Braceurself: entitlement to damages in a procurement claim – the question of sufficiently serious breach

Background

The Defendant, NHS England, ran a procurement for the provision of orthodontic services. The Claimant, Braceurself Limited, who was also the incumbent provider, submitted a tender for the East Hampshire Lot but its bid was unsuccessful. The outcome of the Procurement was very close: Braceurself’s bid scored 80.25% whereas the winning bidder’s bid scored 82.5%.

Braceurself brought proceedings against NHS England raising a number of allegations of breach including that some of the quality scores had been reached in manifest error. The claim initially sought relief in the form of an order setting aside the contract award decision.

Pursuant to Regulation 95(1) of the Public Contracts Regulations 2015, upon Braceurself issuing a claim, NHS England was barred from entering into the contract with the winning bidder, Orthodontics by Eva Petersfield & Alton Ltd (PAL). NHS England therefore applied to the Court for an order that the automatic suspension on contract-making be lifted and was successful in that application which was heard in November 2019[1]. In December 2019 the contract was let to PAL.  

Braceurself subsequently amended its original claim to include a claim for damages. Now that the contract had been awarded to PAL, damages were the only remedy available to Braceurself to compensate it for any loss it had suffered as a result of any breaches of procurement law by NHS England.

The case proceeded to a liability-only trial in March 2022, with the Court being tasked with determining questions of whether NHS England had acted in breach of the PCR 2015 in a way that had caused Braceurself to suffer loss, and whether any breach was “sufficiently serious” to warrant damages. The court handed down judgment in June 2022 which held that NHS England had made a manifest error in respect of one of the scores which had been awarded to Braceurself. The Court revised the score in question from 3 to 4, the consequence of which was to increase the Braceurself’s total bid score by 2.5%. But for the manifest error, Braceurself would therefore have been awarded the contract, having scored 0.25% higher overall than the other bidder – see the trial judgment of Braceurself Ltd v NHS England [2022] EWHC 1532 (TCC). However, the Court decided that the question of whether the breach was sufficiently serious to warrant an award of damages should be adjourned to a later hearing to allow the parties to prepare submissions in light of the findings in respect of liability.

Sufficiently serious breach

The concept of a “sufficiently serious” breach arises from EU case law. In EnergySolutions EU Ltd v Nuclear Decommissioning Authority[2], the Supreme Court held that damages are only warranted for breach of procurement law where the minimum “Francovich conditions”[3] are met. Condition 2 requires that an award of damages can only be made where the breach in question is “sufficiently serious”.

Fraser J had already found at first instance in that case that insofar as a breach of procurement law needed to be sufficiently serious to warrant an award of damages (as subsequently confirmed by the Supreme Court), the breach by the NDA was sufficiently serious. The reasoning given was that a failure to award the contract to the tenderer whose tender ought to have been assessed as the most economically advantageous offer was in itself a sufficiently serious breach to warrant an award of damages.

In another domestic procurement claim, Ocean Outdoor UK Ltd v The London Borough of Hammersmith & Fulham[4], the Court of Appeal had noted that it was not the case that any non-compliance with the Regulations would automatically amount to a breach that was “sufficiently serious”, and that the question of whether a breach was sufficiently serious would depend on the facts of each case.

Why was the breach held to not be “sufficiently serious” in this case?

In assessing whether the breach was “sufficiently serious”, the court referred to the eight factors identified in the case of Factortame[5] and subsequently summarised in the case of Delaney[6]. The eight factors are:

1. The importance of the principle which has been breached
2. The clarity and precision of the rule breached
3. The degree of excusability of an error of law
4. The existence of any relevant judgment on the point
5. The state of mind of the infringer
6. The subsequent behaviour of the infringer
7. The persons affected by the breach, and
8. The position taken by one of the Community institutions in this matter (which was found not to be relevant here).

The Court emphasised that the weight to be given to each factor will vary from case to case and that no single factor is necessarily decisive. It also recognised that the seriousness of the breach will always be an important factor.

