Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2011] CSOH 107
CA12/11	OPINION OF LORD GLENNIE in the cause ELEKTA LIMITED Pursuer; against THE COMMON SERVICES AGENCY Defender: ­­­­­­­­­­­­­­­­­________________

Pursuer: Cormack, Solicitor Advocate, MacGregor; McGrigors LLP

Defender: Currie, Q.C., Ross; RF McDonald

25 March 2011

[1] The pursuer is a company specialising in providing clinical solutions for treating cancer and brain disorders. In particular, so far as relevant for the present case, it develops and manufactures radiotherapy equipment. The defender is the Common Services Agency, also known as NHS National Health Service, National Services Scotland. It is a contracting authority in terms of the Public Contract (Scotland) Regulations 2006 ("the Regulations").

[2] In November 2010 the defender commenced a procurement exercise on behalf of five Scottish health boards, viz. Lothian Health Board, Greater Glasgow Health Board, Tayside Health Board, Grampian Health Board and Highland Health Board, in terms of which it sought to place a contract for a prime contractor to supply, install, maintain and train staff for a range of radiotherapy equipment for five cancer centres within NHS Scotland, viz. Edinburgh Cancer Centre, Beatson West of Scotland Cancer Centre, Aberdeen Royal Infirmary, Ninewells Hospital in Dundee and Raigmore Hospital, Inverness. The estimated value of the contract was about £21,000,000, excluding VAT. That is above the threshold in Article 8 of the Regulations.

[3] It is not in dispute that in carrying out the procurement exercise the defender is bound to comply with the regulations and that its obligation to do so is a duty owed to an economic operator, i.e. to a contractor or supplier such as the pursuer who seeks to be awarded the contract. In terms of the regulations the defender has adopted the open procedure for seeking tenders from interested parties. The contract notice was issued in the official Journal of the European Union on 5 November 2010 and the invitation to tender was produced subsequently which required tenders to be received by 4 January 2011, a date which was later extended to 11 January 2011.

[4] The contract was for a range of equipment including a number of linear accelerators, a CT simulator, a conventional simulator and, in Tayside only, a record and verifying ("R&V") system, sometimes referred to as or as part of radiotherapy management system ("RMS").

[5] The technical issues involved are explained helpfully in the affidavits put in by both parties I am not now concerned to determine any disputed facts between the deponents of those affidavits but it is convenient to proceed for the moment on the basis of the explanations put forward by Jill Stief on behalf of the pursuer. In her first Affidavit, at paras 2-8, Ms Stief explains the components of the radiotherapy treatment:

"2. ... Radiation therapy treatment is used mainly in the treatment of malignant disease. The radiation treatment is delivered using a Linear Accelerator ("Linac"), which is composed of a rotating gantry system and hardware for radiation delivery, a radiation beam shaping device such as a Multi-leaf Collimator ("MLC"), and a Patient Support system, along with a Control System that runs must sophisticated software to control all the parameters of the Linac. Imaging devices may also be part of the radiation treatment system. These devices will use either kilovolt or megavolt radiation to capture images of the patient before treatment all whilst having.

3. A Treatment Plan is individually prepared for each patient and can vary from very simple set-up to a complex plan depending on patient tumour type, stage, histology etc. This can be prepared in computer Treatment Planning System ("TPS") software, which utilises imaging data of the patient from CT, MRI or PET. The Radiation Oncologist defines the area to be treated. The Physicist or Dosimetrist uses the TPS to optimise the best treatment plan for that patient is then approved by the Radiation Oncologist. The plan may range from a simple 3D Conformal plan to a more complex Volumetric Modulated Arc Therapy (VMAT) plan.

4. The treatment plan data is electronically transferred via the Oncology Information System ("OIS"). Record and Verification ("R&V") software is utilised in the transfer of the treatment plan to the Linac. Image data may also be transferred via the OIS and the R&V system to the Imaging system software on the Linac, which will be used to compare the current position of the patient or tumour at the time of treatment.

5. The treatment parameters for an individual patient's treatment are sent from the R&V system via a computer interface to the Linac Control System software to be able to deliver the radiation dose. Once the machine and patient are set-up, the prescribed parameters in the R&V system are checked against the actual parameters within the Linac Control System to ensure there are no discrepancies before the radiation beam is allowed to be switched on.

