Roche Diagnostics Ltd v The Mid Yorkshire Hospitals NHS Trust

INTRODUCTION

This is a public procurement dispute. At the CMC on 26 March 2013, the claimant made applications for both specific disclosure and pre-action disclosure. Having heard the arguments, I gave a short oral ruling in which I ordered that some, but not all, of the documents sought by the claimant should be provided by the defendant. I told the parties that I would provide them with full written reasons for my decision at a later date. This Judgment contains those reasons.

The defendant is responsible for a number of hospitals in West Yorkshire. It is currently seeking to let a Managed Service Contracts (“MSC”) for the provision of laboratory services at three main centres, in Wakefield, Dewsbury and Pontefract. The MSC is intended to last for 10 years. Although, in recent years, an unhappy combination of the political imperative to privatise services of this kind that used to be performed by public authorities, and the need to comply with the complexities of the Public Contract Regulations 2006 (as amended), has led to a major increase in procurement disputes, the tender exercise in this case has been particularly protracted: I am told that this is the fifth attempt to let this MSC. The claimant has been successful in at least one of the earlier, abandoned exercises, but was not the successful tenderer in the most recent evaluation.

The relevant contract notice was published on 22 February 2012 and an Invitation to Tender (“ITT”) was issued on 23 April. The claimant submitted its bid on 15 June. On 2 November, the claimant was told that it had been unsuccessful and that the successful bidder was Abbott Diagnostics Ltd (“Abbott”). The claimant now seeks to challenge the fairness of this procurement exercise.

The ITT set out the relevant evaluation criteria and other detailed instructions for tenderers. In particular, in respect of fixed costs, bidders were required to complete the relevant spreadsheet for year 1 only. They were told that the defendant would then use that data to complete years 2-10 using the principles described in the ITT. They were told that “this approach will also prevent any anomalies occurring where fixed costs are diluted as activity increases.”

In addition, in respect of the costs of certain laboratory tests which were identified as optional, the bidders were told that, if they did not provide a price themselves as part of their tender bid, then “the current cost [to the defendant] of sending away that test will be added to the overall price offered.” This is referred to by the claimant as the ‘additional assays’ issue.

On 5 November 2012, having discovered that its bid had been unsuccessful, the claimant asked for further information relating to the evaluation process. The defendant provided certain spreadsheets on 7 November. These were secondary documents; in other words, they had been created after the evaluation process, as an ex post facto means of explaining how that evaluation process had been carried out. It seems to be common ground that the spreadsheets of 7 November themselves contained errors, and they led the claimant to conclude that the fixed costs had not been dealt with in the way in which, on the claimant’s case, they had been led to believe by the ITT.

When these points were made to the defendant’s solicitors, on 15 November, they sent through a further spreadsheet endeavouring to explain what had happened. It contained different information to the previous spreadsheets but again seemed to contain (different) errors. Not unnaturally, the claimant’s concerns about the latest evaluation process were increased.

On 21 November, the defendant’s solicitors sent through another new spreadsheet which suggested that the defendant had adopted different approaches in evaluating the fixed costs for years 1-5 and 7-10 on the one hand, and year 6 on the other. By this stage, the claimant had, perhaps not unreasonably, lost confidence in the evaluation performed by the defendant. However, none of the primary documents - that is to say, the documents demonstrating the evaluation that had actually been carried out by the defendant - had yet been disclosed.

On 30 November 2012, the claimant commenced these proceedings (action HT-12-405). This focused on the alleged errors in respect of the fixed costs. Subsequently, on 14 February 2013, in action HT-13-42, the claimant issued further proceedings in respect of the evaluation of the additional assays. It has now been agreed that these two claims should be consolidated. On 11 March 2013, having been unable to obtain the contemporaneous documents generated by and relating to the tender evaluation process, the claimant issued an application for specific disclosure. They had already proposed a Confidentiality Ring (common in cases of this kind), into which the documents could be disclosed.

On 15 March, the defendant offered to make available into the Confidentiality Ring what they described as “the corrected spreadsheet”. It was said that this spreadsheet finally identified and corrected all the previous errors and that it demonstrated that, even taking them into account, the claimant’s bid would still have been unsuccessful. The claimant agreed that this further material could be disclosed into the Confidentiality Ring but, for reasons which remain obscure, the defendant was not in a position to disclose the relevant material until after close of business on 20 March 2013.

