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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> DHL Supply Chain Ltd v Secretary of State for Health and Social Care [2018] EWHC 2213 (TCC) (17 August 2018) URL: http://www.bailii.org/ew/cases/EWHC/TCC/2018/2213.html Cite as: [2018] EWHC 2213 (TCC) |
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Neutral Citation Number: [2018] EWHC 2213 (TCC)
Case No: HT-2018-000185
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 17/08/2018
Before :
MRS JUSTICE O'FARRELL
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Between:
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DHL SUPPLY CHAIN LIMITED |
Claimant |
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- and - |
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SECRETARY OF STATE FOR HEALTH AND SOCIAL CARE |
Defendant |
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- and –
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UNIPART GROUP LIMITED |
Interested Party |
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Richard Leiper QC and Joseph Barrett (instructed by Dentons UK and Middle East LLP ) for the Claimant
Sarah Hannaford QC and Ewan West (instructed by Mills & Reeve LLP ) for the Defendant
Fionnuala McCredie QC (instructed by Macfarlanes LLP ) for the Interested Party
Hearing date: 7 th August 2018
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Judgment Approved
Mrs Justice O’Farrell:
1. There are two applications before the Court:
i) an application by the Claimant (“DHL”) for summary judgement; and
ii) an application by the Defendant (“DHSC”), supported by the Interested Party (“Unipart”), for the lifting of the automatic suspension which arose on issue of the claim and which prevents DHSC from entering into a contract with the successful tenderer, Unipart.
Background
The procurement exercise
i) management of existing logistics services, including transport, inventory management and site facilities;
ii) provision of inbound logistics and inter-depot trunking services;
iii) support for expansion of logistics services to meet projected increased demand;
iv) provision for home and community delivery services for continence products (and potentially other products), on behalf of the NHS, to residential homes, care homes, domestic premises and any NHS funded providers of community health care services.
“The Logistics Service Provider must ensure that a sufficient number of appropriately qualified drivers are available to meet the delivery obligations for the HDS.
a) All drivers undertaking deliveries to a Service User’s home must have an Enhanced Disclosure and Barring Service (DBS) clearance.
b) All drivers undertaking deliveries to a Service User’s home must be insured to cross a Service User’s threshold and access their home.
HDS deliveries can be in two types:
a) Individual for Service User’s own home
b) Bulk for residential care homes or nursing homes.
Drivers may be required to deliver individual packages across the threshold and in some cases to break the Products into storage receptacles.
Drivers will not be required to unpack bulk deliveries at locations such as care homes… ”
9. Service User was defined for the purpose of Schedule 2 as:
“an individual who is resident in a nursing home, residential care home or their own home and receives Products delivered to them by the HDS.”
EVALUATION INTENTION |
Seeks to establish that the Potential Provider has experience of providing a Logistics Service within a Health or Social Care Environment in line with the Authority’s requirements. |
SUBJECT |
Experience of providing Logistics Service within Health or Social Care Environment |
QUESTION |
The Health and Social Care Environment presents unique challenges and considerations to a logistics service. Specific product and Customer requirements often require adjustments in storage and delivery practices, for example. For the HDS, it can include direct contact with Service Users in a domestic setting. Potential Providers are to describe where they have provided logistics services within this environment, and where ‘across the threshold’ delivery was a key component of the service and stakeholder experience. |
RESPONSE REQUIREMENT |
The Potential Provider response should demonstrate that it has experience of managing a service in the Health and Social Care Environment of similar size, complexity and scope… Additionally the response should demonstrate that the Potential Provider has experience in delivering an ‘across the threshold service’ irrespective of sector. Particular emphasis will be placed on the: - Understanding of how the unique challenges of operating a logistics service in the Health and Social Care Environment can impact on Service User health and well-being. - Evidence, regulatory compliance and experience around interacting with Service Users. |
13. The glossary forming part of the ITT defined ‘Health and Social Care Environment’ as:
“a complex system in which health and social services and care are provided to Service Users.”
14. ‘Service User’ was defined in the glossary as:
“an individual in receipt of services from an NHS England body or under an NHS England managed contract.”
