BSF Group Ltd. v Secretary of State for Defence & Anor [2006] EWHC 1513 (Ch)

Friday June 23rd, 2006
Neutral Citation Number: [2006] EWHC 1513 (Ch)
    Case No: HC 06 CO 1987

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

    Royal Courts of Justice
Strand, London, WC2A 2LL
    23rd June 2006

B e f o r e :

THE HON MR JUSTICE BLACKBURNE
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Between:

  BSF Group Limited
Claimant
  - and -

  (1) Secretary of State for Defence
(2) Purple Foodservice Limited
Defendants

____________________

Paul Lasok QC and Jennifer Skilbeck (instructed by Pinsent Masons) for the Claimant
Paul Darling QC and Sarah Hannaford (instructed by Treasury Solicitor) for the 1st Defendant
Michael Bowsher (instructed by Maclay Murray & Spens) for the 2nd Defendant
Hearing dates: 19th, 20th and 21st June 2006

____________________

____________________

Crown Copyright ©

    Mr Justice Blackburne :Introduction

  1. These proceedings relate to the proposed award by the first defendant, the Secretary of State for Defence acting by the Defence Logistics Organisation (“the DLO”), of a contract for the provision of food and bottled water to Her Majesty’s Armed Forces. The contract which is intended to run for five years, with a provision for two two-year extensions, covers supply to the Forces both in this country and abroad. It includes provision in operational theatres such as Iraq and Afghanistan. In what follows I shall refer variously to the Secretary of State, the Ministry of Defence and the DLO. It is not important to distinguish between them.
  2. The award is governed by the Public Supply Contracts Regulations 1995 (“the 1995 Regulations”). Those regulations which implement EU Directives 93/36/EEC (on supply contracts) and 89/665/EEC (on enforcement) have since been replaced by new regulations, The Public Contracts Regulations 2006, with which I am not concerned.
  3. The claimants, BFS Group Limited (trading as 3663 First For Food Service) (“3663″) is the holder of the current contract for the supply of food and bottled water to HM Armed Forces here and abroad. That contract which was for an initial period of five years and has since been extended twice, each for a period of two years, expires on 30 September 2006. That contract requires the contractor to source, ship, store and transport food, water and associated supplies to the Forces’ bases for cooking and serving by the Forces’ own personnel.
  4. In the course of 2005 the Secretary of State, acting by the DLO, set about the process of awarding a new contract for these supplies to take effect on the expiry of the existing contract. As required by the 1995 Regulations, the new contract was advertised in the Official Journal of the European Union. As advertised, the object of the contract is “To provide the non-operational and worldwide operational food supply requirements of the MoD outside of pay as you dine (PAYD) contractor supplied units, with a seamless transition from the pervious contractor. The non-operational volumes of the MoD food supply contract will reduce as PAYD is implemented.” The advertisement set out that the contract was to be let by the so-called “negotiated procedure” and, after amendment, that it would be awarded on the basis of “the most economically advantageous tender”. (Nothing turns on the fact that the advertisement had stated the criteria to be “lowest price” and that an amendment was subsequently made.)
  5. In the event, there were three tenderers for the contract. 3663 was one. The second defendant, Purple Foodservice Limited (“Purple”), was another.
  6. On 8 May 2006, the Ministry of Defence, acting by the DLO, announced to the tenderers its intention to award the new contract to Purple. As a public contracting authority, the Ministry was required to allow a standstill period of 10 calendar days to elapse between the date of the announcement of its decision to award the new contract to Purple and the date of entry into the contract. The purpose of the standstill is to enable unsuccessful tenderers to obtain an explanation of the reasons why their tenders were unsuccessful (which by regulation 23(1), the contracting authority is required to provide within 15 days of receipt of a request by the unsuccessful supplier) and, if so advised, to enable proceedings such as the present to be brought before the contract is entered into.
  7. On 17 May 2006, which was within the 10 day standstill period, 3663′s solicitors wrote to the Treasury Solicitor. The letter followed a debriefing on 15 May attended by representatives of the DLO and of 3663 at which the DLO’s representatives set out the reasons why 3663′s tender had been unsuccessful. The letter informed the Treasury Solicitor of 3663′s intention to bring proceedings against the Secretary of State pursuant to regulation 29 of the 1995 Regulations. It repeated a request for the supply of certain information and documents for which a request under the Freedom of Information Act had been made a few days earlier. It also sought an extension of the standstill period to enable the required information to be provided and to afford 3663 a reasonable opportunity to consider whether to proceed with a claim. The letter then set out particulars of what it alleged were breaches of the 1995 Regulations in the conduct of the procurement process leading to the announced intention to award the new contract to Purple. It requested a cancellation of the award process and, in effect, a rerun of that process.
  8. In a detailed reply sent on 31 May the Treasury Solicitor denied that the procurement process had infringed the 1995 Regulations.
  9. In the meantime, 3663 launched these proceedings. The claim form seeks: (1) an order that the Secretary of State cancels the current procurement procedure and starts the procedure again; (2) a declaration that “negotiations with [3663] as contemplated by Invitation to Negotiate have not yet been entered into …”; (3) a declaration that inadequate information has so far been given by the Secretary of State to 3663 for the purpose of negotiating the new contract; (4) a declaration that the assessment of 3663′s tender was made on the basis of criteria lacking in fairness or transparency not set out in the Invitation to Tender; and (5) damages. 3663 issued the claim on 18 May and, on the same day, issued the application which is before me and which, materially, seeks an interim injunction to restrain the Secretary of State, until further order, from entering into the new contract with Purple or any other party other than 3663. It also seeks a declaration to the effect that the Secretary of State unlawfully failed to enter into negotiations with 3663 for the procurement in question. Initially the proceedings were brought against the Secretary of State alone. By an order made on 13 June Purple applied to be and was added as a defendant. It was agreed between the parties that the Secretary of State would delay entering into the new contract with Purple pending the determination of this application.
  10. The effective question is whether I should grant the interim injunction. It is not suggested that I should grant the interim declaration which, if otherwise appropriate, could only properly be granted following a full hearing of this dispute. The 1995 Regulations
  11. As I have mentioned, the procedure chosen for the award of the new contract was the “negotiated procedure”. The other alternatives open to the Secretary of State were the “open procedure” and the “restricted procedure”.
  12. Regulation 2 of the 1995 Regulations contains definitions of all three. According to those definitions, “open procedure” means “a procedure leading to the award of a public supply contract whereby all interested persons may tender for the contract”, “restricted procedure” means “a procedure leading to the award of a public supply contract whereby only persons selected by the contracting authority may submit tenders for the contract” and “negotiated procedure” means “a procedure leading to the award of a public supply contract whereby a contracting authority negotiates the terms of the contract with one or more persons selected by it”.
  13. It is common ground (1) that the DLO (strictly the Secretary of State or, if different, the Ministry of Defence) is, for this purpose, a contracting authority, (2) that the new contract will be “a public supply contract” and (3) that it was open to the DLO to resort to the negotiated procedure for the award of the new contract. Material to the third of those points is that, whereas a contracting authority can use the open or the restricted procedure as it chooses (see regulation 10(5)), the negotiated procedure is only available in the circumstances set out in regulation 10(2).
  14. The 1995 Regulations provide no guidance about what the permissible scope is of the negotiations to which the negotiated procedure, as defined, is intended to refer or indeed what the expression “negotiate” is intended to embrace. Regulation 13, which is headed “the negotiated procedure”, provides, so far as material, as follows:

    “(2) The contracting authority shall publicise its intention to seek offers in relation to the public supply contract by sending to the Official Journal as soon as possible after forming the intention a notice …[in the prescribed form] inviting requests to be selected to negotiate and containing the information therein specified.”