The belated disclosure of this further information caused a good deal of last-minute work on the part of the claimant prior to the hearing of the application for specific disclosure. In summary, it is the claimant’s case that, although this latest attempt to explain what had happened obviated the need for one or two of the categories of specific disclosure originally sought, the basic problems remains the same: those latest spreadsheets were not contemporaneous, so they were not the spreadsheets that revealed what had actually happened during the evaluation. I saw nothing in the hearing to suggest that the claimant’s conclusion about the 20 March spreadsheets was incorrect.

THE PROCUREMENT DISPUTE

The procurement dispute that exists between the parties is financial, and relates to the defendant’s evaluation of the financial information with which they were provided. It does not relate to any other elements of the tenders or the evaluation process, such as the quality of the work proposed by the claimant.

One of the essential disputes concerns the treatment of fixed costs. That dispute can perhaps best be summarised by reference to the earlier correspondence. On 21 November 2012, the defendant’s solicitors said:

“To calculate the amount payable in Year 6, Schedule 8 paragraph 1.1.1 [of the ITT] states clearly that the amount payable per test will be the relevant Unit Price up to and including the Assumed Volume. The Unit Price remains the same unit price that Roche provided in its spreadsheet. The same fixed costs per test apply and the same marginal costs per test apply. However the effect of the increase in the Assumed Volume means the total fixed costs increases as the number of tests within the Assumed Volume envelope has increased.”

In the claimant’s solicitors response of 30 November, there was an attachment prepared by Mr Monster, the claimant’s Finance Director. In dealing with this change of position at year 6 he said:

“As the two critical foundations for the re-baseline of Year 6 are the actual volume and the actual total cost of year 5 and as the actual volume of year 5 has been transposed correctly to year 6, it follows naturally that the actual costs for year 5 should have been transposed as well. Any other outcome is not only contrary to the ITT and a financial failure, but also a failure of logic.”

In addition, there is a dispute about the additional assays. It is the claimant’s case that, whether the defendant took into account the figures provided by the bidder, or the actual costs that they themselves were incurring in respect of those tests, figures for these additional tests should have been included in the evaluation. That is what the ITT indicated (paragraph 5 above). Whilst the defendant’s position on this has shifted, it appears to be their principal submission now that the point is irrelevant because, even if there had been an error, it would not have affected who won or lost the tender evaluation process.

THE APPLICATION FOR SPECIFIC DISCLOSURE

The Law

CPR 31.12 provides:

“31.12(1)

(1)

The court may make an order for specific disclosure or specific inspection.

(2)

An order for specific disclosure is an order that a party must do one or more of the following things –

(a)

disclose documents or classes of documents specified in the order;

(b)

carry out a search to the extent stated in the order;

(c)

disclose any documents located as a result of that search.”

An order for specific disclosure can be made in advance of the standard disclosure of documents, if the court is persuaded that the documents sought are important and should be provided early on in the proceedings. That is often necessary in procurement disputes. In Alstom Transport v Eurostar International Limited [2010] EWHC B32(Ch), Vos J made an order for specific disclosure in a procurement case because of the potential importance of the information relating to the tender evaluation, known only to the defendant. In reaching that conclusion, he relied on his earlier decision in Arsenal Football Club v Elite Sports Distribution Limited [2002] EWHC 3057 (Ch), in which he had set out the principles governing pre-action disclosure, and explained the overlap between that process and the ordering of specific disclosure at an early stage in the proceedings.

In both cases, Vos J followed the approach in Black v Sumitomo Corporation [2002] 1 WLR 1562, a pre-action disclosure case, in which Rix LJ said:

“What, however, these authorities on the unamended section of my judgment reveal, and usefully so, is as follows: first, that at any rate in its origin the power to grant pre-trial disclosure was not intended to assist only those who could already plead a course of action to improve their pleadings, but also those who needed disclosure as a vital step in deciding whether to litigate at all or as a vital ingredient in the pleading of their case. Secondly, however, that, as what I would call a matter of discretion, it was highly relevant in those cases that the injury was clear and called for examination of the documents in question. The disclosure requested was narrowly focussed and bore directly on the injury complained of and responsibility for it in the documents would be decisive on the conduct or even the existence of the litigation.”

