Energy Solutions EU Limited v Nuclear Decommissioning Authority  EWHC 1988 (TCC)
In a judgement reaching nearly a thousand paragraphs, the High Court has held that the procurement exercise conducted by the Nuclear Decommissioning Authority (NDA) was ‘fudged’ and ‘manipulated’ and resulted in one of the largest contracts ever put out to tender by the Government being unlawfully awarded. The court also refused the NDA’s application to dismiss the claim on the basis that some of the Claimant’s witnesses would receive bonus payments if the litigation was successful and made further comments around preservation of an audit trail of the decision-making process.
This ruling has raised questions regarding the way government deals with exceptionally high value contracts and potentially exposes the government to damages claims for hundreds of million pounds.
The proceedings arose in the context of the NDA’s tender for services to decommission 12 nuclear facilities in the UK. The contract’s value is approximately £7 billion and the Court noted it was difficult to envisage a case involving ‘greater amounts of public funds’.
The Claimant was part of a consortium called Reactor Site Solutions (RSS), which was unsuccessful in its bid for the NDA contract. The NDA awarded the contract to Cavendish Fluor Partnership (CFP). The tender process involved a highly technical evaluation exercise and the overall scores given were 86.48% to CFP and 85.42% to RSS (a difference between them, then, of just 1.06%). The Claimant alleged that the NDA had failed to comply with its duties of transparency and equal treatment and had made manifest errors when evaluating the different tenders.
The Claimant did not issue proceedings within the time required to trigger an automatic suspension of the contract and the NDA and CFP have therefore entered into a transitional agreement as part of the initial stage of the contract. The Claimant seeks damages in the region of £100 million.
When considering an unsuccessful tender claim, the court must not simply carry out its own evaluation and remarking exercise. Instead, it must ascertain whether there has been a manifest error and, only where such an error has occurred, can the court disturb the authority’s decision.
Fraser J found many such manifest errors in the evaluation of the RSS tender and, in respect of a number of requirements, that RSS had been treated quite differently to CFP. Moreover, it was held that, had the NDA properly applied the rules it had drawn up for the tender process, the CFP would have been disqualified from the competition entirely. Fraser J went on to say that NDA had “fudged” the evaluation by “choosing an outcome and manipulating the evaluation to reach that outcome”.
Particular criticisms were made in relation to the NDA’s approach to keeping contemporaneous records and documents; it was determined that serious consideration had been given to restricting the amount of contemporaneous records kept for fear of disclosure in any subsequent litigation. The judge highlighted that if the process had been followed correctly, such documentation could have provided a useful audit-trail for the decision-making, rather than presenting any danger for the NDA.
Following the hearing (but before judgment), it came to light that the Claimant had entered into written agreements with several of its witnesses that they would receive bonus payments if the Claimant was successful in its litigation. The NDA applied for the claim to be dismissed and for a mistrial to be declared.
The NDA’s application was refused. The court found it would be disproportionate for the claim to be dismissed and, overall, the agreements had no effect on the truthfulness of the Claimant’s witness evidence. In fact it was the NDA’s witness evidence that came under criticism for being unhelpfully defensive, “on occasion, border[ing] upon almost obstinate refusal to accept that any mistakes or errors had been made at all”.
After identifying particular areas of error, the court adjusted the results of the procurement competition and found them to be 91.48% for RSS and 85.56% for CFP (not taking into account the fact that the CFP ought properly to have been disqualified in any event).
It was therefore held that manifest errors had occurred and, as a result of those errors, the contract was wrongly awarded to CFP instead or RSS. Accordingly, the next stage of the process will be a hearing to determine the level of damages that should be awarded.
Posted on 11/08/2016 in Legal UpdatesBack to Knowledge