Procurement disputes and the automatic suspension – recent trends

What happens when an unsuccessful operator or bidder feels aggrieved by the procurement process? We look at the effects of issuing a claim.

What happens when an unsuccessful economic operator or bidder (rightly or wrongly) feels aggrieved by the procurement process? What can the aggrieved bidder do?

If the bidder can, or believes that it can, show a breach of the Regulations (be that the Public Contracts Regulations or the Utilities Contracts Regulations both as amended) (the Regulations) it can bring a challenge in the courts BUT the time frame for doing so is tight – very tight.

The Regulations require that court proceedings must be commenced within 30 days beginning with the date on which the bidder knew or ought to have known that grounds for starting proceedings had arisen.

The court can extend this period if there is an exceptional reason, but there is a long stop date of three months and in fact there are no reported cases of a bidder successfully persuading the courts to extend beyond the 30 day deadline.

What is the effect of issuing a claim?

For procurements which post-date 19 December 2009, the very issue of a claim can give a distinct advantage to the aggrieved economic operator or bidder.

This is because the procurement process is automatically stayed once proceedings are issued and the contract cannot be awarded (we refer to this throughout as the automatic suspension). One might think that this gives the economic operator a huge advantage, but it is not necessarily that straightforward because the contracting authority can ask for the automatic stay to be lifted.

Until 2014, in every English case where an application had been made to court for the automatic suspension to be lifted, that application had been successful, although there were a few Northern Irish cases where that had not been the case. It was regarded as almost inevitable that in England an application to court to lift the automatic suspension would succeed.

In 2014 however the tide has shown some sign of starting to turn and, like London buses, after no cases, two cases have turned up more or less at once.
To a certain extent the two cases turn on their facts.

  1. The first case was NATS (Services) Limited v Gatwick Airport Ltd. In this case (judgment handed down on 2 October 2014) the Technology and Construction Court (TCC) decided not to lift the automatic suspension. It decided damages were not an adequate remedy for NATS (the economic operator) but would be for Gatwick (the contracting authority). It also took into account the fact that the contract had already been delayed for two years, suggesting it was not desperately urgent that the automatic suspension be lifted, as well as the fact that there was to be an expedited trial, which would mean that there would be relatively little additional delay. The other factors considered were that NATS would suffer reputational damage and that the calculation of damages would be too hypothetical and so would not be an adequate remedy. It also appears to have been significant that NATS offered a cross undertaking in damages both to the contracting authority and to the successful bidder.
  2. In R (Edenred (UK Group) Limited) v HM Treasury + Others, which involved the administration of childcare, the court again refused to lift the automatic suspension. One of the factors it considered was that the trial was just over a month away at the time of the handing down of the judgment on whether to lift the automatic suspension.

There are some indicators that can be taken from these cases

  • If there is no immediate impact to public services or the safety of a section of society the suspension is unlikely to be lifted (compare a change in the scope of a contract for the administration of childcare (Edenred) with the operational capacity of the Army and safety of soldiers (NP Aerospace ltd v Ministry of Defence) a recent case which followed the “norm” of lifting the suspension);
  • Automatic suspension is also unlikely to be lifted:
    • If an expedited trial can be agreed and organised (NATS and Edenred)
    • If there might be a substantial reputational impact on the losing bidder (NATS) 
    • If a decision that the procurement was unlawful would render the basis on which damages might be calculated just too hypothetical for any realistic assessment to take place (NATS)

So, there is now at least the chance that a disappointed bidder will be able to maintain the automatic suspension. If it does so, however, it should expect:

  • That an expedited trial will be ordered: the time commitment and cost of compressing what might normally be 18 months of litigation into just three should not be underestimated.
  • It is also likely to have to give a cross undertaking in damages, which requires it to underwrite any damage suffered by the contracting authority (and sometimes the “winning bidder” too) in the event it is ultimately unsuccessful. In some cases this is a potential exposure of many millions and can therefore remain a very substantial deterrent.

Our content explained

Every piece of content we create is correct on the date it’s published but please don’t rely on it as legal advice. If you’d like to speak to us about your own legal requirements, please contact one of our expert lawyers.

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