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Cautionary tales from public procurement case law
Trowers Public Insight

Cautionary tales from public procurement case law

This blog considers two points of interest for contracting authorities which arise out of the judgement in the public procurement case of Kent Community Health NHS Foundation Trust v NHS Swale Clinical Commissioning Group and NHS Dartford, Gravesham and Swanley [2016] EWHC 1393 (TCC) dated 27 May 2016.

The first point is a cautionary tale which highlights the importance of best practice when planning the communication to tenderers of the decision to award a contract (the Regulation 86 Notice).  In this case, a whole 59 days lapsed between the Regulation 86 Notice and a successful suspension of the contract when the unsuccessful tenderer issued proceedings. 

If the only requirement is a mandatory stand-still period of 10 days from notice of the award decision to completion of the contract, can a contracting authority suffer a suspension of the contract 59 days later under the Public Contracts Regulations 2015 (the Regulations)?  The answer is: yes, it is possible! 

In this case, the contracting authorities (the CCGs) conducted a competitive dialogue procurement procedure to award a contract for adult community services .  The CCGs awarded the contract to Virgin Care and not to the incumbent provider of the services, Kent Community Health NHS Foundation Trust (the Trust).  The CCGs informed the Trust of the award decision on 22 December 2015, and the Trust subsequently issued proceedings against the CCGs to suspend completion of the contract on 19 February 2016.

How could this situation occur?  In theory, and in best practice (i.e. the Regulation 86 Notice makes apparent any grounds for challenge), the Trust would have had only 30 days from 22 December 2016 in which to start its proceedings against the CCGs.  Meanwhile, the CCGs could have entered into the contract on 4 January 2016 (i.e. when the standstill period expired) and doing so would have prevented automatic suspension of the contract. 

The point to note is that an automatic suspension of the contract remains possible beyond the mandatory 10-day standstill period – if a contracting authority delays entering into the contract.  It is not clear from the judgement in this case when the Trust became aware of grounds for starting proceedings but the Trust was in correspondence with the CCGs.  

If a contracting authority gives the Regulation 86 Notice when it is not ready to enter into the contract it leaves itself exposed to a potential suspension and setting aside of the contract.  Where grounds for challenge subsequently emerge, at any time after the Regulation 86 Notice, a challenger will still have 30 days to start proceedings, and an automatic suspension will apply if a challenger does so before the contract is entered into.  Contracting authorities should therefore not give the required Regulation 86 Notice unless and until it is in a position to complete the contract, and should not delay completion of the contract.

The second point of interest is that the court found that damages were an adequate remedy for the Trust, despite the fact that it is a not-for-profit organisation, being a public body that exists solely to provide NHS health care services to the public. 

The court contrasted the position of the Trust with the position of Bristol Missing Link Limited in Bristol Missing Link Ltd v Bristol City Council [2015] PTSR 1470.  In the case of Bristol Missing Link Ltd, it was held that the loss of the contract would have a catastrophic effect on its ability to provide its existing services for vulnerable women in Bristol and that lifting the suspension would have a significant effect upon its reputation because of its consequential inability to continue its work.  By contrast, there was no suggestion that losing the contract would put the Trust out of business, and no real question of loss of reputation arose.   

For the reason that the procurement regime creates "a level playing field and complete equality of opportunity" as between bidders, the court made clear that the question of adequacy of damages should be approached in the same way, whether it is the Trust or Virgin Care that is the disappointed tenderer.

The court also made clear that, as to the procurement, it would only rule on "whether the procurement process was flawed and, if so, what are the consequences" and not on the question of the relative public interest in different forms of provision. 

The court considered the public interest only in relation to the balance of convenience on the question of damages. It concluded that the public interest weighed in favour of the CCGs on the basis that the CCGs would otherwise be required to continue working with the Trust in place of their chosen provider and that the inevitable delay if the suspension was not lifted of the contract until after the busy winter period was undesirable. 
The question of damages for not-for-profit organisations will depend on the facts of each case, but it is now clear that neither the quantum of recovery of damages nor the not-for-profit status of the challenger should, of itself, be a reason for holding that damages would not be an adequate remedy.   

Finally, of course, the CCGs are the statutory bodies responsible for procuring NHS services in north Kent.  The Regulations therefore did not apply in this case, but procurements of healthcare services for the purposes of the NHS, commenced on or after 18 April 2016, are subject to the light-touch regime.


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