England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Rolls Building, 110 Fetter Lane, London EC4A 1NL.
		17th December 2014.

 


Wednesday, 17^th December 2014.

JUDGMENT:
1. This is a public procurement case and on 4^th December 2014 the Defendant issued its application to lift the suspension imposed by the Public Contracts Regulations 2006 (as amended) and it has presented evidence in support of that application and the Claimant has put in responsive evidence. First of all, I should deal with some of the background. The Pirbright Institute ('Pirbright') is a charity, now a registered charity, which is concerned in the research and surveillance of virus diseases in primarily farm animals and viruses that spread from animals to humans. It is well known by more than a limited part of the public in respect of its work in connection with Foot and Mouth and also with the spread of alien viruses of one sort or another. It receives most of its funding in effect from the Government albeit its strategic funding comes through the Biotechnology and Biological Sciences Research Council. It has an annual income of over £33m and mostly that comes from grants albeit there is the evidence suggesting some limited commercial activity. It employs directly or otherwise scientists and researchers in this regard and it runs several state of the art high containment laboratories, high containment large animal facilities and resources which include an insectory, and its scientific expertise includes a mix of disciplines as such. Pirbright is the Defendant.
2. The Claimant is Advanced Business Software and Solutions Ltd ('ABS') and it is a substantial software company that its most recent accounts up to the year ending 28 February 2014 show a turnover of almost £80m and a gross or trading profit of something approaching 60%. ABS regards itself (as indicated on its website) as the leading provider of finance procurement including capital management and performance management solutions for UK public services. It averts to the fact that it has a very large number of public sector contracts including 50 central Government organisations that use its software of one sort or another. In its half-year financial report for the six months ended 31 August 2013 it refers to the fact that it had won substantial public sector contracts across 16 Trusts for the Northern Ireland Department of Health and Social Care and Public Safety, and substantial projects for Doncaster Borough Council, Westminster University and the like.
3. Pirbright currently uses two software systems. One is called Protrack and the other, an Oracle system, which is provided through UKSBS. There came a time in 2013 when apparently Pirbright decided that it was desirable to rationalise and improve its software systems in that connection and to procure an integrated IT system which combined the functionality of the two previous systems, doubtless seeking to improve it and for all I know add various additions to it. On 8 April 2014 accepting that it was or was likely to be considered as a body which was subject to the Public Contracts Regulations it published an OJEU Notice in respect of the proposed procurement of such a system. The system was described in the OJEU Notice as:

'An integrated grants management, financial management, human resource management, payroll and procurement management system or integrated ERP system. The requirements to be met by a reliable single sign-on (active directory) on-site integrated system and would include migration, transition, training, implementation and ongoing support and maintenance.'

The quantity or scope of the contract was identified in that Notice as being exclusive of VAT in a range of between £200,000 and £400,000 with no suggestion, as I understand it, that the prices it eventually received were wildly at least in excess of that range.

4. Amongst others, ABS pre-qualified for the project and an Invitation to Tender was issued on or about 12 May 2014. It set up a tendering arrangement which, as is not uncommon, identified requirements that had to be met and identified how the tenders were to be evaluated providing evaluation criteria and the marking of the tenders. I am not going to go into the detail of the tender but at least three tenderers submitted tenders and before July ABS had submitted its tender. It has or had a number of complaints about what had happened but, be that as it may, it put its tender in. On 1 July 2014 it was told that its tender had been unsuccessful. It was provided on that date with some information about how its tender was marked compared with the successful tenderer at that stage.
5. Following concerns expressed by ABS and/or its solicitors, on 30 July 2014 ABS issued its first Claim, slightly oddly in the Milton Keynes District Registry: I do not intend any disrespect to that District Registry but usually the proceedings are started directly in the High Court and almost invariably these days in the TCC. Be that as it may that is where it went and it was not unlawful or a procedurally wrong issue of proceedings as such. However, by that date, on the day before, Pirbright's solicitors had written to ABS' solicitors saying this:

'In response to your claim that there has been a breach of the Procurement Rules, which our client does not accept, in the light of our client's concern to ensure the full transparency of communications between our client and bidders and of the scoring process our client has taken the decision to restart the current process from the issue of the ITT using a differently constituted evaluation team.'

