REUTERS | Mike Blake

Public procurement case digest (May 2014)

May was a busy month for public procurement case law, with this month’s digest covering decisions on automatic suspension, the requirements for particulars of claim, in-house contract award and limitation periods, as well as an Advocate General’s opinion on development projects.

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.

 “Triable” issues but the balance still favours lifting automatic suspension (John Sisk & Son Holdings Ltd v Western Health and Social Care Trust [2014] NIQB 56)

Many commentators suggested that the introduction of the automatic suspension of a contract award on the issue of proceedings by an unsuccessful tenderer would radically alter the balance of power in public procurement disputes. The latest in a long line of cases that have established this is not the case saw the Western Health and Social Care Trust given the go-ahead to proceed with a framework agreement for building works at a hospital.

While the court found that a number of the claims raised by the unsuccessful bidder (relating to errors in selecting the preferred bidder and alleged errors in scoring the bids) raised triable issues, it also considered that damages would be an adequate remedy for the tenderer, but not for the defendant contracting authority. The court considered that the balance came down firmly in favour of the public interest in the construction, in an appropriate timescale, of a new hospital.

 High Court judgment on whether claim form in a procurement action covered pleadings in particulars of claim (Travis Perkins Trading Company Ltd v Caerphilly County Borough Council [2014] EWHC 1498 (TCC))

The High Court has handed down a judgment on preliminary issues in an action involving an alleged breach of the public procurement rules. The issue to be determined was whether the “Brief Details of Claim” in the claimant’s Claim Form were sufficient to cover the claims in the Particulars of Claim. If they were not, the claims in the Particulars of Claim would have been time barred. However, the High Court ruled that the Brief Details of Claim did cover adequately the complaints later set out in the Particulars of Claim.

The case highlights the potential risks of a tenderer failing to accurately set out its case in the light of a short limitation period and also the potential cost to contracting authorities of dealing with challenges.  As the successful party at this hearing, the tenderer was awarded its costs, assessed in the sum of £45,000 for dealing with the preliminary issues alone.

 Hamburg and in-house exception: take two (Datenlotsen Informationssysteme GmbH v Technische Universität Hamburg-Harburg (Case C‑15/13))

The relationship between the City of Hamburg and the direct award of public contracts is well established, with the Commission v Federal Republic of Germany (Case C-480/06) having made such an impact that it was codified in the recently adopted new public procurement directive.

However, Hamburg was not so successful in its latest appearance before the European Court of Justice (ECJ), which has ruled on a question referred to it by a German court on the application of the in-house exception to the direct award of a contract by a German university (whose purchases of products and services are controlled by Hamburg) to a separate company (partly owned and controlled by Hamburg). The ECJ concluded that:

  • The in-house exception did not apply to the award of the contract by the university. There was no relationship of control between the university and the contractor company.
  • As Hamburg does not exercise “similar control” over the university, as its control extends to only part of the university’s activities, the ECJ did not need to rule on the potentially more interesting issue of whether the in-house exception applies to “horizontal in-house transactions”. This is where the same contracting authority(ies) exercise “similar control” over two distinct operators, one of which awards a contract to the other. However, the new procurement directive expressly provides for horizontal Teckal, so this may not be a live issue in the future.

 ECJ ruling on time limit for bringing an action seeking the annulment of an award decision (Idrodinamica Spurgo Velox srl v Acquedotto Pugliese SpA (Case C‑161/13))

The ECJ has handed down a ruling on a reference from an Italian court on the time limits for bringing an action under the Utilities Remedies Directive (Directive 92/13, as amended by Directive 2007/66). The ECJ held that the time allowed in national law for bringing an action for the annulment of a decision awarding a contract must start to run again where the contracting authority adopts a new decision (after the award decision but before that contract is signed) that may affect the lawfulness of that award decision. That period starts to run from the communication of the new decision to the tenderers or, in the absence of such communication, from when they became aware of that decision.

However, when a tenderer becomes aware, after the expiry of the national period for bringing an action, of an irregularity allegedly committed before the award decision was adopted, an action for the annulment of that decision may be brought only within the national limitation period (unless such a right of action is explicitly provided for by national law in accordance with EU law). However, this did not preclude a tenderer from bringing an action for damages within the general limitation period provided for by national law.

This case could have application in the UK where the limitation period for bringing a claim for ineffectiveness runs from the date of contract award while the general limitation period is linked to knowledge of a breach.

 Future lease not enough to avoid works contract classification (Impresa Pizzarotti & C. Spa v Commune of Bari (Case C‑213/13)(AG’s opinion))

Advocate General Wahl has given his opinion on a reference for a preliminary ruling from the Italian Council of State on the interpretation of the concept of “public works contracts” under the old Public Works Contracts Directive 93/37. The project in question involved a contract to be concluded between the Commune of Bari and a private undertaking for the construction and future lease of a building. Under the contract, the contractor would agree to lease the buildings, which were to be constructed in accordance with contractual specifications, to the Commune of Bari for a period of 18 years.

The Advocate General considered that the main purpose of the contract was the construction of the building. The building did not exist at the time of the lease so the lease had no purpose without the construction, which was done in accordance with very detailed specifications set by the Commune of Bari. Therefore, the “lease” constituted a public works contract within the meaning of Directive 93/37.

 General Court dismisses appeal against ECB procurement procedure (European Dynamics Luxembourg SA v European Central Bank (Case T‑553/11))

The General Court dismissed an action challenging a procurement procedure organised by the European Central Bank (ECB). The ECB had found that an application by a consortium led by European Dynamics did not meet a selection criterion requiring references in relation to comparable contracts. Therefore, the consortium was not invited to submit a tender. The General Court held that the selection criterion was sufficiently clear, that the ECB had provided sufficient reasons for its decision and that it had not manifestly erred in its assessment of the references provided by the consortium. Further, the ECB had not been obliged to ask further questions to clarify the references provided. Finally, the General Court concluded that there was no basis for a claim that the ECB had misused its powers by using the selection phase of the procedure as the award phase.

Leave a Reply

Your email address will not be published. Required fields are marked *