INSIGHT

Procurement update – when can government abandon a procurement process and what are the consequences? Considerations from the UK

By Penny Alexander, Monique Bischof, Mohamed Khairat, Emma Wiggins
Government Infrastructure Property & Development Risk & Compliance

In brief 6 min read

The United Kingdom High Court (the Court) recently handed down its judgment in Amey Highways Ltd v West Sussex County Council1, which considered the abandonment of a government procurement process following a breach of relevant procurement regulations by a public agency. For government departments and agencies in particular, this case clarifies when a public agency can abandon a procurement process and what remedies may be available to bidders in these circumstances.

Key takeaways

  • This decision clarifies that a public agency can abandon a procurement in its entirety, provided the decision is not irrational or contrary to the public interest.
  • Abandonment, however, does not prevent or extinguish accrued private law claims of unsuccessful bidders arising prior to abandonment.
  • This decision highlights the importance of ensuring clear processes and controls are in place at the outset of any government procurement process to safeguard against claims. Where discontinuing a procurement is contemplated by a government department or agency, the department/agency needs to ensure they consider a range of factors to inform their decision and that the decision is ultimately lawful. If deciding to terminate, departments and agencies also need to be aware they will (if Australian courts follow this UK precedent) remain liable for accrued claims at the time of abandonment. This is particularly relevant given the recent introduction of new procurement rules in various Australian jurisdictions which give disgruntled bidders enforceable rights and remedies against government departments and agencies.2

Key facts and considerations

Amey Highways Ltd (Amey) brought two separate proceedings against West Sussex County Council (the Council) after the Council awarded a contract for highway maintenance services to the successful bidder, Ringway Infrastructure Services Ltd (Ringway):

  • Breach of statutory duty during tender process: Amey claimed that, but for a breach of The Public Contracts Regulations 2015 (SI 2015/102) (the Regulations), it would have received a higher score than Ringway – which was awarded a score just 0.03 higher than Amey's – and therefore been awarded the highway maintenance contract. Amey sought an order from the Court to set aside the Council's decision to award the contract to Ringway and claimed damages in the alternative (First Action).3 Amey claimed loss of profit of just under £28 million (based on the projected life of the contract) and close to £1 million for wasted costs of preparing its tender.
    In response, the Council unsuccessfully sought to strike out Amey's claim. The Council then considered its options, which were reported to be:
    • sign the contract with Ringway, which would have involved continuing litigation with Amey;
    • terminate the procurement;
    • 'rewind' the procurement to an earlier stage, such as the call for final tenders and re-run it from that stage; or
    • withdraw its decision to award the contract to Ringway and award it to Amey instead, which ran the risk of an adverse reaction and challenge from Ringway.

Of these options, the Council decided the appropriate course of action was to terminate the procurement entirely, having awarded (but not signed) the contract with Ringway. Abandoning the procurement was intended to defeat any claim Amey might otherwise have.

  • Legality of Abandoning the Procurement: Amey then issued a second set of proceedings, arguing the termination of the procurement was unlawful because the decision was aimed at bringing Amey's claim in the First Action to an end (Second Action).

What did the Court decide?

After consolidating the two separate actions, the Court considered the following three key questions:

1. Can a public agency abandon a procurement?

The Court held a public agency is free to abandon a procurement unless there is a 'manifest error' in the decision to abandon – that is, the decision is either irrational or contrary to the public interest.

In this case, the Court found that by abandoning the procurement process the Council had made a 'rational attempt to preserve public funds'. Factors that were considered included:

  • avoiding the double bind of contracting with Ringway and litigating the Amey claim to a conclusion;
  • the potential costs that would be saved if the First Action could be disposed of;
  • the additional costs that would be incurred by not entering into the contract with Ringway;
  • the need to secure the provision of critical services over the coming winter; and
  • the possibility of developing a more advantageous solution on re-procurement.

The Court found Amey failed to demonstrate the abandonment was irrational or contrary to the public interest and, as such, the Court rejected Amey's claim that the Council had acted unlawfully in abandoning the procurement.

2. Can an unsuccessful bidder alleging misconduct in the tender process still bring an action after the government agency has abandoned the procurement process in its entirety?

The Court confirmed that abandonment does not extinguish any private cause of action that derives from events occurring prior to the abandonment.4 As such, Amey's First Action, alleging a breach of the Regulations during the tender process, was still able to be heard by the Court.

Although the abandonment of a procurement may eliminate the availability of a public law review of decisions made throughout the tender process, the public agency may still be liable for any breach of a private law duty, including a statutory duty, that may have occurred prior to abandonment.

The Court observed that, although bidders accept the risk that a public agency may lawfully decide to award a contract to another bidder, they do not also accept the additional risk that they will be deprived of causes of action that have accrued at the time the decision of abandonment is taken.

3. Did the Council breach its statutory duty under the Regulations during the tender process?

The Court considered it was not able to make findings of fact as to whether the Council had breached its statutory duty under the Regulations during the tender process. However, it observed that, should a breach be found, the question would then turn on whether Amey had suffered loss or damage.

The evidence at trial established that the Council would not have abandoned the procurement without Amey's challenge and, if Amey had scored higher than the evaluation score allocated to Ringway, Amey would have been awarded the contract. As such, the Court concluded that if Amey was able to establish in its separate damages action that its score should be revised to be greater than Ringway, then Amey would be considered to have suffered loss and be entitled to damages.

The Council did not appeal the Court's decision. Accordingly, the next step would have been for Amey to pursue its damages claim (ie the First Action). However, the Council announced in November 2019 that its legal dispute with Amey had been settled by agreement.5

Applicability of this decision to Australia

This is a decision of the United Kingdom High Court and has not yet been followed in Australia. However, the decision nonetheless provides useful insight into the direction in which law relating to procurement is heading. It is also particularly significant given the new procurement rules relating to non‑discrimination and equal treatment of bidders, which have been recently introduced in various Australian jurisdictions and which give bidders enforceable rights and remedies against public agencies. For more information about these new rules see our article 'New government procurement requirements introduced around Australia'.

Actions you can take now

  • Government departments and agencies should ensure their procurement processes are clear and transparent and, in particular, that appropriate controls and checks are in place during the evaluation and award stages of any procurement to safe-guard against potential claims.
  • When involved in a discontinued procurement process, bidders may wish to consider whether the procurement has been abandoned lawfully and whether they have any accrued claim, including arising from the costs of preparing their bid.

Footnotes

  1. Amey Highways Ltd v West Sussex County Council [2019] EWHC 1291.

  2. See our article 'New government procurement requirements introduced around Australia' for more information on this.

  3. Unlike the United Kingdom where the Regulations establish enforceable procedures public agencies must follow when conducting procurement processes, the rights and remedies for disgruntled bidders in Australia are generally limited to three main avenues: (1) breach of contract, on the basis that the tender documents constitute a binding 'process contract'; (2) misleading and deceptive conduct; or (3) estoppel. That said, the principles from this case are still generally relevant in the Australian context, particularly given bidders are now provided with (limited) enforceable rights and remedies under Commonwealth, New South Wales and Tasmanian legislation.

  4. The Court made a distinction between breach of a private law duty that gives rise to a private law remedy and public law remedies, rejecting Amey's argument that decisions taken in the course of a procurement can only attract public law remedies. The Court observed that while a public law remedy might fall away if a procurement is withdrawn, private law duties and remedies would not fall away.

  5. BBC News, West Sussex County Council, 14 November 2019.