Court Upholds Challenge to Tender Process After Contract Signed

April 5, 2016

Court Upholds Challenge to Tender Process After Contract Signed

In a ruling which should be required reading for those who deal with public authorities, a company which claims that it was unjustly denied a nuclear plant decommissioning contract, following a flawed tendering process, had its hopes of receiving up to £100 million in compensation boosted by the Court of Appeal.

After the company was informed by the Nuclear Decommissioning Authority (NDA) that the contract had been awarded to a rival bidder, it swiftly expressed concerns about the tendering process and claimed that the NDA had failed in its duty under the Public Contracts Regulations 2006 to award the contract to the most economically advantageous tenderer.

The announcement of the result of the process was followed by a two-week 'standstill period'. The company could have issued proceedings during that period and, had it done so, the award of the contract would, by operation of the Regulations, have been automatically suspended pending resolution of its claim.

However, the company did not take that step, instead informing the NDA that it was reserving its position, and the contract was duly signed. In those circumstances, the NDA argued that the company had deprived itself of the opportunity of maintaining the suspension and forfeited its potential right to damages.

A judge subsequently ruled that it was not possible to resolve that question as a preliminary issue but that it needed to be decided at a full trial. In upholding the company's challenge to that ruling, however, the Court found that on a true interpretation of the Regulations, the company's failure to issue proceedings before the NDA entered into the contract did not preclude it from pursuing its damages claim.

On a broader point of principle, the Court also found that, if the company succeeded in establishing that there was a breach of the Regulations, a judge would have no discretion to refuse to compensate it for any losses that it had suffered. Ordinary principles of English law would apply to the quantification of such damages.