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Public procurement case digest (December 2015)

December’s case digest includes a Scottish Court of Session judgment representing the first declaration of ineffectiveness from a UK court, a Court of Appeal judgment upholding a High Court ruling that the award of damages for breach of the public procurement rules is not discretionary, and an ECJ ruling on time limits in procurement actions.

Please feel free to submit a comment below or send us an Ask query if you have any views on the cases covered, or think that we have missed a case that should be brought to the attention of public procurement practitioners.

At last! Scottish Court of Session finds framework agreement call-off contract ineffective (Lightways (Contractors) Limited v Inverclyde Council)

The Scottish Court of Session has held that the award of a call-off contract under a framework agreement was ineffective. Inverclyde Council had awarded the contract to a company (a subsidiary of the Amey group), which was not the group company that was actually a party to the framework agreement.

The court concluded that this was not a mere clerical error that could just be rectified. The council had intended to award the contract to that particular company, which it had mistakenly believed to be part of the framework agreement. The court also held that the principle of proportionality could not be applied to limit the entitlement of an economic operator to challenge an alleged breach of a contracting authority’s duty to comply with procurement legislation.

Therefore, as the Council had no defence to the claim that it had breached Article 19(3) of the Public Contracts (Scotland) Regulations 2012, the court held that the decision to award the call-off contract was ineffective under regulation 49(5), which applies where a contracting authority wrongly awards a contract without prior advertisement.

This appears to be the first time in which a UK court has applied the “ineffectiveness” remedy introduced in 2009 in relation to an awarded contract. Also of interest was the Court’s decision to grant Lightways standing, despite the fact that it was not an actual or potential bidder for contracts awarded under the Framework Agreement.

ECJ rules on time limits for bringing procurement actions under Directive 89/665 (MedEval – Qualitäts-, Leistungs- und Struktur-Evaluierung im Gesundheitswesen GmbH v Bundesvergabeamt)

The ECJ has ruled on a reference from an Austrian court on the time limits for bringing an action under Directive 89/665. Under Austrian law, an action for damages for harm caused as a result of the direct award of a contract (without prior notice or a prior competition) could only be brought if a court had first declared the contract to be ineffective due to its illegality. An application for such a declaration was subject to a six-month limitation period (from the date of contract award), irrespective of whether or not the person harmed was in a position to know about the unlawfulness of the contract award decision.

The ECJ held that the combined provisions of the Austrian rules breached EU law, particularly the principle of effectiveness, as they were likely to make it impossible in practice or excessively difficult to exercise of the right to bring an action for damages for breach of the EU procurement rules.

Court of Appeal confirms that damages for breach of procurement rules are not discretionary (Energysolutions EU Ltd v Nuclear Decommissioning Authority)

The Court of Appeal has handed down its judgment on preliminary issues raised in an action for damages for alleged breach of the public procurement rules by the Nuclear Decommissioning Authority. The Court of Appeal upheld a High Court ruling that the award of damages for breach of the public procurement rules is not discretionary. It held that an English court has no discretion as to making an award to a claimant if that claimant has suffered loss as a consequence of breaches of duty by the defendant contracting authority under the Public Contracts Regulations 2015. There is no requirement in English law for a breach of statutory duty to be shown to be “sufficiently serious” before damages must be awarded, and no such obligation should be read in from EU law.

The Court of Appeal has also held that the fact that the claimant did not bring its claim during the “standstill” period (such that the award of the contract was not automatically suspended) did not break the chain of causation between any breaches of the contracting authority’s obligations that may be established and any loss caused to the claimant as a result. As a matter of English law, there is no legal principle allowing for a claimant to be deprived of its damages for failing to apply for interim discretionary relief. Such a principle cannot be overlaid by EU law to the detriment of a claimant that has been injured by breach of EU law rights transposed into English law.

High Court dismisses action for judicial review of a decision of NHS England not to award an interim contract for medical services (R (QSRC Limited) v National Health Service Commissioning Board (NHS England) and another)

The High Court has dismissed an action for judicial review of a decision of NHS England not to award an interim contract for certain medical services. The action was based on an alleged breach of the National Health Service (Procurement, Patient Choice and Competition) (No 2) Regulations 2013. The claimant alleged that NHS England had acted in breach of its obligations to act in a transparent and proportionate way, and treat providers equally and in a non-discriminatory way when commissioning NHS Services.