My attention was also drawn to the decision of Weatherup J in the High Court of Northern Ireland in Scotts Electrical Services Limited v Northern Ireland Water [2012] NIQB 7. That was a procurement case in which, pursuant to rather different procedural rules, the judge declined an application for discovery of documents prior to delivery of the statement of claim. However, I do not consider that that case sets out any statement of principle. It is apparent that the judge’s approach was informed by his clear conclusion that the claimant’s application in that case was a pure fishing exercise.

Because of the existence of the Confidentiality Ring in this case, the difficult questions of confidentiality in a public procurement process, dealt with in Amaryllis v HM Treasury [2009] BLR 425 and Croft House Care Ltd and Others v Durham County Council [2010] EWHC 909 (TCC), do not arise for consideration.

In my view, the following broad principles apply to applications for early specific disclosure in procurement cases:

The Categories of Documents Sought

I have already said that, from the schedule of documents sought, items 3 and 7 have been deleted. The following items remain in dispute:

Analysis

The essence of the dispute between the parties in relation to these documents is simply stated. On behalf of the claimant, Ms McCredie says that no information or documentation relating to the actual evaluation has been provided: instead, the defendant has had numerous attempts at explaining, ex post facto, what happened during the evaluation process, but each of these attempts has been different, inconsistent and contained manifest errors. She submits that the claimant is entitled to see the actual evaluation documents, maintaining that everything that has happened since the decision to award the contract to Abbott has increased the claimant’s concern that the evaluation was not conducted properly.

Mr Giffin, on behalf of the defendant, submits that the claimant’s case is no more than the usual cry of the unsuccessful tenderer that he has been unfairly treated and has not been shown the underlying documents, and that, on a proper analysis of the dispute in this case, the documents sought are irrelevant. Instead, he says, the dispute between the parties here is principally, if not exclusively, a matter of construction of the ITT: was the way in which the defendant dealt with the fixed costs as foreshadowed on a proper construction of the ITT, or was what they did outside the methodology explained in the ITT? On that basis, he submits that these documents are unlikely to be of any relevance at all to the underlying dispute between the parties.

I accept that, at trial, Mr Giffin may prove to be right, and the principal dispute between the parties could be the proper construction of the ITT. That is certainly not uncommon in procurement cases. However, I do not accept that, at this stage, the dispute can safely be categorised as one of pure construction. The defendant’s own conduct since the award of the contract to Abbott makes that crystal clear. The defendant has now sought to explain what happened at the evaluation stage on four separate occasions. None of those explanations has been the same. Spreadsheets have been provided which are internally inconsistent and contain different numbers. It seems clear that errors have been made in the production of those spreadsheets. Thus an impression has been created of potential muddle and confusion.

In those circumstances, the obvious riposte to Mr Giffin’s submission is this: if the underlying dispute really was a clear-cut matter of construction, why has the defendant not said so before? Why has the defendant itself considered it necessary to attempt to give a detailed explanation of the evaluation process, and how is it that, in doing so, they have only confirmed the claimant’s view that the evaluation process has been inept? Even if, by the time of the trial, the question has narrowed down to a simple matter of construction, the claimant is entitled to reach its own conclusion on that point and, in my judgment, it can only do so by seeing the documents relating to the evaluation actually performed.

In my view, as the unsuccessful bidder challenging this (somewhat chequered) procurement process, the claimant is entitled now to see various specific categories of documents by way of specific disclosure. This will allow the claimant the opportunity of taking a considered view of the evaluation process; it will allow each side to approach what happened at the evaluation on the basis of the same information; it will make it more likely that the parties will be able to reach agreement at the forthcoming ‘without prejudice’ meeting; and it will save costs.

First, I consider that the claimant is entitled to see the instructions that were given to the defendant’s evaluation team. The defendant’s approach to the actual evaluation is difficult to discern, because so many different versions of the spreadsheets have been provided. Thus, in my view, the claimant is entitled to see the instructions that were given to the evaluation team setting out the methodology that they were instructed to follow.

