Procurement challenge to rail franchise tender process fails
22 June 2016
This is a rare example of a judicial review challenge to the way in which a public body decided to set out minimum specifications in an invitation to tender. In R (on the application of London Borough of Enfield) v Secretary of State for Transport  EWCA Civ 480 the Court of Appeal dismissed the appeal and upheld the High Court's finding that the local authority in question did not have a legitimate expectation that the tender document would specify a minimum level of train service for an area of regeneration. The Court of Appeal held that the broader public interest in proceeding with the public competition for the rail franchise took precedence over the particular interest of the claimant. It also dismissed the claim that the Department for Transport had acted irrationally.
The Department for Transport (the DfT) conducted a competition to select a train operating company to take over the East Anglia Rail Franchise (the EARF) which serves 131 train stations from London Liverpool Street. The Council wanted a 4 train per hour ("tph") service to serve an area in the Borough of Enfield that was due to be regenerated in order to provide 8,000 residential homes. The DfT had carried out a public consultation in December 2014 on the specification for the EARF prior to commencing the competition. Following that consultation, certain assurances had been provided by DfT officials, by email, to the Council that a 4 tph service would be included in the service specification for the franchise. However, in September 2015, when the DfT issued an Invitation to Tender (ITT) to bidders for the franchise, a lower level of service was specified.
The claimant Council alleged that the decision to issue an ITT breached its legitimate expectation that it would be provided with an opportunity to make further representations as to the need for the 4 tph service. It also argued it was irrational for the DfT not to take into account the benefits of and potential harm to the regeneration scheme when deciding on the service requirements.
The court held that the emails by the official in question were clear and unambiguous representations as to the level of service to be provided. However, they were not sufficient to generate expectations on the part of the Council upon which it was reasonable to rely, given the significance of what was at stake and the informal nature of the email correspondence. Finally, even if the emails did create a legitimate expectation, the DfT would have been entitled to depart from it given the wider public interest in adhering to the modelling methodology adopted by the DfT which took into account all the other users of the West Anglia Main Line. Even though the DfT did not expressly take into account the particular development project in question, there was nothing irrational in the use of the economic modelling it used.
The legitimate expectation test
The court confirmed that a public authority may create a legitimate expectation (substantive or procedural) by making a clear and unambiguous representation upon which it is reasonable for a member of the public to rely. Detrimental reliance is not a pre-requisite to a successful claim based on legitimate expectations. But the lack of any or significant reliance nevertheless is highly significant in the overall assessment by the court as to whether defeating the legitimate expectation is unfair.
The court noted that the Council had already spent or committed GBP 70 million to the regeneration project before the emails were sent. Furthermore, the Council's case was that the emails had created a procedural legitimate expectation of a right to make further representations. However, the Council had already had the opportunity to present its case about the minimum level of train service as part of the formal consultation. The delay to the competition for the rail franchise would have been significant if a further round of consultation took place and that would have been prejudicial to public administration.
The Council argued that the DfT had promised to comply with the duties set out in the Public Services (Social Value) Act 2012. Those require public authorities to have regard to economic, social and environmental well-being in connection with public services contracts. Although local regeneration was an express objective of the EARF, and the particular project in question had not been taken into account, the Court considered that the modelling methodology was nevertheless appropriate and would be bound to further the objectives and social goals set out in the 2012 Act. The DfT enjoyed a wide discretion in the selection of appropriate modelling methodology in a "complex, technical, quasi-commercial" field.
The award of rail franchises has been hotly contested in the courts over the last three or four years. In 2012, the DfT decided not to contest a judicial review sought by Virgin Trains against the decision not to award it the West Coast Mainline franchise. This challenge to this particular franchise came perilously close to succeeding: the emails from the official in question met the "clear and unambiguous representation" test, but fortunately for the DfT the court held that it was not reasonable for the claimant authority to rely on those. In doing so, the court criticised the performance of the DfT and the way its officials had communicated. The court also saw "undoubted attraction" in the argument that the DfT could not rationally have failed to take into account the major regeneration project in question in its assessment of the benefits of the EARF.
However, ultimately the Court of Appeal seems to have been influenced by the fact that if the Council's challenge were upheld it would result in a complete rerun of the entire consultation process. This may be one of the reasons why it ultimately took a reasonably generous and deferential approach to the decision by the DfT to adopt the particular transport modelling in question.
This case summary is part of the Allen & Overy Litigation and Dispute Resolution Review, a monthly publication. For more information please contact Sarah Garvey email@example.com, or tel +44 20 3088 3710