Indeed that is then what happened and, although ABS had expressed some misgivings as to whether the Public Contract Regulations permitted a restart of an existing process in this way it seems (although I make no findings about this) that ABS went along with that. What followed, so to speak, without prejudice, was that the Claim was issued on 30^t July.

6. On 4^th August 2014 or thereabouts a second Invitation to Tender was issued and it is said (although I make no findings) that whilst there are some differences between the first Invitation to Tender and the second it was not necessarily a more informative document. Be that as it may, it provided at Para. 7.4 evaluation criteria and weightings which against about 25 different sections or subsections indicated what weightings were to be provided against different aspects of the tendering. So, for instance, tenderers were going to be invited (and indeed on the first round of tenders already had provided one) to give a physical demonstration to the Defendant subject to what are called Demo Strips 1 and 2 as to how well or otherwise the systems it was proposing operated and, depending on how good those demonstrations were and how compliant with the script they were, a score or weighting of 100 could be provided against that. Price was to represent something under a third of the overall weighting but that was one of the evaluation criteria.
7. Tenders were put in and again ABS received another letter on 9 October 2014 saying that again it had not succeeded and indicating what its overall score was against the various criteria compared with the winning tenderer. The winning tenderer is called Access and Access was not the tenderer who had won first time round. On this second round of tendering, Access scored 560 in total and ABS scored 491. That led to some more correspondence between the parties and ABS, being dissatisfied not only with the result but in the light of the information which it believed it had received, issued its second set of proceedings in effect challenging the second round of tendering on 20 October 2014. Rather unfortunately the Claim Form is headed 'In the High Court of Justice QBD TCC' but it appears that it was taken to the Commercial Court counter here in the Rolls Building and was stamped with the Commercial Court stamp. Whether the fault is the administration here or the person going to the wrong counter I know not, but it does not matter; it seems to have been accepted initially as being suitable for the Commercial Court and that is where it remained.
8. The Particulars of Claim, which with the annexes are together a substantial document, were served on or about 12 November 2014 following I understand an element of agreement between the parties extending the time for service. These Particulars of Claim purport to ally complaints relating to the first round of tendering and the second round of tender albeit it is probably going to be common ground that the greatest concentration of examination is going to be in relation to the second tendering arrangements; one is still going to have to look at the first at the very least from a historical standpoint to see what was really going on and to see why it was felt necessary to embark on a second round of tendering. Particulars in relation to the second round of tendering and particulars of the criticisms of the Defendant, are set out in Para. 42 with the 'errors' being particularised in Annex 6 and Annex 7. I am not going to go into the detail of that, at least at the moment. A detailed Defence was filed including responses to the various relevant Annexes on 11^th December 2014.
9. Meanwhile efforts were being made to gather in the Milton Keynes and the Commercial Court proceedings to get them transferred to this court, the Technology and Construction Court, and indeed that was only completed and formally effected today, but that has not given rise ultimately to a logistic difficulty. It is common ground that, when coming to consider applications to lift the suspension, in broad terms the principles in the American Cyanamid case are to be applied albeit that over the last few months at least if not years the TCC has been proceeding to deal with a number of suspension-lifting applications. For instance in the decision of Mr Justice Coulson in the TCC Covanta Energy Ltd v Merseyside Waste Disposal Authority [2013] EWHC 2922 TCC he said at para. 48:

