Abandoning a procurement exercise—when can a contracting authority extinguish a challenge? (Amey Highways Ltd v West Sussex County Council)

03/06/2019

Local Government analysis: This analysis looks at the legal effect of a decision to abandon a procurement exercise and whether it extinguishes an accrued cause of action a bidder may have against a contracting authority for breaches of the Public Contracts Regulations 2015 SI 2015/102 (PCR 2015). The claimant challenged a decision to abandon a procurement, taken after it had commenced proceedings against the defendant in relation to that procurement. The defendant maintained that its decision to abandon the procurement extinguished the claimant's claim. In this judgment, the court recognises that a contracting authority can use its discretion to abandon a procurement to prevent future claims coming into existence but that does not affect accrued causes of action already in existence. The judgement also demonstrates the high threshold for challenging such decisions; while the council's hope and belief that abandoning the procurement would extinguish the claimant's claims was misplaced, nonetheless it did not make an unlawful decision. Written by Lucy James, partner at Trowers & Hamlins LLP.

Amey Highways Ltd v West Sussex County Council [2019] EWHC 1291 (TCC)

What are the practical implications of this case?

The court decided that a contracting authority can use its discretion to abandon a procurement to prevent future claims coming into existence but that does not affect accrued causes of action already in existence. It will be important for contracting authorities to understand that distinction when deciding to abandon a procurement.

However, that does not mean that this judgment places significant limits on a contracting authority's discretion to abandon a procurement. The court recognised that there is a wide range of circumstances in which a contracting authority can lawfully abandon a procurement, including where pursuing that procurement prevents it from awarding a contract that is not most economically advantageous or where it would not be expedient from the point of view of the public interest to do so. In addition, contracting authorities should be able to abandon procurements where continuing the process would otherwise mean they breach their duties, giving rise to future claims.

The judgment is a useful reminder about the high threshold of manifest error when challenging a contracting authority's decisions. The court recognised the margin of appreciation that contracting authorities have. Even though the contracting authority in this case had a misplaced hope and belief that abandoning a procurement would extinguish the claimant's claim, that was not sufficient to demonstrate the exercise of its discretion, having regard to a number of factors, was unlawful.

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What was the background?

The claimant (Amey) commenced proceedings against the defendant (the council) under PCR 2015 alleging breaches of PCR 2015 in the procurement of a highways maintenance contract (the procurement).

After a competitive dialogue process and submission of its final tender, Amey had been instructed to make certain changes to its costs submission. Failure to comply with the instructions would result in Amey's final tender being noncompliant.

After a competitive dialogue process and submission of its final tender, Amey had been instructed to make certain changes to its costs submission. Failure to comply with the instructions would result in Amey's final tender being noncompliant. Amey was unsuccessful in the procurement, losing to the successful bidder by 0.03 marks. It alleges that the instructions given by the council were unlawful and it was permitted to exclude certain costs from its costs submission (the instructions claims). It also alleges that the council made manifest errors in its evaluation of Amey's quality submission. Amey commenced proceedings alleging that its score should have been higher than the successful bidder and it would have been awarded the contract (the first action).

The council sought to strike out the first action on the grounds that the instructions claims were time-barred pursuant to PCR 2015, reg 92(2). Amey sought summary judgment on its claim. On 30 July 2018, Mr Justice Stuart Smith handed down judgment (Amey Highways Ltd West Sussex County Council [2018] EWHC 1976 (TCC)), dismissing the council's application. See News Analysis: Court permits extension of time in public procurement challenge (Amey Highways Ltd West Sussex County Council) The council then took the decision to abandon the procurement (the abandonment decision) and invited Amey to withdraw the first action, stating that there was no valid basis on which the first action could continue. Amey issued proceedings challenging the lawfulness and effect of the abandonment decision (the second action).

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What did the court decide?

Had the first action not been pursued, the council would have entered into the contract with the successful bidder on 1 July 2018. Had Amey achieved a higher score, it would have been awarded the contract so ‘all the constituent parts of an accrued cause of action would be in place on and from 1 July 2018.’ If successful in the first action, the alleged breaches caused Amey to suffer loss and damage.

The judge disagreed that once a procurement is abandoned, no challenge can be pursued in respect of a non-existent contract. PCR 2015, reg 92(2). enables a damages claim to subsist, even where a contract award can no longer be set aside—there is no express or implied limitation on damages where the criteria under PCR 2015 are met.

A contracting authority could abandon a procurement, preventing future private law claims coming into existence, but ‘an accrued cause of action is fundamentally different.’ There was nothing in PCR 2015 authorities cited which supported the position that a bidder would be deprived of an existing accrued cause of action. The abandonment decision had no effect on the first action.

While the council's hope and belief that the abandonment decision would extinguish the first claim was misplaced, nonetheless it was not an unlawful decision. It was a rational attempt to preserve public funds taking into account a range of factors, including the costs of entering into the contract and litigating the first action and the need to provide critical services.

Case details

  1. Court: High Court, Queen's Bench Division (Technology and Construction Court)
  2. Judge: Stuart-Smith J
  3. Date of judgment: 24 May 2019

Lucy James, is a partner at Trowers & Hamlins LLP, and a member of LexisPSL’s Case Analysis Expert Panel. Suitable candidates are welcome to apply to become members of the panel. Please contact caseanalysis@lexisnexis.co.uk.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

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