Procurement Alert: Automatic Suspensions – another upheld - DAC Beachcroft

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Procurement Alert: Automatic Suspensions – another upheld

Published On: 12 November 2014

The recent Judgment in the case of Edenred v HM Treasury and another [2014] EWHC 3555 is the latest in a line of recent decisions of the Court to maintain the automatic suspension, which applies in circumstances where an aggrieved bidder issues proceedings against a Contracting Authority prior to it entering into the contract with the preferred bidder.

When considering whether to lift an automatic suspension it is usual for the courts to apply the following principles:

  • Is there a serious issue to be tried?
  • Are damages an adequate remedy?
  • Where does the balance of convenience lie?
  • Should the status quo be maintained?

In the past, it has been extremely difficult for an aggrieved bidder to convince a court to uphold the automatic suspension meaning that such cases proceeded on the basis of a claim by the claimant for damages only. This is not usually the preferred remedy of aggrieved bidders, with most usually wanting another chance of winning the contract.

The Edenred case relates to the decision by HM Treasury that the Government's new tax free childcare scheme be administered by National Savings and Investments ("NS&I") via Atos IT Services (UK) Limited through an outsourcing agreement. Edenred alleges that this amounts to a new contract between HM Treasury and NS&I, or a material variation to a contract between NS&I and ATOS, both which are public contracts, and therefore should have been procured as required by the Public Contracts Regulations 2006 (as amended).

Satisfied that there was a serious issue to be tried, that damages would be difficult to assess and, importantly, satisfied that Edenred had secured a trial date of the key issues in dispute only four weeks after the application hearing, the main reason for the Judge upholding the automatic suspension was the damage to the public interest, which would be caused by allowing the scheme to be introduced in a potentially unlawful way i.e. without a competitive procurement having taken place.

This latest Judgment offers encouragement to aggrieved bidders who will take heart from the trend of the Court maintaining the automatic suspension. Claimants should note that the ability to be ready for an expedited trial, meaning that the matter will be determined quickly, will assist in any argument to uphold the automatic suspension and may wish to emphasise the public interest argument in response to any application to lift.

Contracting Authorities could previously take comfort from the fact that they were likely to be able to lift the automatic suspension and move to entering into the contract with the preferred bidder, resulting in the disheartened claimant being left with a damages claim only (which may well then not be pursued to trial). This is no longer the case and Contracting Authorities will have to think carefully before making an application to lift. They may have to have convincing arguments as to the reasons why it is essential that they should be able to enter into the contract immediately. They may also have to be prepared for more expedited trials in future.

What is an automatic suspension?

Under the Public Contracts Regulations 2006 (as amended) and the Utilities Contracts Regulations 2006 (as amended), if a challenger to a procurement process issues a claim form before the award of a public contract, the Contracting Authority cannot go ahead and award the contract unless a court has lifted the suspension or the proceedings have been concluded. The purpose of this is to give a successful challenger the opportunity to win the contract rather than simply pursuing a claim for damages after contract award.