Lancashire Care NHS Foundation Trust & Blackpool Teaching Hospitals NHS Foundation Trust v Lancashire County Council [2018]
The Court has upheld an automatic suspension of a contract award, going against a recent trend of such suspensions being lifted. This is a cautionary tale for public bodies making applications to lift suspensions, and develops the law in this area.
The Court applied a number of established tests and the case was the first to apply the Supreme Court's decision on damages in Nuclear Decommissioning Agency v Energy Solutions EU Ltd ("NDA") in the context of the interim application to lift the automatic suspension of a contract award.
In late 2017, Lancashire County Council ("the Council") ran a Light Touch Regime procurement under the Public Contract Regulations 2015 ("the PCR"), for part of its "0-19 Healthy Child Programme" (a nursing and mental health programme for babies, children and adolescents, worth an estimated £104m).
Lancashire Care NHS Foundation Trust and Blackpool Teaching Hospitals NHS Foundation Trust ("the Trusts") were the incumbent providers of the services and lost the tender by a score of 78.5% to 74.43% to a private sector bidder, Virgin Care Services Limited ("Virgin").
The Trusts' and Virgin's bid prices were almost identical, accounting for a difference of just 0.07% in their overall scores on that factor.
Following announcement of preferred bidder, the Trusts issued proceedings alleging a number of deficiencies in the Council's evaluation of bids.
The proceedings automatically suspended the contract award to Virgin pursuant to Regulation 95 of the PCR. The Council, in accordance with Regulation 96 (1) (a), applied for an interim order to lift the suspension so that they could go ahead and enter into the contract with Virgin.
As an interim application, the Court applied the established "American Cyanamid" principles as summarised in Covanta Energy Ltd v MWDA [2013] EWHC 2922 (TCC). These principles are, in short, as follows:
- Is there a serious issue to be tried?
- If there is a serious issue to be tried, would damages constitute an adequate remedy for the claimant?
- In considering whether damages would represent an adequate remedy, where does the balance of convenience lie between the claimant and the defendant?
When assessing the adequacy of damages, the Court considered the application of the Supreme Court's decision in NDA. There, the Supreme Court ruled that a claimant does not always have an automatic right to damages for a breach of the public procurement rules. Instead, a breach must be deemed "sufficiently serious".
The Court therefore had to consider how the NDA ruling was to be interpreted in the context of an application to lift an automatic suspension, where the adequacy of damages was under consideration. The Court concluded that, at an interim stage in the proceedings, it could not opine as to the seriousness of a breach of the PCR.
In ruling that the application to lift the suspension must fail, the Court held that the case concerned a sufficiently serious matter and that damages would not constitute an adequate remedy for the Trusts. The Court's reasoning was as follows:
- the Trusts were the existing providers of the services;
- the Trusts would be forced to restructure their organisations, resulting in the loss of an estimated 160 skilled employees, and that such restructuring would result in considerable disruption and cost;
- the loss of the contract would jeopardise the Trusts' capacity to provide their other existing public services; and
- the Trusts' potential loss could not be entirely quantified in monetary terms.
In contrast, the Court held that damages would constitute an adequate remedy for the Council, on the basis that:
- the price differential between the two bids was minimal;
- the provision of the services would continue uninterrupted (as the Trusts' existing contract for the services had a contract extension mechanism) until the trial could take place; and
- the Court could offer an expedited trial.
In terms of the public interest, the Court noted that all parties were publically funded, meaning that damages, if awarded, would be paid by one public body to another.
The Court held that the Council's application should fail and that the suspension should remain in place. Any trial relating to the award of the contract itself and the alleged deficiencies in the evaluation of the underlying procurement was ordered to be expedited.
As ever with procurement cases, the case is fact dependent, however:
- it will be interesting to see if more cases seeking to lift automatic suspensions are unsuccessful in light of the change in tack taken in this case; and
- the case emphasises that the Supreme Court's judgment in NDA is an additional hurdle for claimants to prove when considering the adequacy of damages.
The creation of a 'market' in NHS community and acute services contracts is creating an uptake in procurement claims being issued by one public body against another. The costs involved in such High Court claims can be prohibitive. Expect the public policy arguments to be a focus of the Court in any such future cases.
Public authorities cannot always assume that their application to lift a suspension will be successful. This makes the interim application again a more attractive option for an unhappy losing bidder, particularly an incumbent supplier faced with losing the business.
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