10 February 2015 #Public Procurement
In the recent case of Group M UK Ltd v Cabinet Office  EWHC 3863 (TCC), the High Court awarded a successful tenderer its costs of participating in the Cabinet Office’s successful application to lift the automatic suspension on the award of the contract.
The Cabinet Office issued an invitation to tender for a single supplier framework agreement for media planning and buying services in March 2014. The incumbent supplier – Group M UK Limited (Group M) – submitted a bid as did a rival company, Carat. On 12 September 2014, Group M was informed that it had been unsuccessful and that the contract had been awarded to Carat. Group M issued proceedings challenging the decision and by virtue of the Public Contract Regulations 2006, an automatic suspension on the award of the contract came into play. The Cabinet Office subsequently applied for a lifting of this suspension and on 5 November 2014 the High Court granted this, thereby allowing the Cabinet Office to conclude the services agreement with Carat. Applying the usual principles, the Cabinet Office was awarded its costs.
So far, nothing unusual!
What was different in this case however was that the successful tenderer, Carat, who had participated in and attended the hearing of the suspension application, was also awarded its costs, despite not being a party to the proceedings.
Entitlement of non-party to costs
The Court found that Carat should be entitled to its costs because as the successful tenderer it had a very serious and fundamental interest in the outcome of the application – the agreement between Carat and the Home Office could only be concluded if the suspension was lifted. It was understandably important, and moreover, useful for Carat to participate in the application, as it was best placed to provide specific knowledge and to address the concerns raised by Group M in the challenge of the award of the contract. Indeed, Carat had provided two witness statements for the court and these statements were pivotal in determining Group M’s central argument that Carat would have been unable to sustain the low prices given in their bid.
Whilst the costs of an “interested party” such as Carat are not something provided for in the Public Contract Regulations 2006, the High Court considered that in exercising its general and wide discretion as to costs this was the sort of case in which it was appropriate for the costs of the interested party to be borne by the claimants. However Carat would only be awarded what was fair and reasonable in the context of all that an interested party, in those circumstances, might be considered reasonably to have done. Giving examples, the court commented that attending to hear and see what might be happening and taking a note (whilst a perfectly legitimate thing to do) would not necessarily attract any costs. Preparing witness statements and attending the hearing as an advocate on the other hand were necessarily recoverable in light of the commercial interest Carat had in the outcome of the application.
Disqualification for non compliance with Practice Direction 44
Also of interest is the fact that the case applied the principles laid down in Denton v TH White and others  EWCA Civ 906 which discussed the cost implications of a party’s non compliance with court orders, rules and practice directions. Group M argued that it should not have to pay Carat’s costs on the basis that Carat had failed to submit details of its costs within the deadline set by CPR Practice Direction 44 (which provides that a statement of costs must be filed and served not less than 24 hours before the time fixed for the hearing) and as such should be disqualified from obtaining any costs at all. The court disagreed. While the failure to comply with the practice direction was serious – Group M had insufficient time to prepare its response to the substantial costs bill presented by Carat's legal team - the reasons for the default were understandable in this case. Ongoing settlement discussions between Group M and the Cabinet Office, coupled with last minute confirmations of hearing dates and times, meant that Carat was only informed that the hearing was going ahead shortly before it took place. It was also considered that in all the circumstances it would be wholly unjust to refuse Carat the entirety of its costs because of its failure to submit its statement of costs within the 24 hour deadline. Carat’s non compliance with the practice direction was at the lower end of serious and dealing with the matter after the event by way of written representations meant the court was not unduly inconvenienced. Accordingly, the court awarded Carat £40,127.50 of the total amount of £70,072.50 claimed.
Where does this leave us?
This case will provide some reassurance to companies who have been successfully awarded a public contract that they will, in the appropriate case, be able to protect their commercial position by supporting any subsequent challenge by an aggrieved tenderer and be able to recover their costs. Those considering challenging contract awards however need to bear in mind this additional level of exposure that they may have if they unsuccessfully resist an application by the contracting authority for the automatic suspension on the award of the contract to be lifted – they may have to bear more than just the public body’s costs!