In the interim period prior to a new national commissioning exercise, NHS England had refused to fund specialist gamma knife surgery treatments at a facility operated by the claimant. It was only funding treatments at facilities that it considered to be existing providers as at 1 April 2013. The High Court concluded that NHS England had, in accordance with guidance issued by Monitor in April 2014, been wrong to find that the claimant was not an existing provider.

Therefore, according to Monitor’s guidance, it would be a breach of the Regulations for NHS England to exclude the claimant from consideration for the commissioning of the services without objective justification. However, the High Court concluded that NHS England’s decision was objectively justified. In particular, to grant the claimant an interim contract, as it requested, would be to give it preferential treatment, which would itself breach the Regulations. Therefore, the High Court concluded that NHS England had not acted unlawfully.

General Court dismisses appeal against procurement decision of the European Joint Undertaking for ITER and the Development of Fusion Energy (European Dynamics v European Join Undertaking for ITER and the Development of Fusion Energy)

The General Court has dismissed an appeal by European Dynamics Luxembourg SA and Evropaïki Dynamiki — Proigmena Systimata Tilepikoinonion Pliroforikis kai Tilematikis AE (together European Dynamics) against a decision of the European Joint Undertaking for ITER and the Development of Fusion Energy (Fusion for Energy).

Fusion for Energy launched a call for tenders relating to framework service contracts in cascade and concerning the provision of IT services and other related services in 2013. European Dynamics submitted a tender, which was subsequently rejected and the contract was awarded to three other tenderers. European Dynamics brought an action before the General Court, submitting that Fusion for Energy had infringed the principle of non-discrimination by evaluating the tenders after their validity period had come to an end and that Fusion for Energy had breached its duty to state reasons.

The General Court dismissed the appeal as unfounded in its entirety, noting in particular that equal treatment between tenderers is ensured by evaluating all the tenders using the same evaluation criteria and comparing them with one another. If the validity period of the tenders is not one of the evaluation criteria, it could only lead to discrimination in respect of their evaluation if it were proved that a tender was not taken into account on the ground that it had expired. However, European Dynamics had not established that this had happened in this case. Further, European Dynamics failed to identify and to challenge the specific points of the reasons given Fusion for Energy concerning the evaluation of its tender, which they considered to be inadequate and which prevented them from understanding the essential features of that evaluation and the reasons for the tender’s rejection.

Advocate General’s opinion on whether contracting authority can accept substitute tenderer that has not been pre-qualified (Højgaard A/S, Züblin A/S v Banedanmark, AG’s opinion)

Advocate General Mengozzi has handed down his opinion on a reference for a preliminary ruling from the Danish Complaints Board for public procurement, concerning the circumstances in which a contracting authority may accept a substitution of a tenderer in situations where one member of a tenderer group goes bankrupt prior to the award of the contract.

The Advocate General first considered whether the Danish Complaints Board for public procurement was a court or tribunal for the purposes of Article 267 of the Treaty on the Functioning of the European Union (TFEU) and so able to refer questions to the ECJ. The Advocate General considered that it was able to do so because the Danish Complaints Board for public procurement acts as a third party in relation to the authority which adopted the decision challenged in the main proceedings and it carries out its functions in a wholly independent manner.

As regards the question referred, the Advocate General considered that Article 51(3) of the Utilities Directive should be interpreted as requiring there to be a legal and material identity between a tenderer that has been pre-qualified and the tenderer that submits a bid in a procurement procedure. Also, Article 10 of the Utilities Directive should be interpreted as meaning that the contracting authority must verify whether granting permission to the economic operator (which has not individually pre-qualified) to submit a bid leads to a situation where the other bidders are not longer being treated equally. This is likely to be the case were the tenderer that did not pre-qualify has access to information which the other bidders did not, or where the tenderer that did not pre-qualify has access to resources (such as key employees) that the tenderer did not have at the time of the pre-qualification process.

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