6. Imaging may be used before the treatment commences to ensure the patient position/tumour position is still in the correct place. Adjustments may be made to the patient position to correct any misalignments at this stage. Imaging may also take place during treatment delivery to confirm the treatment setting or monitor patient position especially during longer treatment delivery.

7. MOSAIQ is Elekta's OIS. MOSIAQ manages the treatment of cancer from the initial diagnosis of the patient, through planning, treatment and long term follow-up. At the heart of MOSAIQ is an image enabled electronic medical record ("EMR") which is used by healthcare professionals to communicate information about their patients' treatment. MOSAIQ also provides functionality to manage the administrative side of the practice including scheduling, billing support, management reporting and analysis. MOSAIQ also includes an R&V system which interfaces with the Linac for radiation treatment delivery.

8. For patients receiving radiation therapy treatment MOSAIQ provides verification and recording (R&V) capability as an extension of the EMR. Verification and recording software is designed to detect and prevent mistakes in the delivery of external beam radiation therapy by linear accelerators. It helps to provide accidental delivery of dangerous doses, improves quality control, provides a record of the treatment and supports report generating capabilities."

[6] At paragraph 9 of that Affidavit, Ms Stief describes the different forms of intensity modulated radiotherapy ("IMRT"), including (i) Segmental (Step and Shoot), (ii) dynamic (iii) dynamic arc and (iv) volumetric modulated arc therapy. She points out in paragraph 10 that the Elekta system, i.e. the pursuer's system, of linear accelerator can interact with the Varian "ARIA" R&V system for segmental (step and shoot) IMRT only. That may be in dispute but for present purposes I shall assume that is correct.

[7] In her second affidavit, No.15 of process, Ms Stief explains that the pursuer's own MOSAIQ R&V system is an open system capable of accommodating the linear accelerators and other equipment provided by a range of different suppliers whereas the "ARIA" system provided by Varian is a closed system. In particular at paragraph 9 and 10 she says this:

"9. The Varian R&V system does not accommodate anything other than Segmental (Step and Shoot) IMRT from Elekta and other Linac manufacturers. It does not currently facilitate the interoperability that would allow dynamic IMRT, such as dynamic arc treatment or volumetric modulated arc therapy, to be provided clinically on an Elekta Linac. It is not within the power of the Linac manufacturer to insist that the R&V provider expand its capabilities. ...".

In paragraph 10 she makes the same point, saying:

"10. As the ARIA R&V system is installed in 4 of the 5 sites in Scotland, only Varian Linacs can fully interoperates with that system. ..."

She says that Varian may argue that other linear accelerators can communicate with the ARIA R&V system, but that is only to the extent of basic Segmental (Step and Shoot) IMRT treatments. That is fundamental to the issues that are raised in the present case.

[8] In the present case the pursuer did not tender for the contract. There was only one tenderer, Varian, and it was successful. The defender proposes to enter into a contract with Varian. From an early stage the pursuer has complained about the terms of the tender document, complaining that it effectively excluded them and others from bidding. That complaint was made in correspondence as early as mid-December 2010. At the beginning of February 2011 the pursuer commenced these proceedings complaining that the defender was in breach of fundamental treaty obligations and of the Regulations, essentially on the ground that if failed to treat all potential bidders equally and that by the terms of the tender it had, in practical terms, excluded it from bidding.

[9] In terms of Regulation 47(10), the effect of the pursuer commencing these proceedings is that the defender, as contracting authority, "shall not enter into the contract", i.e. the contract with Varian, "unless (a) the proceedings are determined, discontinued or disposed of or (b) the Court by interim order brings to an end that prohibition". The defender has lodged defences disputing the allegations made against it. It has applied by motion for an order, in terms of Regulation 47(10), bringing the prohibition on contracting with Varian to an end.

