Irish Centre for European Law
Trinity College, Dublin
Recent Public Procurement Cases
In the Irish, Northern Irish, English and Scottish Courts
Public Procurement Conference
Royal Irish Academy
28 June 2012
Nathy Dunleavy BL
Recent Public Procurement Cases
In the Irish, Northern Irish, English and Scottish Courts
The notes below cover some recent public procurement cases in the courts of Ireland, Northern Ireland, England and Scotland. Topics include categorisation of contracts as public works or supply contracts; whether an entity constitutes a ‘contracting authority’; when below threshold contracts are of cross-border interest; the misapplication of selection criteria; lifting the automatic suspension; and time limits. A list of some recent Irish procurement cases is also attached.
Cases
A. Threshold Issues – Which procurement rules apply?
1. QDM Capital QDM Capital Ltd v Athlone Institute of Technology (IEHC, Birmingham J, 3 June 2011)
2. QDM Capital Ltd v Galway City Council [2011] IEHC 534
3. JBW Group Limited v Ministry of Justice [2012] EWCA Civ 8
4. Alstom Transport v Eurostar International Ltd [2012] EWHC 28 (Ch)
B. Part B/Below threshold contracts
5. Sidey Limited [2011] CSOH 194
C. Selection Criteria
6. Easycoach Limited v Department of Regional Development [2012] NIQB 10
7. Clinton v Department for Employment and Learning [2012] NIQB 2
D. Automatic Suspension
8. First4Skills Limited v Department of Employment and Learning [2011] NIQB 59
E. Time Limits
9. Easycoach Limited v Department of Regional Development [2012] NIQB 10
A. Threshold Issues – Which procurement rules apply?
1. QDM Capital QDM Capital Ltd v Athlone Institute of Technology (IEHC, Birmingham J, 3 June 2011)
(i) Issue
1. The applicant in this case challenged the failure of the respondent third level institute to advertise a contract for the refurbishment of buildings. The question arose as to whether the contract at issue was a works contract or, as the applicant argued, a mixed services/supply contract. If the former, then the higher financial threshold (€4.845m) for application of the formal public procurement rules would have applied instead of the lower threshold (€193,000) for services/supply contracts. As the contract value was between these two thresholds, the categorisation of the contract was a crucial threshold question in the case. Kelly J directed that the question whether the contract was a works contract be tried as a preliminary issue.
(ii) Holding
2. Following a review of the relevant directives and Irish Regulations and the case law on the categorisation of contracts and having examined in detail the subject matter of the contract, Birmingham J held that the essential obligation under the contract was the carrying out of works of a construction/refurbishment character and it was that obligation which gave the contract its character. The contract was therefore a works contract, to which the higher monetary threshold for application of the formal procurement rules applied, meaning that the respondent Institute had not been required to advertise the contract in the Official Journal. The Court rejected out of hand the applicant’s argument that works referred only to the construction of new buildings.
(iii) Significance
3. The case illustrates the importance of contract categorisation. Whether a contract is categorised as a works contract or a service/supply contract can determine whether the formal public procurement rules apply. It is also an example of what seems to be an increasing trend in commercial litigation for preliminary issues to be tried or modular trials of different issues ordered.
4. Note that Birmingham J issued a separate judgment on the question of costs on 6 July 2011, applying the normal rule that costs follow the event and rejecting the applicant’s contention that the application of this rule would render the public procurement legislative scheme and the Remedies Directive inoperable and in particular would preclude many SMEs from exercising their rights.
2. QDM Capital Ltd v Galway City Council [2011] IEHC 534
(i) Issue
5. Like in QDM v Athlone IT, the key question considered by Feeney J in this case was whether the contract at issue was a public works contract or a public supply contract. The contract was for the replacement of a heating system for a swimming pool, including removal of the current system and installation of the new unit and boilers. If the contract was a public supply contract, it was above the then applicable €193,000 threshold and the contract notice that had been issued in connection with the contract would have been defective pursuant to SI 329/2006. If it was a works contract, it was below-threshold and the formal procurement rules in SI 329/2006 would not have applied. The categorisation of the contract as a supply or works contract was therefore a crucial threshold issue.
6. A second issue arose, namely, whether the contract notice that was issued contained the necessary elements to treat the contract as a public works contract and to have the notice reviewed or to be capable of review, and whether, based upon the principle said to be identified in the Case C-241/06 Lämmerzahl, there was such a failure by Galway City Council to reveal the essential nature and scope of the contract, thereby rendering the notice defective and in contravention of the general principles of EU law.
(ii) Holding
7. Feeney J noted that it was clear that the contract at issue was mixed, requiring both the supply of goods and the carrying out of works. The Court had to ascertain which was the predominant feature. The Court applied the test of main purpose of the contract. It made extensive reference to the earlier decision of Birmingham J in QDM v Athlone IT and proceeded on the basis that the approach and principles on the question of contract categorisation set out in that case ought to be followed here.
