Infrastructure investment may be about to take off to levels not seen in the UK for many years, but the construction industry can vouch for the fact that the much trumpeted increased workloads are nowhere to be seen yet. One factor that increasingly raises worries that it might add to the delays is the level of legal appeals against major contracts when they are, eventually, awarded.
Hopes were raised recently that the courts might find increased support from an Irish court decision for the idea of letting challenged contracts like long term frameworks go ahead while the legal battle went on, with losing tenderers having to settle for damages if they won their cases. Whatever sympathy might be held for losing bidders for major contracts like frameworks when the stakes are so high, most neutral observers would probably prefer that contract awards could go ahead even if there were technical, as opposed to corrupt or otherwise illegal, faults in the procurement process.
The ruling in an Irish court earlier this year suggested that the UK approach which seemed to favour suspension of contract awards in the event of appeals against awards was against European Union procurement law. The Technology and Construction Court (TCC) however has now reinforced the UK approach by choosing to apply a long standing legal test on whether suspension of the contract award should follow automatically on a challenge.
The test was established by a House of Lords’ ruling in 1975 which gave rise to what is called the ‘American Cyanamid’ guidelines on when courts should grant interim injunctions. The guidelines imply that the court should consider whether the challenge raises serious issues to be tried, and then to consider whether damages would be an adequate remedy.
The recent case involved the award of a contract by Gatwick Airport Ltd (GAL) for air traffic control services. The incumbent, NATS, lost the bid and challenged the process. The eventual decision on whether the procurement process should be re-run will be made following a full trial that has yet to start.
GAL had argued in court that as it is not a utility it is not subject to UK procurement rules on utilities contracts. In the TCC Mr Justice Ramsey ruled that even if GAL was not a utility it was still appropriate to grant a temporary injunction banning GAL from entering into the new contract. He applied the test that led him to conclude that the later award of damages would not be sufficient remedy for NATS in the event of it winning its case. The court would have great difficulty in even assessing the damages that GAL would need to pay and the damage to NATS’ reputation and future chances of winning work.
Cases will be decided on their individual merits, but this TCC decision highlights that suspensions of contract awards will be granted where appropriate. All the more reason then for increasing the level of professionalism in procurement in the private sector as well as in the much maligned public sector procurement arms.
Nick Barrett
Editor