Procurement Pulse UK – July 2024

This is the Procurement Pulse, DLA Piper’s bulletin for clients with an interest in developments in public procurement law in the UK. In this issue we report on recent UK case-law, policy and legislative developments.

RECENT COURT JUDGMENTS

English Court of Appeal considers time limits in procurement claims

Lancashire County Council v Brookhouse Group Limited 

On 28 June 2024, the Court of Appeal handed down judgment in Lancashire County Council v Brookhouse Group Limited. 

The leading judgment was handed down by Coulson LJ, and the judgment makes it clear that where no competitive tendering exercise has been carried out, unless the Council has issued a contract award notice explaining why it thought no procurement exercise was necessary, a 6 month limitation period applies. A shorter 30-day limitation period cannot be triggered merely by writing to the individual economic operator. As there has been no competition, it is not possible to give relevant reasons why the economic operator was not successful and the economic operator in those circumstances is not a Candidate or a Tenderer.

Background and facts

In 2012, the Council published a tender procedure relating to the regeneration of public sector assets and subsequently published a Contract of Notice on its website. The aim of the competition was to procure two Regeneration Property Partners to help to deliver this regeneration, which was divided into two Lots. The procurement was conducted using the competitive dialogue procedure and the deadline for receipt was 10:00 on 12 April 2012. Despite the deadline having passed, on 30 April 2012, Brookhouse expressed its interest to the Council. The Council responded on 21 May 2012 to say that, because the specific deadline had passed, it was unable to consider Brookhouse’s proposal. Brookhouse did not challenge that decision.

Subsequently, the Council entered into a Strategic Partnering Agreement (SPA) with Eric Wright Group Limited (EWG) in respect of Lot 2. A Contract Award Notice (CAN) was published in the OJEU. There was never any challenge to the public procurement exercise that gave rise to the SPA. In short, on 29 July 2022, the Council entered into a Development Agreement (DA) with Maple Grove, a wholly owned subsidiary of EWG. The Council's case is that they entered into the DA pursuant to the terms of the SPA, and that no competition was necessary or required, and no Contract Award Notice was published. Brookhouse was informed of the DA on 3 August 2022, and subsequently proceedings were commenced for a declaration of ineffectiveness (reg 98(2)) on 20 January 2023.

Application to Strike Out

On 12 April 2023, Brookhouse issued an application to strike out those parts of the Council's defence that relied on Regulation 93(2)(a). By a cross application, the Council applied to strike out Brookhouse's claim in its entirety on the basis that it was statute barred. The applications were heard by Mr Martin Bowdery KC, sitting as a Deputy High Court Judge in the TCC, at a hearing on 17 October 2023. By an order dated 20 November 2023, the judge granted Brookhouse's application to strike out paragraphs [21]-[25] of the Council's Defence and dismissed the Council's cross-application.

Court of Appeal proceedings

The Council issued an appeal in relation to the High Court decision, with the appeal focusing on two central issues. 

The first ground of appeal concerned whether the judge was wrong to find that Regulation 93(2)(a), and therefore the 30-day period, did not apply in circumstances where there had been no competition. It was argued by Brookhouse that Regulations 93(5) and 93(6) could not apply as there had been no competition at all, therefore the only applicable time limit is the 6 months referred to in Regulation 92(b). The Court found that Regulations 93(3) and (4) are concerned with the first ground for a declaration of ineffectiveness. Thus, if there is no contract notice, an economic operator has 6 months to challenge the direct award of a contract. The contracting authority can reduce this to 30 days by issuing a CAN under Regulation 93(3). The 30 days would commence from the day after the date on which the contract was published. Regulation 93(5) only arises where there has been competition, but the contracting authority has then entered into the contract before it was entitled to. In those circumstances, the contracting authority can reduce the 6-month period to 30 days by complying with Regulations 93(5) and 93(6) and informing the economic operator about the conclusion of the contract and providing a summary of the relevant reasons. The 30 days would start on the day after the date on which the economic operator was informed of the conclusion, or, if later, was informed of a summary of the relevant reasons.

