R v Burgess

In this action the plaintiff, Harmon, claimed (amongst other things) that the defendant had failed to observe the Public Works Contracts Regulations 1991 (PWR), and was also in breach of obligations under Articles, 6, 30, 5965 of the Treaty of Rome (as amended at Maastricht) and obligations stemming from certain European Directives concerning the procurement of public works (eg 71/305 and 89/665), and under an implied contract about the treatment of its tenders, and was also liable for misfeasance in public office in the course of the tender procedures which led to the award of the trade contract for fenestration for the New Parliamentary Building at Westminster. The preliminary issues for decision by the court included questions as to whether Harmon had been treated equally , openly and fairly, whether there had been discrimination of a "Buy British" nature in favour of the successful contractor and as to the damages or compensation recoverable, such as exemplary or aggravated damages. The issues were mainly answered in favour of Harmon for reasons which appear from the text of judgment. (The issues and court's answers are to be found at the end of the text of judgment and before the appendices to it.)

The text of the judgment approved by His Honour Judge Humphrey LLoyd QC is as follows:

In this action, the plaintiff (Harmon) claims damages from the defendant (H of C) for breach of the law relating to the procurement of public works contracts and on other grounds. It is alleged that H of C was not entitled to award a contract to one of Harmon's competitors and that it discriminated in favour of the successful tenderer so as to infringe a number of provisions of European and domestic law. The claim stems from a project to build a New Parliamentary Building (NPB) for the House of Commons in Bridge Street, Westminster. The NPB is to provide offices for some 210 Members of Parliament and their staff, together with committee rooms and other accommodation. The brief to the architects was to design a building with a planned life of 200 years which was to be a "showpiece of British design". It is to be known as "Portcullis House". Its foundation stone was laid or unveiled on 3 February 1998 by the Speaker. At that time the cost for the building was estimated to be £250 million (including allowances for inflation, furnishings, equipment, professional fees and VAT). It is therefore one of the most expensive buildings ever to be built in London. Harmon tendered for the works contract for the fenestration but the contract was given to a company, Seele Alvis Fenestration Ltd, a company specially formed to take over the tender submitted by a consortium comprising an German company, Glasbau Seele GmbH (Seele for short), and a British company, Alvis Vehicles Ltd (Alvis), a subsidiary of Alvis Plc. The fenestration was far from ordinary or orthodox. It is not merely a cladding system or a curtain wall but functions as an integral component of the building in engineering terms. It is probably the most expensive fenestration system ever built partly as a result of the need to provide a facade which would be proof against terrorist attack and against bomb blast and the choice of the material considered necessary by the architects and engineers to achieve these objectives. More information about the building is to be found in the extracts from the contract documents which are in the appendices to this judgment. At this stage, I have to deal with a large number of preliminary issues agreed by the parties, many of which are complex both in fact and in law. They and my answers to them are to be found at the end of this judgment, the scheme of which will be first to describe the people involved and to outline the legal and factual background to the project and to the issues, before turning to the issues themselves.

The defendant is a corporation sole established by the Parliamentary Corporate Bodies Act 1992 . Section 2 (1) of that Act created the defendant as a corporation sole with power to sue and be sued like any other corporation sole. Subsection (2) gave it power to enter into contracts for the House of Commons and to do anything reasonably necessary or expedient for, or incidental to, that power. Section 2 (1) states that the Corporate Officer is in fact the Clerk of the House of Commons who as head of his department is accountable to the House of Commons Commission. Until December 1997 this office was held by Sir Donald Limon. The Commission was initially created in 1800 and derives its present authority from the House of Commons (Administration) Act 1978, by section 2 of which it is required to appoint all staff of the House of Commons and to establish their conditions of service. Until 1 May 1997, its membership comprised the Speaker, the Rt. Hon. Tony Newton (Leader of the House), the Rt. Hon. Ann Taylor (Shadow Leader), the Rt. Hon. Paul Channon, Mr Alan Beith and Mr John Garrett. In 1992, the two Houses of Parliament established the Parliamentary Works Directorate (PWD). This was the successor to the Parliamentary Works Office (PWO), which had been responsible for carrying out works for Parliament including procuring the construction of the NPB. The House of Commons has an Accommodation and Works Committee (AWC), but, as constituted, its powers are limited to making recommendations to the Commission or to the Speaker. Standing Order 142 of the House provides in part as follows:-

