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Hiatus in Award of Public Railway Contract ‘Not In the Public Interest’

The fairness of public contract tendering is rigorously enforced and the award of any such contract is automatically suspended if a dispute arises. However, in one case, the High Court ruled that the continuation of such a hiatus was not in the public interest.

UndergroundA company that had failed to win a contract in respect of provision of a new traction system for an underground railway complained of alleged irregularities in the tendering process. It sought damages for loss of profit and declarations that it should have won the contract that had been awarded to its competitor.

By operation of the Utilities Contracts Regulations 2006, the dispute had the effect of automatically suspending the award of the contract to the successful bidder. The operators of the railway, however, applied to lift that suspension on the basis that, even if the company succeeded in proving its case, it could be adequately compensated by an award of damages.

In resisting the application, the company argued that the loss of the contract would have a huge impact on its centre of expertise in traction technology and would undermine its competitive edge. It had a strong case that the tendering process was flawed and, in those circumstances, money alone could not be viewed as adequate compensation for the damage caused to its business.

In lifting the suspension, however, the Court was not satisfied that it would be unjust to confine the company to a remedy in damages. Given the company’s size and financial strength it was not in danger of being put out of business by the loss of the contract. The Court also noted the operators’ plea that the existing traction system was unreliable and would need to be changed sooner rather than later.

Although the Court found that maintaining the suspension would not be in the public interest, it noted that, if the company’s challenge to the tendering process ultimately succeeded, the operators might end up having to pay substantial damages on top of sums due under the contract to the successful bidder.