    This is a reference to the notice to which I have already referred and which appeared in the Official Journal on 4 March 2005. Paragraphs (3) and (4) are concerned with the timing of receipt by the contracting authority of requests “to be selected to negotiate” and paragraph (5) is concerned with the manner in which applications “to be selected to negotiate” may be communicated to the contracting authority. Paragraph (6) provides that:

    “Where there is a sufficient number of persons who are suitable to be selected to negotiate the contract, the number selected to negotiate shall be not less than 3.”

    Paragraphs (7) and (8) are concerned with the circumstances in which the contracting authority may exclude a supplier from those from whom it will make the selection of persons to be invited to negotiate the contract and with the criteria to be satisfied and the other information which the contracting authority may take into account in deciding which suppliers are to be selected to be invited to negotiate.

  15. What right to “negotiate” (if any) was conferred upon 3663 and the suppliers selected to tender by the use of the negotiated procedure and what obligations (if any) on the DLO this imposed is one of the matters which lies at the heart of 3663′s complaints. I shall return to it later.
  16. The only other regulation I need refer to is regulation 29. Concerned with “Applications to the Court” and entitled “enforcement of obligations” that regulation, omitting irrelevant parts, is as follows:

    “(1) The obligation on a contracting authority to comply with the provisions of these Regulations … and with any enforceable Community obligation in respect of a public supply contract … is a duty owed to the suppliers.

    (2) A breach of the duty owed pursuant to paragraph (1) above … shall be actionable by any supplier who, in consequence, suffers, or risks suffering, loss or damage.

    (3) Proceedings under this regulation shall be brought in England and Wales … in the High Court …

    (4) Proceedings under this regulation may not be brought unless -

    (a) the supplier bringing the proceedings has informed the contracting authority of the breach or apprehended breach of the duty owed to him pursuant to paragraph (1) above by the contracting authority and of his intention to bring proceedings under this regulation in respect of it; and

    (b) they are brought promptly and in any event within 3 months from the date when grounds for the bringing of the proceedings first arose unless the Court considers that there is good reason for extending the period within which proceedings may be brought.

    (5) Subject to (6) below, but otherwise without prejudice to any other powers of the Court, in proceedings brought under this regulation the Court may -

    (a) by interim order suspend the procedure leading to the award of the contract in relation to which the breach of the duty owed pursuant to paragraph (1) above is alleged, or suspend the implementation of any decision or action taken by the contracting authority in the course of following such procedure; and

    (b) if satisfied that a decision or action taken by a contracting authority was in breach of the duty owed pursuant to paragraph (1) above -

    (i) order the setting aside of that decision or action or order the contracting authority to amend any document, or

    (ii) award damages to a supplier who has suffered loss or damage as a consequence for the breach, or

    (iii) do both of those things.

    (6) In proceedings under this regulation the Court shall not have the power to order any remedy other than an award of damages in respect of a breach of the duty owed pursuant to paragraph (1) above if the contract in relation to which the breach occurred has been entered into.

    (7) … in proceedings brought under this regulation against the Crown the court shall have the power to grant an injunction …”

  17. It is common ground that 3663 complied with regulation 29(4): it did so by the letter from its solicitors dated 17 May. Equally it is common ground that the Secretary of State (or the Ministry) as the contracting authority owed a duty to 3663 to comply with the provisions of the 1995 Regulations in respect of the tender, using the negotiated procedure, for the new contract. It is in dispute, however, whether there has been any breach of that duty and, if there has, whether the breach is actionable by 3663 since it is said that, even if there were any breaches, 3663 has not suffered, and does not risk suffering, any loss or damage in consequence of those breaches since the new contract would not in any event have been awarded to it. There is also an issue over whether, in compliance with regulation 29(4)(b), there are good reasons for extending the three month period within which these proceedings may be brought. Relevant to this is an acceptance by 3663 that the grounds for the bringing of the proceedings (or at any rate some of them) first arose more than three months before the claim form was issued. Also in issue is whether, assuming 3663 can overcome these hurdles, it is appropriate that an interim injunction should be granted to prevent the Secretary of State from entering into the new contract with Purple or whether 3663 should, in effect, be left to its remedy in damages under regulation 29(6) on the basis that, if no interim injunction is granted, the Secretary of State intends forthwith to enter into a contract with Purple. Purple, for its part, is not only anxious that this should occur but, on the invitation of the DLO made to it on 5 May 2006 pursuant to the terms of the tender, entered into an option on 8 May 2006 whereby it undertook irrevocably to hold its tender open for acceptance (when the parties would then enter into the new contract) for 25 days or if legal proceedings challenging the award in favour of the successful tenderer are instituted prior to the contract being entered into, until 14 days after final determination of the proceedings. The course of events
  18. Following a so-called “industry awareness day” held by the DLO on 13 April 2005 in Birmingham at which a broad outline of the DLO’s requirements was given to potential tenderers, the DLO sent out so-called Pre-Qualification Questionnaires (“PQQs”) to, inter alia, 3663 under cover of a letter dated 3 June 2005. The purpose of the PQQ was to assess the recipient’s suitability as a potential tenderer. It required that the completed PQQ be returned by early July. The covering letter set out what the successful contractor would be required to supply. It also contained the following:

    “5. It is important for Contractors to note that the new contract will differ significantly from the present one. This is as a direct consequence of the introduction of Pay as You Dine (PAYD) throughout all peacetime establishments in the UK and Germany. The roll out of PAYD where food supply would become the responsibility of catering contractors rather than the Department will take several years … The planned implementation programme for PAYD will be included within the Invitation to Negotiate (ITN). As a result the peacetime element of the task will reduce during the period of the contract whilst that for operations will assume far greater value proportionately.

    6. It is crucial that in its evaluation of tender submissions the Department is confident that the successful Contractor has the resources, skill levels, experience and organisation to satisfy all element of the operational requirement. To aid the Department in its assessment of bids the ITN will include a fictitious operational scenario. Contractors will be asked to demonstrate, in detail, how they would propose to fulfil such a commitment and guarantee the level of service required.”

    Under the current contract, the vast majority of the service personnel for whom the supplies are intended are in the UK which, according to 3663′s evidence, accounts for 73% of the value of the contact, with the UK and Germany currently accounting for 90% of the existing catering requirement. The operations side is mainly, but not exclusively, concerned with areas of conflict such as Iraq and Afghanistan.

  19. It is clear that the DLO’s letter of 3 June 2005 was emphasising not only that with the roll-out of PAYD the operational element of the contract would get proportionally larger as the peacetime element progressively reduced but also that it was attaching particular importance to the ability of the successful tenderer to manage the operational requirement.
  20. 3663 duly completed and returned its PQQ and in due course was informed that it had successfully completed that stage. It was invited to attend and did attend a further industry day meeting, this time in Bath on 2 August 2005. On that occasion the DLO made a further presentation regarding the main procurement (ie the global catering supply contract) and also a separate but linked, procurement concerned with so-called ten-man operational packs (“the ten-man ORPs”).
  21. In the meantime 3663 was invited, as were other potential tenderers, to attend at Bath on 17 August to give a presentation to the DLO in respect of the fictitious operation referred to in the letter of 3 June. The operation was styled “Fantasystan”. In a letter to 3663 dated 28 July 2005, the DLO outlined the purpose of the presentation in the following terms:

    “2. By way of introduction we would appreciate a brief overview of any partnering arrangements that you propose, the relationship between the various companies associated with the bid and where lines of responsibility would fall.”