[10] At one point it was suggested that the issues raised could sensibly be considered at debate but in the course of the hearing both parties recognised that that was unnecessary and, perhaps, premature since the pleadings had not been fully adjusted. Accordingly neither party invited me to sustain or repel any pleas in law and, in those circumstances, the hearing took the form of a hearing only on the defender' motion for an order in terms of Regulation 47(10). The factors to be taken account in considering whether to make such an order are set out in Regulation 47(a)(2). I shall come back to consider those later.

[11] The pursuer has two principal complaints about the tender process. The first is that by making it a requirement of the tender that the linear accelerators to be supplied must be compatible with the defender' existing Varian "ARIA" RMS, the invitation to tender makes it impossible for anyone other than Varian to tender successfully. That is so because it is a mandatory requirement of the invitation to tender, or at least a requirement which weighs heavily in the scoring system so as to make it practically impossible to succeed unless the tender complies with it, that the equipment supplied will be able to deliver dynamic and dynamic arc IMRT. Although the pursuer's own linear accelerator can deliver the whole range of IMRT including dynamic and dynamic arc, it cannot do so when linked to the "ARIA" RMS system, because the "ARIA" system is a closed system not, or not yet, compatible with linear accelerators produced by suppliers other than Varian. Some of this may be in issue, so I make no concluded findings on whether or not it is correct, but I proceed on the basis that the pursuer can show that this is so. So the complaint, as Mr Cormack, who appeared on behalf of the pursuers, was anxious to stress, is not just that the pursuer were unable to bid but that everyone other than Varian was excluded from the bidding process.

[12] The question in relation to this issue is essentially whether the requirement that the equipment to be supplied under the tender must be compatible with Varian "ARIA" RMS was in breach of the Regulations or other fundamental principles of European law. Guidance is to be found in the European case law, in particular in Concordia Bus Finland Oy Ab v Helsingen Kaupunki [200] ECR 1-7213 and EVN AG v Austria [2003] ECR 1-14527.

[13] Concordia Bus was concerned with a tender process in terms of which the contracting authority, the Helsinki City Council Transport Department, invited tenders for the supply of buses. It stipulated in the tender documentation that account would have to be taken of environmental considerations, extra points being awarded for a type of gas-powered bus which, according to Concordia, only one tenderer was in practice able to offer (to do not so much with the ability of Concordia to buy such buses but its ability to run them due to difficulties of refuelling). The Advocate General approached to the question on the basis that the terms of the invitation to tender and the criteria adopted in the tender documentation meant in fact that there was only one tenderer capable of succeeding. I do not propose to quote in full from the Advocate General's Opinion but I was referred to passages at paragraphs 94-98 and 116 which emphasise that the award criteria must be consistent with all the fundamental principles of community law and especially the principle of non-discrimination. The relevant question, which was the third question in the case, is dealt with in the part of his Opinion beginning at paragraph 124. I refer in particular to paragraphs 147-155. The Advocate General points out, in paragraph 147, that the relevant criterion applied without distinction to all tenders. In paragraph 148 he says that in order for it to be found that the criterion in question gave rise to indirect discrimination against Concordia, it would not be sufficient to find that it had been treated differently from the successful bidder ("HKL"), in the sense merely that the latter had been given points which had not been given to Concordia. In paragraph 149 he observes that it is established in the case law that the principles of equality of treatment require that comparable situations are not treated differently and that different situations are not treated similarly, and that such a difference in treatment can be justified objectively. He then makes clear that his approach is on the basis that, of the two undertakings who wished to bid, one of them was able to offer the fleet requested and the other was not. In paragraph 151 he says this:

"finally the specification of the criterion which gives rise to the difference in the awarding of points could only be considered to reveal the existence of discriminatory tactics if it were to appear that this criterion could not be justified objectively having regard to the characteristics of the contract and the needs of the contracting authority".

He says in the next paragraph (152):

"As is seen above a contracting authority cannot be prevented from requiring that the service in question be provided using a fleet which possesses the best available technical specifications".

Having then considered a point about whether the criteria should have regard to all potential tenderers, he says this at paragraph 154:

"Not only would such an approach result in a form of levelling down of the award criteria in eliminating all those which were truly selective, but equally strip all content from the right recognised by the court for the contracting authority to select the criteria for awarding the contract as it chooses".

