Procurement Case Overturns Completed Contract by MacRoberts LLP
On 3 February 2009 in D.R. Plumbing & Heating Services Limited –v– Aberdeen City Council (unreported) the Court of Session endorsed the principle established by the European Court of Justice in Alcatel (C-81/98) that a national court must, in all cases, be able to review and set aside award decisions on all public procurement contracts.
Most significantly, this is the first time a UK Court has set aside a purported concluded contract as a result of a breach of the EU public procurement rules
Aberdeen City Council (the Council) initiated a procurement for the provision of domestic central heating installations last year under the Public Contracts (Scotland) Regulations 2006. D.R. Plumbing & Heating Services (DRP) were one of six contractors to submit a tender but, were notified on 26 November 2008 that they had been unsuccessful. Instead, the Council selected Gas Call Services Ltd as the successful party; a contractor whose tender price was £243,502.73 greater than DRP’s and whose evaluation score placed them third overall.
DRP took advantage of its rights under Regulation 32(4) of the Public Contracts (Scotland) Regulations 2006 (the Regulations) and wrote to the Council requesting (1) the reasons why they were unsuccessful, and (2) the relative advantages and characteristics of the successful bidder.
It was subsequently revealed that the Council exercised their option of not appointing one of the two highest scoring contractors, including DRP on two grounds. Firstly, in the Council’s view the style of pricing was unusual and secondly, the tender price submitted by DRP was greater than the successful contractor’s price on the basis of a “re-measurement” exercise. This undisclosed re-measurement was carried out by the Council to determine an indicative value of an average installation. Moreover, it was only made known to DRP on 16 December 2008 that the Council had in fact entered allegedly into a contract with Gas Call Services Ltd on or around 27 November 2008.
Accordingly, DRP challenged the award of the contract arguing the procurement had been conducted in a non-transparent, unfair and discriminatory manner, and the contract had been awarded unlawfully during the Mandatory Standstill Period.
The case largely focussed on the interpretation of Regulation 47(8)(a) which allows a court by interim order to suspend the procedure leading to the award of the contract, or suspend the implementation of any decision or action taken by the contracting authority in the course of following such a procedure, and Regulation 47(9) which states:
“In proceedings under this regulation the Court shall not have power to order any remedy other than an award of damages in respect of a breach of the duty owed…if the contract in relation to which the breach occurred has been entered into. ”
Essentially, the Council argued the only remedy available to DRP was damages as a contract had been entered into, and as such there was no procedure or implementation of a decision for the Court to suspend. Also, a Court may not set aside a concluded contract in the absence of bad faith.
On the other hand, it was argued for DRP that the conclusion of the contract and the decision awarding the contract cannot coincide in time. The Remedies Directive 89/665/EEC presupposes a gap in time and the Council could not found on Regulation 47(9) in such a way as to seek to act in a manner which is contrary to Community Law. Otherwise, a contracting authority can evade the remedies which EU Law requires are available.
Lord Uist concluded that the arguments put forward on behalf of DRP were well founded. In his view, the Council did not take sufficient account of the decision of the European Court of Justice in Alcatel, subsequent case law or the provisions of the Remedies Directive. A good arguable case had been demonstrated and the balance of convenience was in favour of granting interim orders (1) to suspend the implementation of the decision by the Council to award the contract to Gas Call Services Ltd, and (2) suspend and set aside the purported contract between the Council and Gas Call Services Ltd.
In addition, in order to preserve DRP’s rights in relation to the procurement the judge concluded it was necessary to grant an interim interdict preventing the Council entering into any subsequent contract with Gas Call Services Ltd.
This case highlights very clearly the importance of the intention behind the Mandatory Standstill Period. Contract award must be delayed in order to give bidders time to understand whether or not any concerns they might have about the procurement process are well founded, and if so to permit them to exercise the statutory remedies of setting aside authorities decisions, including suspension of the contract award decision itself.