12 March 2019 #Public Procurement
Last week saw the broadcast of Clarkslegal’s annual Public Procurement Update webinar. Over 200 procurement specialists signed up to watch this well-received event which will be followed up later in the year by our popular webinar on “Challenging Procurement Awards”.
One of the key updates covered in the webinar was the obligation on public bodies to provide disclosure of the key procurement documents where an award is challenged. The leading case on this point is Roche Diagnostics Limited v Mid Yorkshire Hospitals NHS Trust 2013. Here the Court held that public bodies ought to disclose promptly “the essential information and documentation relating to the evaluation process actually carried out, so that an informed view can be taken of its fairness and legality”.
Emphasising what was said in the webinar about the importance of public bodies complying with their disclosure obligation, we now have the decision in Serco Limited v Secretary of State for Defence (2019 EWHC 515], which was published the day after the webinar. This was a challenge by the company, Serco Limited, against a decision of the Ministry of Defence to award a contract as part of a £1.1 billion procurement for fire and rescue services.
As part of its challenge, Serco sought specific disclosure of the contemporaneous records held by the MoD which recorded the evaluators’ reasoning for the marking of Serco’s and the successful tenderer’s bids. What is particularly interesting about this case is not that the Court ordered disclosure – this was conceded and agreed by the MoD before the Court hearing – it was that the Court took the opportunity to punish the MoD for the wasted time and legal costs resulting from their failure to provide the disclosure straightaway when challenged.
Serco made their request for disclosure in June 2018, but it was only shortly before the hearing on 28 February 2019 that the MoD agreed to provide it. The Court commented that “there can be no sensible grounds for the defendant not to have disclosed [the requested documents” and that “the MoD should have voluntarily provided this documentation months ago”.
After conceding disclosure, the MoD next argued that the question of which party should be pay the wasted legal costs of the specific disclosure application should be decided by a “costs in the case” order. In other words, whichever party ultimately won the procurement challenge at trial many months later, whether it be the MoD or Serco, should have their costs of this disclosure application paid by the other party. The Court was very unimpressed with this, stating “That is not a sensible position and it was helpfully abandoned yesterday afternoon”.
The reason, no doubt, that the MoD were pushing for this costs order was that Serco was claiming payment of approximately £79,000 of wasted legal costs; and all because the MoD had delayed providing disclosure. The MoD’s final line of defence was to provide a series of arguments why costs at this level were far too high and should be significantly reduced.
All of these arguments failed, and the Court ordered that the MoD pay the full amount of Serco’s wasted legal costs on an indemnity basis. This is significant because the usual rule is that the successful party is awarded payment of their costs on a summary basis which is typically between 70% to 80% of the total costs incurred. Awarding costs on the indemnity basis (i.e. 100% or close to 100% of the legal costs) is much less common and often signifies disproval by the Court of the conduct of the losing party. In this case, the Judge explained “I am doing that because, as far as I am concerned, its conduct in respect of the disclosure has fallen well outside the norm and is entirely suitable for, and justifies, an award of indemnity costs”.
There is now a long line of cases, most notably Roche Diagnostics (see above), which spell out exactly what a public body’s obligations are when facing an application for specific disclosure of key procurement documents. Where grounds for disclosure exists and a public body fails to comply, they take the serious risk of being criticised by the Court and penalised in costs if they are sued by the relevant bidder.
Although this case has not grabbed the headlines of the mainstream press in the way we have seen with the £33 million damages paid by the Government to Eurotunnel in respect of the flawed Brexit ferry procurement tender it is no less of an important reminder for public procurement specialists.
Please see below a link to a recording of our recent Procurement Update Webinar.