The Court found in favour of Braceurself in relation to a number of the factors, including the importance of the principle which had been breached (i.e. the need to award a public contract to the most economically advantageous tender) and the precision and clarity of the principle breached. However, the court rejected Braceurself’s submission that failure to award the contract to the operator offering the most economically advantageous tender, without more, constitutes a sufficiently serious breach entitling it to damages. The judge commented that he could not ignore his previous finding that, subject to the single breach which had been found, this had been a carefully planned and well organised procurement. He also found that in this case it was relevant to take into account that the breach was inadvertent, rather than deliberate, and self-evidently occurred in good faith.

In relation to the factor concerning the persons affected by the breach, the Court was prepared to assume that Braceurself’s losses in respect of its NHS work may have been significant. However, it noted that Braceurself remained in business so the loss was not existential.

Interestingly, the court did not accept Braceurself’s submission that the overwhelming consideration should be the effect on the losing bidder as this would be too narrow an approach. Rather, it held that it was also relevant to take account of the impact on any wider group of people who may be expected to be directly affected by the breach. The Court held that it was relevant that this was a competition in which the scores were extremely close. Accordingly, the broader public would have been almost equally well served by either practice and the breach had a very, very low impact on wider public access to orthodontic treatment in the Lot area.

The court therefore concluded that the breach was not “sufficiently serious”. In summary, therefore, despite the court finding that the contracting authority had breached the PCR 2015 in a manner that meant that it had failed to award the contract to the most economically advantageous tender, and that Braceurself had lost the contract as a direct result of the contracting authority’s breach, Braceurself was left with no remedy.

One point raised by Braceurself was that a finding that the breach was not sufficiently serious would give rise to “an incoherent and unjust outcome” on the grounds that the automatic suspension had only been lifted on the basis that, if successful, damages would provide the Claimant with an adequate remedy. In response to this, the court noted that if the suspension had been maintained, the right to damages (pursuant to regulation 97(2)(c) of the regulations) would also require an assessment of whether the breach was sufficiently serious.

The difference of course is that in that case, damages would be significantly more limited because the loss suffered could be mitigated through the fact that the contract would not have been signed and the Claimant would have the chance to bid in the new procurement. Ultimately, the contract is the prize that most Claimants in procurement challenges are looking to win and that is why they want the automatic suspension maintained. We would query whether the Braceurself judgment might make that a more realistic prospect if the Claimant can legitimately assert that it might be left with no remedy if the suspension is lifted and the contract allowed to proceed.

The judgment therefore leads to a different outcome to what was considered to be the established position set down by Fraser J in EnergySolutions – namely, that if a breach deprives the Claimant of the contract it would otherwise have won, the breach is sufficiently serious. As Coulson LJ said in Ocean Outdoor, and as Fraser J indicated himself in EnergySolutions by declining to apply his analysis to a hypothetical scenario in which “a single breach in the actual evaluation scoring that had an individual powerful effect on the final percentage score”, each case will turn on its own facts. The effect of the Supreme Court’s finding in EnergySolutions that the Factortame factors have to be applied in each case to decide whether a breach is sufficiently serious, where there is nothing to suggest that the impact on persons affected or the degree of excusability of the error of law should bear any less weight than the need to ensure a public contract is awarded to the most economically advantageous tender, means that economic operators who lose out as a result of breaches of procurement law in future may also go without remedy.

It is not clear whether this judgment will be appealed. But for now, we are left with the unsatisfactory situation where there will be certain breaches of procurement law that simply do not give rise to any remedy whatsoever for the wronged bidder, even where the breach has been found to be the reason for the loss of the contract.

[1]               Braceurself Ltd v NHS England [2019] EWHC 3873 (TCC)

[2]               [2017] UKSC 34

[3]               The Francovich conditions are derived from the Court of Justice’s decisions in Francovich v Italian Republic [1995] ICR 722 and Brasserie du Pêcheur SA v Federal Republic of Germany [1996] QB 404

[4]               [2019] EWCA Civ 1642

[5]               Reg v Secretary of State, Ex p. Factortame Ltd [2000] 1 AC 524, HL

[6]               Delaney v Secretary of State for Transport [2015] 1 WLR 5177, CA at [36]