Stuck in traffic?

The latest victory for campaigning litigants the Good Law Project (GLP) relates to decisions made by the Secretary of State for Health and Social Care (the SoS) to directly award nine contracts for PPE to suppliers referred by Ministers and MPs, using Regulation 32(2)(c) of the Public Contracts Regulations 2015 (PCR). This regulation allows the award of public contracts by a negotiated procedure without prior publication in circumstances of extreme urgency[1].

The High Court ruled[2] that the Government’s operation of a fast-track, ‘VIP’ lane for awarding contracts to suppliers with political connections was unlawful. For contracting authorities, this high-profile case should serve as a reminder to always abide by the fundamental principles of procurement set out in Regulation 18[3] when awarding public contracts, even in exceptional circumstances.
Facts

GLP sought declarations that the SoS acted unlawfully in directly awarding the nine contracts early in the pandemic. The High Court considered the following grounds of challenge:

• That the SoS breached the EU principles of equal treatment and transparency (codified in Regulation 18) by not putting in place procedures to identify the selection criteria or evaluation guidance that would be used when deciding whether to contract with a supplier. Additionally, there was no fair competition between suppliers as a “VIP lane” allowed those who had been referred by senior government figures to be treated more favourably and so increase their chances of being awarded a contract.;
• That the SoS failed to provide proper reasons for his decisions; and
• That the decisions to award two of the contracts via the VIP lane were irrational due to no (or insufficient) technical or financial checks being carried out on the suppliers.

The SoS made a procedural argument that GLP lacked standing to bring a challenge. However, its main defence was that the principles of equal treatment and transparency are displaced or modified in the context of Regulation 32(2)(c), or even if they did apply, the process for awarding the PPE contracts reasonably complied with those obligations, and was broadly rational as a means of securing the legitimate objective of protecting public health.

Judgment

The Court agreed with GLP on the key issue and found that the principles of equal treatment and transparency applied regardless of the SoS’s application of Regulation 32(2)(c). The judge clarified that “[r]egulation 32 does not expressly disapply principles set out in regulation 18…[and] dispensing with a competition does not justify arbitrary or unfair selection criteria where more than one economic operator could satisfy the demand.[4]”

Having established this, the court went on to determine that the SoS’s operation of the ‘VIP’ lane amounted to a breach of the principle of equal treatment by failing to treat comparable offers in the same way[5] and conferring unjustified ‘preferential treatment’ to some of the bidders. GLP’s other grounds for challenging the SOS’s decisions (the failure to give proper reasoning for decisions and alleged irrationality) were dismissed, and the Court held that despite the SoS’s unlawful operation of the ‘VIP’ lane, it was highly likely that the outcome would not be substantially different and the contracts would have been awarded to the two suppliers in question.

Commentary

This decision follows a number of successful legal challenges brought by GLP on issues concerning pandemic-related procurement. As we identified in a comment piece last year, these cases have hinted at an emergent trend whereby claimants who are not economic operators – such as Good Law Project – may possess the requisite standing to challenge procurement decisions via judicial review. For contracting authorities, the risk presented by challenges brought by interested parties who are not bidders should be given consideration.

The High Court’s decision should also remind contracting authorities that principles of equal treatment and transparency (as well as non-discrimination and proportionality) must be applied in all circumstances. Indeed, in addition to emergency procurements pursuant to regulation 32, below-threshold procurements which are not subject to the full rigours of the PCR, are in any case subject to Regulation 18 principles. In view of the High Court’s decision in this case, a renewed emphasis should be placed on ensuring that fundamental principles always remain central to these procurement processes.

James Goldthorpe is a Paralegal and Clare Mendelle is a Professional Support Lawyer at Sharpe Pritchard LLP.

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Footnotes

[1] The full text of Regulation 32(2) provides: “The negotiated procedure without prior publication may be used for public works contracts, public supply contracts and public service contracts in any of the following cases: (c) insofar as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the contracting authority, the time limits for the open or restricted procedures or competitive procedures with negotiation cannot be complied with”. Regulation 32(4) further provides that: “For the purposes of paragraph [32](2)(c), the circumstances invoked to justify extreme urgency must not in any event be attributable to the contracting authority”.

[2] R (Good Law Project and another) vs Secretary of State for Health and Social Care and others [2022] EWHC 46 (TCC)

[3] Regulation 18 provides: (1) Contracting authorities shall treat economic operators equally and without discrimination and shall act in a transparent and proportionate manner. (2) The design of the procurement shall not be made with the intention of excluding it from the scope of this Part or of artificially narrowing competition. (3) For that purpose, competition shall be considered to be artificially narrowed where the design of the procurement is made with the intention of unduly favouring or disadvantaging certain economic operators.

[4] Paragraphs 340 – 341

[5] Paragraph 398