Braceurself Part 2: damages denied as breach was not “sufficiently serious”

Despite a bidder succeeding in its legal claim, establishing that the contracting authority breached procurement law and that it should have been awarded the contract, it has been left without any damages. Laura Wisdom and Lloyd Nail examine the ruling.

Summary

The Technology and Construction Court (TCC) has held that a Claimant, which would have won a public contract worth £2.5m+, were it not for a breach of procurement law by the Contracting Authority is not entitled to damages, on the basis that the breach in question was not “sufficiently serious” to warrant an award of damages.

The TCC had previously held that evaluators from NHS England (the Defendant) made a manifest error when assessing the answer given by Braceurself (the Claimant) to a single question, resulting in a scoring correction of one mark for that question. The Claimant failed in its challenges to five other scores and its broader allegations of ‘lack of transparency’ and ‘unequal treatment’. However, this one scoring change would have been enough to change the result, making Braceurself the highest scoring bidder. That judgment is analysed here.

Having found that the Defendant had breached procurement law, there was then the issue of whether that breach was “sufficiently serious”? Several years ago in a case involving EnergySolutions and the Nuclear Decommission Authority, the Supreme Court held that for a breach of procurement law to warrant an award of damages to an aggrieved bidder, there must not only be a breach of procurement law by the purchasing authority, but that the breach(es) must be “sufficiently serious” to warrant an award of damages. This test of “sufficiently serious” is not unique to procurement law, but is a particular aspect of procurement law that many bidders and purchasing authorities may not be aware of.

In this latest follow-on judgment, the Court has now held that when assessing all the relevant factors in the round this single manifest error was not a “sufficiently serious” breach. The Claimant has therefore been left without any damages (and without the contract) despite the Court finding that, had the procurement been lawful, the Claimant would have been award the contract.

Why does this matter?

This case could potentially (and subject to any appeal) have important ramifications for legal challenges to regulated procurements.

It is obviously unpalatable for any Claimant to have to make allowance for the kind of outcome in this case. A challenger successfully establishing that they have been wronged, and should have been awarded the contract, will feel aggrieved if they are then left without any damages or other meaningful remedy; this would be viewed as clutching defeat from the jaws of victory.

It is also important because there are cases (of which this was one) in which a challenger will seek to maintain the “automatic suspension” (which prevents signature of a disputed contract until the challenge is resolved) so that, if the challenger is successful, the contract can be awarded to it as the ‘rightful’ winner. However, the Court will lift the automatic suspension in order to allow the contract to be signed if, amongst other factors, it considers that an award of damages would be sufficient to compensate the Claimant, should it ultimately succeed at trial. (We analyse this test and the latest cases consider its application here). That is what happened in this case, only for the Claimant to now find that although damages might have been an adequate remedy, in fact they have been left with no substantive remedy at all.

Why was the breach of procurement law not “sufficiently serious” in this case?

In determining that the Defendant’s breach was not “sufficiently serious”, the Court rejected any contention that the test should look only at the impact of the breach on the Claimant. Obviously, if this was the test then the Claimant would have been entitled to damages because the impact was a change in the binary outcome of the procurement: it should have won, and instead was denied, a valuable public contract.

The Court instead decided that this was just one of the factors to weigh in the balance. There are other factors – including the nature of the breach, its impact on others (in particular the general public), and the behaviour of the Defendant – which all fall to be considered as part of an 8-part test.

“…the fact that the outcome of the competition would have been different but for the breach is a highly material one, which I take into account, but it cannot necessarily be determinative. In my judgment, it must also be relevant to consider, and weigh in the balance, the fact that the competition was very close so that even a small change had a significant effect on the outcome. The whole point about an evaluation of the sufficiency of the seriousness of the breach is that one should be able to take account of extent and degree.”

How was the 8-part test (for assessing the “sufficiently serious” requirement) applied in this case?

In deciding whether any breach of procurement law is “sufficiently serious” the Court is required to undertake a balancing exercise. The framework for this exercise was established in a case called Factortame and subsequently articulated in Delaney. Applying the eight parts of this test:

1. The importance of the principle which had been breached: The principle breached was that a procured contract should be awarded to “the most economically advantageous tender”. The Court accepted “such a principle was an important one”. That might be said to be something of an understatement: arguably the very purpose of a public procurement is to ensure value for money for public purse by identifying, and awarding the contract to, the most economically advantageous tender.