    This is a reference to the fact that, as is the case under the existing contract and as it would propose to continue to do under a new contract, 3663 subcontracts aspects of its supply task to third parties. In the case of the existing contract, the overseas role has been undertaken largely, if not exclusively, by an organisation which has been referred to in the evidence as SFS. The letter of 28 July 2005 continued:

    “This would then be followed by an in depth presentation on the enclosed Statement of Requirement (SOR) for Operation Fantasystan. This outlines a fictitious operational scenario which we would ask you to study in detail before preparing a comprehensive plan on how you would execute every aspect of the requirement for presentation to the Authority.

    3. The outline of Operation FANTASYSTAN is based on the generic operational SOR that the Authority utilises for such deployments. … For the purpose of this exercise we are not seeking any costing or pricing proposals from you. As advised in our covering letter to the Pre-Qualification Questionnaire, the Authority is seeking assurance that the successful Contractor has the requisite knowledge, experience and resources to guarantee an acceptable standard of service for each and every element of the SOR. Therefore your presentation should cover all facets of the task, identifying any potential difficulties or possible barriers and the actions you would take to overcome them.”

  22. 3663 duly attended and made its presentation.
  23. On 1 September 2005 the DLO issued a so-called “Invitation to Negotiate” (“the ITN”). The invitation indicated that it was due for return by noon on 16 November 2005. 3663, Purple and one other were recipients of the invitation.
  24. The ITN comprised a number of sections setting out the matters to be addressed by the tenderers, together with instructions and guidance. It contained appendices giving technical and other information. An important part of the ITN was a section called Special Notices & Instructions to Tenderers (or “SNITS” for short). SNITS set out guidance to the tenderers and information specific to the proposed procurement. Scheduled to it was an appendix dealing with performance indicators and a series of annexes. Annexes A to C set out the requirements under the two procurements, Annex A dealing with the main procurement for the supply of food and bottled water etc and in Annex B to C the procurement requirements in relation to the ten-man ORPs. Annex D set out the proposed terms and conditions of the new contract. Annex E set out a so-called “risk analysis questionnaire” concerned with risks, namely what risks there were, what impact they would have on the contract, their probability, how they were to be managed and so forth. Annex F dealt with so-called “soft issues” concerned with relationship, cultural, change management and strategy factors. Annex G set out so-called “partnering principles” outlining how the industry and the contractor would work together. Annex H set out the DLO’s tender evaluation methodology.
  25. Paragraph 1 of the introduction to the SNITS invited the tenderer to submit its proposals “outlining your offer for the requirements detailed in the Schedule of Requirements and the [attached] Terms and Conditions…”. Paragraph 1.2 asked the tenderer to note:

    “… that the aforementioned documents will be the subject of further negotiation should your company be selected to be taken forward to the next stage of this procurement process (see paragraph 13 below).”

  26. Paragraph 2 set out the background to the new contract explaining in particular the introduction and effect of PAYD and stating that the roll-out of PAYD was expected to be completed by 2009. In paragraph 2.2 it stated that:

    “The Global Food Supply contract [ie the proposed new contract] should be a predominantly operationally focused contract but also cover the requirement for non-operational food until such time as PAYD is implemented across Defence…”

  27. Paragraph 4 explained that the intended duration of the contract was five years, subject to regular review, with qualified options to extend the contract for two two-year periods. It also explained that the contract was intended to start on 1 October 2006.
  28. Paragraph 9 stated that a lead-in period of up to five months prior to the start date would be allowed under the new contract and Paragraph 10 dealt with the handover from the current contractor.
  29. Paragraph 13, headed “Assessment of Responses”, was in the following terms:

    “13.1 Each bid received will be assessed and scored against … pre-defined criteria. An outline of the scoring methodology that will be used in this tender is detailed at Annex H to this ITN. The assessment will be undertaken by members of the Food Supply Contract Team supported by an independent consultant and representatives of the three services.

    13.2 Furthermore, the Authority will also benchmark proposed prices to ensure that Tenderers are proposing to charge the appropriate market rate. The Authority reserves the right at this stage to decline those tenders that are commercially non-compliant and/or submit flawed proposals on consumer prices.

    13.3 Preferred Bidder:

    13.3.1 Upon completion of the evaluation and before contract award the Authority reserves the right to:

    13.3.1.1 Enter into Best and Final Offers with ideally 2 or 3 tenderers.

    13.3.1.2 Select a preferred bidder and if necessary reserve bidder.

    13.3.1.3 Re-Tender the requirement.”

  30. Paragraph 15.1 stated that if it was considered that insufficient information had been provided to enable a full response, the tenderer should seek further information from the Authority before submitting its reply. By paragraph 16.1 the Authority reserved the right at its sole discretion to conduct a “Pre-Contract Award Evaluation (PCAE) as part of its evaluation of proposals received”. It stated that “PCAE is a process of evaluating the capacity of potential contractors during the negotiation phase.” It went on to explain what this involved.
  31. By paragraph 20.1 the Authority reserved the right to terminate, amend or vary the procurement procedure by notice in writing.
  32. Annex H, to which I have already referred, explained the tender evaluation methodology. Paragraph 1.1 provided as follows:

    “Technical evaluation of the proposals received from Tenderers will form an integral part of the overall evaluation process. The main objectives of the technical evaluation process are:

    a. To ascertain whether the tenders meet the requirements of the Schedule of Requirements;

    b. To assess whether sufficient resources have been allocated to meet the requirements;

    c. To assess whether proposals are credible and what risks are attached to them;

    d. To assess the impact of new methods of operation on the customer;

    e. To identify innovation;

    f. To mark tenders in order of technical merit.”

  33. In paragraph 2.1 it was stated that:

    “The evaluation process will be systematic, thorough and fair, and seen to be such. Evaluators will ensure that there is a “level playing field” for all Tenderers and conduct themselves in a manner that gives no advantage to any Tenderer, while assessing the relative merits of all tenders impartially.”

  34. In paragraph 3.2 it was explained that:

    “a. An initial clarification process will take place to ensure that all tenders are assessed fairly, with evaluators all having a clear understanding of the tender responses.

    b. The main purpose of clarification is to allow for a fair and accurate assessment of the tenders. Questions will need to be generated when: i Errors, such as typographical, are found in the tender; ii Inaccuracies are found in the tender; iii Evaluators do not fully understand the tender response.

    c. Clarification questions are those asked by the Authority to clarify the content of the tenders; they are not used in order to lead or advise Tenderers on better technical solutions, or to change the tender in any form.”

