Calling off frameworks – a cautionary tale for contracting authorities
The High Court has recently handed down judgment in the case of Consultant Connect Limited v NHS Bath and North East Somerset, Swindon and Wiltshire Integrated Care Board, NHS Gloucestershire Integrated Care Board, NHS Bristol, North Somerset and South Gloucestershire Integrated Care Board  EWHC 2037 (TCC).
This judgment has provoked considerable comment among procurement lawyers, and concern from contracting authorities and those responsible for commissioning decisions around the impact it may have on those decisions in future.
The claim related to steps taken by three CCGs (now ICBs hence the names of the defendants) involved to identify a preferred supplier, and thereafter, to identify a route to award a contract to that supplier, via a framework. Another supplier then brought proceedings, alleging that the steps taken by the CCGs amounted to an unlawful direct contract award without competition. Throughout this article we refer to CCG staff, rather than ICB staff.
- Three CCGs wished to secure a communications system to replace pagers and provide other associated functionality. The three CCGs took the decision to procure together, with the intention to award one contract.
- Consultant Connect was a provider of communication tools, as was another supplier, Monemdical Limited (t/a Cinapsis).
- In 2019, NHSX had implemented a framework for IT services and equipment (“the CCT Framework”). The published framework value was £3m, reflecting funding available from NHSX, rather than the likely value of contracts to be procured using the framework during its life. Cinapsis was a named supplier on the CCT Framework. Consultant Connect was not.
- One of the CCGs had an existing contract with Consultant Connect. Another had a contract with Cinapsis. The third CCG did not have a contract in place for such services.
- Initially, the CCGs considered whether it would be preferable to award a new contract to Cinapsis. However, given the existing contract between one of the CCGs and Consultant Connect, the CCGs arranged a ‘demonstration day’ with both providers in November 2020. In advance of the demonstration day, the CCGs prepared a scoring matrix and criteria against which Cinapsis’ and Consultant Connect’s demonstrations would be marked. Neither supplier was aware of the matrix/criteria, nor indeed that any scoring was taking place at all.
- Following the demonstration day, the CCGs concluded that Cinapsis was their preferred provider, and sought to identify a route by which they could award the contract to Cinapsis. The CCT Framework was identified, but did not provide for a direct award without a further mini-competition. The CCGs thereafter concluded that, based upon their requirements, the only capable provider on the framework was Cinapsis, and commenced a mini-competition in which only one bidder was invited to take part, that bidder being Cinapsis.
- The CCGs also sought to implement a different pricing model to that contemplated in the CCT Framework and engaged in further negotiations with Cinapsis prior to concluding a contract. The final contract value was £2.7m.
- Following contract signature, Consultant Connect brought a claim under the Public Contracts Regulations 2015 (“PCR 2015”), alleging that the CCGs had acted unlawfully.
The key issues
The claim raised a number of issues which the Court had to consider/make a ruling on. The key issues can be summarised as:
- Did Consultant Connect have ‘standing’ to challenge a contract awarded under a framework agreement upon which it was not a named supplier?
- Did the contract/communications system being procured fall within the scope of the CCT Framework?
- Did key members of CCG staff involved in the procurement have conflicts of interest as a result of their preference for Cinapsis, and/or was the decision vitiated by apparent bias?
- Did the CCGs fail to comply with the principles of transparency and equal treatment in the course of the procurement of the communications system?
- Did the decision to use the CCT Framework amount to a breach of the PCR 2015, by artificially narrowing competition and/or unduly favouring Cinapsis?
- Did any of the alleged breaches risk causing Consultant Connect loss or damage?
- If so, what remedies should be granted by the Court?
Taking the key issues one at a time:
The Judge concluded that, while it will often be the case that only economic operators on a particular framework will have a basis to challenge the operation of that framework, in some circumstances, other organisations may also be able to challenge by showing that they have been subject to loss following breaches under the PCR 2015. Here, Consultant Connect was sufficiently affected by the decisions of the CCGs to have a basis for challenge. The impact of this finding is likely to need to be assessed on a case by case basis, based on the factual position – see point 6 below.
- Scope of framework
The Judge concluded that the CCT Framework did cover the communications system/contract being procured.
- Conflicts of interest
There was clear evidence before the Court that an employee of one of the CCGs who was involved in the procurement strongly favoured Cinapsis and lobbied throughout for Cinapsis to be appointed. Other members of staff were also shown to have a strong preference for Cinapsis, and to have tried to identify a route by which it could be awarded a contract without any competition. The Judge concluded that, from November 2020, the conduct of certain CCG employees in favouring Cinapsis was such as to give rise to a conflict of interest on the part of those staff, even though those staff did not stand to gain any financial or other benefit from Cinapsis being appointed.
