HS2 Contract Award Might Draw Legal Challenge – Conflicts of Interest Maybe?

It was only a couple of weeks ago that we mentioned here the potential for a conflict of interest on the HS2 rail project in the UK. A partner in CH2M, a top engineering consulting and project management firm, was acting CEO for HS2, the largest single infrastructure programme in Europe. His firm was also  working for HSD2 and might potentially make billions in revenue from the porgramme. Very recently, he was replaced by a permanent CEO, also recruited from CH2M.

HS2 has now announced that CH2M has won the contract for the £170m development partner contract for phase 2b of the £55bn project. The Times as well as the construction press reported last week that other bidders are now contemplating a legal challenge to the decision, based potentially on that inherent conflict of interest.

The two other shortlisted bidders were Mace, in a joint venture with Turner & Townsend (T&T), and giant US firm Bechtel.  The suggestion was that Mace could lodge a High Court challenge to the award, which is currently in the standstill period, within days. It is interesting to note that Bechtel was part of the disappointed consortium in the recent Nuclear Decommissioning Authority case but chose not to join their joint venture partners in the challenge (which has been successful up to now). Might that suggest Bechtel is not so keen on legal cases against public bodies?

Anyway, we will see in the next few days what happens. Mace, T&T and Bechtel will have to decide whether there is any evidence that the conflict of interest inherent in the employment of the CH2M executives translated into a disadvantage for them in the process. The mere existence of a potential conflict of interest does not in itself mean that a challenge will be successful; it may be that HS2 managed that risk effectively. So the tests in this case will be around issues such as:

  • Is there any evidence that the CH2M people inside HS2 helped their colleagues on the bidding side in any way whatsoever – reviewing the draft bid, advising on bid approaches for instance?
  • Was there any leakage of actual information from inside HS2 to CH2M – information that was not also shared with other bidders in the process?
  • Was there anything in the development of the specifications, requirements or contract documents that was designed to favour CH2M in some way?
  • Were the CH2 staff working inside HS2 involved in any way in the evaluation of the tenders for the new work packages?

In an organisation as large as HS2, it should not have been too difficult to make sure the key staff who might have had conflicts were kept away from the bid process.  The bigger risk is of unofficial contact between people, but that is of course very hard to prove, unless there is an email trail or similar – and even that may only emerge if there is a major investigation. We would also assume that HS2 will have a clear audit trail explaining why the evaluation process favoured CH2M, although if for example the firm won despite being much more expensive, that might raise some interesting issues.

In summary, just because the CH2M situation looks a little uncomfortable does not mean that a court will find in favour of the challenger. Our feeling – no more than a feeling we should stress – is that HS2 was well aware of the dangers here, and will have taken a lot of care to put in place the protections needed to ensure (as far as possible) a fair competition. Unless any of the staff inside HS2 with CH2M connections went rogue and passed on information in some pretty blatant manner, we suspect it may be difficult for other bidders to prove they were disadvantaged.

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