Standing room only: the use of judicial review in procurement challenges

Introduction

The recent judgment in Wylde v Waverley Borough Council [2017] EWHC 466 (Admin) is the latest in a line of cases to have considered the availability of judicial review as a means of challenging procurement processes. That line of cases shows the court striving to reach what it considers to be the right conclusion on the facts of the case before it, but there is unfortunately little in the way of clear and unambiguous statements of principle. Now that the High Court, in the two most recent cases, has reached diametrically opposing conclusions on strikingly similar facts, it is likely that the Court of Appeal will have to address the issue in order to provide clearer guidance.

The facts of the case

The case concerned a proposed redevelopment by Waverley Borough Council ("the Council") of the East Street area of Farnham town centre. Following a competitive tendering exercise in 2002 the Council entered into a development agreement. That agreement included a "viability condition" which had to be satisfied before the agreement became unconditional. The viability condition called for a financial appraisal so as to arrive at a land value for the site. For various reasons the proposed scheme was delayed and the agreement and associated planning permission underwent various amendments. In May 2016 the Council received advice that the viability condition needed to be amended such as to reduce the land value from £8.76m to £3.19m. It decided to vary the development agreement accordingly.

In late 2016 – after the judicial review proceedings had been issued – the Council published a voluntary ex ante transparency notice ("VEAT") advertising its intention to enter into a contract with the reduced land value. No complaints were made to the Council in response to the VEAT notice.

The claimants were five individuals who were members of the Council, Farnham Town Council, and other local civic societies. The claimants sought to quash the Council's decision to authorise the variation to the development agreement on the grounds that the Council had not complied with the applicable procurement regime. The claimants contended that putting the amended contract out to competition would have enabled the Council's ratepayers to have an opportunity to recover the loss that would inevitably arise from the reduction in the land value.

Standing in judicial review challenges

In order to bring judicial review proceedings an applicant must have "a sufficient interest in the matter to which the application relates." This requirement for "standing" applies to all claims for judicial review, but it is applied differently depending on the nature of the decision being challenged. For example, in the context of environmental claims it is given a relatively broad interpretation on the basis that the quality of the environment is a matter of concern to all citizens. In the context of public procurement it is interpreted more narrowly on the grounds, in part, that the persons directly affected by flawed procurement processes (i.e. disappointed bidders) are afforded a remedy by EU procurement Directives and associated domestic Regulations. This had previously been considered in the cases of Kathro, Chandler, and Gottlieb which we consider briefly below.

In the case of Kathro v Rhondda Cynon Taff Borough Council [2001] EWHC Admin 527 the claimants sought to the challenge the choice of procedure that had been adopted by the Council in relation to a development project. The court expressed very strong doubts about whether the claimants had standing, noting that they had not been shown to be affected in any way by the choice of procedure, and had merely seized on the point as a fall-back way of trying to stop the project to which they objected. Having found against the claimants on all grounds the issue of standing was academic and was dealt with very briefly by the court.

The issue of standing was considered by the Court of Appeal in Chandler v Secretary of State for Children, Schools and Families [2009] EWCA Civ 1011. The case concerned the secretary of state's approval of an expression of interest by University College London in being involved in the establishment of an Academy school in Camden. The claimant wanted a competition to take place to determine who should sponsor an Academy. She did, however, object in principle to Academy schools. Again in light of the fact that the Court of Appeal had found against the claimant on the substance of the case, its comments about standing are strictly obiter and are relatively brief. The key section of the judgment stated:

We incline to the view that an individual who has a sufficient interest in compliance with the public procurement regime in the sense that he is affected in some identifiable way, but is not himself an economic operator who could pursue remedies under [the Regulations], can bring judicial review proceedings to prevent non-compliance with the regulations or the obligations derived from the Treaty, especially before infringement takes place. … He may have such an interest if he can show that performance of the competitive tendering procedure … might have led to a different outcome that would have had a direct impact on him.

The court went on to note that the claimant was not bringing her challenge because of any interest she had in the observance of the public procurement regime but because she was opposed to Academy schools. She was therefore seeking to use the procurement regime for a purpose for which it was not intended. In the circumstances the court said it would be wrong to give her standing to pursue her claim.

In 2015 the issue came once more before the High Court in the case of Gottlieb v Winchester City Council [2015] EWHC 231 (Admin). The facts were very similar to those in Wylde, involving substantial amendments to an agreement relating to the development of an area of the city. The court undertook a comprehensive review of the amendments to the agreement and had little hesitation in concluding that the amendments were substantial and the amended agreement should therefore have been advertised. The court described this as a serious substantive and procedural breach of the procurement regime. Once again the issue of standing was dealt with very briefly, the court noting that the claimant, in his capacity as resident, council tax payer, and councillor, had a legitimate interest in ensuring that the council spent money wisely and obtained the most appropriate development scheme through open competition. Accordingly he sought what the procurement process is intended to allow, namely an open competition. The court distinguished Chandler on the facts, noting that in that case the claimant did not have an interest in the observance of the procurement rules, and was instead using them for the ulterior motive of her political opposition to Academy schools.

The Court's judgment in Wylde

The claimants in Wylde naturally relied heavily on Gottlieb and tried to distinguish themselves from Chandler and Kathro. The court undertook a comprehensive review of the relevant authorities and in this sense it is the most helpful judgment on the question of standing because the earlier cases dealt with the matter only briefly and in passing. The claimants argued that the policy of the decision in Chandler was to exclude those with an ulterior motive. The Council argued that the claimants were unable to show that a competitive tendering procedure would have led to a different outcome having a direct effect upon them (an argument greatly assisted by the fact that the VEAT notice had not generated any response from the market) and therefore that the claimants could not bring themselves within the scope of the Chandler test. The court held that the true test in Chandler was not directed to the presence or otherwise of an ulterior motive but rather the "gulf" between the interests of the claimants and the policy and purpose of the procurement regime. It is the purpose of that regime, rather than the ultimate motivation of the claimant, that was the important question. The court in Wylde stated that Gottlieb had been wrongly decided in that the judge in that latter case had sought to distinguish Chandler because of an absence of an ulterior motive. This is unconvincing in that the court in Gottlieb had mentioned the absence of an ulterior motive only in passing and it did not form part of the reasoning as to why the claimant did have standing.

Although the judgment in Wylde will be welcomed by local authorities, the law in this area remains unsatisfactorily unclear. The Court of Appeal in Chandler had merely "inclined" to the view that subsequent courts have sought to apply as a hard rule. There is now scope for claimants in future cases to distinguish Gottlieb or Wylde (as the case may be) on the grounds that a proposed amendment to a contract would or would not have attracted other bidders. The Court of Appeal will sooner or later need to fully engage with the issue of standing in judicial review challenges to procurement decisions, and issue some clear guidance on the correct test to be applied. 

Bevan Brittan's specialist procurement team has considerable experience of advising bidders and contracting authorities on all aspects of public procurement, including bringing and defending challenges under the Public Contracts Regulations, dealing with disclosure obligations, applications to lift the automatic suspension, the management of all stages of High Court litigation, and pursuing alternative dispute resolution.

For more information, please contact Trevor Watt or Emily Heard