'(a) If damages are an adequate remedy that will normally be sufficient to defeat an application for an interim injunction but that will not always be so.' [He quotes American Cyanamid, Fellows v National Bank]. (b) In more recent times the simple concept of the adequacy of damages had been modified at least to an extent so that the court must assess whether it is just in all the circumstances that the Claimant be confined to his remedy of damages as in Evans v Marshall and the passage from Chitty. (c) If damages are difficult to assess or if they involve a speculative ascertainment of the value of a loss of a chance then that may not be sufficient to prevent an interim injunction.' [There is reference to a case called Arachi.] '(d) In procurement cases the availability of a remedy of review before the contract was entered into is not relevant to the issues of the adequacy of damages although it is relevant to the balance of convenience.' [He refers to the case of Morrisons]. '(e) There are a number of procurement cases in which the difficulty of assessing damages based on the loss of a chance and the speculative or discounted nature of the ascertainment has been a factor which the court has taken into account in concluding that damages would not be an adequate remedy.' [He refers to Letter International, Morrisons, Alston, Indigo Services and Metropolitan Resources]. 'There are also cases where on the facts damages have been held to be an adequate remedy and the injunction therefore refused.' [He quotes European Dynamics v Excel]'.

10. In other cases such as the recent decision of Group M (UK) Ltd v Cabinet Office [2014] EWHC 3659 TCC the court in effect and in practice elided the test of the adequacy of damages and the balance of convenience. I do not say necessarily that the court did that as a matter of principle but it did it as a matter of practice dealing with the adequacy of damages or the inadequacy of the damages as the case may be as a strong factor at the very least in considering the balance of convenience. I propose to adopt the same because I hope it is a practical and pragmatic approach so far as that is concerned.
11. There is extensive evidence. I think that there are five witness statements and the evidence with its exhibits runs into three lever arch files. One of the first points made by counsel for ABS relates to the delay in bringing this application on. I do not attach any significant weight to that at all. The Particulars of Claim were not served, as I have indicated, until 12 November. That was by agreement between the parties and it would be quite wrong in general terms to apply to lift the suspension unless and until the Claimant had spelled out what its case actually was; so if there is delay it can only really run from then. It then seems to me that the honours (if that is the right word) for such delay as occurred (and I do not suggest it was very much) lie equally with the Claimant and the Defendant. It could be (and I do not attach heavy criticism of either party in this respect) that the Claimant did not help matters by starting one set of proceedings in the Milton Keynes District Registry and the second set of proceedings in the Commercial Court in circumstances where it became pretty clear that both parties thought that it would be best to bring it on in the TCC; about the earliest date for a 3-4 hour hearing that could be provided in the TCC was today and therefore I do not see that given the belated transfer that this matter would have got on much earlier than it did in any event; it certainly could not have been dealt with in the Milton Keynes District Registry by a District Registrar and it would be extremely unlikely, I suspect, that the Commercial Court would have entertained a hearing like this at such relative short notice. Pirbright could also be criticised for not getting more of a move on. Both parties could be criticised for failing to bring on a Case Management Conference earlier with regard to fixing Directions for remaining pleadings, disclosure, witness statements, and as appropriate, an expedited trial. Therefore I do not see that if an expedited trial is desirable (and it may well be) that this matter would have been brought on much before the end of February or early March 2015 and the court to use a relatively common expression has to proceed on the basis that we are where we are and review this application as it currently stands.
12. Applying the criteria laid down in American Cyanamid I need first to consider whether there is a serious issue to be tried. It has been agreed that I do not really in this context need to consider the Claim in so far as it relates the first tendering process. This is for a number of practical reasons, one of which is that Pirbright is applying to strike out the Claim in so far as there is one on the first part of the tendering process. I have not had time to hear that. But secondly the overwhelming reality is and pragmatically ABS accepts that the suspension must or can properly be considered to be applicable to what might be called the second tendering process and therefore it no longer has to be maintained in respect of the first tendering process because the first tendering process as such did not get to a relevant conclusion in itself.
