COURTS CONSIDER LEGALITY OF PROCUREMENT DECISIONS TAKEN DURING THE PANDEMIC

The post below was first published on our Public Law blog.

Two recent judgments have been handed down, relating to allegations of breach of procurement rules by campaign organisation The Good Law Project against the Government. Both judgments related to procurement decisions made during the first wave of the Covid-19 pandemic:

• The High Court held that the Government’s use of a high priority lane in the procurement of personal protective equipment, or “PPE“, amounted to an unlawful breach of its obligation of equal treatment under the Public Contracts Regulations 2015 (the “PCR“) (R (on the application of The Good Law Project) v Secretary of State for Health and Social Care) [2022] EWHC 46 (TCC), or “R (GLP) v Secretary of State for Health and Social Care“).
• The Court of Appeal overturned a finding of the High Court that the Government’s award of a contract to a company with ties to the then Chief Adviser to the Prime Minister gave rise to apparent bias and was therefore unlawful (R (on the application of The Good Law Project) v Minister for the Cabinet Office [2022] EWCA Civ 21, or “R (GLP) v Minister for the Cabinet Office“).

Key points

• Where a contracting authority considers bids from more than one economic operator, there is no obvious rationale for disregarding the principle of equal treatment in terms of the criteria used to decide which bidders should be awarded a contract. Dispensing with a competition does not justify arbitrary or unfair selection criteria where more than one economic operator could satisfy the demand.
• In a case concerning decisions made by a public body where it is required to make a complex evaluation of a wide range of overlapping criteria, all of which involve difficult and technical judgments, the purpose of which is to safeguard front line workers in a public health crisis, the Court must accord proper respect to the fact that the decision-maker is much better placed to carry out the assessment than the judiciary by way of judicial review.
• Consideration of allegations of bias, actual or apparent, requires an assessment of whether a fair-minded and informed observer would conclude that there is a real possibility of bias. The central context for an assessment of the fair minded and informed observer’s belief is the emergency conditions arising out of the pandemic which, in turn, lead to the engagement of regulation 32 of the PCR, which allows for relaxation of the usual procurement rules where “strictly necessary” and for reasons of “extreme urgency brought about by events unforeseeable by the contracting authority“.
• A claimant may have standing to challenge the award of a government contract despite not being an economic operator if it has a sufficient interest in the public procurement process, and there are no obviously identifiable disappointed bidders who might otherwise be in a position to identify causation and loss. However, the issue of standing in procurement claims is “ripe for review“.

R (GLP) v Secretary of State for Health and Social Care

Background

The judicial review claim, brought by The Good Law Project and doctors’ organisation EveryDoctor, related to the award of contracts for the supply of PPE during the first wave of the Covid-19 pandemic between March and April 2020. The urgency of the health emergency meant the Secretary of State abandoned the usual competitive procurement process in favour of an “open source” approach to purchase over £14 billion-worth of PPE procured through more than 1,000 contracts. Nine of these contracts were awarded to three companies: Ayanda Capital Limited (“Ayanda“) for a value of £252 million, Crisp Websites Limited t/a PestFix (“PestFix“) for a value of £342 million, and Clandeboye Agencies Limited (“Clandeboye”) for a value of £123 million.

The Secretary of State established a ‘high priority lane’ for companies referred by Ministers, MPs and senior officials, which had their offers considered sooner than rival bids and thus increased their chances of being awarded a contract. A National Audit Office report found that companies within the high priority lane were ten times more likely to succeed in their bids.

The claimants sought judicial review on three grounds:

1. The Defendant was in breach of the EU principles of equal treatment and transparency by:
   1. Failing to identify the contract selection criteria or guidance.
   2. Operating a high priority lane which significantly increased a bidder’s prospects of being awarded a contract.
2. The Defendant failed to provide proper reasons for its decisions.
3. The decision to award the contracts to PestFix and Ayanda was irrational because no sufficient financial or technical verification was carried out in respect of their offers due to the operation of the high priority lane.

The Secretary of State relied on regulation 32(2)(c) of the PCR, which allows for relaxation of the usual procurement rules where “strictly necessary” and for reasons of “extreme urgency brought about by events unforeseeable by the contracting authority”. Regulation 18 of the PCR requires contracting authorities to treat economic operators equally and without discrimination and to act in a transparent and proportionate manner. The Secretary of State argued that the Claimants lacked standing to bring the claim because they are not “economic operators” within the meaning of regulation 18.