15. On 6 October 2017 DHL submitted a tender in respect of the logistics contract.
BIDDER |
QUALITY SCORE (60%) |
PRICE SCORE (40%) |
FINAL MEAT SCORE |
DHL |
40.92% |
14.26% |
55.18% |
Unipart |
43.32% |
25.74% |
69.06% |
Proceedings
“[36] The defendant purported to evaluate the Unipart response to SQ 6.9 as meeting the scoring criteria required to be awarded a score of 3. The Defendant has not identified any proper basis on which its decision in respect of the Unipart response to SQ 6.9 can be justified. It is averred that in purporting to award the Unipart response to SQ 6.9 a score of 3, the Defendant breached its duties, failed to apply the published selection criteria, applied undisclosed selection criteria, breached its duties of equal treatment and transparency, misdirected itself and/or committed manifest errors…
[37] It follows that applying the published scoring criteria the Unipart response to SQ 6.9 could not lawfully be awarded a score of 3. Pursuant to the express terms of the ITT, the Unipart response was also, therefore, required to be excluded from the procurement.”
“[27.1] The interpretation and application of SQ6.9 falls to be determined in the context of the Procurement as a whole, the requirements of the Contract to be awarded, and the contents of the tender documentation as a whole, in particular the other selection questions.
[27.2] As explained at the Bidder Engagement Days and Site Visits and as is clear from the requirements of the Contract and the contents of the tender documentation, the majority of the services to be provided by the successful tenderer are general logistics services which require no particular experience or expertise in the health or social care sector. The only element of the contract which requires specific experience and expertise is the HDS, in particular the ability to provide an “over the threshold” service to vulnerable individuals.
…
[27.4] … a requirement that a tenderer had to demonstrate experience of delivering a contract of the size, complexity and scope of the Contract as a whole within the health and social care sector would have the effect of rendering the Claimant the only economic operator capable of bidding. That was not and could not have been the Defendant’s intentions, given that it would have been unlawful to design the competition for procurement of a public contract in a manner which permitted only the incumbent to tender successfully.
[27.5] … the purpose of SQ 6.9 was to focus on the operational side of the HDS …
[27.8] … The requirement was both to “describe where [the tenderer has] provided logistics services within this environment, and where ‘across the threshold’ delivery was a key component of the service and stakeholder experience” (emphasis added). The conjunctive “and” makes clear that SQ 6.9 was not simply looking at a logistics service in the health and social care sector, but one with a specific “across the threshold” element.
[27.9] Consistent with that approach, the evaluation criteria sought demonstration of both elements. However in order to ensure that there was effective competition, the Defendant was willing to accept relevant experience in the health and social care sector that did not include an “across the threshold service” provided that experience of that element could also be demonstrated in another sector. However, where a tenderer had experience of an “across the threshold service” in the health and social care sector, description of that experience alone would suffice. References to similar size, complexity and scope were not therefore to be read as referring to the entirety of the services to be provided under the Contract but to the HDS element specifically.
[27.10] The approach outlined above is both clear and one that would be obvious to the reasonably well informed and normally diligent (“RWIND”) tenderer participating in the Procurement …”
Summary Judgment
“The court may give summary judgment against a … defendant on the whole of the claim or on a particular issue if:
(a) it considers that …
(ii) the defendant has no real prospect of successfully defending the claim or issue; and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial.”
i) The court must consider whether the defendant has a realistic as opposed to fanciful prospect of success. A realistic defence is one that carries some degree of conviction and is more than merely arguable: ED&F Man Liquid Products Limited v Patel [2003] EWCA Civ 472 per Potter LJ at paragraph [8].
ii) The court must not conduct a mini trial and should avoid being drawn into an attempt to resolve conflicts of fact which are normally resolved by the trial process: Swain v Hillman [2001] 1 All ER 91 per L. Woolf MR at p.95.
iii) More complex cases are unlikely to be capable of being resolved on a summary basis without disclosure and oral evidence at trial. CPR 24.2 is designed to deal with cases that are not fit for trial at all: Three Rivers DC v Bank of England (No.3) [2003] 2 AC 1 per Lord Hope at p.261B; Yeheskel Arkin v Borchard Lines Ltd (No.2) [2001] WL 606419 per Coleman J at paragraphs [20] and [21].
iv) However, the court should not decline to deal with a short point of construction merely on the basis that something relevant to the matrix might turn up if there were a full trial. If the court is satisfied that it has before it the factual matrix necessary for determination of the proper construction issue, it should determine it on the summary judgment application: Saleem Khatri v Cooperative Centrale Raiffeisen-Boerenleenbank BA [2010] EWCA Civ 397 per Jacob LJ at paragraphs [3] – [5].
23. There is no dispute as to the material requirements of the Regulations. Regulation 18 states:
“(1) Contracting authorities shall treat economic operators equally and without discrimination and shall act in a transparent and proportionate manner.
