disclosure, confidentiality and

Interested Parties

Mark Gudgeon, Senior Associate

Freeths LLP

28 November 2018


What we will discuss

• Disclosure (pre-action)

• Confidentiality

• Interested Parties/Interveners


Pre-action Disclosure

• Common questions:

– “Do we have to give disclosure of documents before Court proceedings?”

– “We haven’t got time to give disclosure of documents”

– “What happens if we refuse to disclose documents before Court

proceedings?”



Practice Direction - Pre-Action Conduct and Protocols

• Para 3 – “the Court will have expected parties to have exchanged sufficient

information to…..(a) understand each other’s position (b) make decisions about

how to proceed (c) try to settle the issues without proceedings……(f) reduce the

costs of resolving the dispute”

• Para 6(c) – the parties should disclose “key documents relevant to the issues in

dispute”

• Court will “expect the parties to have complied with a relevant pre-action protocol

or this Practice Direction”


Technology and Construction Court Guidance Note on Procedures for Public

Procurement Cases (the “Annex to the TCC Guide”)

• “The authority is strongly encouraged to disclose the key decision materials at an

early stage where relevant to the complaint made”

• “The parties are encouraged to use a pre-action process” which obliges the

authority to “provide any information to which the claimant may be entitled as

soon as possible”.



• “The parties should also act reasonably and proportionately in providing one

another with information, taking into account any genuine concerns with regard to

confidentiality, whether their own, or those of third parties.”

• “The parties should consider the use of confidentiality rings and undertakings to

support resolution of the dispute prior to the issue of proceedings”

• “the aim should be to avoid the need to issue proceedings simply to obtain early

specific disclosure”

• Compliance – note reference throughout the Annex to the TCC Guide being a

protocol - suggests not compulsory but clear expectation of compliance



• Don’t have to give pre-action disclosure – no order to do so

• But there is a clear expectation that it will take place

• Costs risks if you do not do so



Tactically – should you provide pre-action disclosure?

• Benefits/risks

• When a good idea?

• When a bad idea?

• Conduct/costs risks

• How far do we need to go/what level of disclosure do we need to give?



• De-brief/feedback meetings

• But would they really commence Court proceedings?



Contracting authority’s position on pre-action disclosure:

• There’s no court order for disclosure, but a strong expectation of pre-action

disclosure taking place

• You cannot use confidentiality as a reason not to disclose documents, pre-action

or otherwise

• Benefits/risks

• Adverse costs orders

• Tactical issues/risk of court proceedings



Confidentiality

• Usually applies to winning tenderer’s tender and associated evaluation and scoring materials

• Those documents invariably contain commercially sensitive information

• Historically difficult hurdle to obtain disclosure of winning tenderer’s tender

• Now - position is that confidentiality should not be a bar to disclosure and that open justice

usually requires disclosure

• Bombardier Transportation Limited v Merseytravel [2017] EWHC 575 (TCC) - Coulson J:

“Merely because the case in question is a procurement dispute is no reason for the case to be

labelled as "private", with all of the documents on the court file being kept secret and not made

available to non-parties.”

http://www.bailii.org/ew/cases/EWHC/TCC/2017/575.html


• However, the courts seek to protect confidentiality where genuinely necessary –

principally through the use of, marking documents, confidentiality rings and

redactions

• Confidentiality rings “comprise of persons to whom documents containing

confidential information may be disclosed on the basis of their undertakings to

preserve confidentiality” (para 34 of the Annex to the TCC Guide)

• The parties should consider the use of confidentiality rings prior to the issue of

proceedings

• “A party’s external legal advisors (solicitors and counsel) will need to be admitted

to any ring that is established” (para 37 of the Annex to the TCC Guide)

Confidentiality


• Historically, rings may have been confined to lawyers only (IPCom GmbH & Co

KG v HTC Europe Co Ltd [2013]) EWHC 52 (Pat))

• However, in 2015 expert witnesses were permitted as personnel to confidentiality

rings (Geodesign Barriers Limited v The Environment Agency [2015] EWHC 1121

(TCC)). Coulson J:

“It would be wrong to hobble the claimant’s preparation of its case by refusing to

allow documents disclosed into the confidentiality ring to anyone other than lawyers.”

Confidentiality


• More recently (2018) - Appropriate employees (including directors) should be

permitted to confidentiality rings in public procurement challenges (SRCL Limited

v The National Health Service Commissioning Board (also known as NHS

England))

• Fraser J - solicitors acting as witnesses of fact is “highly unsatisfactory” and

“could have been avoided if the same evidence had been called from a director

(say) of SRCL, or someone else involved at the time.”