"(1) There shall be four select committees to consider the services provided for the House in regard to the following matters

1. Accommodation and Works

2. Administration

(4) Each committee appointed under this order shall have power-

(a) to send for persons, papers and records, to sit notwithstanding any adjournment of the House, to adjourn from place to place, and to report from time to time;

(b) to appoint specialist advisers either to supply information which is not readily available or to elucidate matters of complexity within the committee's order of reference;

(c) to communicate to any other such committee, or to the Finance and Services Committee appointed under Standing Order No. 144, or to the Broadcasting Committee appointed under Standing Order No. 139, or to the House of Commons Commission, its evidence and any other documents relating to matters of common interest; and

(d) to meet concurrently with any other such committee, or with the Finance and Services Committee, or with the Broadcasting Committee, for the purpose of deliberating or taking evidence.

(5) Each committee appointed under this order shall have leave to meet concurrently with any committee of the Lords on House of Lords Offices or any sub-committee of that committee, for the purpose of deliberating or taking evidence, and to communicate to any such committee or sub-committee its evidence or any other documents relating to matters of common interest.

(6) Each committee appointed under this order shall have power to make recommendations to the House of Commons Commission or to the Speaker; but any such recommendation whose implementation would incur additional expenditure from the Votes for House of Commons (Administration) or (Works) shall also be considered by the Finance and Services Committee.

(7) Each committee appointed under this order shall have power to make rules and give directions to Officers of the House in respect only of such administrative matters as may from time to time be determined by the Speaker or by the House of Commons Commission."

Until 1 May 1997, the members of the Accommodation and Works Committee were Sir Raymond Powell (Chairman), Sir Sydney Chapman, Mr Derek Conway, Sir Patrick Cormack, Dame Peggy Fenner, Mr George Mudie and Mr Simon Hughes. Regular reports were given to the AWC on the progress of the project and, as will appear, its views were considered to be more than merely advisory, as one might expect since the NPB was being built for members of the House of Commons. At this point I ought also to record that I was warned from time to time by Mr Andrew White QC for the defendant (sometimes leaving me with the impression that the intervention was only for forensic or tactical reasons) not to trespass on matters of Parliamentary privilege, a matter which I had to consider at an interlocutory stage. In essence Mr White was properly anxious that, for example, at the trial, there should be no cross-examination that would or might infringe section 1, article IX of the Bill of Rights 1689 which provides:

"That the freedome of speech and debates or proceedings in Parlyament ought not to be impeached or questioned in any court or place out of Parlyament."

It precludes the Court from impeaching or questioning proceedings in Parliament (see Erskine May:Parliamentary Practice , 22nd Edition at page 93; and Pepper v.Hart [1993] 1 AC 593 and Prebble v. Television New Zealand Ltd. [1995] 1 AC 321 ). Mr White submitted, correctly, that questions about the fact that something had occurred in Parliament (including its committees) were permissible but questioning or challenging the motivation or the reasons why something may or may not have happened were not. As will become apparent I do not consider the motivation or the reasons of any body other than the defendant, in so far as they can be discerned or attributed to it.

