Decisive guidance has been issued by Mr Justice Waksman in relation to the conduct of litigation relating to procurement challenges.
A procurement challenge was made by Altiatech Ltd ("Altiatech") against Birmingham City Council ("BCC") following a direct award of a contract under a framework agreement that Altiatech was not a party to. BCC applied to strike out the claim and / or obtain summary judgment to dismiss Altiatech's claim.
In considering BCC's application, the High Court considered:
- the knowledge required to trigger the running of the limitation clock for procurement claims;
- timeframes to comply with issuing a claim and serving a statement of case prescribed by the Public Contracts Regulation 2015 ("PCR 2015") and the Civil Procedure Rules ("CPR");
- the risks associated with making a bare claim for a declaration of ineffectiveness ("DOI"); and
- the risks of not properly engaging in requests for information by an unsuccessful tenderer.
Practical takeaways
This case highlights a number of key issues that will need to be taken into consideration by practitioners, bidders and contracting authorities alike in procurement challenges going forwards.
- Claimants should consider the earliest date at which knowledge of the facts sufficient to constitute a cause of action could be and ensure that any claim is issued within 30 days of those timescales. Although the Court took a more lenient approach in this judgment, finding that Altiatech did not in fact have the requisite knowledge of grounds of challenge despite having sent BCC a letter before action. In this case, limitation didn’t start running for the purposes of Regulation 92(2) until further reasons for the decision were provided by BCC;
- Deadlines for bringing a procurement claim are particularly short and must be calculated with vigilance. Although it does not appear to have been considered in this claim, claimants should consider seeking agreement for an extension of time with the defendant at an early stage if there is any doubt in order to mitigate against the risk of an application to strike out;
- Particulars of claim in procurement claims must be served within 7 days of the issue of the claim form. This contrasts with the usual rule prescribed by CPR 7.4 that particulars of claim can be served within 14 days of service of the claim form;
- Applications for an extension of time for service of the particulars of claim will be considered by reference to the established Denton relief from sanctions principles. The Court will consider the overall circumstances of the case and reasons for the delay in service. Although generally a solicitor error will not amount to a good reason for a delay, an extension was granted, taking into account all of the circumstances;
- Regulation 24 and whether a challenge can validly be brought on the basis of a conflict of interest has been examined;
- The Court issued a warning that including a claim for DOI for the sole reason of seeking to avoid the regular 30 day time limit for challenges prescribed by Regulation 92 is not acceptable and leaves the DOI claim liable to be struck out; and
- The requirements to bring a DOI claim by reference to Regulation 33(8) were also considered.
Background to the challenge
Altiatech is a reseller of a cyber security software product developed by SentinelOne Inc. ("Sentinel"). In July 2021 Altiatech entered into a call-off agreement with BCC to supply the product for three years pursuant to the G-Cloud framework agreement. To sell services on the G-Cloud framework the supplier must sell cloud hosting, cloud software or cloud support and all suppliers must agree to the same terms and conditions.
BCC terminated the agreement for convenience, giving 90 days' notice, in March 2022. A revised termination notice was served on 29 July 2022. Throughout this period, Altiatech sought an explanation from BCC as to why it terminated the agreement, however a response was not forthcoming.
On 15 July 2022, BCC issued a direct award to a different supplier, Softcat plc ("Softcat"), who was also a reseller of Sentinel's product. The award was made by means of a call-off agreement under a different framework (the North of England Framework Agreement ("NEF")), although Softcat is also a party to the G-Cloud framework. The BCC published a contract award notice on 7 September 2022, disclosing the material facts of the call-off.
Thereafter Altiatech issued a pre-action letter alleging a potential breach of PCR 2015 and requesting specific disclosure. BCC disclosed its decision-making documents on 7 October 2022, however these were heavily redacted. On Saturday 8 October, an in-house solicitor at BCC issued a further email stating that because the limitation period has now expired, "[t]he decision to procure in the way that the Council did was reasonably predicated on ensuring the Council had a clean slate because of a clear issue of trust between it, its former senior staff members and the matters with which they were engaged".
On 19 October 2022 Altiatech issued a claim form with limited detail save to allege breach of equal treatment and transparency regulations, regarding the structure of a procurement to favour or disfavour particular economic operators, seeking a DOI under Regulation 99 PCR 2015 and a final penalty order. Its particulars of claim were served by first class post 15 days after deemed service of the claim form.
BCC's application
BCC's application for strike out / summary judgment contended that:
- Altiatech's claims were issued out of time of the 30 day limitation period after Altiatech had acquired, or should have acquired, the relevant knowledge of the claim pursuant to Regulation 92(2) PCR 2015;
- Its particulars of claim were served out of time pursuant to CPR 7.4(1) and (2), as affected by Regulation 94(1) PCR 2015; and
- In terms of the content of the pleadings:
- There were no reasonable grounds for pleading a breach of Regulation 24 PCR 2015 that contracting authorities are required to take appropriate measures to identify, prevent and remedy conflicts of interest; and
- There was no proper basis for the claim for a DOI pursuant to Regulation 99 PCR 2015. A wholly unparticularised reference to Regulation 99 must not be pleaded simply to enable a claimant to benefit from the longer limitation period which arises under Regulation 93(2)(b).
Judgment
Limitation and the date of knowledge
In considering whether Altiatech's claims were issued out of time the Court assessed when the relevant knowledge was acquired pursuant to Regulation 92(2) PCR 2015.
