Northern Ireland Court of Appeal public procurement judgments:
part 2
18 October 2011
The Northern Ireland Court of Appeal recently handed down
judgment in two public procurement cases: McLaughlin and Harvey
Limited and Henry Brothers. McLaughlin and Harvey
Limited dealt with the weighting of sub-criteria and how (and
whether) this ought to be communicated to bidders, while Henry
Brothers dealt with the use of fee percentages as an indicator
of price competitiveness and time limits.
Henry Brothers (Magherafelt) Ltd & Ors v
Department of Education for Northern Ireland (2011) NICA
59
The Department of Education for Northern Ireland (DoE) invited
tenders for participation in a framework agreement for the
provision of design and construction or construction only works to
be carried out in furtherance of the Department for Education's
Northern Ireland Schools Modernisation Programme.
A consortium of four construction companies was unsuccessful and
brought an action before the Northern Irish High Court challenging
the award of the framework agreement.
Use of fee percentages
The action was based on the DoE’s reliance on fee percentages
applied to hypothetical contract values for the purposes of
assessing the most economically advantageous bids. The DoE
attempted to justify this approach by saying that the use of fee
percentages was intended to address the historic problem of a
low/bid high claim culture. Other mechanisms were considered but
expert advice obtained by the DoE recommended the use of fee
percentages in relation to ‘defined costs’ in order to assess
competitiveness. The trial judge heard evidence from the expert and
came to the view that reliance on this mechanism constituted a
manifest error in the procedure, as the defined costs to which the
percentages applied could vary significantly between different
bidders depending on how staff were allocated and managed. The DoE
appealed the decision.
The Northern Ireland Court of Appeal agreed with the trial
judge’s findings, dismissing the appeal and ruling that the expert
advice was erroneous and so reliance on this advice constituted a
manifest error. The Northern Ireland Court of Appeal did not review
the trial judge’s discussion on how fee percentages might lawfully
be used so no further guidance has been forthcoming on this
point.
It is clear that authorities wishing to assess pricing at the
framework agreement stage in a procurement process should take
great care when doing so. Whilst it is desirable (and arguably
essential) to assess pricing to a greater or lesser degree at this
stage, the use of hypothetical pricing structures in such an
assessment is risky. Care should be taken to ensure that any
assessment mechanism produces an accurate reflection of pricing and
costs. This will be very difficult to do on the basis of
hypothetical or sample schemes without further competition on price
as part of mini-assessments, but carrying out a pricing assessment
partly at the framework stage and partly at a mini-competition at
call-off stage is still a viable option.
Setting aside framework agreements and time
limits
The Northern Ireland Court of Appeal approved the High Court’s
decision to set aside the framework agreement on the basis that it
was not classed as a ‘contract’ for the purposes of the Public
Contracts Regulations 2006 (“Regulations”). This point is, for most
practical purposes, no longer relevant as the changes implemented
by the Public Contracts (Amendment) Regulations 2009 mean that
framework agreements are now classed as contracts under the
regulations.
Time limits were also discussed by the Northern Ireland Court of
Appeal, which allowed an extension of 5 days on the basis that the
standstill period was extended beyond the usual limitation period.
Again, this is no longer relevant to new procurement exercises due
to the changes implemented by the Procurement (Miscellaneous
Amendments) Regulations 2011.
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general interest and information. It contains only brief summaries
of aspects of the subject matter and does not provide comprehensive
statements of the law. It does not constitute legal advice and does
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