I was also originally also told by counsel for the defendant that apparently neither the Speaker, nor the House of Commons Commission nor the Accommodation and Works Committee (AWC) has authority to give directions to the defendant, although it is accountable to the Commission. In operational terms the project sponsor of the NPB was Mr. Andrew Makepeace. He was a civil servant with the Department of the Environment (DOE) from 1964 until 1995 when he became a member of the staff of the House of Commons. He was seconded to the Public Works Office in 1986 and became the project sponsor for the NPB in 1987. He joined the PWD when it was created. A project sponsor has full personal responsibility for the successful completion of a capital project and is in effect the client of those engaged by the defendant for that purpose. Mr. Makepeace submitted reports to the AWC and to the Commission through Mr. Henry Webber, who was the Director of Works of the PWD. Mr Peter Linge was the Contracts Officer for the PWD. Mr Webber and Mr Makepeace would attend meetings of the AWC and of the Commission when invited but would not necessarily be present when decisions were taken. They would be informed of them by the clerk (orally, it seems, since I had hardly anything in writing from the AWC apart from the formal minutes and the occasional letter from the Chairman etc.). Mr White however said that Mr Makepeace had absolute authority to conclude contracts on behalf of the defendant for the NPB within the limits of the financial authorisation set by the Commission. Mr Makepeace said that a decision to accept a tender other than the lowest tender would be taken at executive level, ie by himself, and that "it just doesn't happen that the Commission takes such a decision". In reality, as one might expect, Mr Makepeace paid very close attention to the views of the AWC which appears effectively to have been treated as the client, although like Mr Makepeace, it had to work within the budget set by others, principally the Commission.

On the face of it there is therefore a lacuna since there is no obvious route by which the House of Commons can actually direct the defendant who in turn is to direct Mr Makepeace as to its wishes. Although it was not part of Harmon's case that Mr Makepeace did not have authority I have later to deal with the position of the defendant itself. In evidence Mr. John Pringle who was the director of Michael Hopkins & Partners (MHP - the architects) in charge of the NPB project said that he saw the defendant as the ultimate decision maker and the AWC as a "user group" with no authority (in much the same way as the PSA had acted) making its "views known to the Clerk [to the House] and to the House of Commons Commission, and those instructions come through the Parliamentary Works Directorate". (This is consistent with Standing Order 142(6).) MHP took its instructions from Mr Makepeace since he had the delegated authority of the House of Commons to give instructions. Mr. Philip Brand, the Project Manager of Laing Management Ltd (LML) (which was the defendant's Construction Manger) said in his statement that Mr Makepeace had been

"very careful to explain the client structure to Laings at the beginning of our involvement in the NPB project. We needed to understand the nature of the contracting Authority and I remember that Andy Makepeace briefed both myself and Brian Zelly [LML's managing director] on this structure. He explained that the PWD represented the Authority as defined in the Construction Management Agreement. Henry Webber was director of works, Andy Makepeace, project sponsor of the PWD. The Construction Management Agreement is quite clear, that only the Authority and its delegated agent, the project manager, can give LML as construction manager instructions, albeit that the Corporate Officer signed contracts and the like."

In the Construction Management Agreement (CMA) the Authority was the defendant and the project manager was TBV Consult (or in practice also Mr Makepeace). Paragraph 1.33 of Schedule 1 of the agreement required LML to advise H of C on compliance with EC directives. (Appendix A to this judgment contains this provision and other extracts from the CMA.) Mr Brand also said that any recommendation from LML to award a contract would be made "to the Parliamentary Works Directorate, who in turn would make a recommendation to the Corporate Officer via the [AWC]". Mr Brand's understanding of the structure was the defendant was in effect a figurehead and that "the decisions were taken by the Parliamentary Works Directorate, and, if you like, ratified by the Accommodation and Works Committee".

