Legislative exemptions and procurement law

A High Court judge has handed down an important ruling on whether a contracting authority was entitled to rely on a legislative exemption in relation to a procurement.

In Excession Technologies Limited v Police Digital Service [2022] EWHC [413] (TCC) the High Court (O’Farrell J) dismissed Excession’s claims under the Defence and Security Public Contracts Regulations 2011 (“the Regulations”), and in implied contract, challenging the PDS’s conduct of the national procurement process for technology services for the delivery of covert surveillance operation rooms operated by UK police forces and intelligence agencies (“the SORs”). The SORs are used to conduct covert surveillance in respect of terrorist organisations and organized crime groups (“OCGs”).

The judgment is the first substantive decision in which an English Court has considered the correct approach to the interpretation and application of legislative exemptions from the scope of procurement law.

The principles applied by the Court are likely to be of considerable importance both under the current procurement regime and the new legislative scheme currently expected to be introduced in 2023.

Excession had previously been appointed by UK police bodies to conduct the pilot in respect of the SORs project. The pilot was successful, and formed the basis of the decision to conduct the national procurement. However, Excession was subsequently unsuccessful in the process conducted to select the provider of a national solution.

Excession alleged that the PDS’ conduct of the procurement was in breach of duty under the Regulations, or alternatively under an implied tender contract which had come into existence that required the PDS to apply the evaluation methodology and criteria contained in the published tender documents.

The PDS denied that there was any breach of duty in its conduct of the tender process. However, it also contended that the claims failed on preliminary grounds because:

(i) the Regulations did not apply to the Procurement on the basis that it was seeking offers for a framework contract “for the purposes of intelligence activities” within regulation 7(1)(b) of the Regulations;

(ii) alternatively, if the procurement was subject to the Regulations then Excession’s claims were time-barred because, in particular, the PDS had indicated in the published tender documents that it was proceeding on the basis that the procurement was not subject to the Regulations; and

(iii) there was no implied contract between Excession and PDS governing the Procurement containing the terms alleged by Excession because: (i) it was not necessary to imply such a term for reasons of business efficacy, and (ii) the PDS had reserved a power to vary the tender process from time to time at its discretion, which was fundamentally inconsistent with the implication of the alleged implied tender contract.

The Court found in favour of the Defendant on issues (i) and (iii), concluding that Excession’s claims must be dismissed on grounds that the procurement was exempt from procurement law and no implied tender contract including the terms relied on by Excession could arise.

Interestingly, the Court also indicated however that if it had concluded that the tender process was not exempt from procurement law then it would not have accepted the PDS’ principal time-bar argument – it was not sufficient to start time running for the purposes of limitation that the PDS had repeatedly stated in its tender documents that it was proceeding on the basis that the procurement was not subject to procurement law. Rather, time would only begin to run as and when the PDS clearly indicated that it was specifically departing from the requirements of the Regulations.

Perhaps surprisingly, given how long procurement law has been part of English law, the judgment is the first substantive decision of the English Courts regarding the correct approach to interpreting and applying legislative exemptions from procurement law.

Whilst acknowledging that existing CJEU case law mandates a ‘strict’ approach to the application of such exemptions, a number of features of the Court’s reasoning suggest that in effect the approach of the English Courts may be more purposive and flexible than some of the CJEU jurisprudence might suggest.

The Judgment also contains important guidance on the application of limitation principles to cases in which an authority indicates it is, or may be, proceeding in reliance on an exemption from procurement law or indicates it will or may depart from the requirements of procurement law.

Joseph Barrett of 11KBW was sole counsel for the successful Defendant, the UK Police Digital Service, instructed by TLT LLP.