Automatic suspensions and the public interest

The facts

The Defendant, Supply Chain Coordination Ltd (SCCL), conducted a competitive procurement exercise for the award of a major logistics contract intended to modernise NHS supply chain services. The contract was awarded to GXO Logistics UK Ltd (GXO) following a multistage tender process.

Unipart Group Ltd (Unipart), the incumbent supplier, and DHL Supply Chain Ltd (DHL), both unsuccessful bidders, brought legal challenges alleging breaches of the PCR 2015.

As a result of these challenges, the automatic suspension under Regulation 95 of the PCR 2015 came into effect, preventing SCCL from concluding the contract with GXO. SCCL applied to lift the suspension, prompting the Court to assess whether interim relief should remain in place pending trial.

The American Cyanamid Test

In determining whether to lift the suspension, the Court applied the four-limb American Cyanamid test:

1. Whether there was a serious issue to be tried.
2. Whether damages would be an adequate remedy for the claimants if the suspension were lifted.
3. Whether damages would be an adequate remedy for the defendant if the suspension remained in place.
4. Where the balance of convenience lay.

The judgement

Serious issue to be tried

The first question the Court must ask is whether the claim being brought has enough substance to warrant a full trial.

DHL alleged that a former SCCL executive assisted GXO (the winning bidder) in preparing their bid soon after leaving SCCL. DHL claimed that SCCL mishandled this potential conflict of interest and failed to treat bidders equally. The Court agreed this was a serious allegation to justify a full hearing.

Unipart brought two separate sets of legal proceedings against SCCL relating to the same NHS logistics procurement process:

1. The First Claim – Challenge to Exclusion from the Process
   Unipart was excluded at an early stage of the procurement process. It challenged this exclusion on grounds including errors in evaluation and unfair treatment. However, Unipart did not apply for an injunction at this stage.
2.  The Second Claim – Challenge to the Award Decision
   After SCCL awarded the contract to GXO, Unipart issued a second legal claim. This focused on SCCL’s failure to provide proper information in the Contract Award Notice, such as the reasons for awarding the contract to GXO and GXO’s scores. This, Unipart argued, breached Regulation 86 of the Public Contracts Regulations 2015, which requires certain disclosures to all eligible tenderers.

SCCL argued that Unipart should not be allowed to challenge the award decision because it had already been excluded earlier in the process and had not sought to suspend the procurement at that time. In SCCL’s view, Unipart had ‘missed its chance’.

The Court held that because Unipart’s exclusion had not yet been ruled lawful by the Court, Unipart remained entitled to be notified of the award decision and the reasons for it. Therefore, Unipart’s second claim, focusing on transparency and fairness at the contract award stage, raised serious legal questions that should be fully heard at trial.

Adequacy of damages for the Claimants

This part of the test asks whether financial renumeration would be enough to compensate for the harm caused if the Court allows the contract to be awarded and the claimant later wins their case.

For DHL, the Court found that damages would be an adequate remedy. DHL failed to provide specific evidence of irrecoverable reputational or financial loss. The judge noted in particular that DHL’s performance and profitability had remained robust following its previous loss of the NHS contract in 2018.

Unipart, in contrast, was found to be in a more vulnerable position. As the incumbent provider and a smaller market player, Unipart was more exposed to the reputational and commercial consequences of losing the contract. Although the Court was not wholly convinced by the strength of Unipart’s evidence, it accepted—just—that damages might not be an adequate remedy and that there was a real risk of irreparable harm.

Adequacy of damages for SCCL

The Court accepted SCCL’s argument that damages would not be an adequate remedy if the suspension were maintained. The contract formed part of a wider NHS transformation initiative, including the critical “Project Tokyo” IT modernisation programme.

SCCL had provided evidence that reliance on the current NHS IT system (RESUS) posed serious risks to supply chain operations. The Court accepted that further delay in implementing the new contract would pose operational and public interest risks that damages could not remedy.

Balance of convenience

In the final stage, the Court must balance the competing harms in lifting the suspension and decide which option causes less overall risk or injustice.

Ultimately, the Court held that the balance of convenience strongly favoured lifting the suspension. While Unipart’s claim just passed the adequacy of damages threshold, the broader risks to NHS logistics and the public interest in progressing Project Tokyo outweighed the potential harm to Unipart.

The Court therefore granted SCCL’s application and lifted the automatic suspension, enabling the contract to be awarded to GXO. However, the procurement challenge brought by Unipart and DHL will still proceed to trial, albeit without interrupting the rollout of the new logistics arrangements.

What this means

The decision confirms that the courts are willing to lift an automatic suspension where there are compelling public interest justifications for doing so.

This case also remains relevant when applying the new procurement regime under the Procurement Act 2023, as Section 102 states that the courts should have regard to the public interest in (among others) avoiding delay in the supply of the goods, services or works provided for in the contract being procured.

However, to avoid legal challenge, authorities should ensure that they maintain robust procurement records and manage potential conflicts of interest carefully.

Tim Care is a partner at Ward Hadaway.