Secondly, and most important of all, I consider that the claimant is entitled to see all of the documentation produced for and occasioned by the actual evaluation process itself. I consider this to be fundamental. It appears that all of the spreadsheets so far provided are ‘after the event’ exercises and that, thus far, the defendant has not provided the documents, including the spreadsheets, which were produced during the evaluation exercise. Yet, at trial, in a procurement case such as this, the court will work carefully through how the evaluation itself was carried out. Conventionally that is done by reference to a file of documents which contains the actual evaluation exercise as it was carried out on both bids. That contemporaneous documentation is critical in a case of this kind and the claimant has made out a clear entitlement to see that material now. (Footnote: ¹)

The third category of documents which, so it seems to me, the claimant is entitled to see now by way of specific disclosure relates to any documents generated by any independent check of the evaluation process actually carried out. The defendant has not said whether or not there was any check or audit of the evaluation process. But, given the numerous previous attempts to let this contract, it seems more likely than not that the defendant would have been careful to ensure that this evaluation was properly checked/audited. In such circumstances, I consider that those documents too should be disclosed.

There is no difficulty relating to confidentiality because the parties are agreed that the specific disclosure should take place into the Confidentiality Ring. The claimant has not at this stage made out an entitlement to specific disclosure in respect of any other documents.

Conclusions

Accordingly, by reference to the list of documents sought by way of specific disclosure (Section 3.2 above), I allow item 5 (instructions to the evaluation team); item 4 (the contemporaneous record of the evaluation process, albeit limited to financial matters only) and item 2 (an independent audit of the evaluation). It seems likely that any documents within item 1 are caught by item 4 and, as I explained during the hearing, even if errors were made by the defendant in or perhaps after the evaluation process, it is not appropriate to order specific disclosure by reference to such errors. That is too contentious a way to express a schedule of specific disclosure.

I decline to order specific disclosure in respect of item 6, which seems to me to contain material which, although probably caught by standard disclosure, is not so important to the claimant’s understanding of the evaluation process that a lengthy specific disclosure exercise in respect of these documents is required now. I bear in mind too that, given that standard disclosure will take place if the parties are unable to resolve their disputes at the forthcoming meeting, it is not appropriate to make the defendant go through that element of the exercise twice over.

THE INTERIM CONTRACT

There is a separate dispute, which is not yet the subject of litigation, relating to an interim contract let by the defendant to Abbott and concerning works at the Dewsbury laboratory. Both Abbott and the claimant have been bidding for the MSC throughout the various abandonments and delays, so the defendant knows that the claimant is keen to bid for all aspects of the MSC work. It appears that the laboratory services at Dewsbury were provided by a company called Beckman, but their contract was terminated in the middle of 2012. For reasons which currently remain obscure, Abbott was given an interim contract to perform the laboratory services at Dewsbury, which may have included the carrying out of certain building works at the site.

This last feature of the interim contract is particularly important because the carrying out of building works at Dewsbury was part of the MSC workscope. In other words, there seems to be an overlap (or the very real risk of an overlap) between the works which are the subject of the claimant’s procurement challenge, and the works and/or services which may have been let to Abbott pursuant to an interim contract, for which the claimant was not invited to tender.

The claimant has sought a copy of the interim contract and an explanation for how it was that Abbott was contracted to do this work. Somewhat to my surprise, even this basic information has not been provided by the defendant.

Accordingly, the claimant has indicated that it may have a procurement challenge in relation to the interim contract based on the defendant’s failure to follow the cross-border procurement rules. The defendant’s response is to note that the value of the interim contract is small, in part because it will come to an end as and when the procurement process in respect of the MSC has been resolved.

THE APPLICATION FOR PRE-ACTION DISCLOSURE

The Law

CPR 31.16 deals with pre-action disclosure. That is of course the basis of the application in respect of the interim contract at Dewsbury, because there is currently no litigation relating to that issue. CPR 31.16(3) provides:

“(3)

The court may make an order under this rule only where–

(a)

the respondent is likely to be a party to subsequent proceedings;

(b)

the applicant is also likely to be a party to those proceedings;

(c)

if proceedings had started, the respondent’s duty by way of standard disclosure, set out in rule 31.6, would extend to the documents or classes of documents of which the applicant seeks disclosure; and

(d)

disclosure before proceedings have started is desirable in order to –

(i)

dispose fairly of the anticipated proceedings;

(ii)

assist the dispute to be resolved without proceedings; or

(iii)

save costs.”