13. I am satisfied that there is a sufficiently serious issue that is raised in respect of the second tendering process. As I have indicated, it is set out in paras. 42-44 of the Particulars of Claim and a substantial amount of detail is given in Annex 6 and Annex 7. It is criticised by Pirbright in its Defence on the basis that the errors really amount to little more than an argument that ABS should have been marked higher and in effect reliance on various authorities to the effect that there cannot be an effective challenge unless there is what is sometimes called a manifest error in what in this case Pirbright has done or not done as the case may be. In my judgment it is sufficiently pleaded to identify a complaint about the process and primarily the complaints under Regulation 4.3 of the Regulations which call for broad terms, for transparency, non discrimination, equal treatment, fairness and impartiality and proportionality, it is primarily at the process that one looks and I cannot say that if all or a particular combination of the complaints listed in para. 42 and particularised in Annex 6 and Annex 7, if a sufficient number or a sufficient combination are established that this is a claim that in effect could not realistically be expected to succeed or which could be described as not raising a serious issue. I have put that in a rather negative way but it does seem to me that there is a serious issue and I do not think that the parties will be helped by any observations which I might have about how strong or weak the case is. I do not think that it is an obviously very weak case or an obviously very strong case; all I can say is that it passes the threshold of a serious issue to be tried.
14. I therefore come on to consider the adequacy of damages and/or the balance of convenience. I will deal first with the adequacy of damages. ABS's plea in terms of damages is at paras. 47 and 48, the latter of which says that: 'By reason of the Defendant's breaches as aforesaid the Claimant has suffered loss and damage, in particular its loss of or a chance of profit; to be assessed.' Although I think that formal particulars of that have not been provided ABS's solicitors have provided a helpful explanation and breakdown as to what those losses are said to be, and that is in ABS's solicitors' letter of 25^th November 2014, and those particulars are spelled out and there is a relatively decent breakdown of various losses of margin, losses in relation to implementation costs and upgrades, maintenance profits or margins, loss of the chance of profit on the extension of services, and the like. It seems to me under this head of Adequacy of Damages in itself it is not going to be difficult for ABS to pursue and/or establish and/or Pirbright to seek to defend a claim for damages which is formulated as has been formulated in that letter. I am not beginning to say that any of it is going to prove to be recoverable in fact or even necessarily in law, but that it is eminently quantifiable seems to me to be absolutely clear. So this is not a case in which it is going to be difficult to quantify the damages which are actually recoverable in law. That is under the Public Contracts Regulations which allow damages as a remedy.
15. However, ABS say that is as may be but they will suffer losses which they may well not be able to recover as damages nonetheless and it seems to me that overwhelmingly ABS through its counsel and indeed its witnesses concentrate on one particular area. I am told – although I do not know that it is actually in the evidence but I am prepared to accept it for today's purposes – that ABS has never secured a contract yet for the integrated system of software which it was proposing to provide. I have no evidence as to whether the 'winning' tenderer Access is a step ahead of Pirbright or not in this regard. But the particular concern as adumbrated in the witness statement of Mr Brasen of ABS is the loss of an ability to compete for work with Research Councils including Pirbright. He deals with this mostly between paras. 44 and 50 of his witness statement of 15^th December 2014. First of all he refers to a list apparently published by the Government Office for Science or at least issued to the Chair of the Science and Technology Select Committee in the House of Commons on 16^th May and that includes a wide range of bodies most of which clearly are not Research Councils although I am afraid I have not had time to analyse it but it includes the Departments of Business Innovation and Skills, Culture Media and Sport, the Welsh Government, the Scottish Government, the Ministry of Defence. They do not seem to be Research Councils. But the list of current Research Councils numbering 19 is on a list also May 2013. This includes Pirbright and various other entities and again I have no reason to doubt that a number of these are charities and may not classify as PSREs but be that as it may there is a list there of 19. Again I am told – although there is no specific evidence about this – by counsel for ABS that ABS already provides some software or what is called an HR (Human Resources) tool to one of these Research Councils (the Rothamsted Research Council) and is in the process of making proposals in relation to a comparable tool to another such institute, the Babraham Institute. So it seems at least that the ABS is getting a foothold in that market albeit that is not for the integrated software with which this particular procurement would be concerned.
