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Lifting the automatic suspension: case-law update

Monday October 28th, 2013

Covanta Energy Ltd v Merseyside Waste Disposal Authority 26 September 2013 [2013] EWHC 2922 (TCC)

 

An injunction preventing a contracting authority from entering into a contract pending the outcome of a court action by an unsuccessful tenderer has been granted by the High Court in England.  In this briefing note, we consider the judgment of 26 September 2013 by the Hon. Mr Justice Coulson.

Background

The case involved Merseyside Waste Disposal Authority (“MWDA”) conducting a competitive dialogue procurement exercise for a proposed resource recovery contract with a value of more than £1 billion between July 2006 and April 2013. Covanta Energy Ltd (“Covanta”) made it through the three-stage procurement exercise only to be informed in April 2013 that its tender, which was submitted in June 2012, had been unsuccessful and the contract was to be awarded to a consortium headed by SITA, the only other tenderer at that stage. One of the key issues faced by the court was the fact that, after its involvement in the competitive dialogue procedure, two of the key elements within Covanta’s submission were given zero marks and noted as “fundamentally unacceptable”. This point was considered by the court in its evaluation in considering the remedies available to Covanta.

Jill Fryer

Jill Fryer

Judgment

The first issue dealt with by the court was whether the remedy of automatic suspension contained within the Public Contracts (Amendment) Regulations 2009 was available to Covanta given that the procurement exercise commenced before 20 December 2009. Arguments in respect of the intention behind the EU Directives were put forward by both parties together with the general rules on their implementation into national law. The court favoured the arguments on behalf of MWDA and held that the applicable law was the Public Contracts Regulations 2006 (“2006 Regulations”) and the only remedies available to Covanta were the award of damages and the grant of an injunction.

The court moved on to assess the adequacy of damages and, in doing so, a number of procurement cases were considered in identifying the following principles:-

  • if damages are an adequate remedy, normally an application for an interim injunction will fail, though as this is within the court’s discretion, this may not always be the case;
  • the court should assess the fairness of confining an unsuccessful tenderer to the remedy of damages alone;
  • an interim injunction is not prevented by the fact that damages may be difficult to assess or the involvement of speculation as to the value of a loss of a chance; and
  • the availability of a remedy to review before the contract is entered into is relevant to the balance of convenience and not the adequacy of damages.

In applying the above, the court concluded that damages would not be an adequate remedy due to the difficulty of quantifying damages for the loss of a chance and the fact that some of the allegations in the case were similar to cases involving undisclosed criteria.

Finally, the court mainly focused on the balance of convenience in deciding whether to grant an injunction. The court held the following factors were in favour of granting the interim injunction: (i) contracting authorities’ compliance with procurement legislation is in the public interest; (ii) damages were an inadequate remedy; (iii) Covanta would be deprived of an EU law remedy if an injunction was not granted; (iv) if Covanta did not obtain an injunction but was subsequently successful at trial, damages would likely be for a considerable amount; and (v) due to the length of the procurement exercise, the impact of further delay was considered modest.

Comment

Whilst the High Court judgment applied the 2006 Regulations which have now been superseded (the current applicable law in Scotland are the Public Contracts (Scotland) Regulations 2012), the points considered are relevant to cases where a contracting authority seeks the lifting of the automatic suspension remedy.  An automatic suspension is likely only to be lifted where it is not appropriate to make an interim order preventing the contracting authority from entering into the contract. This High Court judgment is one of the few cases where the court has ruled that the contracting authority should not enter into a challenged contract.

 

Jill is an Associate with Harper Macleod LLP and can be contacted at jill.fryer@harpermacleod.co.uk

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Gov Opps training partner, PASS (Procurement Advice Support Service) runs relevant training courses for public and private sector procurement. These include Evaluation and Standstill, Drafting a Compliant PQQ, Legal Impact on Public Procurement, Writing a Tender Specification, Preparing Perfect Tenders and Introduction to Public Procurement. To get more info on the courses, click HERE.

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