Exel Europe Ltd v University Hospitals Coventry and Warwickshire NHS Trust
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead |
| Judgment Date | 21 December 2010 |
| Neutral Citation | [2010] EWHC 3332 (TCC) |
| Docket Number | Case No: HT-103-64 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 21 December 2010 |
[2010] EWHC 3332 (TCC)
Before: Mr Justice Akenhead
Case No: HT-103-64
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Sarah Hannaford QC and Calum Lamont (instructed by Eversheds LLP) for the Claimant
Michael Bowsher QC and Ben Rayment (instructed by Browne Jacobson LLP) for the Defendant
Hearing dates: 1–2 December 2010
Mr Justice Akenhead:
Introduction
This judgement involves public procurement and is concerned with an application made by the Defendant for an interim order under Regulation 47H of the Public Contracts Regulations 2006 as relatively recently amended by the Public Contracts (Amendment) Regulations 2009. It raises issues as to how courts should go about dealing with public procurements which are automatically suspended upon the issue of proceedings challenging the procurement exercise by a party which has not succeeded on the procurement in question.
These proceedings concern a tender process carried out xby University Hospitals Coventry & Warwickshire NHS Trust, the Defendant, for the establishment of a framework agreement in order to transfer the responsibility of managing and operating the Healthcare Purchasing Consortium (“HPC”) which has been a collaborative procurement hub run by the Defendant on behalf of itself and some 40 NHS Trusts in West Midlands and elsewhere. HPC is not a separate legal entity but provides at the request of and for the benefit of the different subscribers a wide variety of medical services, equipment, medications and other medical related items. HPC is a trading arm of and hosted by the Defendant, albeit funded by all the supporting Trusts. It occupies two offices in Birmingham and Stafford.
The Claimant (“Exel”), a part of the DHL group, acquired, following an open procurement, the business of the National Health Service logistics body known as the “NHS Supply Chain”. It provides a substantial amount of goods, services and consumables to NHS bodies and at least to some extent, and more particularly in the Midlands area, is a competitor of HPC.
The History
The evidence and information provided in this part of the judgement is taken from the papers before me and is not intended to reflect findings of fact which will be ultimately binding at the final trial of liability. A number of documents were provided to the Court on an agreed confidential basis and I will, accordingly, be circumspect in my findings in relation to such confidential documents.
In about 2009, the Defendant decided to transfer and divest itself of the responsibility for managing and operating HPC. There were a number of reasons for this but the principal one was that the Defendant wanted to achieve Foundation Trust status and, as part of the process of achieving that, it has had to develop an integrated business plan which focussed on the essential or mandatory goods and services which it will be required to provide under the terms of its authorisation from the Independent Regulator of Foundation Trusts. A robust evaluation was required of what its core services should be and the focus had to be on patient care and related core services. Substantial savings had to be achieved in the financial year 2010/11; Mr Townshend, the Defendant's Chairman identifies a savings target of £25 million. This led to the Defendant determining that HPC could no longer be supported within the current hosting arrangements. There was a genuine belief that HPC could only survive with a significant investment to maintain its current complement of staff (some 65 or 66 individuals) and to manage and administer the current services and business which it undertakes for and on behalf of the other health trusts; it was believed that it had reached a “plateau” in performance and that the level of savings achieved by HPC to date could only be maintained and improved upon with additional investment in staff and information technology. Thus, it was resolved in late 2009 and the programme involved HPC being divested and a new framework agreement for goods and services being established by no later than 30 September 2010. The evidence of Mr Wedgbury demonstrates that there came a time in 2009 when consideration was given to what was to happen to HPC, and the options, in descending order of preference were a limited company wholly owned by NHS Foundation Trusts, a Community Foundation Trust, a Public Interest Company, a limited company privately owned, a public/private Partnership or a special Health Authority. The first option was abandoned for reasons associated with pension costs.