- Transparency and equal treatment
The Judge concluded that the CCGs had, effectively, conducted a procurement process under the guise of ‘market engagement’, and had failed to comply with their obligations of transparency and equal treatment. The evaluation of Cinapsis and Consultant Connect during the ‘demonstration day’, particularly the use of scoring, was a significant factor in the Judge’s conclusions.
- Artificially narrowing competition
The Judge concluded that despite the fact that the contract/communications system fell within the scope of the CCT framework, the decision to use it amounted to an attempt to artificially narrow competition, and was unlawful. The Judge expressly found that the intention of the CCGs in using the CCT Framework was as a ‘shield’, to justify excluding Consultant Connect or other providers from the opportunity to compete.
- Was there a risk of Consultant Connect suffering loss or damage?
The CCGs sought to argue that, at the point that they elected to utilise the CCT Framework to procure a contract that fell within the scope of that framework, the only parties exposed to any risk of loss from subsequent breaches of the CCT Framework’s terms were the other suppliers on the CCT Framework. However, the Judge concluded that, had the CCGs not elected to use the CCT Framework in order to avoid needing to run a competition, they would likely have used an alternative framework of which Consultant Connect was a member, or carried out an open competition. In either case, Consultant Connect would likely have sought to bid (and would have developed its business in order to be able to meet the specification required), and accordingly, had been exposed to the risk of loss or damage as a result of the actions of the CCGs.
Consultant Connect sought an order that the contract be declared ineffective (as it had effectively been awarded directly to Cinapsis, without advertisement). The Court accepted that there were good reasons not to make a declaration of ineffectiveness, given the disruption to staff and patients that was likely to be caused by the service being stopped immediately. However, the Court felt it appropriate to make a contract shortening order, reducing the contract term by 14 months (allowing time for the services to be re-procured), and further imposed civil penalties on the CCGs. This is thought to be the first time that a contract shortening order has been made under the PCR 2015 in the UK.
The facts of this case are, it is hoped, extremely unusual. The conduct of the CCG staff involved was such as to enable the Judge to make clear findings that the CCGs had sought to unlawfully favour a particular supplier, and that conflicts of interest had arisen for key CCG staff members. By the time of the mini-competition, conducted under the CCT Framework, the intended outcome was so clearly apparent that one of the evaluators did not bother to score the Cinapsis bid “as I think it means nothing”.
Nonetheless, the case raises a number of significant points around the use of frameworks, and the steps open to contracting authorities when considering different routes to market.
The PCR 2015 expressly contemplates market engagement taking place prior to contracting authorities commencing a procurement with a view to preparing the procurement (regulation 40). However, in this case, the ‘market engagement’ carried out was used by the CCGs to establish which provider they wished to award the contract to, based upon what was effectively undisclosed award criteria, and following which the CCGs sought to identify a way to award a contract without competition. The Court held that this amounted to an impermissible attempt to narrow competition. This is likely to cause significant debate around the lawfulness of a contracting authority’s use of a framework in circumstances where it has already, to some extent, determined its preferred supplier. Depending on how a contracting authority selects its provider and the framework to be used, this decision makes it clear that such an approach is at risk of challenge by other providers – including providers not on the framework used to make any award.
Notably, the Judge also concluded that the PCR 2015 do not permit contracting authorities to conduct a mini-competition with only one provider having been invited to take part. The Judge expressly stated that this would not bar a contracting authority from awarding a contract following a mini-competition if only one bid was received, or if only one bidder remained in the competition for some other reason, but that it would be unlawful for a contracting authority to screen out all bidders bar one, and then only invite that provider to take part in a mini-competition.
It was also found that it is possible for a sufficiently strong preference for a particular supplier to amount to a ‘conflict of interest’, even where the staff involved will not receive a direct or indirect benefit from that supplier being appointed, as it was held that such a preference could fall within “other personal interests” (as set out in regulation 24). Again, the strength of preference shown in this case (involving a member of staff passing information on to Cinapsis around a competing bid, and lobbying for its submission on price to be accepted despite concerns) is likely to be exceptional, but it is unclear whether a less strong preference in favour of a bidder, or against a bidder, may still amount to a conflict of interest and require a contracting authority to exclude members of staff from the process. Contracting authorities will need to consider how to identify and manage such issues in future.
Finally, the Judge’s conclusion that a provider which was not a named supplier on the framework agreement utilised could nonetheless bring a claim in respect of damage/losses caused by decisions of the relevant contracting authority regarding the use of that framework (even in circumstances in which he found that the contract being procured fell within the scope of the framework) is likely to lead to providers considering pursuing complaints and claims in a wider range of circumstances than might previously have been the case. While such challengers will still need to show, on the facts, that they have been exposed to a risk of loss by the conduct of the contracting authority, and while the Judge concluded that bidders who are not part of a framework will generally not have been caused loss by breaches relating to the operation of the framework, contracting authorities should be ready to deal with more procurement claims.
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