Judgment

On the issue of standing, the Court found that the Claimants had sufficient interest to bring the challenge on each ground.

In relation to the first ground, Mrs Justice O’Farrell found the Defendant’s open source procurement process had in place adequate selection criteria and guidance for the evaluators of bids. However, the operation of the high priority lane breached its obligation of equal treatment and it was unlawful to confer such an advantage on PestFix and Ayanda. Clandeboye was found not to have been awarded its contracts through the high priority lane and so this part of the claim was dismissed.

The Court dismissed the second ground as the Defendant had given sufficient reasons for the decisions. In relation to the third ground, the Court found there was objective justification for treating the offers from PestFix and Ayanda as high priority offers and that sufficient due diligence had been carried out in respect of these companies prior to the award of contracts, taking into account the limited time and resources.

The Court concluded that, although the Defendant’s operation of the high priority lane breached its obligation of equal treatment and was therefore unlawful, the merits of PestFix and Ayanda’s offers meant it was highly likely the contracts would be awarded regardless of their position in the high priority lane. On this basis, the Court did not grant the declaratory relief sought by the Claimants.

R (GLP) v Minister for the Cabinet Office

Background

This case is an appeal from the High Court judgment handed down on 15 February 2021. Our ebulletin on the High Court judgment can be found here.

The claim related to the award by the Cabinet Office in June 2020 of a contract for the provision of focus group and communication support services (the “Contract“) to Public First, a public policy research agency. The Contract was intended to assist the Government’s communications strategy regarding the public health risks posed by the pandemic. Both the Minister for the Cabinet Office and the then Chief Adviser to the Prime Minister (Dominic Cummings) had personal and professional connections with the co-founders and directors of Public First.

The Minister for the Cabinet Office appealed the High Court judgment that the relationship between the directors of Public First and Mr Cummings led to apparent bias. The Good Law Project put forward three submissions on a cross-appeal:

1. It was not “strictly necessary”, as required by regulation 32(2)(c) of the PCR, for the Government to award the Contract to Public First as it already had existing suppliers which could have been used instead.
2. It was not strictly necessary for the Contract to have a six-month duration.
3. The scope of the Contract was not strictly necessary because work unrelated to the Covid-19 pandemic was carried out in later stages.

Judgment

The Court of Appeal overturned the High Court’s finding of apparent bias. It held that a fair-minded and reasonably informed observer would not have concluded that a failure to carry out a comparative exercise between Public First and other research agencies created a real possibility that the decision-maker was biased. Equally, the fair-minded and informed observer, realising that the use of a negotiated procedure without prior publication (with Public First) was strictly necessary because of the pandemic emergency, would not have found the absence of any formal record of the decision making process indicative of apparent bias.

The Court of Appeal rejected all three grounds of the Claimant’s cross-appeal. It concluded that the Minister was entitled to exercise his judgment about which suppliers could carry out the urgently required services. Furthermore, at the point in time at which the Contract was made, it was impossible to judge whether six months was longer than strictly necessary. Finally, to the extent that work done under the Contract did not relate to the Covid-19 pandemic, this was a matter of contract performance and was unrelated to the Minister’s procurement decision.

Comment

The two judgments are significant from both a procurement law and public law perspective.

Mrs Justice O’Farrell’s detailed exposition of the requirements of equal treatment and transparency in situations of extreme urgency under regulation 32(2)(c) of the PCR will be relevant in any future challenge based on breach of these procurement rules. Her judgment also emphasises the difficulty of succeeding in judicial review claims alleging irrationality, the judge noting that “the court’s role is not to second-guess an appropriate calculation of the risks involved or substitute its own assessment as to the propriety of the contracts awarded“. The Court of Appeal’s decision in the second claim described above is likely to be welcomed by contracting authorities which awarded contracts under conditions of unprecedented urgency brought about by the first wave of the pandemic.

The approach of the High Court and Court of Appeal to the issue of standing in procurement challenges is also of interest. The High Court in R (GLP) v Secretary of State for Health and Social Care found the claimants had standing to bring the judicial review despite neither claimant being an “economic operator”. However, the Court of Appeal in R (GLP) v Minister for the Cabinet Office regarded the first instance decision on standing to be “an unprecedented outcome”, adding that “[t]he question of standing for complete strangers to the procurement process with no commercial interest both under the Regulations and on public law grounds is a question ripe for review when it next arises”. These comments are likely to encourage contracting authorities to seek to question the standing of certain categories of claimant in future claims.