Too early to say: assumed future losses under the Provider Selection Regime too speculative in procurement dispute

Practice Plus Group Health and Rehabilitation Services Limited v NHS Commissioning Board [2022] EWHC 2082 (TCC)

While we await further clarity on the implementation of the NHS Provider Selection Regime, we consider the High Court’s decision in an application to lift the automatic suspension in a public procurement dispute, in which His Honour Judge Keyser QC rejected the claimant’s argument that the new regime will necessarily result in a loss of chance for economic operators.

The procurement

The NHS Commissioning Board (the Defendant) ran a procurement process in four Lots for the provision of integrated healthcare services to prisons in the South West of England. The procurement was subject to the “Light Touch Regime” in regulations 74 to 76 of the Public Contracts Regulations 2015 (PCR). Lot 1 concerned prisons in Bristol, South Gloucestershire and Wiltshire; Lot 2 was for female closed prisons; and Lots 3 and 4 were for prisons in Dorset and Devon respectively. Practice Plus – the incumbent provider for the services in Lots 3 and 4 – was successful in relation to Lot 2, but unsuccessful in relation to all the other Lots, which were awarded to Oxleas NHS Foundation Trust (Oxleas).

The challenge

Practice Plus (the Claimant) issued a claim seeking a declaration that the Defendant acted in breach of the PCR and/or EU retained law, in manifest error and/or irrationally in respect of Lots 1, 3 and 4. The issue of the claim triggered the automatic suspension under regulation 95(1) of the PCR, which prevented the Defendant from entering into the contracts with Oxleas.

The application to lift

The Defendant applied to lift the automatic suspension. In considering such applications the court applies the well-known American Cyanamid test:

1. Is there a serious issue to be tried;
2. Would damages be an adequate remedy for the Claimant if the suspension is lifted and it is ultimately successful at trial (this is sometimes expressed as “is it just in all the circumstances to confine the Claimant to a remedy of damages”); and
3. Does the balance of convenience favour lifting or maintaining the suspension.

It was conceded by the Defendant, as is almost always the case for the purposes of an application to lift, that there was a serious issue to be tried.

Adequacy of damages

In dealing with the adequacy of damages, the Claimant sought to rely on the effect of the (yet to be implemented) Provider Selection Regime (PSR). The PSR creates a new set of rules aimed at allowing decision-makers in the NHS more flexibility when deciding who should provide healthcare services. The new regime will allow for the continuation of existing healthcare service arrangements in circumstances where there is no realistic alternative to the current provider, alternative providers are already available to patients, or the incumbent provider is already doing a good job.

The Claimant argued that whoever was awarded the contracts by the Defendant would still be the incumbent provider in seven years’ time, by which point a competitive tender for the services would be an option for the Defendant rather than (as now) an obligation. The Claimant therefore argued that the losing bidder would be on the back foot when it came to obtaining the contract next time around. HHJ Keyser QC rejected that argument, observing that the harm complained of amounted to a loss of chance caused by legislative reform, rather than the outcome of the proceedings. The judge observed that:

This does not seem to me to be a properly characterised as a “loss of chance” case at all; rather it is a worsening of prospects. A loss of chance occurs where one is excluded from the possibility that a third party will make a decision in one’s favour. … Here, however, the claimant has not been excluded from anything, not even from a future procurement. There is at most simply a diminution of the likelihood that the claimant will get the next contract. However that is dressed up, it is not, in my judgment, a recoverable head of damage.

The judge considered that the loss was extremely speculative and reliant on the concurrence of a host of circumstances. For the pleaded loss to materialise, (1) Oxleas would have to carry out the services competently for the duration of the contract; (2) a change of service would have to be deemed unnecessary; and (3) the Defendant would have to conclude that there was no benefit to the market being tested by way of a procurement exercise. This was too speculative a basis on which the court could conclude that damages would not be adequate (in relation to a loss which may never materialise).

Balance of convenience

In light of that finding, it was not strictly necessary for the judge to consider the balance of convenience. However, he accepted the Defendant’s argument that a rolling extension of existing contracts could not provide the benefits sought under the new contracts. The judge found that even with an expedited trial, the delay and subsequent impact on the health and welfare of prisoners would be substantial. The balance of convenience therefore favoured lifting the suspension.

Comment

A commencement date for the PSR is yet to be announced, but as this case demonstrates, it is already on the minds of healthcare service providers. HHJ Keyser’s decision – that a contracting authority cannot be held liable for a loss arising from legislative reform – is unsurprising. However, suppliers should also take some comfort from the court’s acknowledgment that it would take a specific set of circumstances for them to be denied the opportunity to bid for future healthcare opportunities governed by the new regime.

This article was co-written by Erin Keating, Trainee Solicitor.