Automatic suspension lifted

Tuesday May 31st, 2011

By Ruth McNaught, Solicitor, Harper Macleod LLP

In April, the court lifted an automatic suspension imposed under Regulation 47G of the Public Contracts Regulations 2006 (the “Regulations”), finding that, if the suspension remained in place, the resultant “prejudice” that the contracting authority would suffer would outweigh the potential difficulties in quantifying the aggrieved economic operator’s damages (Metropolitan Resources North West Ltd v Secretary of State for the Home Department).

In this case, the United Kingdom Borders Agency (UKBA) entered into contracts with a local authority and Company A for the provision of asylum accommodation and related services.  The local authority used Company B as one of its providers of asylum accommodation. Thereafter, the local authority entered into a contract with UKBA for the provision of interim accommodation for asylum seekers. Following concerns about the local authority’s provision of interim accommodation, UKBA decided to procure the contract to replace them. In the short term, UKBA requested that Company A provide the interim accommodation services. Company B challenged the proposed award of a contract for such interim services to Company A and, as a result of legal proceedings being raised, the process was automatically suspended under the Regulations.

The Secretary of State – the contracting authority – applied for the automatic suspension to be lifted.

To determine whether a suspension should remain in place, a relatively low threshold is applied: it does not require a high expectation of success at trial, but simply that there is a serious issue to be tried. If this is established, the courts will then consider the balance of convenience between the parties.

Company B submitted that UKBA had breached the Regulations by failing to act in a transparent and non-discriminatory way, which was found to be a serious issue to be tried. Company B also successfully argued that if it won at trial the difficulties in assessing loss meant that damages would not be an adequate remedy.

However, it was determined by the court that damages would not be an adequate remedy to UKBA if it won at trial: it would suffer significant financial loss and it was likely that Company B would not be able to meet these costs. Moreover, if the automatic suspension was not lifted, UKBA would have to enter into interim arrangements to ensure continuity of service to asylum seekers, which would be unsatisfactory and might put it in further breach of the Regulations. The suspension was accordingly lifted.

Contracting authorities should, therefore, bear in mind that, even in cases where there is a serious issue to be tried and damages may fail to adequately compensate the complainant, they should still consider applying for the automatic suspension to be lifted if it is likely to cause them irremediable prejudice and/or place them in further breach of the Regulations.

Ruth is a solicitor at Harper Macleod LLP and can be contacted on ruth.mcnaught@harpermacleod.co.uk

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