When Mr. Makepeace first became responsible for the NPB project management services were then provided by the PSA. After its privatisation, the services continued to be provided by TBV Consult Limited. In the late 1980s, the PSA appointed MHP to carry out a feasibility study for the NPB. Gardiner & Theobald (G&T) and Ove Arup & Partners (OAP), structural, mechanical and electrical engineers, were also appointed to assist in the production of this study. Once the study had been accepted, these firms were then appointed as, respectively, the architects, quantity surveyors and costs consultants, and engineers for the project. A subsidiary or associated company of OAP, Arup Facade Engineering (AFE) became the designer of the facade for the fenestration package (so that the fenestration was to be of British design). In 1993 LML was appointed as Construction Manager for the NPB. In addition to Mr Brand, amongst those directly involved in the fenestration package (no 4200) with which this action is concerned were Mr. Tony Aikenhead, the Joint Managing Director, Mr. Ron Kerr (who was named in the Construction Management Agreement as Procurement Co-ordinator), an associate Director and the Business Development Manager responsible throughout LML, Mr. Roger Morehen, a Senior Purchasing Manager, Mr Jerry Mumford, the Purchasing Managing for the fenestration package (both of whom together with Mr Kerr were primarily responsible for the procurement of this package), and Mr. Paul Nettleship, the Package Manager for the mock-up (to which I shall later refer). Mr Brand and Mr Mumford gave evidence but neither Mr Aikenhead nor, even more surprisingly, Mr Kerr was called even though the latter was certainly available. At MHP, Mr. Pringle was the partner and director in charge of the NPB project although, of course, Sir Michael Hopkins was closely involved. (Sir Michael Hopkins was also not called.) Mr. Peter Romaniuk was involved, as Senior Associate, as was Mr. David Selby and Mr. Bill Dunster, who was the project architect responsible for fenestration. Mr John Turzynski was the partner of OAP responsible for its work. Mr Nigel Quick, a Director of OAP Project Management Services, led the task force which was set up in the summer of 1995 but was not called. Harmon naturally commented on his absence. Mr Neil Noble, a partner of OAP, and head of AFE, did give evidence. AFE's project manager was Mr Jonathan Sakula. Mr TRE Blois-Brooke FICE, a partner in William J Marshall & Partners, and a consulting engineer of considerable experience, was called by H of C to give expert evidence on technical and engineering issues concerning the selection of Seele/Alvis. His report and evidence was helpful and fair. Mr James Nisbet FRICS, a well-known and distinguished quantity surveyor, was also called by H of C as an expert witness to give evidence about whether or not Harmon's tenders were deficient and on related matters.

Harmon was incorporated on 17 August 1990. It acquired its present name on 5 December 1994. It is a wholly-owned subsidiary of Harmon Europe S.A., which is itself a subsidiary of Harmon Limited, a company based in Bloomington, Minnesota, USA, whose ultimate holding company is Apogee Enterprises Inc. Although Harmon did not commence trading until March 1995, the Harmon Group had in fact been trading in the United Kingdom from about 1986 through another company, Harmon Contract (UK) Limited. One of the principal businesses of the group which is controlled by Apogee Enterprises Inc. is the design, manufacture and installation of cladding systems for buildings, not only within the United States, but all over the world. Companies within the group provided cladding for the Bibliothèque Nationale in Paris (but see below), the Petronas Towers in Kuala Lumpur, Malaysia, the Opéra at the Place de la Bastille, in Paris, a building at 199 Avenue of the Stars, Los Angeles, California, USA, the Mellon Bank in Philadelphia, Pennsylvania, USA, a development at Little Britain, Smithfield, London and James Capel House, in London. Harmon Contract (UK) Limited was responsible for the project at Little Britain which was worth approximately -35 million. It operated as a "construction manager" co-ordinating and bringing together the supply and fabrication of materials for making curtain walling elements.

