Energy Solutions wins landmarks public procurement challenge

Written on 29 Jul 2016

On 29 July 2016, judgment was handed down in the much-anticipated case of Energy Solutions EU Ltd v Nuclear Decommissioning Authority. The result, that Energy Solutions is entitled to damages as a result of errors made by the NDA in the evaluation process, will be welcomed by suppliers to the public sector struggling with the difficult decision whether to challenge a seemingly questionable tender award.

What was the dispute about?

The dispute relates to the procurement of a major contract for the decommissioning of a number of nuclear facilities. Energy Solutions was part of a consortium (RSS) that bid for the contract, but was unsuccessful. Energy Solutions questioned and subsequently challenged the award, on the basis that there had been ‘manifest errors’ in the evaluation process, and that its consortium should have instead been awarded the contract. Energy Solutions did not, as is usually the case in procurement challenges, issue proceedings within the statutory ‘standstill period’. As a result, the NDA was able to, and did, enter into a contract with the winning bidder, and Energy Solutions was left having to claim damages, rather than seeking to have the tender exercise re-run or the contract awarded to it.

NDA challenged this approach at the interim stage, arguing that by failing to issue proceedings within the standstill period, Energy Solutions had failed to mitigate its loss, or had broken the chain of causation. That argument failed at the preliminary issues stage and subsequently at the Court of Appeal, and the case proceeded to trial.

What did the Court decide?

Fraser J, giving judgment, found that there had indeed been manifest errors by those evaluating the bids. Had the bids been evaluated properly, he found, the winning bidder should have in fact been disqualified, under the NDA’s own evaluation criteria; alternatively, Energy Solutions’ consortium should have been scored higher and should have been awarded the contract. The question of quantum of damages will be decided separately, in a decision that will be watched with interest given the rarity of a successful claim for damages (rather than annulment, for example) in a procurement challenge.

The case has generated a number of other points of interest for suppliers, authorities and lawyers alike. Energy Solutions challenged the NDA’s approach to preserving and providing records. In a previous hearing, the court upheld the NDA’s right to claim legal privilege over documents generated by its solicitors in relation to the carrying out of the evaluation exercise (which Energy Solutions had argued was a commercial, rather than a legal, role). However, Fraser J noted that the withholding of these records meant that, in some instances, there was an omission in the evidence on the decision making. This, he held, did not assist the NDA in defending Energy Solutions’ claim. The judge was even more critical of the NDA’s approach to the making and retaining of notes relating to the evaluation exercise, finding that this left certain important issues being dealt with “in a manner that is wholly contrary to the obligation of transparency.”

The case also took a dramatic last-minute turn, when it transpired shortly before judgment was to be handed down that Energy Solutions had agreed to pay certain of its witnesses a “bonus” payment if it were successful. After learning of this, the NDA applied for the case to be struck out or retried as a result. Having heard further submissions and cross-examination of those witnesses, though, the judge declined to order this. Although such payments are not allowed under English law, he held that the correct approach would be to look again at the evidence given by those witnesses and decide whether a different result would have been reached had that evidence been excluded. Fraser J concluded that the result would have been the same.

What does this mean for suppliers?

The judgment is highly detailed, and we will be reporting further on the issues that it raises for suppliers to the public sector. However, one thing that is clear is that this will give encouragement to those challenging awards that, in addition to seeking to prevent the contract being entered into or having the tender re-run, a claim for damages may well be a viable option.