His conclusion, given at paragraph 155, is that the mere fact of including in a tender notice a criterion which can be met by only one tenderer did not contravene the principle of equality.

[14] A number of points seem to me to emerge from that. The first is that the contracting authority must be entitled to decide what it wants, what is the subject matter of the procurement which it seeks to obtain, the subject matter of the contract, or to put it another way it must be entitled to decide upon the functional requirements it wishes to satisfy. Second, the fact that the criteria included in the tender notice can only be met by one tenderer, or a limited range of tenderers, does not of itself contravene the principle of equality. And third, that the inclusion of these criteria can only be considered discriminatory if they cannot be justified objectively having regard to the characteristics of the contract and the needs of the contracting authority.

[15] The reasoning of the Court in Concordia seems to me consistent with this approach. I do not propose to go into the details of the decision of the Court except to refer to paragraphs 85 and 86. In paragraph 85 the Court held that in its factual context - and it may be that it took a different view of the facts from the view taken by the Advocate General - the fact that one of the criteria adopted by the contracting entity to identify the economically most advantageous tender could be satisfied only by a small number of undertakings, one of which was an undertaking belonging to the contracting entity, is not in itself such as to constitute a breach of the principle of equal treatment. And in paragraph 86, the court held that in those circumstances the answer to the third question must be that the principle of equal treatment does not preclude the taking into consideration of criteria connected with the protection of the environment such as those at issue in the main proceedings solely on the ground that the contracting entity's own transport undertaking was one of the few undertakings able to offer a bus fleet satisfying those criteria.

[16] The principles which emerged from Concordia were approved and summarised by the Court in EVN in paragraph 37 in this way. It is open to the contracting authority when choosing the most economically advantageous tender to choose the criteria on which it proposes to base the award of contract, provided that the purpose of those criteria is to identify the most economically advantageous tender and that they do not confer on the contracting authority an unrestricted freedom of choice as regards the award of contract to a tenderer. At paragraph 39 it is made clear that it follows that, provided they comply with the requirements of community law, contracting authorities are free, not only to choose the criteria for awarding the contract, but also to determine the weighting of such criteria providing the weighting enables an overall evaluation be made of the criteria applied in order to identify the most economically advantageous tender.

[17] In the present case the defender wishes to procure the purchase of a range of radiotherapy equipment including, in particular, linear accelerators. These are for incorporation into an existing system or systems, a feature of which, in four of the five hospitals in question, is the use of a Varian RMS system with which the equipment to be purchased has to be compatible. Except in the case of Tayside, the defender does not want or need to purchase a new RMS system. In those circumstances, the adoption of criteria which recognise that the new equipment must be compatible with the existing equipment and, in particular, with the existing RMS system is to my mind self-evidently justifiable and objectively so. On that basis, in line with the reasoning in the Concordia Bus case and EVN, those criteria which, as I say, essentially define what the defender wants to purchase, cannot be regarded as discriminatory, even if the application of those criteria results in there being only one tenderer.

[18] Mr Cormack sought to draw some support from the fact that the defender had chosen to adopt an open procedure under Regulation 15 rather than the negotiated procedure available under Regulation 14 in a case where there is in effect only one possible supplier. His argument appeared to be that the defender must have recognised that it should be opening the tender up to a range of suppliers; and, in that context, the inclusion of criteria which effectively meant that Varian was the only tenderer was discriminatory. If it chose to adopt the open procedure, it had a duty to frame the criteria in such a way as to enable a range of tenderers to bid. I do not accept that argument. The negotiated procedure is not compulsory. It may be (I do not decide this though Mr Cormack's submissions tended to point that way) that the defender could have used a negotiated procedure. But it does not follow from that that if it uses an open procedure it has to remove the criteria which it regards as essential to define its requirements or, to put it another way, to invite tenders for something it did not want.

