SRCL Ltd v The National Health Service Commissioning Board (NHS)

Under the Public Contracts Regulations 2015, a contracting authority has no general duty to investigate every tender that might appear abnormally low. The duty to seek an explanation arises where the authority considers that a tender appears abnormally low and is considering rejection on that ground. Rejection is mandatory only in the statutory case of non-compliance identified in regulation 69(5). The court reviews the authority’s assessment for manifest error, rather than substituting its own commercial judgment. A procurement challenge must be brought within the strict period in regulation 92. An extension requires a good reason related to the failure to issue in time. An agreed list of issues confines the matters for trial. Bidders may be required to assess their own TUPE risks where the procurement documents clearly allocate those risks.

SRCL Ltd v The National Health Service Commissioning Board (NHS) concerned a challenge to an April 2017 reverse e-auction for clinical-waste services under a framework agreement. SRCL alleged that the treatment of TUPE was unlawful, that the winning and second-placed bids were abnormally low, and that the proceedings were within time or deserved an extension.

The claim was issued on 30 June 2017. The court also considered late allegations concerning regulation 35 and the use of pyrolysis, and whether those allegations could be raised despite not appearing in the pleadings or agreed issues. The central questions were whether the claim was timely, whether regulation 69 required NHSE to investigate the bids, and whether the procurement documents dealt lawfully with TUPE.

1. Disposition and limitation. The claim was dismissed. SRCL knew, or ought to have known, of its complaints about TUPE and the allegedly abnormal bids within the period prescribed by regulation 92(2). The proceedings were therefore out of time. There was no good reason under regulation 92(4) to extend time. NHSE’s voluntary investigation and the parties’ correspondence did not restart time or justify delay. A protective claim form could have been issued.
2. Agreed issues and fairness. An agreed list of issues is the procedural road map for the trial and, as a general rule, identifies the only issues the court must determine. The new regulation 35 and pyrolysis allegations were unpleaded, absent from the agreed issues and raised too late. NHSE had been deprived of a fair opportunity to call evidence. They were therefore not entertained.
3. Abnormally low tenders. Regulation 69 does not impose a general duty to investigate every tender that appears low. The duty to seek an explanation arises where the authority considers that a particular tender appears abnormally low and is considering rejection on that ground. An unexplained or unsatisfactory tender may be rejected, but rejection is mandatory only in the statutory circumstances specified in regulation 69(5). An abnormally low tender is one which is below the range of what may legitimately be regarded as normal in the particular procurement. Competitive pricing, commercial advantages, spare capacity and an attempt to increase market share do not by themselves establish abnormality.
4. Review standard. The court must not substitute its own commercial assessment for that of the contracting authority. Intervention is justified only for a manifestly erroneous conclusion. NHSE’s conclusion that the HES and Sharpsmart bids were not abnormally low was neither manifestly erroneous nor wrong on the evidence. The HES bid included appropriate overheads and profit and was commercially sustainable.
5. TUPE. The framework and call-off documents did not warrant that TUPE would not apply. They stated NHSE’s expectation, required bidders to assess the risk themselves, and made clear that TUPE costs would be borne by the successful bidder. That approach was not unlawful and did not conflict with TUPE or COSOP.

The substantive challenges would also have failed even if they had been brought in time.