The High Court has rejected a legal challenge alleging that NHS England had breached procurement law when setting the rules for a major procurement of drugs for the treatment of Hepatitis C. This procurement exercise was described as the largest ever undertaken by the NHS and would lead to the award of up to three contracts, worth up to £1 billion over five years. The claimant, AbbVie, contended that aspects of the methodology laid down by NHS England infringed the principle of equal treatment. The Court disagreed, ruling that NHS England had acted within its margin of discretion when specifying its methodology for the procurement.

Key points:

  • The case underlines that contracting authorities enjoy a wide margin of discretion when setting the award criteria and methodology for a public procurement
  • A scoring methodology will not be found to infringe the principle of equal treatment simply because it will de facto be more favourable to certain bidders than others
  • Nonetheless, the increasing willingness of bidders to contest procurement procedures in court means that authorities must continue to take great care to ensure equal treatment and fairness when designing and implementing their evaluation methodology.
Background

The case of AbbVie Ltd v NHS Commissioning Board (operating under the name of NHS England) [2019] EWHC 61 (TCC) concerned a competitive dialogue procedure run by NHS England under the Public Contracts Regulations 2015 in order to select suppliers to provide drugs and related initiatives for countering the infectious liver disease, Hepatitis C.

One of the bidders, AbbVie, alleged that two aspects of the methodology laid down by NHS England breached the principle of equal treatment:

  • First, a “dummy price mechanism“, involving a revenue capped model, was used to impute a price to a bidder in respect of a particular patient group, even if the bidder did not produce drugs capable of treating that group. AbbVie claimed that this mechanism conferred an unfair advantage on bidders that were unable to supply part of the market, as compared to those that could do so.
  • Second, NHS England applied an “unmetered access model“, which entailed payment of a fixed fee in return for the treatment of a number of patients which the supplier had committed to treat. AbbVie argued that this model was unfair because a failure by one bidder to treat the number of patients that it had committed to treat might lead to other bidders being required to supply additional treatments to patients exceeding the number they had committed to treat, without receiving additional remuneration.
The Court’s Ruling

In a judgment laid down on 18 January 2019, Mr Justice Choudhury dismissed both claims, stressing that contracting authorities are afforded a wide margin of discretion when designing their award criteria and methodology. Moreover, an authority would not necessarily breach the equal treatment principle just because it chose to apply a scoring system which could favour one bidder as compared with an alternative scoring system.

As regards the dummy price mechanism, the Court considered that the fact that a bidder might score better than a rival under a particular model did not necessarily mean that the model violated the equal treatment principle. The choice of model fell within the wide margin of discretion afforded to a contracting authority when setting the award criteria and scoring methodology which best met its objectives. Furthermore, evidence presented to the Court showed that, despite the dummy price mechanism, the claimant would still be able to win the most valuable contract under the procurement, depending on the prices which it chose to submit.

In addition, the Court found that, even if the dummy price mechanism had infringed the principle of equal treatment, its use was objectively justified. In adopting that mechanism, NHS England was pursuing the legitimate aims of increasing competition, achieving greater value, reducing costs and enabling a like-for-like comparison between different tenders. The mechanism’s combination of dummy prices and capped revenues was held to be a proportionate means of achieving those aims.

Turning to the unmetered access model, the Court found that all bidders were in a comparable position and subject to the same rules. It rejected AbbVie’s claim that it was not in a comparable position because of the greater popularity of the treatments which it was able to supply, compared to those of its competitors. The alleged advantage enjoyed by AbbVie due to its more popular product reflected a difference in its competitive position which did not need to be catered for in the evaluation methodology.

In any event, even if the unmetered access model had infringed the principle of equal treatment, there was an objective justification. According to the Court, the fixed fees inherent in this model were a proportionate means of achieving the legitimate aim of encouraging investment in solutions for eliminating Hepatitis C.

Comments

This high-profile case illustrates the increasing willingness of suppliers to go to court to contest the fairness of public procurement procedures. In this case, AbbVie challenged the ground-rules for the procurement while the procedure was still ongoing and before it knew whether or not its bid would be successful. AbbVie was clearly concerned to ensure that the authority’s methodology would not put it at a disadvantage compared to rival bidders. Moreover, the strict time limits for starting proceedings under the procurement regulations (in essence, 30 days from the date when the claimant first knew of the alleged breach) meant that it would be too late to challenge that methodology once the outcome of the procedure was known.

The detailed findings of the Court were clearly very specific to the rather complex facts, which revolved around the use of two novel mechanisms. Nonetheless, the overriding message that emerges from the ruling is that contracting authorities have a wide margin of discretion when designing the ground-rules and scoring methodology for a procurement. Absent a truly manifest infringement, the courts will generally be reluctant to interfere with the exercise of that discretion.

The judgment also highlights that a scoring methodology will not be found to infringe the principle of equal treatment simply because it will de facto be more favourable to certain bidders than others. This is an inherent feature of any methodology which is designed to enable the authority to choose between competing bidders. Moreover, some divergence from the unequal treatment principle may be permissible if the authority can point to an objective justification.

Co-incidentally, one day earlier on 17 January, the EU General Court in Luxembourg had also ruled upon a procurement challenge contesting a complex evaluation methodology. In Case T-117/17 Proximus SA v Council of the EU, Proximus alleged various defects in the Council’s system for scoring bids for a framework contract for cybersecurity services, claiming that this system would not enable the Council to select the most economically advantageous tender. The General Court dismissed these claims on all counts, stressing that a contracting authority has a broad discretion as to the choice, content and implementation of the relevant award criteria. The Court also refused to rule upon the alleged merits of an alternative scoring methodology put forward by the claimant.

By stressing the wide margin of discretion enjoyed by contracting authorities, both judgments provide some reassurance to authorities as they undertake the difficult challenge of designing fair and robust procurement methodologies for their contracts. Nonetheless, the increasing willingness of bidders to contest the procedure in court means that authorities must continue to take great care to ensure equal treatment and fairness when designing and implementing their procurement procedures.

Nusrat Zar
Nusrat Zar
Partner
+44 20 7466 2465
 
Rachel Lidgate
Rachel Lidgate
Partner
+44 20 7466 2418
 
Adrian Brown
Adrian Brown
Of Counsel
+32 2 518 1822