High Court refuses council's request for confidentiality ring in procurement dispute

The High Court has rejected a request by Durham County Council for a “confidentiality ring” limiting disclosure and inspection of key documents to be set up in a dispute over a procurement exercise.

The local authority had argued that it would be impossible to re-run the process without having such arrangements in place.

In Croft House Care Ltd & Ors v Durham County Council [2010] EWCH 909 (TCC) (27 April 2010), the county council had begun a procurement procedure for domestic care contracts through an OJEU notice in October 2008. It then notified the claimants of the results in a letter on 26 February 2009.

This outcome was challenged by another tenderer. The council then wrote to the parties on 12 May 2009, changing the basis of the evaluation of the tenders and providing for the interviews to be re-run.

After the new interviews, Durham notified the tenderers of the revised results in a letter on 21 July 2009. The claimants were either awarded contracts for no demand zones or for fewer demand zones than in the 26 February letter.

The claimants then alleged breaches of the Public Contracts Regulations 2006 and European law principles, and/or that there had been a breach of an implied or tender contract. They criticised the decision of the council to re-run only the interview stage and to change the weightings given to the pre-qualification questionnaires, invitation to tender and interview stage.

The claimants also argued in their pleadings that the way in which the re-run interviews were conducted was unfair, that unadvertised sub-criteria and weightings were introduced, and that the panel lacked experience and did not have knowledge of the information previously submitted as part of the process.

They called for the tender procedure to be suspended, the council’s decision of 21 July to be set aside, an order to be made preventing the council from entering into any contract, and an order to be made requiring the council to reconsider re-running the tender procedure and/or pay damages.

The case was either commenced in or transferred to the Technology and Construction Court in the Newcastle District Registry, and it was decided that it was appropriate to be heard by a High Court judge.

As part of the case management process, Mr Justice Ramsey was asked to consider the issue of disclosure and inspection of two categories of documents:

• Documents containing confidential matters, and
• Documents which contain information which would prejudice the council’s ability to re-run a procurement.

The judge said the fact that documents might contain confidential information – such as information about the way in which a particular tendering company or operation operates, or personal information about employees or third parties – is not, in itself, a reason for not providing such documents on disclosure and inspection.

The ultimate test, he added, was whether disclosure and inspection is necessary for disposing fairly of the proceedings. In making that decision, he added, the court has to consider whether any special measure should be adopted.

Mr Justice Ramsey said: “In balancing the right of the third parties to confidentiality against the necessity for the documents to be provided for the purpose of a fair trial, I have no doubt that such material should be provided in this case. Without disclosure of this material to the relevant personnel of the claimants, they will not be able properly to put forward their case.”

He ruled that the claimants should be permitted to see documents such as method statements or information relating to technical capacity provided by the tenderers, subject to redactions making the documents anonymous or excluding material that it was not necessary for the claimants to see to give instructions to their lawyers to plead their case.

The judge meanwhile recognised the council’s “proper concerns” about its ability to re-run the procurement.

In a witness statement, the head of commissioning in adult well being and health had warned that disclosure of its model answers for interview questions, the method statements for all tenderers and the interview panel’s notes would give the claimants a significant advantage over other providers. He added that it would not be possible for the council to eliminate this advantage from another procurement process.

The council had proposed a confidentiality ring be established so that certain documents could only be disclosed to solicitors, counsel and appropriate representatives, such as business advisors, for each of the claimants who could give appropriate instructions.

Durham said certain information – such as the use made of interviews, the weight accorded to them, the alleged use of unadvertised sub-criteria and weighting, the comparative marks awarded to different tenderers in relation to different responses, the information available to interview panel members, the choice of interview questions and the weighting accorded to them – need not be disclosed to the directors or personnel of the claimants.

Counsel for the claimants insisted that the only way in which disclosure could proceed was by making access to the documents unrestricted, subject to redactions and limits on the way in which copies of documents were seen and reviewed by the claimants’ representatives. They added that in many cases the directors and personnel of the claimants were the only relevant people to give instructions, and the fact that they were small, family businesses meant it was not feasible to set up a confidentiality ring.

Mr Justice Ramsey agreed, saying that he could not see how the directors and personnel could be excluded from the process and still provide proper instructions.

He said: “They cannot properly and fairly give instructions for the preparation of their case if they do not have access to the documents from which those matters arise. They need to say what they would have done had they known of the unadvertised sub-criteria, what the answers given by other tenderers meant, whether there were important factors in the context of the particular services, what the effect of the feedback was on the tenderer’s ability to improve their scores and so on.”

However, the judge also accepted that a number of the allegations could be dealt with by the claimants’ legal teams without the need for the directors and personnel of the claimants seeing the names of other tenderers, other information by which they might be identified, the individual marks awarded and the name of the person carrying out the evaluation on behalf of the council.

The judge added that whilst there might be potential problems with re-running the procurement exercise, he was “less than convinced that the disclosure of material to the claimants will give rise to such insurmountable difficulties that there will be no practical way of carrying out a fair procurement process, should the process need to be re-run”.

The council’s suggestion that tenders in any re-run process would be indistinguishable is “not well-founded”, he said. This was because tenderers would make submissions based on a better understanding of what the council required, a proper interview process would expose unsupported statements of methods and capabilities, and tenderers would have to put forward documents based on the new tender rather than use the documents from the earlier tender.

Mr Justice Ramsey added that none of this was detrimental to fair and transparent tendering.

The judge concluded that “the need under CPR Part 31 for documents to be disclosed to and inspected by the directors and personnel of the claimants if there is to be a fair hearing, is dominant in the balancing exercise” he had to perform.

He added that while in some cases it might be “necessary and permissible” to impose a confidentiality ring, this was not a solution in this case.

The judge allowed access to the contested documents subject to certain safeguards, namely that the directors and personnel of the claimants could only read the documents – redacted as necessary – in their solicitors’ office or in the presence of their solicitors. They would also not be allowed to take copies or make notes other than notes provided to their solicitors.