16. I find it very difficult to see that there is or is necessarily or obviously a serious or significant problem for ABS. I do not disagree that there is a perception that there may well be by representatives of ABS but ABS is a substantial organisation; it has on its own publicity a very wide-ranging series of contracts with public bodies; it has as I have indicated at least one contract with one of the 19 Research Councils listed; and it is said that by reason of not succeeding on this project they will lose the opportunity of being able to build on that by securing other contracts with these Research Councils. It is nebulous and speculative as to whether that is the case. Of course I cannot begin at this stage to know whether or not ABS would succeed or would have succeeded in relation to this procurement. If it is successful in this case and there is a re-run, it may still not be successful what might be called the third time round in this case. So it seems to me that that is not really a counterbalancing weight in respect of the ease at which its truly recoverable damages claim could be readily quantified. So if adequacy of damages alone was the test I would have little or no doubt that damages would be an adequate remedy.
17. But I go on to consider the balance of convenience as well. There has been a long and detailed discussion between the court as to whether or not in effect Pirbright could make do with its current systems whilst there was an expedited trial say in late February or early March 2015 as such. If the stay is lifted however it can get on and place the contract with Access and expedite very substantially the introduction of its new integrated system. I am persuaded on the evidence, particularly because Pirbright is a charity, that the balance of convenience favours the lifting of the suspension. What I am concerned about – and there is evidence before the court in effect – that currently scientists, researchers, have to use the current system; they are both – particularly the Protrack – are old systems; there are risks or perceived risks at least in them perhaps not surviving well and effectively through much of 2015. If the procurement, the placing of the contract, is delayed these researchers and scientists who do important work in general but for the public interest in this country will have to work with machines, with software, which is clearly old-fashioned and inefficient, and the longer that goes on the less use their work will be. Put another way, they will have to spend more time working with an old and outdated pair of systems which will mean that their time will be wasted dealing with that rather than the benefits of the new system which both ABS and doubtless Access have put forward as a good solution to the problems of the existing systems which Pirbright currently has. The detailed discussion about whether it would be appropriate to maintain the stay also partly depends upon an analysis of when it is likely that a new tendering process would be successful and a new system be implemented. If there was an expedited trial on liability in early March, and if ABS was successful, it would doubtless want a re-tendering process. That would take doubtless about the same time, if not more than the first tendering process, so that is from May to the end of July, so round about three months – maybe a bit more than that, unlikely to be less – so that assuming the judge who tries this is able to produce a reserved judgment say by the end of March it would be unlikely that any new tendering process would be completed much before the end of July, possibly going into August. Then the successful contractor would have to be mobilised to start installing, and I can see on that basis that Pirbright would be left with its old systems until well into 2016.
18. One of the systems, the Oracle system, is one which at the moment the Pirbright in effect has three through the SBS but there has been evidence before me there is certainly a risk that by December 2015 the current system will no longer be available through SBS, there will be a new system and the Pirbright would have to secure – possibly direct from Oracle – a licence to continue with the old system; alternatively it would have to go on to the new system available through SBS. Either way that would cost money and although that would be theoretically recoverable under a counter indemnity, it is money coming out of the charity's cash flow in the short term which it should not be required in practice to have to forego. So far as the Protrack is concerned, the impression one gets is that if it has not got to the end of its useful life it is not that far away. I have no doubt that there is a chance that it might be capable of being adequately supported beyond the Spring of 2015 but whether supported or not there is little doubt that it is a system which on its own is nowhere near as efficient as the proposed combined integrated system, and the Pirbright would be left with that system for possibly the best part of 12 months longer than it would otherwise be with the inconvenience, difficulty, and loss of research and scientists' time dealing with the old systems. Although there is always a balance to be weighed, I am satisfied here that the balance of convenience does fall with the adequacy of damages as an appropriate remedy for one which should lift the suspension. So the Pirbright's application will be allowed.