Use of VIP lanes in government PPE procurement unlawful, High Court finds

The Government's use of a fast track "VIP" lane for awarding PPE (personal protective equipment) contracts was unlawful, the High Court ruled this week.

In Good Law Project Ltd & Anor, R (On the Application Of) v The Secretary of State for Health and Social Care [2022] EWHC 46 (TCC) (12 January 2022), Mrs Justice O'Farrell DBE found that operation of the High Priority Lane, also referred to as the VIP lane, was in breach of the obligation of equal treatment under the Public Contracts Regulations 2015 (PCR) and therefore unlawful.

However, the judge also concluded that it was likely that the contracts in question would have been awarded to the same companies with or without the VIP lane, and the court chose not to grant declaratory relief to the claimants.

The Good Law Project and EveryDoctor had gained permission to advance three grounds at the High Court in the challenge to nine PPE contracts awarded in 2020 and worth a total of £702m. These grounds were:

• The direct award of the contract violated Treaty principles of equal treatment and transparency. The claimants' case was that even if the Regulation 32(2)(c) procedure was lawful, there remained an obligation to comply with the principles of transparency, equality of treatment and proportionality set out in Regulation 18. The defendant had failed to provide evidence that it conducted any or any fair and transparent form of negotiated process which applied equally as between prospective suppliers. (Ground 2)
• No proper reasons permitting the court to assess the lawfulness of the procedure. The claimants' case was that the defendant had failed to provide reasons that were sufficient to enable them to understand the basis for the decision and if necessary challenge it or to enable the court to assess the lawfulness of the procedure. (Ground 3)
• The contracts awarded were irrational. The claimants' case was that the award of contracts to suppliers PestFix and Ayanda were irrational, based on no or insufficient financial or technical verification in relation to PestFix, Ayanda or their suppliers and by operation of the High Priority Lane. Initially, this allegation was made in respect of all the Interested Parties but at the hearing, the claimants confirmed that this ground was no longer pursued in respect of the contracts awarded to another supplier, Clandeboye. (Ground 5)

The claimants argued that allocation to the VIP lane conferred a clear advantage on potential suppliers since their offers were expedited, they were guided through the process from offer to contract and they were supplied with privileged information about the department's priorities. 

Suppliers who had made offers had to be referred by a minister, MP or senior official to be put on the VIP lane.

The claimants also argued that while allocation to the VIP Lane did not guarantee a contract for PPE, it significantly increased the chances of obtaining a contract.

Further, the operation of the lane was not disclosed to potential suppliers, breaching the duty of transparency, the Good Law Project and EveryDoctor claimed.

In response, the Secretary of State for Health and Social Care argued that the use of the VIP lane for some offers was not an infringement of the principles of equal treatment and transparency, as the route through which the offer came was not taken into account when taking decisions to award contracts.

The Government argued that only the Accounting Officers had the power to decide to award contracts. Their decisions were made based on the information in the submission packs assembled at the technical assurance and due diligence stages, which included both "VIP Lane" and normal offers.

In addition, it contended that offers placed into the VIP Lane were different from other opportunities in that they required more time and effort. The High Priority lane allowed these offers to be dealt with more efficiently and was a proportionate measure given the public health emergency, it added.

In relation to Ground 2 Mrs Justice O'Farrell accepted the claimants' arguments concerning the issue of whether the operation of the VIP lane was in breach of any obligations of equal treatment and transparency.

The judge said it was clear "that offers that were introduced through the Senior Referrers received earlier consideration at the outset of the process. The High Priority Lane Team was better resourced and able to respond to such offers on the same day that they arrived, in contrast to the Opportunities Team, where the sheer volume of offers prevented such swift consideration."

She added: "This is implicitly recognised by Mr Cairnduff, who states that the High Priority Lane had no influence on the speed of progress of an opportunity once the papers were passed to Technical Assurance. But speed in getting an offer to Technical Assurance improved the chances of securing a contract."

Max Cairnduff worked on the High Priority Lane at the Department for Health and Social Care.

The judge added that the dedication of more resources to offers that came through the VIP lane indicated that such offers were more likely to be subject to Technical Assurance more quickly. "Timeous consideration of an offer was a material advantage in obtaining the award of a contract given the urgency of the procurement," the judge said.

She added: "The difficulty faced by the Defendant in responding on this issue is that the criteria used to allocate offers to the High Priority Lane did not treat comparable offers in the same way. The size of a supplier company, the type of PPE and the volume of an offer were factors that were justifiable objectively as a basis for early consideration. However, the mere fact that an offer was sent to the priority email address from a Senior Referrer did not justify preferential treatment over a similar offer that was made through the Portal. That amounted to a breach of the principle of equal treatment."

Mrs Justice O’Farrell concluded in relation to equal treatment and transparency:

i) the defendant was obliged to comply with the principles of equal treatment and transparency set out in regulation 18 in relation to the process chosen by the defendant for making direct contract awards without prior publication pursuant to regulation 32(2)(c) of the PCR;

ii) use of the 'open source' procurement complied with the obligations of equal treatment and transparency;

iii) the defendant put in place the selection criteria to be used and issued guidance to the evaluators as to the application of such criteria so that the offers could be properly evaluated;

iv) operation of the High Priority Lane was in breach of the obligation of equal treatment.