Regulation 92(2) provides that, for claims not seeking a DOI, proceedings must be started within 30 days beginning with the date when the economic operator first knew or ought to have known that grounds for starting the proceedings had arisen. For claims seeking a DOI the longstop for service is six months from the date after the contract complained of was entered into, save for two exceptions whereby potential claimants can be seen to possess specific information triggering the requirement to start a challenge within 30 days:
- where a relevant contract award notice has been published in the Official Journal of the European Union, where the relevant time begins the day after publication; and
- where the contracting authority has informed the economic operator of the conclusion of the contract, and provided a summary of reasons, where the relevant time begins the day after the economic operator was informed of the conclusion or (if later) the day it was informed of the relevant reasons.
In this case, the Court held that "what is needed is knowledge of material which does more than give rise to suspicion of a breach of the Regulations but that there can be the requisite knowledge even if the potential claimant is far from certain of success". BCC contended that the date of requisite knowledge was 7 or 14 September 2022. Considering the correspondence between the parties, the Court found that it was only on 7 October that Altiatech was able to come to an informed view as to whether it had a claim because it was only on that date that BCC provided the reasons for terminating the contract. On that basis, the claim form was issued in time on 19 October 2022.
Service of the particulars of claim
The parties disagreed as to when the particulars of claim should have been served; with Altiatech arguing 14 days from the date of service of the claim form, and BCC arguing that the particulars of claim must be served within 7 days of the claim form being issued.
Regulation 94(1) PCR 2015 states that the latest date for service of the claim form is 7 days after issue. It does not amend CPR 7.4, which states that particulars of claim must be contained in the claim form or served within 14 days of service of the claim form (subject to 7.4(2)). The Court confirmed the position that has previously been considered, for example in Bromcom Computers Plc v United Learning Trust [2022], that the particulars of claim must be served within 7 days of issue of the claim form in procurement challenges. Waksman J noted that whilst this timeframe is tight, it is deliberately made so. Ultimately there is a public interest based policy approach to strictly applying the time limits in PCR 2015.
Relief from sanctions
In the alternative, Altiatech also issued an application for a retrospective extension of time, seeking relief from sanctions for the delay in serving the particulars of claim. Applying the usual principles on relief from sanctions (aka the Denton principles), the Court considered that the delay by Altiatech was not serious or significant and that there was good reason for the default, notwithstanding that in the circumstances the delay was attributable to an error by Altiatech's solicitor. In particular Waksman J noted that the action might have been commenced earlier had BCC provided further information at the outset including the underlying reason for its actions. Accordingly, relief from sanctions was granted to retrospectively extend the time for service of the particulars.
Regulation 24
Altiatech alleged that, in breach of Regulation 24, BCC failed to take appropriate measures to effectively prevent, identify and remedy conflicts of interest arising in the conduct of the procurement procedure. It was inferred by Altiatech that the same person or persons who decided to terminate Altiatech's contract also directly awarded the new contract to Softcat.
The Court held that there was no real prospect of success for Altiatech's Regulation 24 PCR 2015 claim in relation to an alleged conflict of interest. As Altiatech's claim was that BCC terminated its contract due to wanting to cut ties and award another supplier a new contract, the principle that it failed to take appropriate measures to prevent or remedy a conflict of interest seemed moot.
Declaration of ineffectiveness
In respect of the claim for a DOI, the Court considered that the details of the claim were sparsely pleaded and the basis was only explained in oral argument at the hearing for BCC's application. This meant that BCC was unable to properly respond to Altiatech's position. Waksman J held that a bare claim for DOI is insufficient and liable to be struck out.
It was held that it is especially important where the claim for a DOI was made to avoid the 30 day time limit for issuing a claim, but whether a claim for a DOI is made for that reason or just because it regarded as something as a routine plea "will not do in the future", with Waksman J stating that practitioners should take note of this.
Altiatech argued that there was no basis for BCC to make a direct award as opposed to holding a mini competition under the NEF pursuant to Regulation 99(6) PCR 2015. BCC's arguments that the requirements under Regulation 33(8)(a) PCR 2015 were satisfied was accepted, as the contract was awarded to Softcat in a position of objective exclusivity as the only licensee under its Lot of the NEF. Pursuant to Regulation 33(8)(a), an authority can proceed by way of a direct award, provided that the terms set out therein are observed. Altiatech's claim for a DOI was therefore struck out.
Conclusion
The issues in this case should be carefully considered during the pre-action and issuing stages of a procurement claim. In particular, practitioners will need to be understand the interplay between the CPR and PCR 2015 in bringing a procurement challenge in time. Whilst Waksman J found it appropriate to grant a retrospective extension in this case, parties should not presume that relief from sanctions will be granted.
Contracting authorities should also be aware of the risks in adopting a guarded approach to requests for information from unsuccessful tenderers. Parties must be mindful of the Technology & Construction Court guide, which emphasises pre-action conduct ought to be co-operative, reasonable and proportionate. The absence of such conduct, such as refusing to give early disclosure of documents, can impact the Court's conclusions.
In the Consultant Connect v NHS Bath ICB and others [2022] case we saw the defendants seek to use a framework agreement that the preferred supplier was a party to, whereas Altiatech saw the defendants use a framework agreement to avoid contracting with a particular supplier. Whilst BCC's approach was accepted pursuant to Regulation 33(8)(a) as sufficient to avoid a successful claim for a declaration of ineffectiveness, the commissioning decisions will be considered further at trial.
