6 November 2008
Two recent decisions of the High Court in Northern Ireland in Henry Brothers (Magherafelt) Ltd. and others v Department for Education for Northern Ireland and McLaughlin & Harvey Ltd. v Department of Finance and Personnel demonstrate that tenderers for public works contracts will face difficulties in obtaining injunctive relief against irregularities in tender procedures, even where there is a serious issue to be tried and damages may not be an adequate remedy.
Both decisions of the High Court of Northern Ireland related to tenders by contractors for inclusion in "Framework Agreements" for the execution of major construction works for public projects in Northern Ireland. A "Framework Agreement" is an agreement by which a public body selects a limited number of contractors for the purpose of inviting tenders for individual projects in the future.
In Henry Brothers, the evaluation system for the Framework Agreement was to be 80% qualitative and 20% commercial. The commercial component was to be based on the fee percentages proposed by tendering companies.
Henry Brothers argued that reliance on the fee percentage as the sole commercial criterion, without reference to any other element of cost, was wrong and contrary to the procurement requirements of the European Union. Such reliance, it was argued, did not take into account differing levels of efficiency between contractors or the prices that contractors could negotiate for labour, materials and site establishment costs.
Henry Brothers sought injunctive relief to prevent the Northern Ireland Department for Education awarding the Framework Agreement based on the evaluation system.
In applying the guidelines set out by the Court of Appeal in American Cyanamid Company v Ethicon Ltd  for exercising the court's discretion in granting injunctive relief, the High Court of Northern Ireland agreed that there was a serious issue to be tried. It held that the Department for Education's sole reliance on the fee percentage in evaluating the commercial component of tenders did not satisfy the EU requirement that the "most economically advantageous" or lowest priced tender should be accepted.
The court also agreed with the contractor that damages would not necessarily be an adequate remedy. While a claim for damages could be produced on the basis of a tenderer's loss of opportunity of securing work on a number of projects (with a total value in the region of £54 million), the court acknowledged that the calculation of damages would be difficult. It therefore found that damages would not be an adequate remedy.
Notwithstanding these findings, in considering the "balance of convenience" between the parties, the court held that it could take into account the public interest. It concluded that if an injunction was granted to prevent the award of the Framework Agreement, there would be a substantial increase in the cost of public projects together with delay which, amongst other things, could result in loss of central government funding.
The court therefore refused injunctive relief on the basis that the balance of convenience was weighed heavily in favour of the public entity and that the increased cost of and delay to individual projects would not be in the public interest.
The second case of McLaughlin & Harvey Ltd, related to the establishment of a Framework Agreement for various construction projects with a combined capital value in the range of £500 million to £800 million.
The contractor's tender for the Framework Agreement was unsuccessful and they requested a debrief meeting with the Department of Finance and Personnel (DFP). At the debrief meeting, the contractor became aware that the DFP had marked their tender using a methodology which had not been disclosed prior to the submission of their tender. It was claimed that this was in breach of the EU requirement for transparency and that the basis on which their tender had been evaluated was unfair. The contractor therefore sought an injunction to prevent the award of the Framework Agreement.
Again, in considering the guidelines set out in American Cyanamid, the court had little difficulty in establishing that there was a serious issue to be tried. However, in this instance, the court held that although the assessment of damages would not be easy to determine or calculate, damages would nevertheless be an adequate remedy. More importantly, however, in assessing the balance of convenience between the parties, the court held that it cannot be in the public interest for the public to be required to pay a contractor for the cost of executing public works and also to pay another contractor loss of profit on projects from which it had been excluded, even if unlawfully. The court therefore refused to grant the injunction sought.
The decisions in Henry Brothers and McLaughlin & Harvey underline the difficulties faced by tenderers for public works contracts in obtaining injunctive relief from the courts to prevent unlawful action in procurement procedures. It appears that the balance of convenience will always be weighed in favour of the public procuring entity who will, in the majority of instances, be able to establish that an injunction would delay worthy public projects and result in increased costs to the taxpayer.
Even if it can be established under the American Cyanamid guidelines that there is a serious issue to be tried and that damages would not be an adequate remedy, the adverse consequences of granting injunctive relief are always likely to outweigh the rights of private tendering parties.
This will need to be recognised in considering the remedies available to tendering entities if procedural or substantive irregularities are encountered during a procurement exercise.
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