knowledge | 16 November 2021 |
Pressing Pause – Word Perfect Brings More Clarity on the Automatic Suspension in Procurement Litigation
On 12 November 2021 the Court of Appeal gave judgment in Word Perfect v Minster for Public Expenditure & Reform.1 The judgment clarifies the considerations for lifting the automatic suspension in procurement challenges, and is the first published procurement judgment to consider this issue since the Supreme Court clarified the test in Merck Sharpe & Dohme.2
The institution of a procurement challenge pursuant to Order 84A gives rise to a suspension which prevents the contracting authority from concluding the relevant contract. Authorities can seek the permission of the Court to conclude the contract (i.e. the lifting of the suspension).
Word Perfect brought a challenge against the procurement by OGP of a framework for translation services. The framework was to operate by way of rotation, and OGP had set certain minimum prices for some Lots (below which prices bidders were not permitted to tender). Word Perfect disagreed with the way that the competition had been structured, and challenged before the tender deadline. Word Perfect argued that the proposed rotation system was “random” and not consistent with procurement rules. It also argued that the minimum pricing rule infringed on competitive freedom and constrained Word Perfect from providing the most economically advantageous tender. Finally Word Perfect argued that the minimum turnover requirement was too low, and the competition rules could therefore admit tenderers who did not have the capacity to perform the contracts.
In an ex tempore judgment in September 2021, the High Court lifted the suspension. However, the Court of Appeal reversed that position, and reinstated the suspension. The court’s consideration of the issues is comprehensive and provides useful clarity to authorities and challengers involved in procurement litigation.
The test for whether the suspension should be maintained is (i) whether the challenger has raised a fair issue and (ii) where the balance of convenience lies (and part of this second factor will include whether damages will be an adequate remedy). Both the High Court and the Court of Appeal were satisfied that Word Perfect had raised fair issues to be tried, meaning that the case turned on the second consideration (the balance of convenience).
One of the major obstacles faced by a contracting authority in seeking the lifting of a suspension is the fact that previous case law has indicated that damages are very difficult for a challenger to obtain in procurement litigation. This is because procurement damages are only available where the breach of procurement law is “sufficiently serious” (i.e. the Francovich threshold). Previous case law has found this to be “decisive” in refusing to lift the suspension. However, in this case, the OGP gave a commitment that it would not dispute the seriousness of the breach if Word Perfect were successful in establishing (at hearing) that a breach had in fact occurred. Therefore, the Francovich threshold was not decisive in this case.
Ultimately, however, the Court of Appeal still concluded that damages would not be an adequate remedy for Word Perfect, if it was ultimately successful at hearing. The reason for this was that the calculation of the applicable damages would be too uncertain, too speculative. Because the challenge was not to the award of a contract, but rather to the way that a competition was structured, it was impossible to say what Word Perfect’s loss would look like (as there was no counterfactual to assess). Therefore, rather than being unavailable, the Court of Appeal was concerned that damages would be simply too complex to assess, and that would give rise to a risk of injustice.
Having considered that damages would not be adequate for Word Perfect, the Court of Appeal went on to find that damages would also not be adequate for the OGP (having regard to the fact that, if the proposed framework was not available, contracting authorities across the public sector might be left without translation services pending the resolution of the hearing).
Having concluded that damages would not be an adequate remedy for either party, the Court of Appeal then considered the remaining factors in the balance of convenience. The High Court had been swayed by the sheer scale of the potential disruption to the public sector’s translation services that would occur if the suspension continued. However, the Court of Appeal disagreed, finding that there were very few contracting authorities who could not benefit from an existing contract for translation services, and that the matter would be resolved in short order (a hearing date having been listed for early January 2022). In light of these factors, the Court of Appeal felt that the balance of convenience was best preserved by maintaining the suspension until full judgment.
This case suggests that a court will be unlikely to lift a suspension, (even if damages are available in principle), where those damages are viewed as being very complex to quantify. Procurement actions, at their most straightforward, anticipate compensation being calculated on the basis of the challenger’s loss of the chance of winning the contract. This is itself a fairly complex analysis, so contracting authorities should be prepared for a challenge in seeking to persuade a court to lift the suspension.
Also contributed by Emma Flood.
-  IECA 305
-  IESC 65
This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.