The Court accepted that, but for Defendant’s error, the Claimant should have won because it had put forward the most economically advantageous tender. Nevertheless, the Court said that “the mere fact that the principle breached is important cannot of itself be determinative” and that the importance of this factor “remains a question of fact and degree”.

2. The clarity and precision of the rule breached: The Court accepted the Claimant’s submission that the ‘rule’ meant the legal rule, not the wording of any provision within the procurement documents. On this factor the Court followed the decision in EnergySolutions that “the obligation to award the contract to the most economical advantageous tender was clear and precise.”

Again, the Court said this should only be seen as one factor in the balance: “this factor in combination with the first cannot, of itself, be decisive in the Claimant’s favour”.

3. The degree of excusability of the error of law: The Court decided that it should not only look at the error itself, but at the context of the wider procurement, noting that “subject to the single breach found, this had been a carefully planned and well organised procurement….the Defendant got a lot else right and I take that into account.” This reasoning may be questioned by some who would assume that the starting point for all procurements should be that the purchasing entity gets at least most things right. However, in the circumstances, this issue was found to operate in the Defendant’s favour (i.e. against the breach being “sufficiently serious”).

4. The existence of any relevant judgment on the point: There was no analogous judgment and so this point went in neither party’s favour. Perhaps unsurprisingly, no weight was given to previous judgments which have emphasised the need for procuring entities to apply procurement law correctly.

5. The state of mind of the infringer: The scoring error arose from a simple misreading of the words in the Claimant’s tender, and so the Court concluded that “the breach was inadvertent, rather than deliberate, and self-evidently occurred in good faith…[so] this factor positively weight in favour of the Defendant.”

6. The subsequent behaviour of the infringer: This was not a relevant factor since the breach was only evident when judgment was handed down. 

7. The [impact on] persons affected by the breach: Although the Court accepted that the breach had a significant impact on the Claimant, it noted that the Claimant “remains a business even now, so the loss was not existential” and also that – unlike the contracts in the EnergySolutions (£4.2bn) and Alstom (£1.8bn) procurement claims – this was a “relatively routine contact…[which] the NHS income would have been £2.7m over its whole lifetime.” This appears to be the first case in which a court has considered that the uniqueness of an opportunity and/or the financial standing of the Claimant as a result of having been wrongly denied the contract are relevant factors in assessing the ‘seriousness’ of the breach.

The Court also considered it relevant that, since the difference between the winning and losing bidder was only one mark “it can truly be said that the broader public would have been almost equally well served by either practice” with the possible exception of the small number of patients with specific access issues who would have benefitted from the Claimant’s alternative proposal. Whilst that might be true in this case, if a Claimant was successful in establishing breaches of multiple different Requirements, would a Court now be expected to embark on a consideration of the extent and seriousness of impact of both the wider public and specifically affected classes for each Requirement? That would seem to be a very onerous analysis which would require evidence.

8. Any other matters: There was nothing material to add to the considerations above.

Balancing these factors, the breach was not sufficiently serious to warrant an award of damages. 

What of the Claimant’s argument that denying it any remedy was “unjust”?

The Claimant argued that this outcome was “unjust and incoherent” in circumstances where the Court’s decision to lift the automatic suspension (see [2019] EWHC 3873 (TCC)) hinged on the Court’s finding that, applying the American Cynamid test, damages would be an adequate remedy for the Claimant. Had the suspension remained in place and the Claimant succeeded at trial (as it did) then it could have been awarded the contract; now it had been left without the contract or damages.

The Court said this argument was “misconceived” because, had the suspension been upheld, then Regulation 97(2)(c) of the Public Contracts Regulations 2015 (which concerns the remedies the Court may award where the contract has not been entered into, including where signature has been suspended) also required the Court to apply the “sufficiently serious” condition. Therefore “The outcome in respect of a claim for damages would, therefore, have been the same whether the question was tested before or after the award of the contract.”

This is potentially problematic since it suggests that procurement law can operate (and indeed in this case has operated) so that the automatic suspension is lifted explicitly on the basis that the Claimant should be compensated in damages if it ultimately succeeds, only to later find that (applying the ‘sufficiently serious’ test) the successful Claimant is not entitled to damages, and potentially left without a substantive remedy at all.

Laura Wisdom is a Partner and Lloyd Nail is a Senior Associate at Burges Salmon.