In a judgment that is likely to be welcomed by Contracting Authorities and Utilities (Braceurself Limited v NHS England), the Court has ruled that a manifest error in the evaluation of the Claimant’s tender was not a sufficiently serious breach of the procurement regulations to justify an award of damages despite the fact that, but for the Defendant’s error, the Claimant would have been awarded a valuable public contract.  The effect of this judgment, which may be concerning for private sector operators considering challenging the outcome of a procurement process, is that the Claimant was essentially left without a remedy despite having lost out on a valuable contract as a result of the Defendant’s error. 

Background

In February 2019, NHS England completed a nationwide procurement for the provision of orthodontic services.  The outcome of the competition was very close but ultimately the Claimant lost by just 2.25%.  The Claimant brought a claim alleging that as a result of various manifest errors and breaches of the Public Contracts Regulations 2015 (“PCR 15”), the Claimant’s score was too low and the successful tenderer’s score was too high. 

On 20 June 2022, a detailed judgment on liability issues was handed down (see here).  The Judge was impressed by the careful way in which the evaluators had tried to carry out their functions, and that the procurement itself was carefully planned and well organised.  Nonetheless, of the very many complaints made by the Claimant, the Court held that one error had occurred which led to the Claimant being awarded a score of 3 (good) in respect of one question rather than a score of 4 (excellent).

The Court concluded that the consequence of changing the relevant score from 3 to 4 was to increase the Claimant’s total score by 2.5%.  In short, but for the manifest error, the Claimant would have scored 0.25% higher than the other bidder and would have been awarded the contract.

Was the breach sufficiently serious?

The issue of whether or not the single breach identified was “sufficiently serious” to justify an award of damages was dealt with separately in the most recent judgment. 

In summary, the Judge held that the manifest error had resulted in the Defendant breaching its duty to award the relevant contract to the most economically advantageous tenderer.  The Court concluded that this was a clear and precise rule that embodied an important principle designed to support fair and open competition.  These factors weighed heavily in favour of the relevant breach being sufficiently serious to justify an award of damages.

However, the Judge was persuaded that the error made by the Defendant in this case was very much at the excusable end of the spectrum:  “The misunderstandings were neither egregious nor gross. On the contrary, they were minor” (see paragraph 55).  The Court also took into account that (i) subject to the single breach, this had been a carefully planned and well organised procurement; (ii) the breach was inadvertent, rather than deliberate, and self-evidently occurred in good faith; (iii) the Defendant’s purpose in carrying out the scoring of the relevant question was to maximise access to publicly funded orthodontic services for people with a disability (i.e. its purpose was laudable); (iv) the impact of the breach on the Claimant was not so grave as to have been existential (the Claimant remained in business and was likely to continue to do so notwithstanding the loss of the relevant contract); and (v) the impact on the wider community was minimal.

When all of these factors were weighed in the balance, the Court concluded that the single breach committed by NHS England was not sufficiently serious to justify an award of damages notwithstanding the fact that this meant that the Claimant was left without a remedy for the losses it suffered as a result of the contract being unlawfully awarded to a third party.

Comment

This case is interesting because the Judge appears to take a very different approach to that taken by Fraser J in the case of Energy Solutions EU Limited v Nuclear Decommissioning Authority [2016] EWHC 3326 (TCC), which indicates that any breach of the PCR 15 that affects the outcome of a competition would be sufficiently serious to justify an award of damages. 

In reaching that conclusion, Fraser J focussed heavily on the fact that the duty to award contracts to the most economically advantageous tenderer is clear, precise and embodies an important principle: “The importance of the principle is considerable, and central … It is both clear and precise, both in the Regulations and in the Directive itself.” Fraser J does not appear to have been convinced by arguments that breaches of such an important, clear and precise rule could nevertheless be excused if the breaches were relatively minor in nature and were not deliberate - after all, “it matters little to an aggrieved tenderer why a manifestly erroneous score has been awarded; the important element is that the score was manifestly erroneous”.     

The Judge in Braceurself appears to try to justify these differences in approach by distinguishing the two cases on the basis that the Energy Solutions case involved a plethora of errors and other breaches of the regulations whereas the Braceurself case involved a single error in an otherwise well run procurement.  However, there are two key difficulties with this distinction: (i) Fraser J is very clear in his judgment that each individual breach by the NDA that would have affected the outcome of the competition was, in and of itself, sufficiently serious to justify an award of damages; and (ii) in paragraph 88 of the Braceurself judgment, the Judge suggests that the reasoning in Braceurself is not in fact limited to cases where there has been a single breach of the regulations, but rather to cases where the relevant breach has had a small but decisive impact upon the overall scores as opposed to a large (but similarly decisive) impact on the scores. 

Given the apparent differences in approach between the Judges in Energy Solutions and Braceurself, it will be interesting to see which approach is followed in future cases.  No doubt Contracting Authorities and Utilities will be hoping that the Braceurself approach will be followed, which may provide additional arguments in defence of claims where a minor error may have affected an otherwise well run procurement. 

It will also be interesting to see what impact this judgment may have on applications to lift the automatic suspension.  Currently, it is relatively common for Contracting Authorities to concede that, on the law as it currently stands, alleged breaches (if proven) would be sufficiently serious to justify an award of damages.  This helps to avoid potential arguments that the suspension should be maintained because damages may not be an adequate remedy for a Claimant if the Defendant has the potential to argue successfully that any breach is not sufficiently serious to justify an award of damages. 

Contracting Authorities will now be left with a difficult decision when it comes to applications to lift the suspension, should they (i) agree that any breach would be sufficiently serious in order to help secure the early lifting of the suspension, or (ii) keep open the possibility of arguing at trial that any breach is not sufficiently serious to justify an award of damages whilst accepting that this may make it less likely that the suspension is lifted?  This will be an important strategic decision that requires careful consideration, at least until the Courts have provided further guidance on this issue and the test to be applied in relation to applications to lift the suspension more generally.