  35. Paragraph 3.3 headed, “Evaluation Method”, explained that:

    “The methodology adopted for evaluating the responses is divided into four distinct areas, namely SOR [ie statement of requirements], Risk, Soft Issues and Price. An overall value for money decision will be made using the following proportions:

    SOR 30%

    Risk 30%

    Price 30%

    Soft Issues 10%

    Each area will be evaluated separately as described below. Soft issues evaluation is described in Annex F…”

  36. Paragraph 3.4, headed “Commercial Compliance Matrix (Appendix 1) and Price”, stated as follows:

    “Commercial staff will assess elements such as the prime cost of food, management fee cost elements, Terms and Conditions and soft issues to ensure that Tenders are commercially complaint. The Authority will assess the compliance to the Terms and Conditions using the Commercial Compliance Matrix detailed under Annex H … including deciding whether any proposed variations are permissible. The Pricing Schedules appended to DEFFORM 47 [one of the documents comprising the ITN] will also be reviewed to rank Tenders in order of price and strength of the commercial bid generally. The Authority will then mark responses to the soft issue questions which will be weighted as detailed in Annex F …”

  37. Paragraph 3.5, headed “Technical Compliance”, was as follows:

    “a. Tenders will be assessed by first checking compliance with the SOR. Some critical areas will require the Tenderers to achieve minimum scores. If found to be unsatisfactory in such areas this may result in the bid not being further evaluated, however the Authority reserves the right to conduct negotiations with any tenderer. The Authority also reserves the right at this stage to decline those Tenders that have failed to fully respond to the SOR. The Authority will then mark the responses to the SOR Questions, which will be scored using the following criteria:”

    There then followed a matrix comprising five levels of score, marked, in declining order, 4, 3, 2, 1 and 0 against each of which was an explanation for the scoring. The paragraph then continued:

    “b. The methodology adopted for analysing responses to the SOR is based upon the Technical responses detailed in the Invitation to Negotiate. The overall service for these Technical areas has been broken down into ten separate requirements within the SOR, and questions pertaining to these areas are detailed therein and weighted as follows…”

    There was then set out a so-called “SOR scoring matrix” listing ten items against each of which was a percentage, the totality of the percentages adding up to 100%.

  38. Paragraph 3.6, (erroneously marked 7.6) and headed “Risk Assessment”, stated that:

    “Members of the Food Supply Contract Team will conduct an assessment of the potential risks associated with placing the New Food Supply Contract [ie the new contract] with each tenderer. This information will be gathered from many sources including, but not limited to:

    • Site visits
    • Meetings with tenderers.”
  39. Paragraph 3.7, headed “Further and Final Clarification”, stated that:

    “Once the leading Tenderer(s) have been selected, it is reasonable to expect the Authority will need to go back to these Tenderer(s) to clarify further issues raised …”

  40. The DLO undertook visits to sites where the tenderers operated. The sites were suggested by the tenderers. In the case of 3663 the DLO visited a site in Croatia which served the Balkans and was operated by an intended sub-contractor of 3663 called DCS, a site in Kuwait City which was a new overseas location to be operated by a sub-contractor called Al Yasra and was intended to service Iraq, and 3663′s Basingstoke depot. These visits occurred between 3 October and 15 November 2005.
  41. 3663′s response to the ITN was returned to the DLO in due time. So also were the tenders of Purple and one other. In its particulars of claim 3663 asserts and, although I have not seen the document, I accept that in the executive summary to its response to the ITN submission, 3663 noted that it had been “progressing a number of other innovative logistical solutions of the MoD which are listed below and which 3663 will be pleased to share in the negotiation period”. Six matters were listed.
  42. On 6 December 2005 the DLO wrote to 3663 to say that:

    “The new Food Supply Contract Team (FSCT) is currently conducting a detailed evaluation of each of the ITN submissions and, dependent upon the outcome of these evaluations, will invite some or all of the interested parties to enter a period of negotiations.

    It is intended to conduct the negotiations from mid January to mid February 2006 and all parties that successfully reach the negotiation phase will be contacted with proposed dates, along with subjects to be covered, in due course.

    The unsuccessful bidding companies will be fully de-briefed on all aspects of their submission. These de-briefs will take place either upon completion of the ITN evaluation, or upon completion of the negotiation and subsequent re-evaluation phase as appropriate.

    I will contact you on completion of the ITN evaluation to advise whether or not your company has been successful in reaching the negotiation phase.”

  43. In a subsequent letter, dated 5 January 2006, DLO wrote to 3663 in connection with a matter which 3663 had raised concerning overseas management fees. The letter stated:

    “As you will appreciate the Food Supply Contract Team are currently conducting a detailed evaluation of the ITN responses. Due to the restricted time scale within which to complete this task all resources are currently focused on bringing this process to a conclusion to enable progression into the negotiation phase.”

    It then stated that it was unable to address the concern over management fees which 3663 had raised stating that “we … foresee this as an issue that may be discussed during negotiations” and then added:

    “I will contact you on completion of the ITN evaluation to advise whether or not your company has been successful in reaching the negotiation phase.”

  44. It is plain from those two letters that whether or not 3663 or either of the other tenderers would be invited to participate in any “negotiation” depended upon the outcome of the FSCT’s evaluation of its tender. There was no indication that negotiations would take place before completion of that process. This reflected paragraph 2 of the introductory section to the SNITS (mentioned earlier) which in turn referred to paragraph 13 which reserved to the DLO (1) the right, following evaluation of tenders, to decline altogether tenders which were “commercially non-complaint” or which had submitted “flawed proposals on the consumer prices” and (2) the separate right upon completion of evaluation and before contact award either to invite best and final offers, or to select a preferred bidder and if necessary a reserved bidder, or to re-tender the whole requirement.
  45. By a letter dated 19 January 2006 (“the 19 January letter”) sent to each of the three tenderers, the DLO announced a change of approach. The letter stated as follows:

    “Within the above mentioned Invitation to Negotiate the Authority reserved its rights in respect of selecting a preferred bidder. However, it has been decided that a final round of clarification (face to face) with all bidders would be more beneficial and then to proceed seamlessly into the MoD Approvals activity. The intention is to accelerate the approvals process to try and bring forward the date of contract award to April 2006.

    In order to facilitate this the Authority would like to meet with you to discuss a few further clarification issues. A member of the team will contact you shortly to arrange a date for this proposed clarification meeting.

    Attached as Annex A is a list of the areas that the Authority wishes to discuss with you to confirm that your bid has been fully understood by the team. Following completion of this meeting the Authority request that you “stand down” your bid team, in order to ensure no unnecessary costs are incurred by yourselves, whilst the Food Supply Contract Team is engaged in seeking the necessary approval for Contract award.

    All bidders are reminded that no decision has yet been reached or approved, and consequently no financial commitment or capital expenditure should be made in connection with this contract until the outcome of the tender exercise is announced.”

    Annex A referred to six areas for further discussion one of which, concerning overseas management fees, was the matter which had led to the DLO’s letter of 5 January referred to earlier.

  46. The meaning and effect of the 19 January letter has figured large in the course of the present hearing. I will return to this later.
  47. As indicated in the 19 January letter, a further clarification meeting took place at which the six listed issues were the subject of further discussion. Present at the meeting which took place on 6 February 2006 were six persons representing the DLO and five representing 3663. The meeting was recorded and a transcript of it later produced. A statement at the start of the transcript indicates that owing to the quality of the recording some of the dialogue was difficult for the typist to transcribe and that the notes should be treated as “an aide-memoire and not relied upon as a full and accurate record”.
  48. The transcript notes Mr De Ternant, one of 3663′s representatives, as stating that 3663′s objective was “to fully understand the questions posed, to ensure clarity on our bid is communicated to all; to ensure any areas of concern are covered; to clarify and understand the next steps in the tender process”. At the end of the discussion of the six matters, Mr Phillip Tozer, one of the DLO representatives, is reported as stating that there was nothing else in terms of questions that his side could ask. Lieutenant Colonel Mark Beardsell, another of the DLO representatives, is then reported as stating that “it is a long and drawn out process but the plan is as soon as we have a decision we will let you know” to which Mr Andrews Selley from the 3663 side is then reported as asking “and what will that communication route be?”. To that Colonel Beardsell is reported as stating:

    “At the moment it hasn’t been confirmed but the proposal is that we would contact each of the three bidders by phone over a 30 minute period, on the hour, quarter-past and half-past, simultaneously signalling, e-mailing all key stakeholders within the DLO and simultaneously faxing a letter to each of the FLCs. That’s the proposal at the moment, we think that a letter is too impersonal.”

    Mr Tozer is then reported as stating:

    “Essentially it is CDL’s [the chief of defence logistics] decision on behalf of the DLO but it will still go up for ministerial acknowledgement and he might come up with further questions, that’s the unknown bit of the process and that’s why we’re trying to move this on parallel to the clarification.”

    Mr De Ternant, from the 3663 side, is then quoted as asking:

    “So there are no other concerns within our bid that you haven’t shared with us?”

    To which Colonel Beardsell is reported as replying:

    “I think we’ve fully understood.”

    The transcript ends at that point.

  49. 3663 pleads that, following that meeting, there was continuing correspondence between itself and the DLO concerning the terms on which the ten-man ORPs would be supplied but it has not been suggested that there was any further communication concerned with the terms of the main supply contract.
  50. Although it had been DLO’s intention, as indicated by the 19 January letter, that an announcement would be made in early April of the successful bidder and although it would appear that the decision was indeed reached by early April, there was a hold-up in the announcement. This was because of the local council elections in England and Wales when, it appears, there is an embargo on announcements of this kind being made. The identity of the successful tenderer was ultimately announced on 8 May 2006, although it would appear that Purple, the successful tenderer, was made aware of the outcome two or three days earlier. The announcement led to a debriefing meeting on 15 May 2006 attended by representatives of the DLO and 3663 at which the reasons for 3663′s failure to secure the contract were explained. Two days later 3663′s solicitors wrote their letter of 17 May 2006 and, the following day, these proceedings were commenced. Owing to the obvious urgency of the matter, a speedy timetable was agreed to enable this matter to come on for hearing before me without due delay. The allegations of breach
  51. 3663 complains that the DLO changed the award procedure from the negotiated procedure to the restricted procedure. It complaints that this occurred without 3663 being informed, much less without obtaining its consent or its observations on the change, and that, in so acting, the DLO failed to act with transparency.
  52. The sole basis for this complaint, which is denied, is the 19 January letter (in which the DLO announced its wish to undertake “a final round of clarification …with all bidders” rather than to exercise its right to select a preferred bidder and then “to proceed seamlessly into the MoD Approvals activity” in order “to accelerate the approvals process to try and bring forward the date of contract award to April 2006″) coupled with the DLO’s failure to negotiate with 3663.
  53. As became evident during the submissions of Mr Paul Lasok QC, appearing with Ms Jennifer Skilbeck on behalf of 3663, the substantial complaint is not so much that there was any change in the formal award process from the negotiated procedure to the restricted procedure – a complaint which finds no support at all in any of the documentation – as the fact that the DLO failed to engage in any negotiation with 3663 over its tender. It is this failure, which 3663 says was unlawful, that lies at the heart of many of 3663′s complaints. Thus, in paragraph 20 of their skeleton argument, Mr Lasok and Ms Skilbeck stated that advertising that a contract is to be awarded under the negotiated procedure is “a clear and unequivocal representation that negotiations are envisaged” and that, in such a procedure, “one does not expect tenderers to start off with their best and final offers, or that that one will, in the event, necessarily be the one that is most likely to recommend itself to the contracting authority”. In paragraph 29 of their skeleton argument, it was submitted that in a negotiated procedure “the contracting authority must negotiate with all those admitted to the negotiation stage of the procurement, even if it is believed that they will not be successful”.
  54. In the course of his closing submissions, Mr Lasok, as I understood him, while accepting that 3663 had no right to engage in the negotiation of its tender at the initial evaluation stage when consideration was being given by DLO to whether 3663′s tender should be declined on grounds of non-compliance or the like, contended that thereafter it had a “right to receive from the contracting authority an improved description of the authority’s requirements and a corresponding right to respond to that communication”. That, said Mr Lasok, was the right that had been infringed. No authority was cited in support of these propositions.
  55. Quite what right the use of the negotiated procedure confers on the contracting authority and the bidder is not evident from the 1995 Regulations. The matter seems to be devoid of authority. Looking at the matter entirely generally, I have the greatest difficulty in accepting as accurate the proposition that, merely because the negotiated procedure is employed, each bidder has the right and expectation to engage in a negotiation of its tender, much less that, for so long as it remains in the process and has not been rejected on grounds of tender non-compliance or the like, it has a right to receive from the contracting authority an improved description of the authority’s requirements and thus to proceed on the basis that, as Mr Lasok put it at one stage, the bidder’s tender is no more than an “opening salvo” and that he has the right to put forward in the course of negotiations his “final shot”.
  56. To my mind, what the negotiated procedure contemplates is that, subject to maintaining transparency and the even-handed treatment of other bidders, and subject also to the terms of the particular tender invitation, the contracting authority is entitled, but not bound, to negotiate with the bidder, for example with a view to eliminating some of the bidders or, which is much the same thing, with a view to selecting a preferred bidder to whom the contract may ultimately be awarded. I find it hard to see how adoption of the negotiated procedure confers on the bidder any right to put forward reviewed or improved terms once his tender has been submitted.
  57. Those general considerations aside, I am quite unable to see that there is anything in the ITN in this case, and in particular the terms of the SNITS, which conferred, or gave rise to any expectation of, a right in the bidder to receive from the DLO an improved description of the DLO’s requirements and a corresponding right in the bidder to respond to that communication and, in the light of it, to revise its proposal. On the contrary, the terms of paragraph 1.2 of the SNITS when taken with paragraph 13 (to which paragraph 1.2 refers) suggests that any further negotiation is wholly dependent upon whether the bidder should be selected to go forward to the next stage of the procurement process and that, once that stage is reached, it is for the DLO (acting as the contracting authority) to decide whether to invite best and final offers, or to select a preferred (and if necessary a reserved bidder) or to call for a re-tender. I find it difficult to imply into any of that any right in the bidder to be consulted let alone to engage in the type of negotiation to which Mr Lasok referred. It is noteworthy too that in the tender evaluation methodology set out in Annex H the only reference to negotiation is in paragraph 3.5 – concerned with whether the tender complies with the statement of requirements – where the authority reserves the right to conduct negotiations with any tenderer.
  58. As this is merely an application for interim relief I do not need to reach any final conclusion on whether 3663 establishes any actionable claim arising out of the DLO’s failure to negotiate with it. It is sufficient merely to say that I find the asserted breaches based upon a failure to negotiate, and a fortiori breaches of an unlawful change of award procedure and of the duty to act with transparency, to be exceedingly weak.
  59. Separately from those matters are a number of other alleged breaches where the complaint is in part about the award criteria used by the DLO (as set out in Annex H) and in part about the application of those criteria to 3663′s proposal. Yet others are concerned with the duty to act with fairness and transparency. They are set out in paragraphs 68 to 81 of the particulars of claim. (Others, concerned with breach of DLO’s statutory duty of confidence and with breach of contract, contained in paragraphs 82 to 86 of the particulars of claim, were not pressed before me.) Rolled up in some of the breaches are repetitions of the complaint that the DLO failed to enter into negotiations with 3663 (see for example paragraphs 69(a), 70(c), 76 and 80).
  60. Insofar as the complaints are directed to the award criteria themselves (for example, complaints that in respect of the so-called SOR ratings, described in paragraph 3.5 of Annex H, the tender documents failed to reveal “the minima and the weighting of the individual questions” and that “there was no good reason for not disclosing this information to the tenderers”, or that, in respect of the assessment of price, it was unclear whether the documentation intended matters other than price to be included: see paragraphs 69(d) and (e) and 70(a)) I consider that they are unfounded. If there was any aspect of the tender documentation which 3663 did not understand, it should have raised the matter with the DLO. Paragraph 15.1 of SNITS provided for this. That apart, I am not persuaded that there is any real basis for these particular complaints. For example, a fair reading of paragraph 3.4 of Annex H makes reasonably clear that “Price”, which accounts for 30% of the marking in the evaluation methodology was intended to extend to matters other than price alone.
  61. What then of the complaints based upon the application of the award criteria to 3663′s tender and upon of the need to display fairness and transparency?
  62. Paragraph 70(b) complains that in its assessment of “Price” the DLO failed to take into account cost saving suggestions that 3663 had included in its tender. Paragraph 71(b) to (c) complains that, as regards scoring for risk, the assessors adopted “an impressionistic approach to an assessment for each location” and “did not have to distinguish probability of risk and impact of risk in any particular location” and that “each of five locations was scored with equal weighting for risk without regard to throughput: non-operational, Balkans, Iraq, Afghanistan, future operations” – the five headings under which risk was scored. 3663 points to a document, headed “Scoring for Risk”, which was only disclosed, I understand, under its Freedom of Information Act request. The document refers to a series of criteria used in the assessment, a system of graduated marks for the various levels of risk (with Low Risk attracting 30 points and High Risk attracting 0 points) and showing that 3663 scored badly, indeed was rated high risk and therefore obtained no points, for Afghanistan and future operations and only 12 points (as a Medium Risk) for Iraq. 3663 complains that, by contrast, Purple scored 30 points under each of the four operational headings.
  63. Mr Lasok commented that one would expect risk to be rated differently and described 3663′s low marking for Afghanistan where its current sub-contractor, SFS, was said to be operating in close conjunction with 3663 personnel but where, under a new contract, it would be using the services of a new sub-contractor called DCS, as “irrational”. He described a document, also disclosed, I understand, pursuant to the Freedom of Information Act request, in which the DLO summarises the outcome of its visit to 3663′s sites, as impressionistic, superficial, and, in places, as arguably inconsistent and as one the quality of which could only properly be assessed by examining at trial and after disclosure what it was based upon.
  64. Coming to breaches under the heading “Fairness and Transparency”, 3663 complains that having, as the DLO knew, “consistently performed the Existing Contract to the highest standards”, the only substantive difference between 3663′s existing position and what it was proposing in its tender was the change of its sub-contractors. This is a reference to the fact that SFS, its existing overseas sub-contractor, is part of the consortium which controls Purple and therefore would not be acting as 3663′s sub-contractor, as it hitherto has done, in respect of any overseas operations if 3663 were to be awarded the new contract. 3663 complains of undue reliance by DLO on sub-contractors and on DLO’s failure to inform tenderers of the importance of sub-contractors. It complains that DLO unfairly failed to visit any sites operated by Purple other than those operated by SFS using 3663′s IT and other management systems and unfairly failed to visit a site where SFS currently acts otherwise than as 3663′s sub-contractor and therefore without the benefit of 3663′s systems and failed to make a like for like comparison between a site in Croatia and a 3663 site. More generally, 3663 complains that the DLO placed undue emphasis on overseas operations, even though under the existing contract, overseas operations account for only 10% of the overall catering requirement. It complains that the tender documentation and other information supplied did not make clear the importance that DLO attached to such matters.
  65. Some of these complaints, for example the complaint that the importance which the DLO was attaching to operations had not been made sufficiently plain to 3663, I regard as without foundation. I have already referred to some of the documents received by 3663 prior to the sending out of the ITN which makes this plain. The very fact that the tenderers were required to give an in depth presentation for the fictitious Fantasystan is difficult to reconcile with this complaint. In the schedule of requirements, forming part of the tender documents, the operations requirement was described as “fundamental” and “critical”. There was also evidence which suggested that 3663 fully understood the importance attached to the overseas requirement.
  66. Some of the complaints had an air of the speculative about them. Yet others, for example the complaint concerning DLO’s failure properly to assess cost saving suggestions, turned on the relatively summary manner in which this complaint is dealt with in the evidence of Phillip Tozer the Deputy Director Logistics Procurement (Supply Chain) for the DLO.
  67. I remind myself that, as Fennely J pointed out in the Irish Supreme Court in Siac Construction Ltd v Mayo County Council [2003] EULR1, a case in which allegations were made that a contracting authority had acted in breach of EU public procurement rules:

