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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 Educations 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 DoEs 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 judges 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 judges 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 Courts 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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The content on this page is provided for the purposes of 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 not provide a substitute for it.

Peter Ware

Peter Ware

Partner and Head of Government Sector

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