Henry Bros (Magherafelt) Ltd & Ors v Department of Education for Northern Ireland

Factual and Procedural Background

The Plaintiff, a long-established building contractor, formed a consortium with other Plaintiffs to submit a tender for inclusion in a framework agreement under the Northern Ireland Schools Modernisation Programme (NISMP). The Defendant, the Department of Education for Northern Ireland, initiated the NISMP to address under-investment in school infrastructure. The Department excluded the Plaintiffs from the framework agreement, leading to allegations of breach of contract, breach of the Public Contracts Regulations 2006, and breach of general principles of EC law.

The Central Procurement Directorate (CPD), acting as the Department's agent, managed the procurement process. The procedure involved publication of a contract notice, issuance of Pre-Qualification Questionnaires (PQQ), evaluation, and a primary competition to select contractors for the framework. Twelve contractors were invited to tender, and after assessment, eight were selected, excluding the Plaintiffs. The Plaintiffs requested a debrief and subsequently initiated legal proceedings.

Legal Issues Presented

1. Whether the Department’s exclusion of the Plaintiffs from the framework agreement breached the Public Contracts Regulations 2006 and principles of EC law.
2. Whether the Department’s use of fee percentages without detailed pricing at the primary competition stage complied with the requirement to award contracts based on the most economically advantageous offer.
3. Whether the Department’s procedure for establishing specific contract prices post-award, without competitive pricing at the secondary competition stage, violated transparency, equal treatment, and competition principles.
4. Whether the Plaintiffs’ claim was brought within the applicable statutory time limits under Regulation 47 of the Public Contracts Regulations 2006.

Arguments of the Parties

Plaintiffs' Arguments

• The assessment of the most economically advantageous offer must include a comparative analysis of price or cost; without price comparison, the evaluation is meaningless.
• The Department erred by not requiring tenderers to submit prices for representative or historic contracts at the primary stage, which was contrary to the Regulations and procurement principles of equal treatment and transparency.
• The Department’s method allowed specific contract prices to be set through one-to-one negotiations post-award, which breached competition law principles.
• The Department’s assessment involved a manifest error based on the incorrect assumption that costs would be consistent across contractors regardless of contract options.
• There was a risk of unlawful State Aid due to the lack of open competition in establishing contractual prices.

Defendant's Arguments

• The Department had wide discretion to choose award criteria linked to the contract subject matter, including non-price criteria, consistent with EU and domestic law.
• The Regulations do not require price or cost criteria at the primary competition stage, provided there is a mechanism for establishing prices during the framework’s lifetime.
• The fee percentage mechanism, applied to hypothetical contract value bands, was a reasonable pricing mechanism at the primary stage.
• Specific contract prices are established at the secondary competition stage through negotiation with a Department-appointed costs manager, consistent with the NEC3 contract and Regulations.
• The Plaintiffs’ claim was out of time as any breach occurred when the Invitation to Tender (ITT) documents were issued.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed the procurement process under the Public Contracts Regulations 2006 and relevant EU directives, focusing on the requirement to award contracts on the basis of the most economically advantageous offer. It recognised the Department’s discretion to select award criteria linked to the subject matter of the contract, including qualitative and non-economic factors, but emphasised that price or cost must form part of the assessment to ensure meaningful economic comparison.

The court found that the Department’s reliance solely on fee percentages applied to hypothetical contract value bands at the primary competition stage was based on a manifest error of fact—that defined costs would be uniform across contractors regardless of contract options. Expert evidence demonstrated that fee percentages alone could not reliably predict outturn costs, undermining the validity of the pricing mechanism.

Furthermore, the court held that the Department’s procedure for establishing specific contract prices after the primary competition through one-to-one negotiations with a costs manager lacked competitive transparency and distorted competition, contrary to the Regulations and EU principles of equal treatment and transparency.

Regarding the limitation period, the court adopted established case law holding that the cause of action arises when the breach occurs or is apprehended, not necessarily when loss is suffered. It concluded that the relevant breach occurred at the point of exclusion from the framework rather than at the time of issuing the ITT documents. The court also exercised discretion to extend time for bringing proceedings given the public interest and the importance of resolving procurement legality involving significant public funds.

Holding and Implications

The court’s decision was to ALLOW THE CLAIM insofar as it found that the Department’s procurement procedure breached the Public Contracts Regulations 2006 and relevant principles of EU law by:

• Relying on fee percentages alone at the primary competition stage without a proper price mechanism;
• Failing to conduct a genuinely competitive process for establishing specific contract prices at the secondary competition stage;
• Breaching principles of transparency, equal treatment, and effective competition.

The court’s ruling implies that the Department’s framework agreement award process was unlawful and that the Plaintiffs’ exclusion was improper. No new precedent was established beyond applying existing EU and domestic procurement principles to the facts. The decision underscores the necessity for contracting authorities to incorporate meaningful price or cost criteria in awarding framework agreements and to maintain competitive pricing mechanisms throughout the procurement process.