The English High Court has refused to lift the automatic suspension of a contract for public health and nursing services, including mental health services for children (Services).
It held that damages would not be an adequate remedy for the incumbent service provider due to the impact the award of the new contract would have on the provision of similar public services by the incumbent.
Lancashire Care NHS Foundation Trust and Blackpool Teaching Hospitals NHS Foundation Trust (Trusts) were the incumbent providers of the Services to Lancashire County Council (Council). The Council ran a light touch procurement process and proposed to award the proposed contract for the Services to the only other bidder, Virgin Care Services Ltd (Virgin). (The light touch regime applies to certain services, including healthcare services. These services are subject to higher thresholds and can be procured without adherence to the strict procedural rules in the Public Contracts Directive 2014/24/EU. Authorities do, however, need to conduct a transparent procurement process during which all tenderers must be treated equally.)
The Trusts alleged a number of deficiencies in the evaluation of the bids, including unequal treatment and a failure to apply the scoring criteria correctly, and issued proceedings to challenge the proposed award of the contract. The issue of proceedings triggered the automatic suspension of the award of the contract. This meant that the Council could not conclude the contract with Virgin. The Council applied to the Court to have the automatic suspension lifted to allow it to enter into the contract with Virgin.
The Court applied the American Cyanamid test (known in Ireland as the Campus Oil test) which requires the court to consider three questions:
- is there a serious issue to be tried?;
- are damages an adequate remedy for either party?; and
- where does the balance of convenience lie?
The Court in this case, as in most procurement cases, considered that there was a serious issue to be tried. Regarding the adequacy of damages, the Court took into account the recent UK Supreme Court recent decision in NDA v Energy Solutions EU Ltd. In the NDA case, the UK Supreme Court held that damages in a procurement case could only be awarded if the breach was sufficiently serious. The Court in this case stated that this needs to be taken into account in considering whether damages are an adequate remedy.
The Court held that damages would not be an adequate remedy for the Trusts. It noted that incumbent service providers who are unsuccessful in a procurement process will face inevitable business reorganisation as a result which may include redundancies. However, the implication of the reorganisation for the Trusts would not only have led to costs implications and redundancies but would also have had an impact on similar public services being delivered by the Trusts. The Court accepted that the impact on the provision of healthcare as a whole to those in the catchment areas of the Trusts would be considerable. In particular, the Court noted that
"lifting the automatic suspension would also result in the loss of senior staff who currently manage the full range of children’s services provided across all contracts” and that “[t]hese are precisely the sort of effects…that cannot be compensated for by damages”.
In contrast, the Court stated that damages would be an adequate remedy for the Council as the there was only a small difference in cost between the Trusts and Virgin. The Court also considered that the balance of convenience lay in maintaining the suspension pending the outcome of the full hearing. The Court therefore refused to lift the automatic suspension.
This case is a rare example of the courts holding that damages are not an adequate remedy for the incumbent service provider.
It is of particular interest in Ireland in light of the Irish Court of Appeal’s recent judgment in Word Perfect Translation Services v The Minister for Public Expenditure and Reform. Similar to the judgment of the UK Supreme Court in the NDA case, the Court of Appeal held that a breach of procurement law must be sufficiently serious in order for the claimant to be entitled to damages. This is likely to have serious implications for contracting authorities and claimants. Prior to these judgments, it was relatively easy for a contracting authority to argue that damages would be an adequate remedy, thus leading to the court lifting the automatic suspension and allowing the contracting authority to enter into the contract. Courts may now more frequently hold that the breach is not sufficiently serious to entitle the claimant to damages, thus holding that damages are not an adequate remedy. This means that the automatic suspension would stay in place pending the full hearing of the case.
The case therefore puts additional pressure on contracting authorities to carefully conduct their procurement processes in full compliance with the EU directives. Failure to do so may lead to the award of the resulting contract being significantly delayed as a result of the automatic suspension remaining in place until the full hearing of a procurement challenge. On the other hand, claimants may find it harder to prove that the breach of procurement law is sufficiently serious and that they are entitled to damages.