NP Aerospace Ltd v Ministry of Defence
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead |
| Judgment Date | 01 August 2014 |
| Neutral Citation | [2014] EWHC 2741 (TCC) |
| Docket Number | Case No: HT-14-162 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 01 August 2014 |
[2014] EWHC 2741 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Akenhead
Case No: HT-14-162
Jason Coppel QC and Joseph Barrett (instructed by Squire Patton Boggs (UK) LLP) for the Claimant
Valentina Sloane and Tim Johnston (instructed by Treasury Solicitor) for the Defendant
Rob Williams (instructed by Freshfields Bruckhaus Deringer LLP) for Force Protection Europe Limited
Hearing date: 31 July 2014
This is a public procurement case in relation to a Defence project involving the conversion of armoured vehicles. There has been a tendering process and the Claimant, NP Aerospace Ltd (which trades as Morgan Advanced Materials Composite and Defence Systems: "Morgan"), was unsuccessful. Morgan having commenced proceedings on 19 May 2014, the statutory suspension on the placing of the contract with the successful tenderer, Force Protection Europe Limited ("FPE"), has come into force. The Ministry of Defence (" MOD") apply to have the suspension lifted. The case raises issues about, as alleged, abnormally low tenders and predatory pricing. The case arises under the Defence and Security Public Contracts Regulations 2011.
It should be appreciated that, given the confidential nature of much of the information which has been disclosed in court and possibly in the national interest of avoiding providing unnecessary detail into the public arena in relation to what are likely to be sensitive defence matters, it is necessary that I limit the content of this judgement to what is essential for the parties to know why one has lost and the other has succeeded in relation to its application.
The Background
On 21 August 2013, MOD advertised in the Official Journal of the European Union that it wished to commence a tender procedure to select a contractor for a project known as the "Protected Mobility Cougar Conversion Project" which will involve the conversion of approximately 250 such vehicles, which is about one third of the fleet. These are operational vehicles available for use for training but also in combat zones and other areas.
It is common ground that Morgan has historically been the sole provider of conversion services for this type of armoured vehicle since 2006. The existing vehicles had been acquired by the MOD from Force Protection Industries Inc, a company since bought out by General Dynamics Land Systems ("GD") which is now the holding company of FPE, albeit that FPE is said to be relatively autonomous. Morgan's business goes well beyond simply armoured vehicle conversion including other work for MOD; indeed recently it has reported the successful tender with the MOD on another project. Morgan has in the past worked collaboratively with FPE.
There is evidence that the latest approved delivery date for the current Cougar Conversion project has been set at March 2016.
On 24 January 2014, MOD issued to 5 tenderers, including the Claimant, FPE and Thales, the Invitation to Tender ("ITT") and the Special Notices and Instructions to Tenderers ("SNITS"). On 8 April 2014, Morgan submitted its tender and there has been no suggestion that it was not formally compliant. I presume that the other two tenderers also submitted their tenders on time and there is no suggestion that they were not in formal terms compliant.
On 9 May 2014, MOD wrote to Morgan notifying it of MOD's decision to award the contract to FPE. It identified from the SNITS what the criteria used were and explained that the winning tenderer against a total of 100 had obtained 69.0 whilst Morgan had obtained 64. It set out in attachments the differences against the nine questions or criteria (only one of which was price 20% of the whole) how well both Morgan and FPE done. It appeared that, other than in respect of price and affordability related questions, Morgan had done and scored as well as FPE on four out of the eight remaining questions or criteria and had done better than them on four. However on price and affordability, whilst FPE scored 100%, Morgan had only scored 16.41%, the expressed reason for the award of the scores in relation to this being that Morgan "submitted a price of [X – well over that] of the Winning Bidder". There was also attached an Annex B which provided substantial detail of the basis on which they had been marked on the non- price and affordability question. It is clear that it was the price which led to Morgan losing out.
It is clear that Morgan was upset about this and through its solicitors wrote on 15 May 2014 to MOD expressing their extreme surprise and their belief that there could be grounds legally to challenge the decision. Substantially, the complaint was that the winning tenderer must have put in an "abnormally low tender" and also that it must have been involved in "predatory pricing" to secure the contract. They asked for further documents and information. On 16 May 2014, Morgan attended an evaluation debrief meeting at which its representatives made clear that they believed that FPE could not have priced everything, either deliberately or due to misinterpretation. Having not received any or any clear response from MOD, it issued the Claim in these proceedings.
On 19 May 2014, MOD had a meeting with representatives of FPE to seek some information at least in general in relation to the relative level of pricing by it. It is clear from the meeting minutes and notes that there was provided by the FPE representatives general explanations as to why their price was at the level it was at but they declined to provide a detailed breakdown.
There then followed procedural disputes between the two parties in relation to the litigation as to the extent to which further disclosure or other information should be provided by MOD to Morgan. Confidentiality rings were established and more information was provided. The parties came before the Court and I ordered that Morgan should serve Particulars of Claim because I had formed the view that they had adequate information to set out what their case was and that it was important that the current application (which was anticipated) should be heard in the context of whatever it was that Morgan's case was. I was also extremely concerned about the delay in the proceedings because unless and until Morgan set out what its case was the proceedings would be otherwise unnecessarily delayed. I also considered that it was important that MOD served a Defence. It was clear by an early stage in the proceedings that MOD wished to apply to have the statutory suspension on its placing of the contract with the successful tenderer lifted. Having at that stage a completely open mind (largely through not being aware in any detail how each party might put its case or defence) and then being unaware of the basis for or strengths or weaknesses of any MOD suspension lifting application I fixed not only a hearing date for any such application (31 July 2014) but also a trial date on liability to start on 10 November 2014, albeit I pencilled in a date also in early October 2014 (although, given the steps likely to be required to get the case ready for trial (which would include experts possibly of at least two disciplines), this was very provisional). I was anxious that any prejudice to either party from having a suspension lifted or not lifted might be at least somewhat limited.
There was a contested application by Morgan for specific disclosure which I heard on 16 July 2014 upon which it was substantially unsuccessful. The date for the hearing of the current application having been fixed by me some time before, MOD issued its application on 18 July 2014 to have the statutory suspension lifted.
The Statutory Background
The Courts over the last few years have had to address the Public Contract Regulations but particular regulations have been introduced in relation to defence: The Defence and Security Public Contract Regulations 2011. These regulations followed the European Directive 2009/81/EEC 13 July 2009 and in particular Article 56(5):
"Member States may provide that the bodies responsible for review procedures may take into account the probable consequences of interim measures for or interests likely to be harmed, as well as the public interest, in particular defence and/or security interests, and may decide not to grant such measures when they are negative consequences could exceed their benefits."
The 2011 Regulations contain many of the same features as the ordinary Public Contracts Regulations. Material ones for the purposes of this application are:
"5(2) A contracting authority shall –
(a) treat economic operators equally and in a non-discriminatory way; and
(b) act in a transparent way.
31(1) …a contracting authority shall award a contract on the basis of the offer which –
(a) is the most economically advantageous from the point of view of the contracting authority; or
(b) offers the lowest price…
(6) If an offer for a contract is abnormally low the contracting authority may reject that offer but only if it has –
(a) requested in writing an explanation of the offer or of those parts which it considers contribute to the offer being abnormally low;
(b) taken on account of the evidence provided in response to a request in writing; and
(c) subsequently verified the offer or parts of the offer being abnormally low with the economic operator.
(7) Where a contracting authority requests an explanation in accordance with paragraph (6), the information requested may, in particular, include
(a) the economics is of the method of construction, the manufacturing process or the services provided;
(b) the technical solutions suggested by the...
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