The High Court has granted an application by the Ministry of Defence (MoD) to lift the automatic suspension on the award of a contract. This is an important case in illustrating the Court’s procedure in determining the suspension of the award of contracts and how national defence interests will be viewed as part of this judicial analysis.
Under Regulation 56(1) of the Defence and Security Public Contracts Regulations 2011 (the Regulations), where a claim form is issued to challenge a contracting authority’s decision to award the contract and the contract has not been entered into, the contracting authority must refrain from entering into the contract.
However the Court may lift the suspension of the award of the contract under Regulation 57(1). In deciding whether to lift a suspension, the Court must take into account the interests of all parties as well as the public interest, and in particular defence or security interests (Regulation 57(2)).
In August 2013, the MoD advertised in the Official Journal its intention to commence a tender procedure to select a contractor for the conversion of certain operational military vehicles for training and combat purposes.
NP Aerospace Ltd (which trades as Morgan Advanced Materials Composite and Defence Systems (Morgan)) had been the sole provider of conversion services for this type of armoured vehicle since 2006. In January 2014, Morgan, along with four other tenderers, was issued with an Invitation to Tender (the Tender). Morgan duly submitted its tender.
On 9 May 2014, the MoD informed Morgan of its decision to award the contract to Force Protection Europe Limited (FPE). The MoD informed Morgan of the respective scores awarded to it and FPE. These showed that Morgan had scored very low on price and affordability as compared with FPE.
Morgan issued a claim against the MOD, alleging breach of the Regulations in that the MoD had accepted an abnormally low tender price which was also potentially predatory on the part of FPE. The MOD applied for the automatic suspension under Article 56(1) of the Regulations to be lifted.
The Court, following other public procurement cases, held that the principles and approach laid down in American Cynamid v Ethicon ( AC 396) were applicable to the decision as to whether the suspension should be lifted. Therefore, the High Court examined the following:
- Was there a serious issue to be tried?: The Court concluded that there was a serious issue to be tried. The issues turned on whether the price of the winning tender was abnormally low and whether it was predatory, given FPE’s alleged dominance in the relevant market. Morgan therefore claimed that the winning tenderer ought to be disqualified.
- Were damages an adequate remedy?: Morgan was likely to be able to prove that loss and damages flowed from it not being awarded the contract if it established liability. The Court concluded, however, that damages would be an adequate remedy for the claimant if it were successful. The Court was not convinced that there was other damage caused to Morgan such as reputational damage or inability to win other contracts, which could not be compensated by damages.
- Where did the balance of convenience lie?: The Court was satisfied by (confidential) evidence provided by the MoD that the suspension on the award of the contract needed to be lifted immediately to avoid serious impact to the training and operational capability of the Army. It would not be acceptable to delay. Work needed to be completed by March 2016, for the purposes of Army planning. Given that the trial was listed for November 2014, with judgment possibly a month later this would result in a seven month delay in a project which is very important for military purposes. If Morgan were successful at trial, the project would be further delayed. The Court therefore concluded that this would be contrary to the national interest as such a delay would have a serious impact on the training and operational capability of the Army. The Court therefore concluded that the balance of convenience lay firmly in favour of lifting the suspension. Morgan will have an adequate remedy in damages if it succeeds in establishing its case.
The Court, therefore, granted the MoD’s application and brought to an end the suspension in exercise of its powers under Regulation 57(1).
See: NP Aerospace Ltd v Ministry of Defence  EWHC 2741 (TCC), judgment of 1 August 2014