The Technology and Construction Court (TCC) has maintained the suspension of adult health and social services contract, thereby preventing a commissioner from entering into a contract with its preferred bidder. 

It is rare in healthcare cases for the courts to maintain the contract suspension (read about another instance here). 

This case underlines that the court is prepared to do so where the loss of a contract would have a considerable adverse impact on the challenger and the community, for which financial compensation is inadequate.

The court’s reasons were:

Serious issue: removal of a consortium member

The court said that the post-award removal of a member of the winning (consortium) bidder (CSH, the claimant here) gave rise to a serious issue as to whether there was a material change in the tender. 

Damages not adequate for the claimant (CSH)

The court found that a financial remedy (damages) would not be adequate for the losses that CSH would suffer if it won at trial: there would be a knock-on effect on the good work CSH does for the community and an impact on CSH’s other contracts as a result of staff (which were pooled across three contracts) being transferred under TUPE to the winning bidder.  The impact on other contracts was also an important factor in the court’s decision to maintain the suspension in Lancashire Care.  

Further, the damage to CSH’s reputation from losing the contract (which was its core service) would be considerable because CSH was a small organisation heavily reliant on its track record.  The court drew a parallel with Bristol Missing Link in which the court concluded that the loss of the contract would have a catastrophic effect on the losing bidder’s (a not-for-profit organisation) reputation and its ability to provide its cores services.

In contrast, the CCG failed to adequately support their claim that patients would die in the three month interim period until trial.

Balance of convenience favours maintaining the suspension to trial

Given the court’s views about the adequacy of damages for either party, the balance of convenience favoured maintaining the suspension until trial.

Cross-undertaking in damages extended to the preferred bidder

Part of a condition of the suspension is that CSH was required to give a cross-undertaking in damages to the CCG pending the outcome of the trial.  The court extended this to the preferred bidder (Epsom and St Helier University Hospitals NHS Trust, for whom Capsticks acted) because it was affected, in financial terms, by the suspension too.

What does this mean for contracting authorities and bidders?

Contracting authorities: will need to have convincing evidence of the impact on services in the interim before trial, particularly when it is a short period (three months in this case).   

Challengers/bidders: will need to show there will be a substantial impact arising from loss of the contract on their employees, other business / contracts and/or reputation.

How Capsticks can help

Capsticks has acted for commissioners and bidders in these applications.  In this case, we acted for the preferred bidder and secured a cross-undertaking from the challenger to pay for our client’s losses arising out of the maintaining of the suspension. 

If you would like to discuss this topic in more detail, please contact Dylan Young and Hugh Wooster.