    “78. …it seems to be well established by a significant line of case law of the Court of First Instance that a Community institution, when in a comparable situation to the awarding authority of a member state, enjoys “a wide discretion” as to the criteria by which it will judge tenders and, moreover, its decisions will be annulled only if a “manifest error” can be demonstrated.

    79. It is not conceivable that the courts of the member states are required to apply a different standard of judicial review to their own awarding authorities…”

    Mr Lasok did not question that as an accurate statement of the position in law.

  68. The clear view that I have formed is that none of the particular matters of which 3663 complains can fairly be described as demonstrating that the DLO stepped outside the wide discretion which it enjoys either in the criteria by which it approached the assessment of the tenders in the award process or in its application of those criteria to the terms of 3663′s tender or in its approach to the assessment of matters such as site visits, nor that its decisions in this regard demonstrated any “manifest error”. In so stating I bear fully in mind the caution expressed by Fennelly J in paragraph 83 of his judgment against adopting too rigorous a test of manifest error.
  69. I remind myself again that this is not the trial but no more than an interim application and that a closer examination of the facts at trial may gainsay the strong impression that I have formed. Suffice it to say that, as regards these complaints as much as the complaints based upon a failure to negotiate, I regard the allegations of breach as, at best, weak. Limitation
  70. For a breach of the 1995 Regulations to be actionable – and all of the breaches which 3663 has urged before me are of the duty owed to it pursuant to regulation 29(1) – the proceedings must be “brought promptly and in any event within 3 months from the date when grounds for the bringing of the proceedings first arose unless the Court considers that there is good reason for extending the period…”. See regulation 29(4)(b) of the 1995 Regulations.
  71. Mr Darling QC, who with Ms Sarah Hannaford appeared for The Secretary of State, and Mr Michael Bowsher, who appeared for Purple, submitted, and I agree, that the complaints, so far as based upon failures to negotiate and upon a change of the award procedure in consequence of such failure, are outside the 3 month period. Mr Lasok accepted that that was so. It was also submitted that the same is true of the other breaches (as I shall refer to those which are concerned with breaches other than those arising out of the failure to negotiate). This largely turned on a document upon which, for reasons concerned with the failure to negotiate and change of procedure allegations, Mr Lasok placed reliance, namely a independent review (called the OGC Gateway Review 3) into the procurement process. That review proceeded on the basis that, by the time the review was conducted, which was between 13 and 15 February 2006, a preferred bidder had been selected (presumably Purple). See paragraph 10 of the review. On that footing, as paragraph 48(a) of Mr Lasok’s skeleton argument appeared to accept, the grounds for making the further complaints must have arisen, and therefore the 3 month period within which to bring the proceedings must have expired, before 3663 issued its claim form on 18 May 2006 which was just over three months after the review had been carried out.
  72. I am far from satisfied that, as regards the other complaints, the 3 month period had indeed expired by the time these proceedings were launched. I find it difficult to place much if any reliance on that review whether on this or on other points arising in this dispute. The real question to my mind is whether, this being an interim application, 3663 establishes a sufficiently arguable case for establishing that good reason exists for extending the period or periods in relation to the breaches relied upon.
  73. As regards the other breaches (assuming they are well-founded), I have no doubt that it does. This is because, even if they occurred outside the three month period, 3663 had no awareness of them and had no reason to be aware of them (the breaches are all concerned with DLO’s evaluation of its tender) until, at the earliest, the debriefing meeting which took place of 15 May and it came into possession of the other documents and information (in part as a result of the Freedom of Information Act request) at about the same time or later, upon which it has based the complaint set out in its particulars of claim.
  74. As regards the complaints based upon the failure to negotiate and on a change of the award procedure, I am of the view, despite Mr Lasok’s valiant attempts to persuade me otherwise, that 3663 was clearly on notice at the latest from the further clarification meeting held on 6 February 2006 that there would be no negotiations. Since it is that fact coupled with the 19 January letter upon which the allegation of a change of award procedure is based (see paragraph 60 the particulars of claim), 3663 was on notice of a change of the award procedure (assuming, contrary to the documentation that I have seen, that those two matters justify such a conclusion). Yet 3663 took no action at all.
  75. In this regard I consider the terms of the 19 January letter as making tolerably plain that, subject to the further clarification meeting, there would be no further discussion, let alone “negotiations”, and therefore that the 3663 “bid team” should thereafter stand down while the DLO set about obtaining the necessary approval for the contact award. An attempt was made during the course of Mr Lasok’s closing submissions, by the introduction of a last minute witness statement from a Mr Murphy, a representative of DCS (one of 3663′s proposed sub-contractors), to suggest that the bid team is different from the team that conducts negotiations, the inference being that 3663 had no reason to understand the letter as indicating that there would be no negotiations. This is despite the fact that there was, in 3663′s case, effectively only one team. (I should say that, on instructions, Ms Hannaford made clear that the Secretary of State disputed what was said in this late witness statement.) Be all that as it may, the clear import of the 19 January letter is that, following the further clarification meeting, there would be no more for 3663 to do other than to await the decision in relation to the contract award.
  76. That this was the position was reinforced, in my view, by the exchanges, referred to earlier, at the conclusion of the clarification meeting held on 6 February.
  77. I have seen nothing in the witness statements of Mr Shelley (filed on behalf of 3663) to suggest that, following receipt of the 19 January letter and the meeting on 6 February, 3663 expected negotiations to take place. I notice too that in paragraph 45 of their skeleton argument, Mr Lasok and Ms Skilbeck in terms submit that “the Claimant was informed on 19 January 2006 and knew after the clarifications meeting on 6 February 2006 that there would be no negotiations”. The force of this is not diminished by the fact that the submission goes on to suggest that 3663 “was not aware that that signified, not that negotiations were not considered necessary, but that negotiations had (apparently) been dispensed with”.
  78. It is also noteworthy, as Mr Lasok confirmed in answer to a question that I put to him, that, although given to understand by the 19 January letter that the DLO’s intention was to bring forward the date of contract award to April 2006, 3663 made no attempt after the 6 February clarification meeting to negotiate with the DLO or even to raise with the DLO why no approach had been made to conduct any kind of negotiation. As the weeks passed, and April came and went, 3663 must have thought that this failure was very odd if its understanding was that negotiations would take place. The only reasonable inference is that 3663 was fully aware that there would be no further negotiations before the contract was awarded and that, for whatever reason – possibly a belief that it was the successful bidder – it did not wish or see the need to press the issue. That 3663 may not have realised that DLO’s decision not to conduct any negotiations (or, if it did, to change the award procedure) constituted breaches of the 1995 Regulations (assuming they did) does not avail it. See, in this context, the observations of Dyson LJ in Jobsin.co.uk plc v Department of Health [2001] EuLR 685 at 698 to 699 (paragraphs 33 and 38).
  79. In the circumstances, I am not persuaded that, as regards its various complaints based on a failure to negotiate, 3663 establishes sufficient grounds, at any rate on this application, to justify the exercise in its favour of the discretion under regulation 29(4)(b) to extend the statutory period. Mr Dickinson
  80. There is one further complaint that I should mention. It features as one of the supporting particulars of the allegation concerned with assessment of risk, set out in paragraph 71 of the particulars of claim, that the award criteria were unfair and/or were unfairly applied in respect of 3663′s tender in that “Purple would have had some background knowledge of the methodology not available to the Claimant through Mr Dickinson”.
  81. This is a reference to the fact that a Mr Dickinson who had previously been employed at the Ministry of Defence had subsequently joined Purple as a member of its bid team. The suggestion initially made was that he was involved in the drafting of the ITN while at the Ministry and, I think, that the DLO should have made it a condition of Purple’s tender that he should take no part in Purple’s bid.
  82. The matter had been first raised in 3663′s solicitor’s letter of 17 May 2005. The Treasury Solicitor’s letter of reply stated that Mr Dickinson had reached retirement age and ceased his employment with the Ministry in December 2004, had been involved in “scoping the project”, but had not contributed in any way to the production of the final ITN. I was told by Mr Darling on instructions that he had not been involved in either the DLO’s statement of requirements or in the fictitious operation Fantasystan. Mr Bowsher told me, also on instructions, that Mr Dickinson joined SFS in July 2005 and that 3663 was fully aware of this at the time and raised no objection. (At that time and indeed currently SFS is, as I have mentioned, 3663′s overseas sub-contractor.)
  83. The matter was not pursued by Mr Lasok in his closing submission, although those submissions covered a variety of other matters. Mr Dickinson’s involvement is not mentioned in the skeleton argument prepared by Mr Lasok and Ms Skilbeck prior to the start of this hearing.
  84. In my view Mr Dickinson’s decision to join SFS is not something which vitiates the DLO’s proper evaluation of 3663′s tender. If there was to be an objection to his involvement, if he has been, in Purple’s bid, this is a matter which 3663 could and should have raised at a much earlier stage. The matter is not one to which I have attached any weight on this application. Causation
  85. Mr Darling and Mr Bowsher both submitted that in any event since 3663 only has a cause of action under regulation 29(2) if it can establish that, in consequence of the breach of duty owed to it by the Secretary of State to comply with the provisions of the 1995 Regulations it has suffered or risked suffering loss or damage which assumes that it would have won the contract. They submitted that since on the evidence it has no sensible prospect of being awarded the new contract it has no right to bring a claim under that regulation.
  86. Contrary to Mr Lasok’s submission, this was more than a mere pleading point based upon the manner in which paragraph 87 of the particulars of claim had been formulated. The nub of the contention was that 3663 was so far behind Purple in the contest for the new contract that, even if there had been negotiations and the other alleged breaches had not occurred 3663 would not have been the successful tenderer and, in particular would not have been selected as either the first or even as the second preferred bidder.
  87. This is not a submission I feel able to accept. Assuming that 3663 were able to make good its various complaints it must be an open question whether it could show that, in that event, it would have had a material prospect of winning the contract. Interim relief
  88. If an injunction is refused it is clear that the new contract will be entered into with Purple. Despite the delay in the announcement of the decision to award it the contract and despite the subsequent delay resulting from the standstill period and these proceedings Purple is willing and anxious to take up the contact. Despite the truncation of the five-months lead-in period prior to the intended starting date of the new contract (see paragraph 9 of SNITS) to what is now little more than three months, Purple considers that it is able to achieve this deadline although for reasons cogently set out in a witness statement by its managing director, Mr Murray Pritchard, each day that passes makes this increasingly problematical. Mr Pritchard says, and there has been no challenge to this, that:

    “5. To state Purple’s predicament as simply as possible: to successfully take up the contract as bid for by the intended due date of 1 October 2006 there is a vast amount of infrastructure that needs to be put in place. The process of putting that infrastructure in place and the planned transmission period was based on an award being made by the MoD on 2 May. There are a number of third parties on the other side of contracts that need to be in place to create that infrastructure (for the lease of premises, build of cold stores, warehouses, vehicles etc). Those contracts are not yet signed by Purple because the award has not yet been confirmed.

