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Procurement challenge to £4bn contract award

Procurement proceedings brought by Energy Solutions EU Limited (ES) to challenge a procurement decision by Nuclear Decommissioning Authority (NDA) to award a £4 billion contract to Cavendish Fluor Partnership (CFP) continues to break new ground in procurement litigation.

In a lengthy judgment, the court set out important guidance for public authorities and bidders for public contracts. This should be noted with interest by all professionals working in the area of public procurement.

Mitigation of Loss

The first point of interest arose from a preliminary challenge by NDA at the outset of the case.  NDA sought an order that, because ES had not issued proceedings within the standstill period, it had failed to mitigate its loss. It also sought a ruling that the court had discretion whether to award damages.  On appeal both applications failed. The Court of Appeal held that issuing a claim outside the standstill period did not affect causation and or amount to a failure to mitigate.  Furthermore, where a breach of regulatory duty was proven, the court had no discretion whether to award damages.

This opens the door for a claimant in procurement ligation, to limit its claim to damage rather than seeking a re-run of the bidding process or an order that the contract be awarded to it.  This aspect of the case is now subject to a further appeal to the Supreme Court.

Manifest Error

ES also succeeded in their main argument, that NDA had committed “manifest errors” in the bidding and evaluation process which should have resulted in CFP being excluded from the process and the contract awarded to ES if the criteria had been correctly applied.

NDA were criticised for their approach they took to in evaluating bids. The court took the view it was guilty of “fudging” the data. NDA were criticised for “choosing an outcome and manipulating the evaluation to reach that outcome”.

The court held that public authorities have a duty to act transparently without manifest error. The court will normally only interfere with a public authority’s decision where it is reached as result of manifest error. It will afford the public authority “a margin of appreciation” that is, some element of discretion. In reaching a decision the court would consider:

  • The application of the scoring criteria.
  • The reasons given to bidders for reaching the score.
  • The score itself.

All three must agree if a conclusion of manifest error is to be avoided.

Record keeping

NDA also drew criticism for its approach to record keeping.  The court was not impressed that evaluators had received guidance to keep recorded notes of the evaluation process to a minimum in the hope of avoiding criticism and challenge by an unsuccessful bidder. However, this approach did not act in NDA’s favour.   The trial judge took the view that the absence of an audit trail actually harmed NDA’s defence as it left it relying on very limited contemporaneous records to support its evaluation process.

The question of damages, which ES estimate at £200,000,000, has been stayed pending the Supreme Courts decision on the courts discretion to award damages. 

Watch this space…

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

Categories: Dispute Resolution | For Business | Manufacturing & Supply Chain

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