(2) The design of the procurement shall not be made with the intention of … artificially narrowing competition.
(3) For that purpose, competition shall be considered to be artificially narrowed where the design of the procurement is made with the intention of unduly favouring or disadvantaging certain economic operators.”
24. The obligations of transparency and equal treatment require a contracting authority to apply the selection criteria set out in the ITT. The meaning and effect of the ITT criteria is a matter of law for the court. The transparency obligation does not allow for any margin of appreciation: Woods Building Services v Milton Keynes Council [2015] EWHC 2011 per Coulson J at paragraphs [7] & [8].
25. A material issue raised on the pleadings is whether the ITT criteria were sufficiently clear to permit of uniform interpretation by all reasonably well informed and diligent (“RWIND”) tenderers. Although evidence may be relevant to the question of how a document would be understood by the RWIND tenderer, the test is an objective one and does not depend on the subjective intention or understanding of the contracting authority or any tenderer: Healthcare at Home Ltd v The Common Services Agency (Scotland) [2014] UKSC 49 per L.Reed at paragraph [5], [8], [14], [26] and [27].
29. Ms Hannaford QC, for DHSC, submits that DHL’s interpretation of SQ 6.9 is wrong. It is accepted that SQ 6.9 required each tenderer to demonstrate its capability in respect of two distinct elements: (i) experience of managing a service in the Health and Social Care Environment of similar size, complexity and scope; and (ii) experience in delivering ‘an across the threshold service’ irrespective of sector. The Health and Social Care Environment is a defined term and is concerned with the delivery of health and social care services to Service Users. Service Users are individuals who benefit from the HDS. Therefore, the relevant environment is the HDS. “Across the threshold” is part of the HDS but the HDS is of wider scope. Not all HDS deliveries are to Service Users in their homes; the HDS includes deliveries to Service Users in nursing and care homes where an “across the threshold” service is not required. Element (i) requires evidence of experience of logistics services in the HDS as a whole; element (ii) requires evidence of experience of “across the threshold” services within or outside the HDS. SQ 6.9 was not directed to the wider Core Logistics services which are dealt with elsewhere in section 6. DHL’s interpretation would require the Court to read additional words: “to the whole contract” at the end of the response requirement for element (i) but there is no basis for re-writing the ITT.
30. Ms Hannaford submits that in any event this issue is not suitable for summary judgement. Evidence would be needed as to the context, definitions and factual matrix within which SQ 6.9 should be read and understood by the RWIND tenderer. Further there are disputed factual issues, such as what was said at the tender meetings, whether other bidders could meet the requirements if the DHL interpretation were to be correct, whether Unipart could have merited a score of 3 for SQ 6.9 on the DHL interpretation and whether the confidential allegations set out in paragraph 36 of the Amended Particulars of Claim could be established on the balance of probabilities by DHL.
31. On the documents currently before the Court, DHSC has a real prospect of successfully defending the claim. Ms Hannaford’s submissions as to the proper construction of the ITT are supported by the express definitions of “Health and Social Care Environment” and “Service User”. Those defined terms used in SQ 6.9 suggest that the question could be limited to the HDS as claimed. Of course, it will be necessary to construe SQ 6.9 against the relevant factual matrix and together with the other provisions of the ITT. The Court does not speculate as to what such an exercise will show. The witness statements of Mr Sahota, Senior Procurement Officer for DHSC, and Mr Jones, Vice President (Business Development) for DHL, indicate that there are factual disputes as to: (a) what was said to tenderers at the pre-bid meetings, (b) what would be required to be demonstrated to show the relevant experience required by SQ 6.9, (c) whether there were other bidders who could meet the stated criteria and (d) whether Unipart’s response satisfied the criteria. The Court cannot determine those matters fairly without giving the parties an opportunity to test the evidence at trial.
32. For those reasons, DHL is not entitled to summary judgment and its application is dismissed.
Application to lift the suspension
“Where –
(a) a claim form has been issued in respect of a contracting authority’s decision to award the contract; and
(b) the contracting authority has become aware that the claim form has been issued and that it relates to that decision; and
(c) the contract has not been entered into,
the contracting authority is required to refrain from entering into the contract.”
34. Regulation 96 empowers the Court to lift the suspension as follows:
“(1) In proceedings, the Court may, where relevant, make an interim order –
(a) bringing to an end the requirement imposed by regulation 95(1) …
(2) When deciding whether to make an order under paragraph (1)(a) –
(a) the Court must consider whether, if regulation (1) were not applicable, it would be appropriate to make an interim order requiring the contracting authority to refrain from entering into the contract; and
(b) only if the Court considers that it would not be appropriate to make such an interim order may it make an order under paragraph (1)(a).
