BSF Group Ltd. v Secretary of State for Defence & Anor

Factual and Procedural Background

These proceedings concern a proposed contract award by the Secretary of State for Defence, acting through the Defence Logistics Organisation ("the DLO"), for the supply of food and bottled water to Her Majesty's Armed Forces both domestically and abroad, including operational theatres such as Iraq and Afghanistan. The contract was to run for five years with options for two extensions of two years each. The award was governed by the Public Supply Contracts Regulations 1995 ("the 1995 Regulations").

The current contract holder, BFS Group Limited trading as 3663 First For Food Service ("3663"), held the existing contract due to expire on 30 September 2006. The Ministry of Defence, via the DLO, initiated a new procurement process advertised under the negotiated procedure. Three tenders were received, including from 3663 and Purple Foodservice Limited ("Purple").

On 8 May 2006, the Ministry announced its intention to award the contract to Purple, triggering a mandatory 10-day standstill period to allow unsuccessful tenderers to seek explanations and potentially bring legal proceedings. Within this period, 3663 notified its intention to challenge the award, alleging breaches of the 1995 Regulations and seeking cancellation of the procurement process and an interim injunction to prevent contract award to Purple.

Purple was subsequently added as a defendant, and the Secretary of State agreed to delay contract entry pending determination of the injunction application. The central issue before the court was whether to grant the interim injunction restraining the Secretary of State from entering into the contract with Purple.

Legal Issues Presented

1. Whether the contracting authority breached the 1995 Regulations in the conduct of the procurement process, particularly by failing to negotiate with 3663 as required under the negotiated procedure.
2. Whether the alleged breaches are actionable under regulation 29 of the 1995 Regulations, including issues of loss or risk of loss to 3663.
3. Whether the statutory limitation period under regulation 29(4)(b) had expired and if there was good reason to extend it.
4. Whether an interim injunction should be granted to restrain the Secretary of State from entering into the contract with Purple pending trial.

Arguments of the Parties

Appellant's Arguments (3663)

• The use of the negotiated procedure implied a clear right and expectation that negotiations would take place with all tenderers admitted to that stage, including 3663.
• The contracting authority failed to negotiate with 3663, breaching transparency and fairness obligations under the 1995 Regulations.
• There was an unlawful change in the procurement procedure from the negotiated procedure to a restricted procedure without informing or consulting 3663.
• The award criteria and their application were unfair and lacked transparency, including failure to disclose minima and weightings and improper risk assessment.
• 3663 contended it had a right to receive improved descriptions of requirements and to respond accordingly, which was denied.
• 3663 sought an extension of the limitation period on grounds that it only became aware of certain breaches after the debriefing and receipt of documents post-claim issuance.

Respondent's Arguments (Secretary of State and Purple)

• The negotiated procedure does not confer a right on tenderers to engage in negotiations or to revise their tenders once submitted.
• The contracting authority retained discretion to decide whether to negotiate, select preferred bidders, or re-tender, consistent with the tender documents.
• The alleged breaches based on failure to negotiate and change of procedure were outside the three-month limitation period, and no good reason existed to extend it.
• 3663 suffered no loss or risk of loss as it had no realistic prospect of winning the contract.
• The award criteria and their application were within the wide discretion afforded to contracting authorities and did not demonstrate manifest error.
• Granting an injunction would cause serious operational disruption and financial loss to Purple and the Ministry of Defence, risking continuity of supply to the Armed Forces.

Table of Precedents Cited

Court's Reasoning and Analysis

The court carefully examined the nature of the negotiated procedure under the 1995 Regulations and the tender documentation. It found that the negotiated procedure does not inherently confer a right on bidders to engage in negotiations or to revise their tenders post-submission. The contracting authority retains discretion to negotiate or not, select preferred bidders, or re-tender.

The court rejected the appellant’s contention that the use of the negotiated procedure amounted to a firm representation of an entitlement to negotiations. The tender documents, including the Special Notices & Instructions to Tenderers (SNITS), clearly indicated that further negotiation was conditional upon selection for the next stage and was at the contracting authority’s discretion.

The court found the allegations of breach, including failure to negotiate and improper change of procedure, to be weak and unsubstantiated by the documentation or evidence. It held that the contracting authority acted within its wide discretion and did not commit manifest error in applying the award criteria or conducting site visits.

Regarding limitation, the court concluded that 3663 was on notice of the absence of negotiations by 6 February 2006 and thus failed to bring the claim within the three-month statutory period for those complaints. Although some other complaints arose later, the court found no good reason to extend the limitation period for the negotiation-related breaches.

The court also considered causation and loss, noting the respondents’ submission that 3663 had no realistic prospect of winning the contract even absent breaches. The court, however, held that this issue remained open pending trial.

In relation to interim relief, the court acknowledged the significant operational and financial harm that granting an injunction would cause to Purple and the Ministry of Defence, including risks to continuity of supply and the feasibility of meeting contract start dates. The court balanced these harms against the weakness of 3663’s case and the delay in bringing proceedings.

Ultimately, the court exercised its discretion to refuse the interim injunction, finding the balance of justice favoured allowing the contract to proceed.

Holding and Implications

The court REFUSED the interim injunction sought by 3663 to restrain the Secretary of State from entering into the contract with Purple.

This decision means the contract award to Purple may proceed without delay. The court did not establish any new precedent, emphasizing the wide discretion contracting authorities possess under the 1995 Regulations and the importance of timely legal challenges. The refusal reflects the court’s concern over operational risks and the weak evidential basis for the appellant’s claims at the interim stage. 3663 remains entitled to pursue its claims at trial but, if unsuccessful, will be confined to damages rather than injunctive relief.