The recent case came within the very tightly drawn grounds for use of the declaration of ineffectiveness remedy, a draconian remedy that the courts have only used once or twice before in the UK, most notably in the Faraday case.
In this instance, the Court used its even rarer seen contract shortening powers alongside a large civil penalty against the defendants.
Background
The case of Consultant Connect Limited v (1) NHS Bath and North East Somerset, Swindon and Wiltshire Integrated Care Board (2) NHS Gloucestershire Integrated Care Board and (3) NHS Bristol, North Somerset and South Gloucestershire Integrated Care Board [2022] EWHC 2037 (TCC) (“the Case”) relates to a procurement by the defendants for the supply of communications services for use within the NHS. The Claimant challenged claiming that the process was non-transparent and skewed in favour of a particular supplier while breaching various provisions of the Public Contracts Regulations 2015 (PCR 2015). The winning supplier had been awarded the contract following a mini competition in which it was the only supplier invited to tender.
The Claimant alleged that the Defendants were in breach of the following parts of PCR 2015:
- Regulation 18(2) - preventing procurement from artificially narrowing competition;
- Regulation 18(3) – designing the procurement without the intention of unduly favouring or disadvantaging certain economic operators;
- Regulation 33(11) – competitions shall be based on the same terms applied for the award of the framework or just more precisely formulated terms.
It is important to note that one of the three limited grounds for the ineffectiveness remedy is a breach of any requirement imposed by Regulation 33(11), as noted above. In the Case, the Court agreed that the Defendants were in breach of Regulation 33(11).
Despite having grounds to declare the contract ineffective, and unravel it there and then, the Court did not issue a declaration of ineffectiveness. This was due to it being in the general interest for the contract to be maintained to ensure patient care was not disrupted. As such, the Court chose to shorten the contract instead and order that the Defendants undertake a new procurement within six months prior to the contract expiring. This is a permitted alternative when the Court has power to use the declaration of ineffectiveness remedy.
The Court also issued fines (aka civil financial penalties) to each of the Defendants of £10,000, £8,000 and £4,000. The highest penalty was issued in relation to the worst breach of the Regulations, i.e. breaching the requirement to ensure fairness and transparency.
Key Points to Takeaway
There are several key points that contracting authorities should take away from this case:
- Frameworks are not a free for all and you cannot just amend the terms to manipulate the outcome of the tender process. Doing so will often result in a challenge from other bidders, which is both costly and time consuming (particularly if it ends up in court).
- The grounds for ineffectiveness are rarely satisfied and as this case demonstrates, there may be occasions where the grounds are satisfied but it is not appropriate to simply cancel the contract. This case has helped establish the likelihood that a contract relating to the healthcare sector will result in courts using their shortening powers to ensure patient care and safety is maintained.
- The financial penalty in this case provides some scale for what penalty may be considered “effective, proportionate and dissuasive” in a case where a declaration of ineffectiveness or its alternatives are awarded. This was previously unclear following a the Faraday case in which a nominal £1 penalty was issued due to the very particular case facts.
The Defendants are now left with the task of having to restart the procurement process and go through a large, time consuming tendering process to award the contract while also having to pay out the fines.
For more information on public procurement issues, please contact a member of our Public Procurement Team.