(3) If the Court considers that it would not be appropriate to make an interim order of the kind mentioned in paragraph (2)(a) in the absence of undertakings or conditions, it may require or impose such undertakings or conditions in relation to the requirement in regulation 95(1).”
35. It is established law that the applicable test is the American Cyanamid test: DWF LLP v Secretary of State for Business Innovation and Skills [2014] EWCA Civ 900 per Sir Robin Jacob at [45]-[47]; Covanta Energy Ltd v Merseyside Waste Disposal Authority [2013] EWHC 2922 per Coulson J at [34] and [48], OpenView Security Solutions Limited v The London Borough of Merton Council [2015] EWHC 2694 per Stuart-Smith J at [10]-[11]; Lancashire Care NHS Foundation Trust v Lancashire County Council [2018] EWHC 200 per Fraser J at [16]-[18].
36. The Court must consider the following issues:
i) Is there a serious issue to be tried?
ii) If so, would damages be an adequate remedy for DHL if the suspension were lifted and it succeeded at trial?
iii) If not, would damages be an adequate remedy for DHSC if the suspension remained in place and it succeeded at trial?
iv) Where there is doubt as to the adequacy of damages for either or both parties, which course of action is likely to carry the least risk of injustice if it transpires that it was wrong, that is, where does the balance of convenience lie?
Serious issue to be tried
37. DHSC concedes, for the purpose of this application, that there is a serious issue to be tried.
Adequacy of damages for DHL
41. Thirdly, the impact of the decision of the Supreme Court in Nuclear Decommissioning Agency v Energy Solutions EU Ltd [2017] UKSC 34 raises the real prospect that if the suspension were lifted and DHL established its claim, it would be deprived of any damages on the ground that the “sufficiently serious” criterion could not be satisfied. In those circumstances, DHL would be left without any effective or substantive remedy in respect of DHSC’s breach of the Regulations.
44. In response to the Nuclear Decommissioning issue, Ms Hannaford confirmed that if DHL succeeded in establishing that DHSC acted unlawfully in awarding the contract to the wrong bidder, DHSC accepts that the breach would be sufficiently serious to sound in damages. This concession was made without prejudice to any argument on causation or quantum of loss.
45. When considering whether damages would be an adequate remedy for DHL, the Court must have regard to the issue whether it is just, in all the circumstances that DHL should be confined to its remedy of damages: Covanta (above) at [48]. Damage to reputation may be a relevant factor but requires cogent evidence showing that such loss of reputation would lead to financial losses that would be significant and irrecoverable as damages or very difficult to quantify fairly: Alstom Transport v Eurostar International Ltd [2010] EWHC 2747 per Vos J at [129]; NATS (Services) Ltd v Gatwick Airport [2014] EWHC 3133 per Ramsey J at [84]-[85]; DWF (above) at [52]; Openview (above) at [33]-[40].
Adequacy of damages for DHSC
49. Ms Hannaford submits that DHSC would suffer loss that could not be adequately compensated for in damages if its application were refused. If the suspension were not lifted, the full implementation of the FOM would be delayed until after conclusion of the proceedings. One of the objectives of the FOM is to achieve savings of over £600 million per annum for the NHS as explained by Mr Sahota in his first witness statement. If the suspension were to be maintained, DHSC would seek the provision of a cross-undertaking in damages in respect of the delayed benefits of the FOM.
Balance of convenience
55. The starting point in assessing the balance of convenience is to consider how long the suspension might have to be kept in force: DWF (above) at [50]. Mr Leiper seeks to persuade the Court that the parties could be ready for an expedited trial with a 1-2 day estimate in September or October 2018. This would reduce any prejudice to DHSC in maintaining the suspension pending resolution of the dispute. However, the position of Ms Hannaford and Ms McCredie is that a reasonable estimate would be 3 days and that it is unlikely that the parties would be ready for trial before October or November 2018. I note that an application for an expedited hearing was made by DHL and rejected by the Court at the hearing on 12 July 2018. I consider that it is unlikely that the parties could be ready for a trial before October/November 2018, particularly as I understand that disclosure will be required but has not started and there are material issues of factual evidence that will need to be addressed, as identified in respect of the summary judgment application. Even if the Court could give a judgment shortly after the hearing, realistically, it would not allow the current FOM implementation deadlines to be met.