The leading case is Black v Sumitomo (ibid). At paragraph 81 of his judgment, Rix LJ said:

“…for jurisdictional purposes the court is only permitted to consider the granting of pre-action disclosure where there is a real prospect in principle of such an order being fair to the parties if litigation is commenced, or of assisting the parties to avoid litigation, or of saving costs in any event. If there is such a real prospect, then the court should go on to consider the question of discretion, which has to be considered on all the facts and not merely in principle but in detail.”

The Categories 8-15

The categories of documents sought under this part of the application are as follows:

Analysis

In isolation, there is some force in Mr Giffin’s submission that the interim contract was a relatively minor matter which might not even trigger the Public Contracts Regulations. But it does seem to me that the position is made considerably more complicated by the fact that some of the work and/or services at Dewsbury may well have been within the workscope of the MSC. On the face of it, the defendant needs to explain how it is that some of the MSC works (or at the very least what might be regarded as enabling works for the MSC) could now be carried out pursuant to a contract for which the claimant never even had the opportunity to bid.

I accept of course that, because of the ongoing problems with the procurement of the MSC, the defendant may have got themselves into a position where the needs of the patients were such that an interim contract for at least some works and/or services at Dewsbury had to be let. But as Ms McCredie pointed out, that itself begs the question as to why the original contract with Beckman was terminated at a time when the MSC had not been let. The unspoken issue appears to be this: is it just a coincidence that Abbott were awarded the MSC shortly after they had been given the interim contract in circumstances of some secrecy, or have the Regulations been flouted?

In the round, in accordance with CPR r.31.16 and in the exercise of my discretion, I consider that the defendant ought to provide the basic documentation relating to the interim contract. What I have in mind are the documents relating to the decision to invite Abbott to tender for and/or carry out this work, and the contract that they let to Abbott in consequence. It is, I think, artificial to require the claimant to commence proceedings in respect of the interim contract (and the defendant’s failure to ask them to bid for it), in circumstances where they have no information at all about either the decision to let the contract and the decision to ask Abbott to do the work.

Accordingly, applying the principles in Black v Sumitomo, I consider that it would help to dispose fairly of the anticipated proceedings, and/or would assist that dispute to be resolved without proceedings at all, if the documentation relating to the invitation to tender and the contract itself were provided to the claimant. They would be caught by standard disclosure in any litigation between these parties over the legality of the letting of the interim contract. Their disclosure now would certainly save costs. Moreover, as a matter of discretion, I consider that such documentation should be provided in order that the real issues can be identified and, if possible, resolved. Indeed I have already commented on my surprise that this basic information was not provided to the claimant voluntarily.

Conclusions

Accordingly, by reference to the categories of documents sought, I allow category 10 (the information relating to the tender/invitation to bid) and category 12 (the contract with Abbott). I do not allow categories 8, 9, 11, 13 and 14: those do not seem to me to be caught by CPR 31.16(3)(d).

That leaves item 15. That is the item concerned with the building works. It seems to me that the claimant is entitled to these documents. I have pointed out above that there is at the very least a potential overlap between the works at Dewsbury that were the subject of the ITT, and the works that were the subject of the interim contract. Indeed, it cannot sensibly be suggested otherwise. In such circumstances, item 15 in the schedule relates to documents which, in my judgment, are disclosable now, either under CPR r.31.16 or by way of specific disclosure under r.31.12. Either way, that material should be disclosed.

CONCLUSIONS

For the reasons set out in Section 3 above, in respect of the application for specific disclosure, I allow items 2, 4 and 5 in the schedule (but restricted to financial information only). For the reasons set out in Section 5 above, I allow items 10, 12 and 15.

At the end of the hearing there was an argument about costs. For the reasons that I explained orally, in the circumstances the claimant has been successful and is entitled to its costs to be paid by the defendant. However, in order to reflect the fact that the claimant’s application was more extensive than it ought to have been, I made a reduction of 15%. Thus the defendant will pay 85% of the claimant’s costs of these two applications. I am very grateful to both counsel for the economy and clarity of their submissions.