In relation to Pestfix, Clandeboye and Ayanda, the judge found:

• Pestfix: It was unlawful to confer on the company preferential treatment simply on the basis of its allocation to the High Priority Lane. “However, …. the PestFix opportunity justified priority treatment on its merits. PestFix offered high volumes of a range of PPE items that were in urgent demand. It had an established business in sourcing PPE, plausible contacts with manufacturers in the PRC and could provide a logistical solution to transport the PPE from the manufacturers to the UK. These skills, experience, contacts and credibility justified priority consideration of the high volume offers. Regardless whether they were made through the Portal and assessed by the Opportunities Team, or were assessed by the High Priority Lane Team, it is very likely that the offers would have resulted in the award of the PestFix Contracts.”
• Clandeboye: The offers by Clandeboye were not allocated to the High Priority Lane and the claimants accepted that no challenge to lawfulness of the Clandeboye Contracts could be made on that basis. The claimants' challenge to the Clandeboye Contracts on this ground was dismissed.
• Ayanda: It was unlawful to confer on Ayanda preferential treatment simply on the basis of its allocation to the High Priority Lane. “However, the offer made by Ayanda justified priority treatment on its merits. It was a unique opportunity to acquire very high volumes of PPE, through exclusive access to the full manufacturing output of a plant in the PRC…..The nature of the opportunity, and the concern that the offer would disappear if not pursued with alacrity, justified priority consideration of the same. Regardless whether made through the Portal and assessed by the Opportunities Team, or assessed by the High Priority Lane Team, it is very likely that the offer would have resulted in the award of the Ayanda Contract.”

Mrs Justice O’Farrell dismissed the claimants' other grounds, the alleged failure to give sufficient reasons, and irrationality.

In relation to ground 3, the judge found that prior to the issue of proceedings, the defendant “complied with his duty to give clear and sufficient reasons for awarding the contracts the subject of challenge”.

On the irrationality ground (ground 5), she concluded:

i) the defendant did not place any reliance on their referral to the High Priority Lane when awarding the contracts to PestFix and Ayanda;

ii) sufficient financial due diligence was carried out in respect of the Interested Parties and their suppliers when awarding the contracts to PestFix and Ayanda;

iii) sufficient technical verification was carried out in respect of the contracts awarded to PestFix and Ayanda

The claimants' challenge in respect of the contracts awarded to Clandeboye was also dismissed.

Mrs Justice O’Farrell concluded: “Although operation of the High Priority Lane was in breach of the obligation of equal treatment under the PCR and therefore unlawful, it is highly likely that the outcome would not be substantially different and the contracts would have been awarded to PestFix and Ayanda. In those circumstances, pursuant to section 31(2A) and (2B) of the Senior Courts Act 1981, the court refuses to grant declaratory relief.”

The defendant had sought to argue the claimants did not have standing to bring their challenge under Ground 2 (equal treatment and transparency) or that part of Ground 3 (reasons) relating to the PCR. It was accepted that they did have standing to bring the challenge in respect of the public law elements of Ground 3 and in respect of Ground 5.

However, the judge said she was satisfied that the claimants had sufficient interest to bring the challenge on each ground for the following reasons:

i) The Good Law Project was a not-for-profit company which aimed to use the law to protect the interests of the public. “It has a sincere interest, and some expertise, in scrutinising government conduct in this area.”

ii) EveryDoctor's interest in the challenge arose from its concerns regarding good governance and lawful procurement of PPE for the NHS.

iii) It was not realistic to expect economic operators to mount a challenge to the award of the contracts which were at issue in these proceedings, “particularly in circumstances where there has been no competition and therefore, no obviously identifiable disappointed bidders who might reasonably be in a position to identify causation and loss”.

iv) The gravity of the alleged breaches, concerning issues as to the lawfulness of the awards of public contracts, supported a finding of standing so as to enable review by the courts.

Responding to the ruling, the Good Law Project said: “Over a year of hard work has paid off….. The High Court has ruled that the Government’s operation of a fast-track VIP lane for awarding lucrative PPE contracts to those with political connections was unlawful.”

It added that it was considering the wider implications of – and its next steps in relation to – the aspects of the ruling where Mrs Justice O’Farrell found that, even though Pestfix and Ayanda received unlawful preferential treatment via the VIP lane, they would likely have been awarded contracts anyway; and the judge’s refusal “to allow publication of how much money was wasted by the Government’s failure to carry out technical assurance on the PPE supplied by Pestfix and Ayanda”.

A DHSC spokesperson said: “At the height of the pandemic there was a desperate need for PPE to protect health and social care staff and the government rightly took swift and decisive action to secure it. 

“We are pleased the court has ruled that our industry call to arms was open and transparent. The ruling says it is highly likely these offers would have been awarded if they were processed through other channels also used to process offers. All contracts underwent sufficient financial and technical due diligence and the Court found that we did not rely on the referral to the High Priority Lane when awarding contracts.

“Throughout the pandemic our absolute priority has always been saving lives and we have been working tirelessly to deliver PPE to protect our health and social care staff on the frontline, with over 17.5 billion PPE items delivered so far.”

Adam Carey