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SRCL Ltd v The National Health Service Commissioning Board (NHS)
Factual and Procedural Background
The Plaintiff, Company A, provides healthcare waste and compliance services within the United Kingdom, including clinical waste disposal services to the National Health Service ("the NHS"). The Defendant, NHS England ("NHSE"), a non-departmental Government body responsible for funding contracts including clinical waste services, is a contracting authority under the Public Contracts Regulations 2015 ("PCR 2015"). The dispute concerns a procurement challenge by Company A against NHSE following a reverse e-auction held on 26 April 2017 for clinical waste services in Cumbria and the North East of England (Wave 6), part of a Framework Agreement covering England.
Company A was one of five operators appointed to the Framework Agreement, entitling them to participate in mini-competitions ("Call-Off" contracts) for specific regional services. Company A was the incumbent provider but did not win the Wave 6 auction, submitting only one bid early and then ceasing to bid further. The winning bidder was Company B, with Company C placing the next lowest bid.
Company A commenced proceedings on 30 June 2017, alleging that the winning and next lowest bids were abnormally low tenders and challenging the treatment of Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE") costs by NHSE in the procurement process. NHSE disputed these claims and also raised limitation as a defence, contending that proceedings were issued outside the 30-day period required by Regulation 92(1) of PCR 2015. A split trial on liability and causation was ordered but delayed due to the unavailability of a key witness, and the trial was held on 11 June 2018.
The auction was conducted online as a reverse auction administered by the Crown Commercial Service. Following the claim form, NHSE suspended the auction process for all remaining Waves. Company A had won some lots in Waves 1 to 5. Company A’s strategy for Wave 6 involved ceasing to bid after reaching a predetermined minimum price, which was higher than the winning bid.
Company A’s solicitors sent a letter to NHSE immediately after the auction alleging the winning bid was abnormally low. NHSE conducted an investigation which concluded there were no grounds to consider the winning bid abnormally low. Correspondence between the parties’ solicitors is relied upon for arguments on limitation.
The Framework Agreement and auction process involved bidding on a representative basket of clinical waste disposal services, with rates for specific waste types set in a Closing Financial Return Template ("FRT") submitted by the winning bidder. The auction price was a lump sum for the basket, with the actual payment depending on quantities collected and the rates in the FRT or Framework Agreement. The auction duration for Wave 6 was shortened to four hours, requiring rapid bidding decisions. The final winning bid was £310,000 by Company B, with Company C bidding £313,000, and Company A bidding £479,999 before ceasing to bid.
Legal Issues Presented
- Did the Defendant unlawfully encourage bidders to price their bids on the basis that TUPE would not apply?
- Did the Defendant breach Regulation 69(1) of PCR 2015 by failing to require the lowest priced bidder to explain its winning bid?
- If so, would the Defendant have been obliged to reject the winning bid?
- Would the Defendant have been required to seek an explanation from the second-placed bidder?
- If so, would the Defendant have been obliged to reject the second-placed bid?
- Did the Defendant act unlawfully by accepting an abnormally low, unsustainable bid likely to prevent the winning bidder from fulfilling contractual commitments?
- If so, would the Defendant have rejected both the winning and second-placed bids and awarded the contract to the Plaintiff?
- Did the Plaintiff commence proceedings within the 30-day limitation period under Regulation 92(2) of PCR 2015?
- If not, should an extension of time be granted under Regulation 92(4)?
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| J. Varney & Sons Waste Management Ltd v Hertfordshire County Council [2010] EWHC 1404 (QB) | Duty to investigate abnormally low tenders arises only if the authority considers rejecting the tender. | The court preferred this approach, holding that the duty to investigate is not general but linked to a decision to reject. |
| Morrison Facilities Services Ltd v Norwich City Council [2010] EWHC 487 (Ch) | Earlier authority suggesting a duty to investigate abnormally low tenders regardless of rejection intent. | The court preferred Varney over this decision due to later authority and better reasoning. |
| SIAC Construction Ltd v County Council of the County of Mayo [2001] ECR I-7725 | Time for starting proceedings in procurement cases begins when claimant has all necessary information. | Used to establish the start date for limitation periods. |
| Jobsin Co UK PLC v Department of Health [2003] EWCA Civ 1241 | Policy rationale for short limitation periods in procurement cases to avoid disruption and delay. | Supported the strict enforcement of 30-day limitation periods. |
| EnergySolutions EU Ltd v Nuclear Decommissioning Authority [2016] EWHC 1988 (TCC) | Principles on confidentiality rings and solicitor witnesses in litigation. | Used to criticize the calling of a party’s own solicitor as a witness of fact in procurement litigation. |
| Scicluna v Zippy Stitch Ltd [2018] EWCA Civ 1320 | Function and binding nature of agreed lists of issues in litigation. | Supported the court’s refusal to consider unpleaded new issues outside the agreed list of issues. |
| R v Commissioner for Local Administration ex parte Croydon London BC [1989] 1 All ER 1033 | Judicial review delay principles; courts not to apply technical rules rigidly if no prejudice. | Distinguished as not applicable to PCR 2015 limitation rules. |
