Under review

It is a feature of modern government that a wide range of activities formerly carried out exclusively by public bodies are now conducted with the assistance of private sector bodies who have won contracts to perform such work. Contract award decisions may be devastating to the business of unsuccessful bidders and as more and more public bodies seek to place ever more valuable contracts for the performance of formerly public sector activities, the legal remedies available to a disappointed tenderer have become a matter of acute interest.

Many contracts will be tendered pursuant to specific EU public procurement requirements, now given effect by the Public Contracts Regulations 2006, which allow for legal challenge where a contracting authority departs from the approach that the regulations prescribe. Many contracts will be governed by the EU Treaty provisions on freedom of establishment and free movement of services, with their obligations of transparency (notably, advertising) and equality of treatment of tenderers. Some tender procedures will give rise to an implied contract between customer and tenderers as to the way in which they will be conducted (see Blackpool & Fylde Aero Club v Blackpool BC [1990] 1 WLR 1195). But such implied contracts will not always exist, and the obligations that they impose may be very limited in nature. Significant contracts may fall outside the scope of EU obligations, because of their subject-matter or value, and/or because there is no sufficient cross-border element on the facts. Judicial review, the usual mode of challenge to decisions of public bodies, might, if it was available, fill those gaps, and might import a wide range of potential grounds of challenge to a contract award decision.

However, while the reach of judicial review has expanded beyond all recognition over the last 30 years, there have been relatively few judicial review challenges to contract award decisions, and much debate as to the circumstances in which such decisions are susceptible to judicial review at all. In the recent case of R (Menai Collect Ltd) v Department for Constitutional Affairs [2006] EWHC 727 (Admin), McCombe J reviewed the principal authorities on the application of judicial review to contract award decisions and gave some guidance as to the circumstances in which the Administrative Court will entertain a public law challenge to a contract award decision.

Failure to consider relevant information

The claimants in Menai challenged the outcome of a tender procedure for bailiff services '“ execution of warrants of distress and wheel-clamping '“ in the Wales and Cheshire region of Her Majesty's Court Service. The tender procedure was conducted pursuant to an express power in s 2(4) of the Courts Act 2003, but not pursuant to the procurement regulations (being a public services concession contract). It followed what is for the DCA a standard format and culminated in the marking and re-marking of tenders by an evaluation panel which reported its conclusions, and its recommendations, to a Project Board, which took the final decision. The outcome of the marking process was that the claimants' bid finished second, but only fractionally behind the winning bid, which was that of a company (known as 'Swift') that the claimants believed to have performed existing work for the Welsh courts less successfully than they had done. There was evidence, gathered informally by one of the evaluation panel, that the first place bidder was less popular than the claimants among the local courts managers, who would have to use its services after award of the contract.

The claimants' main contention was that the DCA had failed properly to take account of the information gathered from local managers favouring their bid, principally because that information had been examined and dismissed by two members of the evaluation panel without being passed onto the project board which took the final decision. The DCA's first line of defence was that its decision to award the contract to Swift was not one that was open to challenge in public law; it also contended that its conduct of the tender procedure had not, in any event, been unfair.

'Classic areas'

The judgment of McCombe J contains a valuable review of the leading authorities on judicial review of contract award decisions, authorities that appear to have led him to the conclusion that judicial review was in principle available to challenge such decisions, but that judicial review claims would only succeed in a limited range of clear cases of abuse of power. His starting point was Mercury Energy v Electricity Corporation of New Zealand [1994] 1 WLR 521, in which the defendant company had terminated a supply contract with the claimant. The Privy Council held that the commercial decisions of the defendant company could be judicially reviewed but doubted whether a claim for judicial review of a decision by a state enterprise to enter into or determine a commercial contract would ever succeed 'in the absence of fraud, corruption or bad faith'. The judge drew a similar principle from the more recent case of R (Cookson and Clegg) v Ministry of Defence [2005] EuLR 517, in which Buxton LJ had stated that public law should not be excluded entirely from a contract award procedure 'even if there were no statutory breaches involved: for instance, if there were bribery, corruption or the implementation of a policy unlawful in itself, either because it was ultra vires or for other reasons'. These cases identify what the judge described as 'the classic areas in which judicial review will be available in the context of the commercial activities of public bodies' (s 42).

But Buxton LJ purported only to give examples of when judicial review might be available and the difficult issue is just how far beyond these classic areas the reach of public law might extend. McCombe J adopted a cautious approach to that question. He relied extensively on the relatively old authority of R (Hibbit and Sanders) v Lord Chancellor's Department [1993] COD 326, in which the Divisional Court had held that a contract award decision was not reviewable for want of a public law element, but which had previously been distinguished on the grounds that it concerned the exercise of common law rather than statutory powers. According to the judge, the fact that (as in this case) a tender process was conducted pursuant to a statutory power would not in itself justify the full application of judicial review principles. Indeed, he cited a dictum from Hibbit and Sanders to the effect that a decision to place a contract with a particular firm would be unlikely to have a sufficient public law element (ss 31 and 47). He also held that the nature of the services at issue in this case '“ which were argued by the claimants to involve the exercise of the coercive powers of the state '“ did not alter the essentially commercial character of the
tender process.

Abuse of power

On the other hand, McCombe J held, relying on R v Kensington and Chelsea RLBC ex parte Molinaro [2002] LGR 336, that judicial review will be justified where a body awarding a contract pursuant to a statutory power has abused its power, acting with conspicuous unfairness (ss 39-40). The judge's conclusion therefore appeared to be that serious misconduct in the course of a tender procedure, amounting to an abuse of power, would justify judicial review, but that less serious flaws in the process would not. As he put it: 'It is not every wandering from the precise paths of best practice that lends fuel to a claim for judicial review' (s 47). He proceeded to reject the primary ground of claim 'both on the facts and on the law' (s 47): the criticisms made by the claimants did not disclose any shortcomings in the tender process, but
even if they did, they were not sufficiently serious as to warrant judicial review in this commercial context.

Standstill period

The case is notable for two other reasons. Firstly, through judicious use of the standstill period now commonly adopted by public authorities between the decision to award a contract and actually entering into the contract, and of the judicial review Pre-Action Protocol, the claimants were able to obtain from DCA a detailed explanation of the tender procedure and many of the important underlying documents, and to frame their claim for judicial review accordingly. They were then able to launch judicial review proceedings before the DCA had taken the crucial step of entering into a contract with the winning bidder, which meant that there could be no arguments to the effect that the court should not consider granting relief which would involve setting aside third party rights. Had it accepted their claim, the Administrative Court could have granted relief leading to the re-opening of the tender assessment process, or even ordering the DCA to enter into the contract with the claimants.

Openness of marks

Secondly, while post-award de-briefs and pre-action disclosure will often enable unsuccessful bidders to learn the marks which the various tenders were awarded under the assessment criteria, Menai Collect demonstrates that the courts will rarely entertain criticisms by a tenderer of the marks awarded to its tender. The claimants had made detailed criticisms of the marks they had received in relation to a number of the evaluation criteria, complaining, for example, that they had been misled as to what was expected in answer to a particular question, and that the winning tender had been awarded the same marks under a particular head for a manifestly inferior answer. Any successful challenge to a mark accorded to their bid would have resulted in the claimants' total overtaking that of the winning bidder, but McCombe J refused to engage with their arguments. He held instead that he did not have the material or the expertise to 'second-guess' the judgment of the evaluation panel and that the marking process was 'even more clearly in the realm of commercial judgment for the defendant' and so devoid of any public law element.