Implications of the HPC / Exel judgement on public procurement

As part of our recent look at UK health sector procurement, we mentioned the court judgement that allowed health trusts to transfer management of the Healthcare Purchasing Consortium (HPC) to HCA, the 'winning' bidder in a recent competition.  But as we said, it was a bit of a pyrrhic victory in that the judge  allowed the claimant -  Exel (DHL) - to take forward one of their issues for further judicial consideration, with the possibility of damages if they are successful there.

So what are the general EU procurement issues that we can draw out from the judges findings?

1. The complaint that was seen as worth further examination was around whether the successful bidder had discussions with HBC before the formal competition started which gave them an unfair advantage.  Was iin reality a 'done deal', as one might paraphrase some of DHL's claim.  This re-inforces that any EU procurement must be demonstrably 'fair' - the courts don't like to see evidence of different treatment for different bidders.

2. The judge considered that the public interest was best served by allowing the contract to continue.  IF a future judgement goes in favour of DHL, he felt that damages would suffice.  This suggests that, even though the Remedies directive gives the courts the ability to halt award of contracts where there may be breaches of regulation, they may well take the view that damages will be enough remedy where there are good reasons for the Authority to continue with the contracting process.

3.  The judge was less worried about some further negotiations taking place once the preferred bidder had been selected - he saw 'no root and branch objection' to finalising agreements as long as they were not changing terms in a substantial / significant manner.  So while we'd suggest you don't push this one too hard, it confirms that some normal business finalisation of contract terms post tender is unlikely to be a problem.

4. He also didn't buy an argument around the winning tenderer using an 'associated company' as the contracting vehicle rather than the precise entity that had bid.  He saw that as 'not uncommon in the corporate world' - which seems a good common sense view as long as the 'new' contracting entity is not totally different from the bidder of course!

5. He firmly rejected the idea that a tender with only one bidder (as in this case) could not arrive at 'the most economically advantageous tender'.  That seems sensible.  It may not be particularly good news to end up with only one bidder, but that shouldn't invalidate the whole process.

6. I'm confused about his statements on the issue of whether the tender winner would act as an unlawful 'central purchasing body'.  He doesn't seem to think the winning bidder will be a 'contracting authority' at all, because they will only award framework contracts.  I would have thought that still made you a 'contracting authority' but I guess I'm wrong.

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First Voice

  1. Flog:

    Good summary Peter, in respect of point 6, the distinction is that the ‘central purchasing body’ [CPB] facilitates the setting up of frameworks for use by contracting authorities ie the actual contracts are formed when the public health body uses the framework. At the end of the day the HCA (and the other CPBs often do not use the arrangements that they have created) – they are a vehicle of convenience to enable these arrangements to be set up. The legislation gives then, in essence, a special status.

    If my organisation works collaboratively with another one or two and I lead a collaborative procurement, the my organisation is essentially a CPB for the purposes of this specific exercise. Many of the CPB are set up as private limited companies with their member organisations as shareholders etc. They are a private company, however, their Articles of Association etc will, I assume, clearly state their purpose is as a contracting vehicle for its members (public sector organisations).

    Where this is important, is that there have been instances of private sector organisations advertising arrangements (usually frameworks) in the OJEU, going through an EU-compliant process and publishing an award notice. They then make these arrangements available to contracting authorities for a fee. The issue here is that the private sector organisation is not a ‘CPB’ under the legislation and a public sector body using one of these arrangements (which look and appear to be presented as EU compliant) are not will not be deemed to have complied with the legislation and would be open to legal challenge. OGC issued a PPN on this last July see

    So my read is that the judge is saying the HCA is the vehicle, and is a CPB that will act on behalf of the contracting authorities to set up frameworks for them to use.

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