31/01/2017
In December 2016, another decision came out of the long-running saga of Energy Solutions EU Ltd v Nuclear Commissioning Authority. In the latest decision (the third judgment in the High Court), the Technology and Construction Court (TCC) the Honourable Mr Justice Fraser had to rule on the self-imposed question;
"Did the failure to award a contract to the tenderer whose bid ought to have been assessed as the most economically advantageous is a sufficient enough breach of the contracting authority's obligations to warrant an award of damages?"
Brief background to the case
Most of those involved in procurement will be familiar with this case. The Nuclear Decommissioning Authority (NDA) held a tender for the decommissioning of 12 nuclear facilities in the UK, a contract worth over£4 billion. The procurement was run using the competitive dialogue procedure under the Public Contracts Regulations 2006 (which were the relevant procurement regulations in force at the time). In the final scores there was a mere 1.06% difference between the winning bidder and Energy Solutions, who tendered as part of a consortium.
Energy Solutions challenged the award of the contract to its competitor on the grounds that there had been 'manifest errors' in the evaluation process and its consortium should have been awarded the contract. Energy Solutions did not issue proceedings within the statutory 'standstill' period and therefore the contract was awarded to the competitor and the only redress available was to claim damages.
The decision
Justice Fraser was mindful that his findings and/or decision making process could trespass on the Supreme Court's decision which is expected in March 2017.
The NDA argued to the TCC that none of the breaches committed during the competition were serious enough to warrant an award of damages. This included the fact that the contract was wrongly awarded to another bidder, (the court having found in the liability trial that had the tenders been marked correctly, another bidder would have won the contract).
NDA argued that for an award of damages to be made, the breach would have to be in bad faith and the bad faith (or flagrant misconduct as NDA put it) must come from the NDA and not from its employees.
This argument was rejected by Justice Fraser who relied on the observations of Lord Hope in Risk Management Partners Ltd v Brent London Borough Council that the whole point of procurement law is to provide for fair competition. He went on to reason that fair competition is where the company awarded the contract either offers the lowest price or the most economically advantageous offer. Energy Solutions did this, but because of breaches by the NDA, was not given the lucrative contract. Therefore, he concluded, this was a 'sufficiently serious' breach.
Justice Fraser also held that the breach did not have to be made in bad faith for it to be 'sufficiently serious'.
In summary
This decision highlights how important checks and balances are to the procurement process to ensure the tender competition is run fairly. Evaluators should also be given the time and resources to carry out the evaluations of the tender applications carefully (the NDA evaluators were put under pressure to complete the process).
We will update you on the Supreme Court decision in March as soon as it becomes available.
Fisher Scoggins Waters are a London based law firm who specialise in construction, manufacturing and engineering law. If you would like more information about procurement law, please phone us on 0207 993 6960.