• Membership of the rings should be extended to those able to give evidence of

fact on matters involving confidential information

Confidentiality


Our very recent experience:

Two rings, each with specific undertakings:

• Lawyers-only ring – terms and undertakings

• Employee ring – terms and undertakings

• Full and non-redacted disclosure into lawyers-only ring

Confidentiality


• A mixture into the employee-ring to protect genuinely sensitive commercial

information

• Some parts held back entirely

• Some redacted

• Some not redacted

• Different, less senior, employee

Confidentiality


• Court unwilling to get into detailed arguments about which parts of the documents

are relevant/have been referred to in pleadings

• Court favoured open justice principle and need for disclosure to enable the

claimant to get into the “full detail”

• Court content that robust terms of confidentiality rings and undertakings would

protect confidentiality

• Interested Party’s conduct/cost risks – adverse costs order

Confidentiality


Contracting authority’s position on confidential information:

• You cannot use confidentiality alone as a reason not to disclose documents

• However, it confidential information belongs to a third party, then reasonable to

seek that parties consent and they should be allowed to make representations to

the Court

• Safe position - take a neutral stance on disclosure of confidential material

• Be careful about supporting unreasonable positions taken by third parties

• However, free to make justified observations on the relevance of the

documents and/or merits.

Confidentiality


• Handle documents carefully

• Don’t inadvertently send confidential information to other parties

• Mark documents

• Password protection

Confidentiality


Interested Parties/Interveners

• Interested Parties fairly common in commercial judicial review proceedings, but

arguably not so in public procurement matters

• JR – CPR Part 54.1 “Interested Party” means any person (other than the

claimant and defendant) who is directly affected by the claim”

• However, the Annex to the TCC Guide makes it clear that the term “Interested

Party” is “given a wider meaning than in CPR Part 54”

• sector regulators

• competition authorities

• sub-contractors


• However - Interested Party to a public procurement challenge is normally the

winning tenderer

• The interest is in the outcome i.e. the decision to award the contract being set

aside. But also issues around confidentiality, as discussed in previous slides

• Whether to become a formal Interested Party:

o Annex to TCC Guide - Interested Parties do not necessarily need to apply to

become formal parties to proceedings:

“…its interests can usually be considered and addressed by the Court without that

being necessary”



Our experience –

• Without formal application – Interested Party not get all of the information and

documents its wants

• If formally apply, greater risk of being seen as active

• However, even if not formal party, adverse cost order can still be made

• Do get opportunity to make representations at hearings

• Difficulty in agreeing terms of the order for Interested Party by consent



What can an Interested Party expect to get/receive?

• notice of hearings

• pleadings

• copied into all correspondence

• relevant documents

• evidence

• the right to make representations on matters which concern it (note risk of being

considered active)



Costs:

• Orders can be made in favour of Interested Party

• Can also be made against e.g. unreasonable position on confidentiality

• Adverse costs order - need not be formal Interested Party

• Considerations for an adverse costs order:

• Did the Interested Party cause the other parties to incur unnecessary costs?

• Did the course of action add any value to the case?

• Were the costs incurred by the other parties wasteful?



Contracting authority’s position on Interested Parties:

• May be helpful to have them:

• Interests probably aligned = maintaining award decision

• Interested Party can add helpful points and be asked to provide comments on

claimant’s pleadings

• Easier to deflect/re-direct issues to Interested Party

• Adds pressure on claimant = tactical benefit



Can be problematic:

• Loose cannon

• Burden of having to supply information and documentation

• Make unhelpful statements

• Be unreasonably difficult

• Accidentally give credibility to claimant

• May be risk to expedition



Safe position:

• take an outwardly neutral stance to addition as Interested Party

• arguably better to have formal order for Interested Party

• However, be cautious about terms of order – not too wide

• Be careful about supporting unreasonable positions taken by Interested Parties



Any questions?

Mark GudgeonSenior Associate0845 166 [email protected]


About me

• Mark Gudgeon is a Senior Associate in the Commercial Dispute Resolution team

and is based in the Sheffield Office

• Mark advises and acts for public sector and commercial bodies on a wide range

of commercial disputes

• Particular interests are public procurement, IT/outsourcing and reputational

management

• Mark has in excess of 15 years' experience in advising and acting on the

avoidance and resolution of commercial disputes

Mark GudgeonSenior Associate0845 166 [email protected]


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