In early 1993 the Harmon Group acquired, via a company called Harmon Contract WSA Inc., acting through another company called Harmon Europe S.A., three French companies which were in financial difficulties and in the hands of receivers: CFEM Façades S.A. (CFEM stood for Compagnie Française Enterprise Metallique), Sitraco S.A. and Façalu S.A. CFEM Façades S.A. had provided curtain walling to the Grande Arche, the Musée d'Orsay, the Pyramide at the Louvre, the Georges Pompidou Centre, the Arab World Institute and the Ministry of Finance, all in Paris. At the time of the acquisition it had then in hand the Bibliothèque Nationale, the Human Rights Building in Strasbourg, the Crédit Lyonnais Tower in Lille and the Cartier Building in the Boulevard Raspail. The Harmon group took over the management of the contract for the Bibliothèque Nationale. Despite a four month delay every milestone completion date was met. The factory of Sitraco S.A. was CFEM's primary manufacturing centre. it was situated at 26 rue du 7ème BCA, Pinon, 02320 Anizly le Château, about 100 km north-east of Paris. Façalu S.A. had a factory at Epernon near Chartres. Sitraco's premises comprised about 45,000 m2 of manufacturing area. It was the largest equipped facility of its kind in France and therefore useful for large projects. The factory at Epernon had about 10,000 m2 of manufacturing space and was suitable for standard curtain wall projects. In 1994 and 1995 Harmon Europe S.A. acquired two further companies, namely LTS S.A. and Voisin S.A., both of which had gone into receivership and which had specialised in architectural metalwork including stainless steel, brass and other alloys. They became known as Harmon LTS S.A. and Harmon Voisin S.A. Harmon Limited owned 70% of the shares in Harmon Europe S.A., with the remaining 30% being owned by Harmon Façades S.A. Harmon Europe S.A. which is owned and directed by Messrs Gabriel, Pierre and Paul Sahyoun, controls Harmon LTS S.A. (at Saint Nazaire), Harmon Voisin S.A., Harmon Sitraco S.A. and Harmon CFEM Façades S.A. as well as Harmon, the plaintiff. Harmon, the plaintiff, did not undertake any work itself in that it retained contractors and others. Its office contained merely an administrator. The company was run from the offices of Harmon CFEM at 18/20 avenue Louis Bleriot, 91781 Wissous (which is near Orly). By mid 1995 it had contracts at Hinxton Hall, Cambridge, the Manchester Concert Hall, three projects for SmithKline Beecham and a building for Scottish Widows, the materials for which had been fabricated mainly at Pinon but also at Epernon.

The managing director of Harmon until 10 June 1997 was Mr Gabriel Sahyoun (when Mr Normand Saucier took over). His brothers, Paul and Pierre Sahyoun are also directors. Mr Saucier had previously been finance director of Harmon Europe SA. Harmon's principal representative was Mr Edward Boyle III who was Harmon's sales director until the company went into liquidation and then was engaged by Harmon Ltd (the US company) to work on special projects. Mr Boyle's close involvement in the project led him on a few occasions to recall some minor matters which I do not consider occurred but these over-statements did not affect his fundamental credibility, which was well borne out by the documents. M. Michno also gave evidence. He had been in charge of all manufacturing operations within the Harmon Europe SA group, prior to which he had been responsible for both design engineering and manufacturing operations within Harmon Europe SA. He too was plainly highly competent and entirely credible. At the end of February 1998 Apogee decided to withdraw financial support from its Asian and European subsidiaries, including Harmon, as result of which on 10 March 1998 Harmon was placed in voluntary liquidation. For convenience I shall in general also use the term "Harmon" to refer to Harmon Contract (UK) Ltd since that company operated until the plaintiff took over in the spring of 1995. Harmon also called expert evidence from Mr Barry Josey, a senior associate of Bickerdike Allen and Partners who is a specialist in curtain walling and cladding systems and Mr Paul Barry FRICS, a partner of E.C. Harris who reported on procurement practice and other issues. Mr E.G. Hay Davison FRICS gave evidence on quantum. He had wide practical experience of financial and contractual management of many types of projects. Amongst his clients was a German fenestration and cladding company. All three were very well qualified and their reports were rational, impartial, well presented and directed to the issues, and generally persuasive.

The Treaty of Rome, as amended at Maastricht, contains the following provisions (the numbering has not been brought up to date to reflect the changes made at Amsterdam):

Member States shall take all appropriate measures, whether general or particular, to ensure fulfilment of the obligations arising out of this Treaty or resulting from action taken by the institutions of the Community. They shall facilitate the achievement of the Community's tasks.

They shall abstain from any measure which could jeopardise the attainment of the objectives of this Treaty.

Within the scope of application of this Treaty, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited.

The Council, acting in accordance with the procedure referred to in Article 189c, may adopt rules designed to prohibit such discrimination.

Quantitative restrictions on imports and all measures having equivalent effect shall, without prejudice to the following provisions, be prohibited between Member States.