[19] Mr Cormack also argued that since the duty to observe equal treatment and not to discriminate was absolute, the contracting authority was under a "strict duty to define its functional requirements in a way which enabled effective competition to take place and did not effectively reserve the contract to one supplier". He relied upon two cases in the European Court Commission v The Netherlands [1995] ECR 1-157and Vestaguard v Spottrup Boligselskab [2002] CMLR 42. Those cases say that the contracting authority cannot stipulate for goods of a specific brand or name but must allow for an equivalent to be offered in a tender. It is important to note in the present case that the defender did not specify that they required a Varian linear accelerator. Taking the matter at its strongest for the pursuer, they specified, in effect, that they required a linear accelerator which was compatible with Varian ARIA RMS; and it might be said that they thereby specified for something like "a Varian linear accelerator or equivalent". If that is the right construction to be placed on what they did, it seems to me that they have fulfilled their obligation in terms of those cases rather than acting in breach of them.

[20] In developing his submissions, Mr Cormack argued that the defender had erred in making it part of the functionality requirement of the equipment which it sought to acquire that the equipment be compatible with Varian "ARIA" RMS. He argued that "the true functional requirement was to have linear accelerators integrated with an RMS system which could be 'ARIA' or some other system, which system also connects to or interfaces with other items of equipment whether existing or to be procured". He argued that the pursuer and others would have been able to bid against a properly defined functional requirement of this sort, albeit they would have had to have overcome the disadvantage that this would place them under as compared with Varian, of having to replace the ARIA RMS system throughout the hospitals. I reject this submission. I emphasise again that it is for the defender as the contracting authority to decide what it wants. It has an existing RMS system in four out of the five cancer units which will remain in place for some years, the precise length of time depending upon a rolling system of replacement which was shown in the documents put before the Court. It does not presently wish to replace that system. There are no doubt many factors leading to its decisions in this regard, including the question of cost, disruption and teething problems likely to be encountered if one system is replaced by another which then has to interface it with other equipment which is already in operation. It cannot, in the interests of equal treatment, be compelled to seek tenders for something it does not want. I note, as Mr Currie QC (for the defenders) submitted, that there has been no attack on the present procurement exercise on the grounds that the criteria adopted by the defender are not objectively justifiable; and Mr Cormack, in his oral argument, did not seek to argue that they were not objectively justifiable. I therefore proceed on the basis that they are. That being the case, no purpose would be served by requiring the defender to invite tenders for something other than what they in fact want.

[21] In pursuing the argument that would-be tenderers should have been allowed to tender on the basis that their tender might include an offer to replace the defender's ARIA RMS, Mr Cormack accepted that the defender would have no obligation to accept such a tender. It seems to me that this demonstrates the impossibility of sustaining this argument. There is no realistic likelihood that the defender would accept a tender which involved replacing its existing ARIA RMS system when it is clear it was happy to retain it. Nor has the pursuer put forward in its pleadings or in productions any details of the sort of tender that they would have made had they been allowed to tender on that basis. It seems to me that if the Court is to be persuaded to open up or to stop the present procurement exercise so as to require the pursuer to be allowed to tender on that basis, there requires to be put before the Court material to show that the tender that they might have put forward had a realistic chance of success.

[22] The second complaint made by the pursuer is about the stipulation that there should be a single provider of the equipment. It complains that that was also discriminatory, since it imposed an obstacle to the pursuer and others from bidding for the Tayside part of the procurement, which obstacle was irrelevant to that part of the procurement exercise since Tayside did not itself have an ARIA RMS system. I do not think there is anything in this point. For reasons I have given already it seems to me that it is up to the contracting authority to decide what its procurement requirements are and how to frame them. The decision that there should be a sole tenderer to provide the equipment across the board for the five hospitals was, it seems to me, a decision which the defender could properly take in the exercise of its judgement as the contracting authority. It was, as Mr Currie suggests, a proportional decision or, as I would prefer to put it, it was objectively justifiable for much the same reasons as I have held the other criteria to be objectively justifiable.

[23] Mr Cormack's argument put against this was to the effect that proportionality was not an answer to discrimination or unequal treatment. I agree, but that seems to me to put the cart before the horse. The question in the first place is whether the decision to tender by reference to these criteria, which include the decision to have one provider of equipment across the board, was objectively justifiable. That has not been put in issue. No attack has been made on the objective justifiability of the decisions made by the defender, nor for that matter has any attack been made on the basis that they were disproportionate in some way. That being the case, if the criteria were objectively justifiable, the fact that they lead to the exclusion of the pursuer and possibly all other potential tenderers does not make them discriminatory.

