Government department secures lifting of automatic suspension of logistics contract

The Department for Health and Social Care has succeeded in lifting the automatic suspension imposed on entering a £730m logistics contract with Unipart when rival DHL brought a legal challenge over the procurement exercise.

Sitting in the Technology and Construction Court Mrs Justice O’Farrell ruled in DHL Supply Chain Ltd v Secretary of State for Health and Social Care [2018] EWHC 2213 (TCC) that the ‘balance of convenience’ favoured lifting the suspension.

DHL had since 2006 provided NHS under a master services agreement with all medical devices and hospital consumables - except medicines - together with IT, logistics and transactional services.

The NHS launched a procurement exercise as part of a reorganisation of its supply chain under its ‘future operating model’ under which this work was broken down into 11 contracts for the goods supplied by DHL and single IT and logistics contracts. The planned implementation date is 31 March 2019.

DHL issued proceedings in June challenging Unipart’s success in the procurement on the ground that the department acted in an unlawful manner by failing to show any proper basis for the score it gave Unipart on one question.

The Department argued that the interpretation and application of the question concerned fell to be determined in the context of the procurement as a whole, as the majority of services to be provided were general logistics requiring no particular expertise in health and social care.

O’Farrell J said that on the documents before her the Department “has a real prospect of successfully defending the claim” and so DHL was not entitled to summary judgment in its favour on its challenge.

The judge also noted: “In this case, the public interest militates very strongly in favour of lifting the suspension [of the Unipart contract].”

This was because of the need for the timely introduction of the future operating model, of which all the necessary components were in place other than the disputed contract.

The transition period had to start at latest by September to be ready for the March 2019 start date, the judge said, and even if the Department eventually lost and had to pay Unipart for the logistics services and DHL for lost profits, “it would still make significant savings over the existing arrangements”.

Mark Smulian