| Woods Building Services v Milton Keynes Council [2015] EWHC 2011 (TCC) | Standard of judicial review of contracting authority’s evaluation decisions is manifest error. | Applied to hold that court should not substitute its view for contracting authority absent manifest error. |
| Chandra v Brook North [2013] EWCA Civ 1559 | Prudence in issuing protective claims to preserve limitation rights. | Referenced to emphasize importance of timely claim issuance in procurement cases. |
| Matrix-SCM Limited v LB Newham [2011] EWHC 2414 | Factors relevant to extensions of time in judicial review. | Used to outline considerations when assessing extension requests under PCR 2015. |
| Willers v Joyce (No.2) [2016] UKSC 44 | Precedent on following decisions of coordinate jurisdiction. | Supported preference for Varney judgment over Morrison. |
| EnergySolutions EU Ltd v Nuclear Development Authority [2016] EWHC 1988 (TCC) | Confidentiality ring principles and solicitor witness evidence. | Referenced regarding solicitor witness evidence and conflicts of interest. |
| Roussel UCLAF v ICI [1990] RPC 45 | Confidentiality ring necessity and scope. | Cited in the context of balancing disclosure and protection of confidential information. |
| Al Rawi v The Security Service [2012] 1 AC 531 | Confidentiality rings and court’s inherent jurisdiction. | Supported the court’s power to regulate procedure to protect confidentiality. |
| Libyan Investment Authority v Société Générale SA [2015] EWHC 550 (Comm) | Confidentiality club principles and balancing exercise. | Applied to analyze confidentiality ring membership and witness evidence issues. |
| Jobsin v Department of Health [2003] EWCA Civ 1241 | Public interest in rapid resolution of procurement disputes. | Supported strict application of time limits in procurement challenges. |
| Data Medical Service (C-568/13) | Permissibility of public entities bidding with public funding advantage and consideration in abnormally low tender assessment. | Held not to assist Plaintiff’s case on abnormally low tender issues. |
| Various General Court cases (T-392/15, T-90/14, T-74/15) | Challenges to decisions not to reject abnormally low tenders by EU institutions. | Considered but found not to impose broader obligations on contracting authorities. |
| Scicluna v Zippy Stitch Ltd [2018] EWCA Civ 1320 | Importance of agreed lists of issues limiting issues for determination. | Used to reject unpleaded issues raised late in trial. |
Court's Reasoning and Analysis
The court carefully examined the procurement process, the applicable legal framework under PCR 2015, and the evidence presented. It emphasized that NHSE, as a contracting authority, must observe principles of transparency, fairness, and equality in awarding contracts through open competition. The court analyzed the auction process, the role of the Framework Agreement, and the nature of the Call-Off contracts.
Regarding the limitation period, the court found that the 30-day period under Regulation 92(2) began on the date the Plaintiff knew or ought to have known of grounds for the claim, which was the auction date (26 April 2017) or earlier for TUPE-related issues. Proceedings were issued on 30 June 2017, outside the 30-day limit. The court rejected the Plaintiff's argument for extension under Regulation 92(4), finding no good reason for the delay, and held that voluntary investigation by NHSE did not reset or suspend the limitation period.
On the substantive challenge of abnormally low tenders under Regulation 69, the court reviewed relevant case law and academic commentary, preferring the interpretation that the duty to investigate arises only when the contracting authority considers rejecting a tender as abnormally low. The court held that the 2015 Regulations did not impose a general duty to investigate all tenders appearing low but only when rejection is contemplated.
The court accepted the Defendant’s investigation conducted by Mr Smith as thorough and unimpeachable, concluding that the winning bid by Company B and the next lowest bid by Company C did not appear abnormally low. It rejected the Plaintiff's approach of comparing isolated rates or imposing its own margin requirements, noting the commercial realities and competitive strategies of bidders. The court also found the Plaintiff’s own conduct in providing misleading TUPE information to be an attempt to disrupt competition.
The court addressed unpleaded new allegations raised late in trial concerning breaches of Regulation 35 and the use of pyrolysis technology by the winning bidder. It held that these were not properly before the court as they were absent from the agreed list of issues and pleadings, and that allowing them would be unfair and prejudicial to the Defendant.
The court further criticized the Plaintiff’s decision to call its own solicitor as a witness of fact, highlighting the risks of conflicts of interest and the proper use of confidentiality rings in procurement litigation.
In summary, the court applied the principles of procurement law, procedural fairness, and limitation rules strictly, finding the Plaintiff’s claims to be both time-barred and substantively without merit.
Holding and Implications
DISMISSED
The court dismissed the Plaintiff’s claims on the grounds that the proceedings were issued outside the statutory 30-day limitation period and that there was no good reason to extend time. Additionally, on the merits, the court found no breach of the Public Contracts Regulations 2015 by the Defendant in respect of the treatment of TUPE or the acceptance of the winning and second lowest bids, which were not abnormally low.
The direct effect is that the procurement challenge fails, and the Defendant acted lawfully in conducting the auction and awarding the contract. No new precedent was established beyond the application of existing principles. The court’s findings reinforce the importance of adhering to procedural time limits in procurement litigation and confirm the limited scope of the duty to investigate abnormally low tenders under PCR 2015.
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