[24] I therefore conclude that the pursuer's attack on the bidding process has no reasonable prospect of success. I was not asked to dismiss the action but, as at present formulated, it seems to me that the pursuer's case is a very weak one.

[25] The conclusions that I have reached seem to me to cover compendiously the various heads of the particular regulations under which the procurement process was challenged. Those were regulations 4(3), 9(4), 9(5) to (9), 9(12), 916), 9(17). I do not think it would be helpful to go through each one merely repeating the same analysis.

[26] I turn then to the question of discretion. The order sought is an order under Regulation 47(10). In Regulation 47A(2) it is provided that in any interim proceedings under this part of the Regulations the Court may decide not to grant an interim order when the negative consequence of such an order are likely to outweigh the benefits, having regard to the following considerations. It then lists three matters to be taken into account. I was referred to a number of English cases - including Exel Europe Limited v University Hospitals Coventry and Warwickshire NHS Trust [2010] EWHC 3332 (TCC) and Indigo Services (UK) Limited v The Colchester Institute Corporation [2010] EWHC 3237 and The Halo Trust v Secretary of State for International Development [2011] EWHC 87 - on the question of how the discretion should be exercised in a case such as this. I was also referred to certain Scottish authority, albeit in a different context, in particular the decision of the Inner House in Scottish Power Generation v British Energy Generation UK Limited 2002 SC 517, at paragraph 21. It seems to me that what requires to be considered is the strength of the parties' cases, the balance of convenience having regard (but not overwhelming regard) to the question of whether the damages might be an adequate remedy, and the public interest.

[27] Those factors are identified in Regulation 47A(2) at paragraphs (a), (b) and (c). As regards paragraph (a) it provides that the Court must have regard to the fact that decisions taken by a contracting authority should be reviewed effectively and as rapidly as possible. I take that into account. Effective review of decisions is the rationale for having a standstill period after the decision has been made on the award of the contract before the contract may be entered into. This is to allow an effective challenge to be made. In a proper case, the requirement that the challenge should capable of being effective might require that the standstill period be extended until the end of the proceedings, as is the presumption unless an order is made bringing it to an end earlier. That will depend upon the assessment of the strength of the challenge.

[28] Item (c) in paragraph 47A(2) requires the Court to have regard to the public interest. It seems to me that the public interest includes, but is not limited to, the requirement for effective review. It takes account of the requirement that a public procurement exercise which has been properly conducted is not unduly delayed by proceedings which have little prospect of success. In other words it takes account of the need for certainty. In the case of a body such as a health service, it must be in the public interest that, if the challenge has no reasonable chance of success, the procurement exercise should be allowed to go ahead without having to wait until the end of the challenge proceedings. So the strength of the challenge will to my mind often be a very important factor - as it is in this case. If I were satisfied that the pursuer had shown a reasonable prospect of success, then I might have been inclined to refuse the order, but that would depend on all the circumstances. I would have had to have regard, though not as a conclusive factor, to the adequacy of damages. I would also have had to consider questions of timing, for example if there were a prospect of this matter going to a full proof, and then possibly a reclaiming motion, before the proceedings were resolved. In addition, I think that there is some force in the points made by the defender, in the Affidavits lodged on its behalf, that this is a procurement exercise which needs to be implemented straightaway. It is a rolling process of replacement, and although the period for delivery of all the goods stretches until 2014 it is clear that some of the replacement has to take place in the next few months.

[29] Consideration (b) in Regulation 47(2) requires the Court to have regard to the probable consequences of an interim order for all interests likely to be harmed. Those interests are, on the one hand, the potential tenderers including the pursuer and, on the other hand, the defender and the Health Boards for whom they act. Where the case is weak or, as I perceive this case to be, very weak, then I consider that the consequences of allowing the standstill period to continue until the end of these proceedings would be so adverse to the legitimate interests of the Health Boards that that factor weighs strongly in favour of the grant of the order sought by the defender.

[30] For those reasons, I am persuaded that I should grant the order sought by the defender and will do so.