Council hit by injunction after contractor takes legal action

Fri 05 Mar 2010

A recent legal ruling could prompt building contractors to take legal action against public authorities if their bids are rejected.

Morrison Facilities Services took Norwich City Council to court after it bid £23 million for a building maintenance contract.

However, the authority favoured a £17.5 million proposal submitted by Connaught, but Morrison believes this bid was abnormally low.

Morrison decided to take legal action against Norwich City Council and the court subsequently imposed an injunction on the authority, thereby stopping it from awarding the contract.

Richard Tinham, a commercial partner at Winckworth Sherwood Solicitors, commented: "Contracting authorities have always maintained an interest in ensuring bids are not priced so low as to make their delivery unsustainable.

"Although the full judgment and reasoning is eagerly anticipated, this decision might suggest that contracting authorities may be obliged to reject abnormally low offers pursuant to regulation 30(6) of the public contract regulations, rather than simply being afforded an entitlement to do so."

This decision could potentially lead to other contractors opting to go through the courts if a council accepts a significantly lower bid.

Andrea Squires, another partner at Winckworth Sherwood who regularly advises local authorities, said: "The economic downturn places greater pressures on both sides – the need to secure value for money for contracts has never been greater, and the stakes for bidders in securing fewer and potentially less lucrative contracts means that there's greater impetus for challenge particularly under the new regulations."