The second ground of appeal concerned whether the judge was wrong to find that the Council had not provided a summary of the relevant reasons, so that the 30-day period did not apply. The Court rejected the claim that regardless of the specific words used in Regulation 55(2), the test for “relevant reasons” should be capable of being satisfied if the economic operator knew why there was no competition and the underlying contract had been awarded directly.

The claim was rejected for four reasons:

• Firstly, under Regulation 93, the Council could have reduced the period from 6 months to 30 days by publishing a relevant CAN.
• Secondly, the Council took a “tactical decision” to only inform Brookhouse of the DA as they were aware that the publication of a CAN would alert other economic operators. This conduct was described as “astonishing” and the decision was a “flagrant breach” of the Council’s obligations under the PCR15 of transparency, fairness and the requirement to treat each economic operator equally.
• Thirdly, the court held that the reasons which the economic operator “would have been entitled to receive” did not extend to a hypothetical economic operator who had never been involved in any competition. For the Council to trigger the 30 day period, they have a positive obligation to provide the information that they would otherwise only have had to provide on request. Therefore, this does not extend to a hypothetical economic operator.
• Fourthly, Regulation 55 contains no requirement for the provision of reasons explaining why there was no public competition in the first place as the Regulation presupposes that there has at least been a call for competition.

Conclusion

Thus, for contracting authorities to successfully reduce the longstop period from 6 months to 30 days they must issue a CAN if there has been no competition.

POLICY, GUIDANCE AND OTHER DEVELOPMENTS

Procurement reform update

Recent developments relating to the implementation of the Procurement Act 2023 include:

• Commencement: The Procurement Act 2023 (Commencement No. 3 and Transitional and Saving Provisions) Regulations 2024 were made on 22 May 2024. They confirm that the Procurement Act 2023 will come into force on 28 October 2024. They also provide for transitional and savings provisions for procurements that have already begun under the existing legislation on that date.
• Procurement Regulations 2024: The UK Parliament passed the Procurement Regulations 2024. They will also take effect on 28 October 2024. The Regulations outline the core information that suppliers need to provide to contracting authorities, what contracting authorities must include in their procurement notices and what information they must publish on the central digital platform. They also define what a light-touch contract is (light touch services are exempt from certain requirements under the Act) and define various terms for the purposes of the Act.
• Wales: The Procurement (Wales) Regulations 2024 were made on 3 July 2024. They make provision for how the Act will operate in relation to procurements undertaken by contracting authorities that are devolved Welsh authorities.
• Guidance: The Cabinet Office has published guidance documents in relation to the Act. The guidance is intended to help procurement practitioners and commercial policy leads in contracting authorities to understand the new regime. The latest publications cover the planning, defining and procuring stages of a procurement and include the National Procurement Policy Statement.

We have recently launched our UK public procurement reform webpage which collates expert analysis on the new procurement regime, commentary on developments and key materials and resources. Recent publications on our webpage include:

• The Procurement Act 2023 starts on 28 October 2024
• National Procurement Policy Statement – what is it and when does it apply?
• Procurement Blog – Direct Awards Under the Procurement Act 2023

Welsh procurement policy note published on threshold changes for publishing contract award notices

The Welsh Government has published procurement policy note 01/24 which requests that Welsh public sector contracting authorities start publishing Contract Award notices on Sell2Wales for all contracts valued above GBP30,000. This requirement will become mandatory when the Procurement Act 2023 enters into force in October.

Scottish Government publishes procurement policy handbook

On 7 May 2024, the Scottish Government published the Scottish procurement policy handbook. The handbook provides guidance on the rules and policies that apply to the procurement activities of public bodies in Scotland and highlights some key legal obligations.

Defence procurement and the SSRO’s non-referral advice service

The Single Source Regulations Office has published a Code of Practice on the operation of its new non-referral advice service. This service provides advice to contracting parties on the application of the regulatory framework to a proposed or existing single source defence contract.

European Commission launches first investigation under EU international procurement instrument

The European Commission has initiated for the first time an investigation under the International Procurement Instrument. This investigation has been launched in response to measures and practices in the Chinese procurement market for medical devices which are said to discriminate unfairly against European companies and products.

If you have any comments on this issue or would like to be added to our mailing list, please contact: