A case of judicial intervention in public procurement

Those familiar with public procurement will be accustomed to the rigours and complexities of the bidding process. Public sector projects must, with certain exceptions, be tendered in accordance with the rules set out in the Public Contracts Regulations 2015, which, consistent with the aims of the underlying EU directives, seek to promote free and open competition and value for money, defined as “the best mix of quality and effectiveness for the least outlay over the period of use for the goods and services bought”.

A range of other enactments cover procurement of projects in certain fields (such as defence and security), and there are different requirements for certain bodies with the wider public sector. While the nuances and complexities of each are beyond the scope of this article, common to all public procurement is a requirement for a tender process that is fair, transparent and proportionate, conducted according to stated, objectively assessed criteria.

Certain areas of law have their own, specific procurement processes. In response to EU Directive 2008/50 (the air quality directive), the UK government’s method of implementation was through the creation of clean air zones (CAZs) in towns and cities. Those CAZs are enforced, like London’s congestion charge, through automatic numberplate recognition (ANPR): if a sufficiently polluting vehicle enters the controlled area without paying the required charge, the system of cameras recording vehicles’ registration plates permits identification and subsequent enforcement action to be taken.

A specific framework agreement (Crown Commercial Services Framework RM1089 Traffic Management Technology, Lot 2, Traffic Management and Enforcement Cameras) provides for named contractors to bid for such projects. The invitation to tender for one such project in Newcastle, Gateshead and North Tyneside set out a competitive tendering process and the rules by which it would be governed. It was in relation to this that the case of Neology UK Ltd vs Newcastle City Council [2020] EWHC 2958 (TCC) arose.

One of the unsuccessful bidders claimed that the tender process had been conducted wrongfully and that the three councils were liable

The client’s tender documents made clear, as is common, that the most “economically advantageous” tender would be selected, and that tenders would be evaluated according to a 20% weighting for price and 80% for quality. Within the quality assessment, sub-weightings were stated between four heads: (1) installation, mobilisation, operation; (2) support and resource; (3) management and communication; and (4) social value and climate change.

The invitation to tender set out a number of additional requirements as to the form and content of tender submissions, including an overall word limit.

Although the original intention was for the award decision to be issued in April 2020, the impact of the covid-19 pandemic meant that they were not issued until 24 June.

One of the unsuccessful bidders, Neology UK Ltd, claimed that the tender process had been conducted wrongfully and that the three councils were liable. In particular, it contended that Newcastle, when evaluating the tender, had unfairly penalised Neology’s responses. The effect of Neology commencing proceedings was an automatic statutory stay, pursuant to regulation 95(1) of the Public Contracts Regulations 2015, on the power to conclude the contract with the successful bidder.

However, the judge considered that Neology’s criticisms were better characterised as disagreements with the scoring and the reasoning behind it

Newcastle denied the allegation that it had assessed Neology’s bid unfairly: it noted, for example, that, despite the word limit, Neology had submitted voluminous appendices (a tactic disliked by judges and tribunals everywhere); elsewhere, Newcastle maintained that Neology’s responses had been insufficiently detailed.

Neology made an application for summary judgment on the basis that the local authorities had no real prospect of defending the challenge.

Mr Justice Kerr, hearing the application, rejected Newcastle’s submission that an unsuccessful bidder had to show that it would clearly have won the contract but for any breach of the regulations. It was sufficient to show that the bidder had at least lost a significant chance of obtaining the award. However, the judge considered that Neology’s criticisms were better characterised as disagreements with the scoring and the reasoning behind it, rather than clear-cut examples of breaches of the underlying principles of fair treatment, equality and proportionality. There being no obvious flaw in the conduct of the process, examination of the substance of the evaluation criteria, their weighting and the responses received was not a process suitable for summary judgment.

The judge also lifted the automatic stay, finding, on the basis of established principles, that it would not be unjust to confine the unsuccessful bidder to damages as a remedy. That was so given the fact it was not the only contract Neology could obtain, and the result was akin to a business setback rather than an exclusion from the market.

Judicial decisions in public procurement cases remain relatively rare (especially given the frequency with which such claims are threatened or made), and the case is helpful in identifying the limits to the court’s readiness to intervene in the procurement process. It is arguably of particular interest that the court was prepared to lift the statutory stay at this relatively early stage, clearly mindful of the chilling effect of any suspension on the local authority’s business while the various legal challenges are resolved. Of course, whether all these procurement rules will survive Brexit – we will have to wait and see.

Sir Robert Akenhead is an arbitrator, mediator, DRB member and adjudicator at Atkin Chambers. He was assisted in the writing of this article by David Johnson, a barrister at Atkin Chambers.