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Abandonment Issues, Procurement: Start again and defeat the claim?

Abandonment Issues, Procurement: Start again and defeat the claim?

A lot of construction goes on in my house, with varying levels of success.  We are quite proficient at lego models and can create some pretty futuristic looking structures with magnetic shapes.  Our child-sized Burj Khalifa (a grandiose project title, I know) was an attempt at our biggest building out of wooden blocks yet, but it had some structural issues near the base, so we made the call to abandon and start again.

Abandoning a project is sometimes a bitter pill to swallow, but often it’s a pragmatic course of action, especially if flaws emerge which have potentially had a significant impact on the outcome.

Abandonment of award procedures in a regulated procurement is not uncommon. Flaws in the process may come to light during the tendering and evaluation process which require the contracting authority to conduct a comprehensive review and start afresh.
 
Procurement teams will also be aware of Regulation 27(9) of the Public Contracts (Scotland) Regulations 2015, which provides that “Nothing in these Regulations prevents an authority which has commenced a procurement from terminating that procurement at any time.”

So, in the face of a legal challenge by a bidder aggrieved at the outcome of a procurement, do contracting authorities always have the safety net of abandonment: start again and defeat the claim?  Not necessarily.

Decisions to abandon are not often the subject of a challenge so we have little guidance on the point.  However, in Amey Highways Ltd v West Sussex County Council, the Technology and Construction Court held that the decision of the Council to abandon a procurement did not defeat a claim where the accrued cause of action arose before the abandonment decision was taken.

In that case, Amey had brought two sets of proceedings against the Council alleging failures in the Council's procurement of a contract known as the Highways Term Service Contract. The Council decided to award the contract to Ringway Infrastructure Services Ltd. Amey's overall score was assessed to be 85.48, with Ringway just 0.03 ahead. In its first action, Amey alleged that its score should have been higher than Ringway's and that it should have been awarded the contract. 

The Council then gave notice that it was abandoning the process and would start again with the hope and intention that abandonment would defeat Amey’s claim. Amey promptly issued a second set of proceedings challenging the lawfulness and effect of the abandonment.

While the judge concluded that the decision to abandon was not, in and of itself, “manifestly wrong” - he noted a variety of reasons for the decision which were a “rational attempt to preserve public funds” - the decision to abandon still left the Council exposed to a claim for damages.

This was because the court held that the abandonment decision had no effect on Amey’s first claim because it had an accrued cause of action before the abandonment decision was taken.

The court commented that there was a fundamental difference between, on the one hand, abandoning to prevent further causes of action accruing in the future, and on the other, depriving an economic operator of a cause of action which already existed and which that operator was entitled to enforce before the decision was taken to abandon.

This is a helpful case to note for parties involved in potential procurement challenges. Although tenderers are taken to accept the risk that a contracting authority may in some circumstances lawfully decide to abandon, they do not also have to accept the additional risk that, if that happens, they will be deprived of the opportunity to raise an action in respect of a breach of duty that caused them (or risked causing them) loss or damage before the decision to abandon was taken.

By Ruth McNaught
Senior Associate, Procurement

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A lot of construction goes on in my house, with varying levels of success.  We are quite proficient at lego models and can create some pretty futuristic looking structures with magnetic shapes.  Our child-sized Burj Khalifa (a grandiose project title, I know) was an attempt at our biggest building out of wooden blocks yet, but it had some structural issues near the base, so we made the call to abandon and start again.
Abandoning a project is sometimes a bitter pill to swallow, but often it’s a pragmatic course of action, especially if flaws emerge which have potentially had a significant impact on the outcome.
Abandonment of award procedures in a regulated procurement is not uncommon. Flaws in the process may come to light during the tendering and evaluation process which require the contracting authority to conduct a comprehensive review and start afresh. 
Procurement teams will also be aware of Regulation 27(9) of the Public Contracts (Scotland) Regulations 2015, which provides that “Nothing in these Regulations prevents an authority which has commenced a procurement from terminating that procurement at any time.”
So, in the face of a legal challenge by a bidder aggrieved at the outcome of a procurement, do contracting authorities always have the safety net of abandonment: start again and defeat the claim?  Not necessarily.
Decisions to abandon are not often the subject of a challenge so we have little guidance on the point.  However, in Amey Highways Ltd v West Sussex County Council, the Technology and Construction Court held that the decision of the Council to abandon a procurement did not defeat a claim where the accrued cause of action arose before the abandonment decision was taken.
In that case, Amey had brought two sets of proceedings against the Council alleging failures in the Council's procurement of a contract known as the Highways Term Service Contract. The Council decided to award the contract to Ringway Infrastructure Services Ltd. Amey's overall score was assessed to be 85.48, with Ringway just 0.03 ahead. In its first action, Amey alleged that its score should have been higher than Ringway's and that it should have been awarded the contract. 
The Council then gave notice that it was abandoning the process and would start again with the hope and intention that abandonment would defeat Amey’s claim. Amey promptly issued a second set of proceedings challenging the lawfulness and effect of the abandonment.
While the judge concluded that the decision to abandon was not, in and of itself, “manifestly wrong” - he noted a variety of reasons for the decision which were a “rational attempt to preserve public funds” - the decision to abandon still left the Council exposed to a claim for damages.
This was because the court held that the abandonment decision had no effect on Amey’s first claim because it had an accrued cause of action before the abandonment decision was taken.
The court commented that there was a fundamental difference between, on the one hand, abandoning to prevent further causes of action accruing in the future, and on the other, depriving an economic operator of a cause of action which already existed and which that operator was entitled to enforce before the decision was taken to abandon.
This is a helpful case to note for parties involved in potential procurement challenges. Although tenderers are taken to accept the risk that a contracting authority may in some circumstances lawfully decide to abandon, they do not also have to accept the additional risk that, if that happens, they will be deprived of the opportunity to raise an action in respect of a breach of duty that caused them (or risked causing them) loss or damage before the decision to abandon was taken.
ChrisA