8. Feeney J examined the predominant purpose of the contract and concluded that it was a works contract. The learned judge carried out a detailed analysis of the subject matter of the contract:
‘The Court must address the question, is the main purpose of the contract the supply of the CHP unit and the two boilers on an objective test, or is the main object the removal of an existing system and the installation of a new system while continuing to operate the leisure complex? The evidence is that the value of the CHP unit and the two boilers is significantly less than 45% of the envisaged total price. There are a number of important factors that point significantly to this being a works contract when viewed objectively. There is the fact that the CHP unit and the two boilers require not just mere simple attachment, as might be the case with a boiler purchased for a family home or even a small business, but it is the case that when obtained those boilers must be integrated into an existing construction requiring plumbing, electrical and construction works and works which are compatible with the existing installations. It is also the case that there is a significant and technical issue in relation to the demolition and removal of works, and that they are required, including the removal of asbestos. It is also the case that the total time period now identified of being at least 18 weeks makes it clear that it is not a work of simple or indeed an uncomplicated nature or which could be categorised as a straightforward attachment of goods on a site. It is also the case that the site in issue is a leisure site open to the public and that that leisure complex must continue to operate during the works over an 18-week period and the works must be carried out and supervised to permit such continued access by the public in a safe manner. It is also the case that the description of the works in the affidavit of Brian Carroll indicate the need for significant multi-discipline works over a number of months, requiring expert professional governance and management from a number of different professionals. It is also the case that the description of the nature and type of works by the respondent's witnesses who know the works and the location and site identify the relevant intricacy of those works. It is also the case that the type and nature of the contracts required of the successful tenderer can properly be equated with a party carrying out construction works and that a contract based upon the supply of goods would be inappropriate. This is illustrative of the true, predominant and essential obligations which are required in this particular case.
It is also the case that the interconnection of the works involving the removal, installation and continued operation leads to the requirement for there being a lead contractor and it is not a situation where a party supplies goods and can arrange for sub-contractors to carry out specified works … Even if the goods were supplied, radical interconnected and complex works would be required to complete the installation and not just mere attachment. It is also the case that a number of different experts and technical skills are needed. The tasks required to be carried out can truly be said to be predominantly of a construction contractor type. It is also the case that the works required cover a number of works specifically covered by the activities listed in schedule one. The works clearly fall within the terms of schedule one.’
9. In concluding that the contract was a works contract, the Court again emphasised the significance of the fact that the contract would take 18 weeks to complete.
10. On the second issue, the applicant argued that there was an obligation on the respondent to set out in the contract notice sufficient detail, facts and information as would allow the notice to be capable of being identified as to its true scope and nature and capable of being challenged if necessary.
11. The Court of Justice had held in Lämmerzahl that a contract notice must state the total quantity or scope of the contract. Feeney J went on to consider the judgment of the Court of Justice in Lämmerzahl in detail but concluded that the facts at issue in the case at bar were entirely different to those which pertained in Lämmerzahl, in which there was a call for tenders, a limited amount of information about the contract was identified and tenders had to be submitted by a certain date. After citing the relevant sections of the contract notice which provided a description of the contract, Feeney J stated:
‘… this Court is satisfied that, given the description of the goods and services required, as contained in the notice, that it is an indication of the scope of the contract and in no way could it be said that it failed to provide information identifying and giving an indication of the nature of the scope of the contract and that is all the more so where the contract was relating to the replacement of the boiler in an existing leisure centre and where the process which was to be followed was to be one where, after indication of interest had been made, that additional information and documentation would be available before any tender be submitted. The facts of this case make it clear that the principles sought to be relied upon by the applicant in the Lämmerzahl case have no application in relation to this particular case and that the respondent provided a sufficient and adequate indication of the scope of the contract to ensure that the notice was capable of challenge, capable of understanding and capable of being operated within the time limit identified in that notice.’
(iii) Significance
12. The case again illustrates the potential importance of contract categorisation as a threshold question in procurement litigation. While one might think that the main purpose of a contract such as that at issue ought to be readily discernible, the case shows that this is not necessarily so and that issues of categorisation can be heavily litigated.
3. JBW Group Limited v Ministry of Justice [2012] EWCA Civ 8
(i) Issue
13. The English Court of Appeal dealt with the question whether contracts for bailiff services to be provided to magistrates courts were service concession contracts, which were excluded from the scope of the formal procurement rules, or public service contracts to which the procurement Regulations applied.
(ii) Holding
14. While the contracts did not fit neatly into either category and lacked many of the typical features of a concession, Elias LJ ultimately concluded that the contracts were concessions, although conceding that the categorization was ‘a very difficult question’ (§52).
(iii) Significance
15. The case is a further recent illustration of the importance of contract categorisation. It is noteworthy that the Court found the task of categorisation to be very difficult. This is a reminder that in practice, the nature of many contracts may present categorisation problems and there may be some doubt as to whether the correct categorisation has been made and therefore, the correct procurement procedures, have been followed.
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4. Alstom Transport v Eurostar International Ltd [2012] EWHC 28 (Ch)