    6. Those third parties are on the verge of walking away. If that happens, then Purple will effectively be back at square one in terms of setting up the infrastructure to support the contract. That is not a question of 3 or 4 weeks delay. That is a question of 6-9 months delay.”

    Mr Pritchard then explains in some detail what is involved in preparing to take up the contract on the due date, how that includes having in place the transition plan to take over from 3663 as existing supplier including modifying existing warehouses, taking up and adapting additional premises, securing a fleet of vehicles, having appropriate IT systems in place and securing large numbers of additional staff. He goes on to say this:

    “24. Purple and its sub-contractor DBC have already suffered losses as a consequence of the delays to date. For example, in order to accommodate the anticipated disbursement of business from Petersfield (which in turn is to be done to accommodate the MoD business under the Contract then taking up that site) DBC has emptied one of its units in Brentwood. The standing cost of that unit is £60,000 per month; it was supposed to be empty for 2-3 weeks at the most. It has now been empty for 11 weeks.

    25. Such losses are presently of secondary concern: of far greater concern is the near certainty that further delay will kill the Contract in the sense that Purple will need to substantially start from scratch in setting up the necessary infrastructure to support it.”

    And yet later in his witness statement:

    “32. The risk that I need to emphasise is that these various components of the infrastructure that Purple needs to create are entirely interconnected. If we lose one of the premises, it is not simply a matter of finding another and the 2-6 month delay in doing that. There would be the inevitable knock-on effect in respect of the people that Purple needs to hire; the building contracts that will need to be secured; and the redrafting of the logistics plan.

    33. We have reached the stage right now where, even if the Contract were to be confirmed immediately, it is highly likely that we will have extreme difficulty in meeting our contractual obligations. Further delay will make this a certainty; we would need to start from scratch in setting up the supporting logistics and infrastructure.”

  89. It is therefore fair to assume that if an injunction is granted and 3663′s claims fail at trial then, even if the trial could be fixed and take place within a short time span, Purple would be quite unable to meet the 1 October 2006 deadline and it is by no means clear when it would be in a position to take up the new contract.
  90. It is no answer to these points for 3663 to say, as Mr Lasok submitted, that Purple bound itself by the option it entered into on 8 May 2006 to enter into the new contract 14 days after determination of proceedings such as these and that the existence of the standstill period and the scope for challenge offered by the Regulations are inherent in the procurement process or that the possibility of delay of this kind is something that should have been factored into the overall procurement timetable.
  91. On the other hand it is clear that if an injunction is refused the new contract will be entered into and, even if otherwise wholly successful at trial, the effect of regulation 29(6) is that 3663 will be confined to an award of damages.
  92. I accept that, if I were to grant an injunction against cross-undertakings in damages extending both to the Secretary of State and to Purple and, although Mr Lasok submitted that this was inappropriate, to those who constitute the consortium which lies behind Purple, 3663 would be well able to discharge any liability that might fall on it if its claims should fail at trial and if, as would almost certainly be the case, those having the benefit of the cross-undertaking could show that they had suffered damage as a result of the injunction. I equally accept that if Purple were refused an injunction, the new contract were entered into but 3663 were successful at trial, the Secretary of State would be well able to honour any award of damages that, on this footing, 3663 would obtain.
  93. I also accept that, in the particular circumstances of a case of this kind, it is no answer to say, even if it were the case, that damages could adequately compensate 3663 for the loss of the new contract in the event that it were to establish at trial that the new contract should have been awarded to it, and therefore that on that ground alone an injunction should be refused. My understanding of regulation 29(5)(b) of the 1995 Regulations, when read with paragraphs (1) and (2) of that regulation, is that the possibility is held open of a supplier securing the award to it of a public supply contract, for example by the court making an order setting aside the contracting authority’s decision to award the contract to another, provided the supplier can demonstrate that the contracting authority has acted in breach of the duty owed to it to comply with the 1995 Regulations and provided also that it can show that, but for the breach, it might have secured the contract. The underlying purpose is, to my mind, to ensure, consistently with the other requirements of the 1995 Regulations, that the public procurement contact goes to the supplier which best meets the criteria which have been adopted for the award of the contract in question. In any event I accept that, in various respects (they are summarised in 3663′s evidence), damages would not be a wholly adequate remedy if 3663 were to succeed at trial.
  94. With those considerations in mind I have come to the conclusion on what it a far from easy exercise of discretion that the injunction should be refused. I reach that conclusion for the following reasons.
  95. First, there is the marked weakness of 3663′s allegations of breach of duty. Some of them, as I have mentioned, are scarcely arguable. Second, insofar as the claim is founded upon failures to negotiate, 3663 could and should have taken action much earlier. Third, there is the risk that, given the shortness of time between now and the expiry of the existing contract, there may be a break in the continuity of supply before the new contract can be awarded.
  96. In this regard, 3663 has made clear that if an interim injunction were granted it would be willing, in order to avoid the risk any break in the continuity of supply, to continue to provide supplies, in effect as a continuation of the existing contract, and would be willing to do so on terms, over and above offering the usual cross-undertaking in damages, which would enable any cost to the DLO over and above what it would have incurred from 1 October 2006 had the new contract been in place to be identified and, if necessary, secured. I am not, however, altogether convinced that the matter is quite as easy as that. Mr Bowsher raised as an open question whether under public procurement law it is possible simply to extend for what could be an indefinite period a public supply contract to which either the 1995 Regulations or their replacement, The Public Contracts Regulations 2006 would in principle apply. Mr Lasok was not able to give me any assurance on the point beyond asserting that there was nothing in public procurement law to prevent an extension of a supply contract beyond its contractual termination date provided this was done for a genuine reason rather than as a ruse to circumvent the application of the public procurement rules. I feel uneasy on the point, not least because I can well see that if a trial of 3663′s challenge to the decision to award the new contract to Purple were to fail, an injunction having been granted in the meantime, it might be very many months before a replacement supplier, whether Purple or another, could be in a position to provide the replacement supply. Relevant to this is the evidence of Brigadier David Martin, Director Logistics (Commodities) at the DLO. He referred to the “clear operational imperative” to start a new contract on 1 October 2006 and, for reasons which he summarises in his evidence and which, in any event, do not require much imagination, to the “risk of … irreparable harm to enduring operations” if proper arrangements are not in place. I consider that it is entirely appropriate to take into account the very great importance of avoiding the kind of harm to which Brigadier Martin refers. I do not think that it is an answer to this concern to argue, as Mr Lasok submitted, that to an extent the position is one of the DLO’s (or the MoD’s) own making as a consequence of the decision to delay announcing the contract award by a month from early April to early May. I should add in passing that, notwithstanding what is said in Brigadier Martin’s evidence, I attach no weight to the suggestion that, because SFS is a member of the consortium which controls Purple, its continued cooperation as overseas sub-contractor to 3663 under the latter’s existing contract, if continued after September 2006, cannot be assumed.
  97. Fourth, there is the interest of Purple to take into account. It is an innocent player in all of this. If an injunction is granted and 3663′s challenge fails at trial, Purple may not be in a position, whatever its contractual obligations, to provide the supply without considerable further delay. On any view it faces losses as a result of the delay. This assumes, and there is no real evidence to suggest otherwise, that whatever the delays Purple would be in a position in due course to take up and fulfil the new contract. I can well see, nevertheless, that formidable difficulties may arise in quantifying just what its losses are as a result of any delay.
  98. For all of these reasons I consider that the balance of justice favours the refusal of any interim injunctive relief.

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