Mr Wedgbury has provided evidence that he held high level discussions with a number of possible joint-venture partners including with the Claimant's Chief Executive, Mr Aston. No later than early September 2009 contact was made between HPC and the Defendant and HCA International Ltd (“HCA”) a subsidiary of an American group, which had apparently substantial experience of medical and hospital procurements in the USA. There was contact and discussion which continued for the following four months with a view to there being some commercial arrangement between them whereby HCA took on HPC's activities. The discussions covered pensions and VAT amongst other things. For instance, some information about staff costs was provided in December 2009 by HPC to HCA; other information was exchanged.
In November 2009 at a procurement conference attended by amongst others representatives from HPC and Exel, Mr Wedgbury announced that HPC was exploring a public/private partnership involving HCA and also possibly University College London Hospitals NHS Trusts. There is some difference on the evidence as to whether Mr Wedgbury also noted that this was merely one of a range of options being explored in relation to HPC.
It seems clear that HCA was interested or possibly very interested in reaching an agreement with HPC by early January 2010 and there were discussions about financial models and lists of assets and the like; there was some discussion about terms and agreements. Although it appears that no “deal” was actually achieved in legal terms, it is not possible to determine upon the information put before the Court precisely how far these discussions had gone. There is no direct evidence that there was some sort of “done deal” or that there was some agreement made whereby HCA was to have preferential treatment in the procurement which followed. However, Exel's solicitors served a Freedom of Information Request on the Defendant on 5 February 2010 raising questions about the relationship between the Defendant or HPC and HCA.
A valuation of HPC was carried out and completed in February 2010; this revealed that any new owner of the business would need to invest over £3 million in information technology and systems and over £4 million per year on staff. On 23 February 2010, the Working Group of Chief Executives from various of the Trusts which subscribed to HPC resolved that a competitive procurement should be undertaken as soon as possible with a view to the Defendant divesting itself of HPC by no later than 30 September 2010. Deloitte MCS Ltd was appointed as an adviser to the Defendant in early March 2010 to run the procurement.
On 11 March 2010, a Contract Notice was published to initiate the procurement process. It was described as a procurement for the “NHS Healthcare Purchasing Consortium: business transfer and framework procurement” and it was to involve a framework agreement with a single operator. The “initial period of the framework agreement [was] expected to be five years, but renewable…for a period of a further five years”. It was estimated that the total value of purchases for the entire duration of the framework agreement was estimated at a cost of between £330 million and £1 billion, exclusive of VAT. The short description of the contracts was:
“II.1.5 This proposed framework agreement is viewed by the contracting authorities as the transfer of responsibility for managing and operating the business of the trading arm of [the Defendant] known as…[HPC]. It replaces existing purchasing arrangements operated by HPC, both of itself and on behalf of the established grouping referred to above; the aggregate turnover of the HPC business (over the 12 month period immediately preceding the date of this notice) is approximately GBP 10,000,000 net of VAT but the potential is considered to exist for considerable growth opportunity.
As part of the transfer, the successful candidate will be required to assume the various business liabilities and ongoing commitments alongside such business opportunities as they emerge from the framework agreement. A number of staff of the contracting authority had been dedicated to the work of HPC, and the successful candidate will be required to employed those staff following the transfer of their employment under the [TUPE] Regulations 2006, as well as to assume the accrued pension liabilities relating to the said staff…It is expected that the liabilities will be transferred via a Business Transfer Agreement, separate from the framework agreement…
The framework agreement itself is accordingly expected to cover key services ensuring the delivery of a solid and sustainable supply-chain solution to the contracting authorities over its entire lifetime…
The framework agreement is initially expected to be for the benefit of an established grouping of NHS contracting authorities including Primary Care Trusts, hospital Trusts, mental health Trusts, NHS Foundation Trusts (of which there are currently 12) and other NHS organisations. This initial grouping of contracting authorities is listed in section VI.3.
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