Workshop: Public law: challenging automatic suspension of tenders under review

The claimant in Newcastle upon Tyne Hospital NHS Foundation Trust v Newcastle PCT [2012] EWHC 2093 (QB) was a foundation trust which challenged the decision by four primary care trusts not to award it a contract for the provision of diabetic retinopathy screening (DRS) in the North East. In judicial review proceedings, the foundation trust contended that there was an error and lack of clarity in the tender documents which led to an incorrect assessment of its bid. As per regulation 47G(1) of the Public Contracts Regulations, the claim triggered an automatic suspension of the procurement process.

The action before the High Court which came before Tugendhat J was brought by the defendants PCTS to lift the automatic suspension so as to allow them to award the contract to their preferred bidder pending the proceedings.

The court applied the American Cynamid principles and considered:

1. Is there a serious issue to be tried?

2. Would damages be a sufficient ?remedy? and

3. Where does the balance of ?convenience lie?

The court did not focus on the first ?issue noting that the threshold was low. The key considerations related to the question of whether damages would be a sufficient remedy and the issue of prejudice to the parties.

While acknowledging that the loss of the contract would be a direct loss to the claimant and may hinder its ability to win or perform other contracts, the judge did not consider that it had demonstrated why damages would not be an adequate remedy for this loss.

By contrast, the court held that damages would not be an adequate remedy for the defendants should the claim be dismissed. In terms of prejudice and the balance of convenience, the court considered that the continuing suspension would prejudice the defendants' ability to provide DRS services to patients in the North East.

The court rejected the claimant's proposal that it would provide services in the meantime pending the outcome of the litigation, holding that this [i] would only be an interim solution, [ii] would in effect put the defendants in the position of awarding the contract to the unsuccessful bidder and [iii] would result in overall disruption in staff having to be transferred back and forth should the litigation not ultimately lead to the claimant being awarded the contract. This would not be in the best interests of patients.

The court was also influenced by the fact that there was likely to be detailed expert evidence and statistical investigations, delay pending full disclosure and potential further appeals which would lead to a considerable period of time before the proceedings ?were resolved.

The judge considered that this would result in a significant delay in the commencement of the contract.

Accordingly the court lifted the automatic suspension, allowing the defendants to enter into the contract with their preferred bidder notwithstanding the unresolved nature of the proceedings.

Balance of convenience

The decision in Newcastle upon Tyne Hospital NHS Foundation Trust v Newcastle PCT reinforces the position that the automatic suspension in the regulations is capable of being displaced and that there is no presumption in favour of its retention. A decision as to whether it continues will be made on well established principles as to the balance of convenience.

Those challenging contract awards should expect defendants to apply for the automatic suspension to be lifted and should be in a position to demonstrate to the court why it should continue pending what may be lengthy proceedings.

Key factors to take into account include:

? Automatic suspension should be challenged where it is considered that the balance of convenience lies in favour of allowing the contract to proceed.

? The onus is on the claimant to demonstrate why damages will not be an adequate remedy for any losses.

? The overall time scale of court proceedings is a factor the court will have regard to when deciding whether to lift the suspension and determining whether the balance of convenience lies.

? In this particular case the public interest weighed in the balance in terms of ?the overall effect on patients having regard to disruption and provision of services.