The Technology and Construction Court in R (on the application of good law project and another) v Secretary of State for Health and Social Care has this week granted permission for a judicial review of the government's decision to directly award contracts for the supply of personal protective equipment (PPE) at the start of the Covid-19 pandemic.

Background

In April 2020, the Secretary of State for Health and Social Care (the SoS) directly awarded a number of contracts for the supply of PPE. This meant that the SoS dispensed with the normal procurement rules, where contracts are advertised and a competitive tender process takes place before the contract is awarded, pursuant to the Public Contracts Regulations as amended (PCR 2015). The PCR allows contracting authorities to derogate from the usual rules in limited circumstances and, instead, award contracts directly by applying a negotiated procedure without prior publication. This is only permitted where it is strictly necessary to do so for reasons of extreme urgency which are brought about by unforeseeable events (PCR 2015, Regulation 32(2)(c)). 

PPE is usually sourced by the SoS for the National Health Service (NHS) using the NHS Supply Chain, in compliance with the normal procurement rules. However, the SoS relied on this derogation in the PCR 2015 in order to immediately award PPE contracts to secure supply in response to the public health risks brought about by the unforeseeable events of the Covid-19 pandemic.

The Good Law Project (GLP) (a not-for-profit organisation with the stated aim of protecting public interests) sought permission from the Court to apply for Judicial Review to assess the lawfulness of the SoS' decision to directly award the PPE contracts. GLP argued that the SoS' decision was unlawful, on the following grounds:

• The PCR 2015 urgency derogation was not satisfied, as the urgency was attributable to the SoS' delay in obtaining PPE, which should have been done in February/March 2020.
• The SoS' decision breached the key principles of the public procurement regime of transparency and equal treatment (PCR 2015, Regulation 18). 
• The SoS' decision was insufficiently reasoned.
• The size (duration and volume) of the contracts directly awarded were disproportionate – the contracts should have been shorter and for smaller volumes of PPE until a formal procurement could be run.
• The SoS' decision was irrational, as contracts were awarded directly to contractors without sufficient financial/technical verification being undertaken.
• GLP were granted permission to apply for Judicial Review on grounds 2 and 3. However, GLP then renewed their application with the Court, seeking permission on all of the above grounds.

Outcome

Permission was, again, granted to GLP to pursue a Judicial Review on grounds 2 and 3 and, in addition, ground 5. 

On ground 1, the Judge found that the SoS had satisfied the conditions justifying the derogation, as it was impossible for the Government to comply with the procurement rules, in the circumstances. The Judge found that there were genuine reasons for extreme urgency for PPE supplies and the global Covid-19 pandemic was unforeseen. This urgency was not attributable to any delay on the SoS' part and, therefore, this ground was refused.

On ground 4, the Judge found that it would have been unwise for the Government to limit an order for PPE to what was immediately necessary and risk another shortage of supplies whilst a full procurement could be concluded, given the risks to the health of NHS workers and other key workers in frontline positions. It was a suppliers' market for PPE and immediate supplies were desperately needed. Accordingly, this ground was refused.

However, on ground 5, the Judge did find an arguable case that the SoS had acted irrationally. The test for irrationality is whether any person properly directing itself to the relevant law could reasonably have reached the decision that was reached on the facts and the materials before it. The Judge found that it was unclear how the contractors' financial and technical details were verified by the SoS and, therefore, it was unclear how the SoS gave preferences to certain bidders and what criteria these preferences would have been based on in order to award the contracts.

Key Takeaways

Whilst this decision only relates to the Claimants' application for permission for Judicial Review, and not on the merits of the overall case, it highlights that the Courts will interpret the derogation from the usual rules for procuring contracts under the PCR 2015 strictly, and contracting authorities should take care when undertaking urgent procurements to only go as far as needed before a formal procurement process can be run.

As the burden of proof falls on the contracting authority to show not only that the conditions in the PCR 2015 are met, but also that the contracting authority is still applying the key procurement principles, there is a high bar to meet when deciding to award contracts directly. Even if a contracting authority is facing a situation as urgent and unforeseen as the Covid-19 pandemic, they still have a duty to give reasons for directly awarding contracts and sufficient information should still be provided to allow parties to review whether the procedure adopted was lawful. 

The new Green Paper on Transforming Public Procurement suggests the law is changed to make allowances for urgent award in times of 'crisis', but we will have to wait and see if the legislation is changed after the pandemic, and whether the Judicial Review is successful at a later stage.