Procurement Briefing – Court makes first Contract Shortening Order

On 29 July 2022, Mr Justice Kerr handed down a first of its kind judgment in a procurement challenge concerning a contract for the supply of electronic communications services to support medical professionals (the full judgment can be found here). As the first UK decision to grant a Contract Shortening Order, and one of only a small number of cases to deal with the tricky issue of calling-off under a Framework Agreement, the Judgment serves as an important warning to Contracting Authorities in all sectors as to the potential consequences of non-compliance. 

Relevant legal provisions

Regulation 18 of the Public Contracts Regulations 2015 (PCR) sets out the key principles of any procurement process:

1. the obligation to treat all economic operators equally and without discrimination;
2. not designing a procurement exercise with the intention of excluding it from the application of the PCR or of artificially narrowing competition;
3. competition shall be considered to be artificially narrowed where the design of the procurement is intended to unduly favour or disadvantage certain economic operators.

Regulation 33 sets out specific rules governing the procedures to be followed when awarding Call-Off Contracts under a Framework Agreement including, under Regulation 33(11), a requirement for any mini-competitions to be based upon the same terms as applied for the award of the Framework Agreement (and any terms for such a mini-competition specifically referred to in the procurement documents for the Framework Agreement).  Only where necessary can more precisely formulated terms be applied.

The decision

The Judge ruled that the relevant Clinical Commissioning Groups had breached Regulations 18(1), 18(2) and 33(11).

Whilst the decision turns on its facts, it is of broader relevance in two particular respects:-

1. The Judge imposed Civil Penalties on each of the Defendants and made Contract Shortening Order in respect of a contract which had been entered into in breach of Regulation 33(11);
2. The Judge determined that a supplier who was not a party to a Framework Agreement was able to challenge successfully the award of a Call-Off Contract under that Framework Agreement.  

This is the first time that the Courts in the UK have made a Contract Shortening Order. The Judge decided that abruptly stopping the services would adversely affect patient care and cause disruption.  He allowed the contract to continue for six months for a fresh procurement exercise to be conducted. He also awarded the Claimant damages to be assessed, based upon the counterfactual that a procurement involving the Claimant had been conducted in accordance with the PCR.  The Judge assessed that the Claimant’s loss of a chance of winning the contract at 50%.

The Judge rejected the argument that the Claimant lacked standing to mount a challenge to the award of a Call-Off Contract because it was not a member of the relevant Framework Agreement.  He noted that “usually, a non-member will not be able to satisfy the causation of loss test in regulation 91(1).  If the entire exercise is carried out within the four corners of a framework agreement, the parties most likely to be prejudiced and in a position to claim are disappointed framework members”.  However, the Judge found that “where, as in this case, the winner is picked, first by means of a covertly competitive process outside the framework, and then using the framework without genuine competition, there is plenty of scope for the proposition that regulation 18(2) and (3) (and indeed regulation 18(1)) are not complied with.”

Eversheds Sutherland act for the Claimant in the proceedings.