Procurement decision clarifies the application of ‘automatic suspensions’

In an important decision by Mr Justice Pepperall, the High Court has helpfully clarified the law relating to the continued application of ‘automatic suspensions’ that apply under regulation 95 of the Public Contract Regulations 2015 (PCR) following a claim being issued against a contracting authority’s original decision to award a contract in circumstances where there is then a withdrawal of the award and a re-evaluation. The neutral citation for the judgment is Aquila Heywood Limited v Local Pensions Partnership Administration Limited [2021] EWHC 114 (TCC).

The judgment has resolved two areas of material ambiguity for contracting authorities, as well as for anyone seeking to challenge an award of a contract by issuing a claim in the High Court.

Put shortly, the first is that an automatic suspension definitely does arise following a legal challenge to a contract award following a mini-competition under a framework and, the second, is that the automatic suspension does not persist but will automatically lapse once a public body decides to abandon an award and to re-evaluate so that any new award will not be subject to the same suspension until lifted by a court order.

Background

The decision itself concerned a short point on costs relating to an application brought by the contracting authority, Local Pensions Partnership Administration Limited (LPPA), to lift an automatic suspension that it argued was subsisting under regulation 95 PCR. The case related to the proposed award of a contract following the conclusion of a mini-competition under a framework agreement. The claimant, Aquila Heywood Ltd, had successfully issued a claim in respect of a first decision to award, with the Defendant then conceding the validity of the challenge and undertaking a re-evaluation and re-award.

In these circumstances, upon notifying the second award decision on 8 December 2020, LPPA sought the Claimant’s urgent explicit consent to lift the automatic suspension which they claimed was arguably in effect, and set a short timeframe within which that consent was required. The request was made in circumstances where the Claimant had indicated a willingness to discontinue the Claim on terms if LPPA agreed to pay the costs of its challenge. It was common ground that a discontinuance of the original proceedings would have terminated the suspension.

A dispute ensued, with the Claimant not wanting to withdraw its proceedings before obtaining its costs of and occasioned by its successful Claim, and the Defendant LPPA insisting that the automatic suspension had to be lifted so that it could proceed to entering into its contract with the successful bidder. The dispute was not resolved through correspondence, and so the Defendant LPPA filed an application to have the automatic suspension under regulation 95(1) lifted by the High Court.

Prior to the application being made the Claimant did not assert that there was in fact any continued suspension in existence that would bar LPPA from entering into a contract based on the second award. Subsequent to the application being filed, the Claimant took the overt position that the application was misconceived and entirely unnecessary since no ‘automatic suspension’ ever arose in the case of a contract award under a framework agreement, or, alternatively, the automatic suspension only applied to the first decision to award, and did not persist once a decision to withdraw and re-evaluate had been made. The Court ultimately accepted the second of these arguments.

Legal discussion

Regulations 95 and 96(1) of the 2015 Regulations provide:

“95. Contract making suspended by challenge to award decision

(1) Where —

• a claim form has been issued in respect of a contracting authority’s decision to award the contract,
• the contracting authority has become aware that the claim form has been issued and that it relates to that decision, and
• the contract has not been entered into,
  the contracting authority is required to refrain from entering into the contract.

(2) The requirement continues until any of the following occurs–

• the Court brings the requirement to an end by interim order under regulation 96(1)(a);
• the proceedings at first instance are determined, discontinued or otherwise disposed of and no order has been made continuing the requirement (for example in connection with an appeal or the possibility of an appeal).

“96. Interim orders

(1) In proceedings, the Court may, where relevant, make an interim order–

• bringing to an end the requirement imposed by regulation 95(1);
• restoring or modifying that requirement;
• suspending the procedure leading to–
• the award of the contract, or
• the determination of the design contest, in relation to which the breach of the duty owed in accordance with regulation 89 or 90 is alleged;
• suspending the implementation of any decision or action taken by the contracting authority in the course of following such a procedure.”

In his judgment, Pepperall J concluded very briefly that in his view there was no basis for concluding that regulation 95 did not apply to awards/ contracts that were challenged following a mini-competition. He then considered the natural reading of regulation 95(1), and identified that it prevents the contracting authority from entering into the contract pursuant to the ‘challenged decision’. Further, it is identified that a construction of regulation 95 which does not limit the authority’s freedom to enter into a contract, where no other party has pleaded a claim challenging the decision to award such contract, is consistent with the policy of the PCR, which is to strike a fair and sensible balance between the authority’s contractual freedom and the need to protect economic operators in the context of a challenge.

Based on this statutory analysis, an automatic suspension only prevents a contracting authority from awarding a contract pursuant to an award decision that is the subject of a claim. Once the decision that is the subject of a claim been withdrawn, and the bids re-evaluated, the automatic suspension served no further purpose, and is therefore no longer in effect.

What does this mean?

Overall this decision helps simplify life for contracting authorities who have capitulated following an initial claim and decided to re-evaluate their decision as they do not need to observe any automatic suspension in respect of the subsequent re-evaluated decision, and may proceed to contract without being restrained by an automatic suspension under regulation 95(1) unless the losing bidder issues fresh proceedings before any contract is concluded.

However, contracting authorities in such a position must act lawfully and reasonably in their conduct towards bidders, including the bidder who raised its original claim. While not infringing against regulation 95(1), seeking to immediately enter into contract without providing bidders with a sufficient or reasonable opportunity to be satisfied with the outcome of the re-evaluation, and potentially issue a new claim, will still raise significant issues that must be considered.

The case nonetheless raises wider issues for possible consideration in the context of the current consultation process on procurement law reform. In particular, the case highlights the question of whether the current position whereby there is no mandatory requirement for a standstill or clear feedback to be provided to losing bidders under frameworks is really fit for purpose in all cases. This light touch approach to call-offs maybe desirable in lower value call-offs where the total value of the relevant contract involved is under GBP500 thousand, but it is hard to justify, as was the case with LPPA, where in reality the call-off was more complex and higher value than many stand-alone procurements. It follows that if following Pepperall J’s decision there is any continued debate about the matters addressed by him, it would be good to amend the regulations to put the issues beyond doubt . However, more importantly, it would be good to ensure that in practice the requirement for feedback and a mandatory standstill period will apply to all mini-competitions above a certain threshold value.

DLA Piper’s Paul Stone (Partner and Head of UK Public and Procurement Law) and George McLellan (Public Law Associate) advised the successful party in the case, Aquila Heywood Limited. Azeem Suterwalla of Monkton was instructed as Counsel.