Corporate: Pandemic procurement: proper preferences?

While the UK Government continues with scaled-back proposals to overhaul the procurement regime, certain judicial reviews brought by the Good Law Project (“GLP”) are of interest. These pandemic procurement cases relate to the direct award of contracts by the Government without prior publication, under reg 32(2) of the Public Contracts Regulations 2015 (“PCR”).

Apparent bias?

R (Good Law Project) v Minister for the Cabinet Office [2022] EWCA Civ 21 concerns allegations of bias where a contract for support services relating to COVID-19 public communications was awarded to a firm with close contacts of Dominic Cummings, then chief adviser to the Prime Minister and who had previously worked for Michael Gove MP. The contract was awarded at the beginning of the pandemic and was later extended to other areas, such as Brexit.

A High Court judgment had found the award did give rise to apparent bias, though dismissed claims that the grounds for making an emergency direct award were not met and that the contract length was disproportionate. This was reversed by the Court of Appeal, which considered that there was a “tension” between the finding that the minister was allowed to rely on the reg 32 exception (“reasons of extreme urgency”) in making the award, yet should have considered and evaluated other organisations, keeping a clear record of the selection process in order to avoid an appearance of bias. The court also stated it was unsurprising, given the specialised nature of the industry in question, that those involved could have built up friendships over the years.

In short, it held that an impartial and informed observer would not have considered a serious possibility of bias because of the lack of either a “procurement regime-light” or a formal, documented process.

Another issue raised by the Appeal Court is the legitimacy of GLP (or of anyone who is not an “economic operator” with any commercial interest) even raising the judicial review action. Although the GLP has asked for permission to appeal to the Supreme Court, this issue will not be decided there. With the Government proposing a more “simple and flexible” procurement regime (see below), could we receive guidance on this issue in the near future?

Equal treatment

Good Law Project v Secretary of State for Health and Social Care [2022] EWHC 46 (TCC) relates to contracts entered into again by use of the reg 32 exception. This involved nine contracts for the supply of PPE, much of which was later found to be faulty, at a cost of over £700 million. GLP, together with a doctors’ group, sought declarations that the Secretary of State acted unlawfully in awarding the contracts. The claimants were refused permission to challenge the use of reg 32(2)(c), but received permission to challenge on the following grounds:

That there had been a breach of the principles of equal treatment and transparency by failing to put in place procedures that identified the selection criteria or evaluation guidance in deciding which supplier to use, or any fair competition between suppliers. It was argued that the creation and use of a “VIP” high priority lane for suppliers referred by ministers, MPs etc meant more favourable treatment and a much greater chance of being awarded a contract to those suppliers.

That there had been a failure to provide proper reasons for the decisions.

That the decisions to award the contracts to two of the suppliers were irrational due to insufficient financial/technical verification, and also due to the use of the VIP lane.

In relation to the failure to provide proper reasons, it was held that this duty had been complied with prior to the issue of proceedings. It was also held that none of the award decisions were irrational, there had been no reliance on VIP lane status in awarding contracts to two of the suppliers, and sufficient technical and financial verification had taken place.

However it was held that the operation of the VIP lane, which gave more favourable treatment to those suppliers referred to it, was in breach of the obligation of equal treatment under the PCRs and therefore unlawful. Nevertheless, two of the suppliers would likely have been awarded contracts even if they had not been allocated to the VIP lane. As the outcome would likely not have been substantially different, the court refused declaratory relief.

Progress on procurement reform

The Government has scaled back some of the more controversial proposals in its green paper Transforming public procurement. For example, there will no longer be a cap on damages and the light touch regime will not be abolished but reduced in scope. The Government has responded with further detail to other proposals, e.g. the framework for excluding unsuitable suppliers (to be backed up with statutory guidance and a debarment list), but also a move from assessing bids on a “most economically advantageous tender” to a “most advantageous tender” basis. Although concerns were raised about the latter causing a burden to SMEs, the Government considered this issue alleviated by “embedding concepts of proportionality” into the award criteria.

Space does not permit further detail here; however it is worth noting that these proposed changes to a more principles based system are only to the English procurement regime, and there is the possibility of increased divergence given the varying devolved powers in the UK. The Welsh and Northern Irish administrations are mentioned in the Government response; however Scotland is omitted. Given the short timescales involved (at time of writing the as yet unseen Procurement Bill is proposed to be in effect in 2023), and the consequences for the whole of the UK, we should keep a close eye on developments.