Within the framework of the provisions set out below, restrictions on freedom to provide services within the community shall be progressively abolished during the transitional period in respect of nationals of Member States who are established in a State of the Community other than that of the person for whom the services are intended.

The Council may, acting by a qualified majority on a proposal from the commission, extend the provisions of the Chapter to nationals of a third country who provide services and who are established within the Community.

Services shall be considered to be "services" within the meaning of this Treaty where they are normally provided for remuneration, in so far as they are not governed by the provision relating to freedom of movement for goods, capital and persons.

"Services" shall in particular include:

(a) activities of an industrial character;

(b) activities of a commercial character;

(c) activities of craftsmen;

(d) activities of the professions.

Without prejudice to the provisions of the Chapter relating to the right of establishment, the person providing a service may, in order to do so, temporarily pursue his activity in the State where the service is provided, under the same conditions as are imposed by that State on its own nationals.

1. Freedom to provide services in the field of transport shall be governed by the provisions of the Title relating to transport.

2. The liberalization of banking and insurance services connected with movements of capital shall be effected in step with the progressive liberalization of movement of capital.

Save as otherwise provided in this Treaty, Member States shall not introduce any new restrictions on the freedom to provide services which have in fact been attained at the date of the entry into force of this Treaty.

The provisions of Articles 55 to 58 shall apply to the matters covered by this Chapter."

Harmon contend that H of C has broken the obligation not to discriminate on the grounds of nationality (article 6), the principle of equal treatment of tenderers (articles 6, 30, 59-65) and the obligation not to restrict intra-community trade (articles 30 and 59).

In 1971 the policy of the European Community to achieve freedom of establishment and the freedom to provide services was extended to public works contracts by Directive 71/305. Its recitals stated:

"WHEREAS the simultaneous attainment of freedom of establishment and freedom to provide services in respect of public works contracts awarded in Member States on behalf of the State, or regional or local authorities or other legal persons governed by public law entails not only the abolition of restrictions but also the co-ordination of national procedures for the award of public works contracts;

WHEREAS the Council in a statement concerning the aforementioned General Programmes has stressed that co-ordination should be based on the following principles: prohibition of technical specifications that have a discriminatory effect, adequate advertising of contracts, the fixing of objective criteria for participation and the introduction of a procedure of joint supervision to ensure the observation of these principles;

WHEREAS to ensure development of effective competition in the field of public contracts it is necessary that contract notices drawn up by the authorities of Member States awarding contracts be advertised throughout the Community; whereas the information contained in these notices must enable contractors established in the Community to determine whether the proposed contracts are of interest to them; whereas, for this purpose it is appropriate to give them adequate information about the services to be provided and the conditions attached thereto, whereas, more particularly, in restricted procedures advertisement is intended to enable contractors of Member States to express their interest in contracts by seeking from the authorities awarding contracts invitations to tender under the required conditions;

WHEREAS additional information concerning contracts must, as is customary in Member States, be given in the contract documents for each contract or else in an equivalent document..."

The Directive then set out a regime for the advertisement, reception of tenders and award of pubic works contracts. It was amended by Directives 89/440 and 89/665. The latter provided in part:

1. The Member States shall take the measures necessary to ensure that, as regards contract award procedures falling within the scope of Directives 71/305/EEC and 77/62/EEC, decisions taken by the contracting authorities may be reviewed effectively and, in particular, as rapidly as possible in accordance with the conditions set out in the following Articles, and, in particular, Article 2 (7) on the grounds that such decisions have infringed Community law in the field of public procurement or national rules implementing that law.

2. Member States shall ensure that there is no discrimination between undertakings claiming injury in the context of a procedure for the award of a contract as a result of the distinction made by this Directive between national rules implementing community law and other national rules.

3. The Member States shall ensure that the review procedures are available, under detailed rules which the Member States may establish, at least to any person having or having had an interest in obtaining a particular public supply of public works contract and who has been or risks being harmed by an alleged infringement. In particular, the Member States may require that the person seeking the review must have previously notified the contracting authority of the alleged infringement and of his intention to seek review.

1. The Member States shall ensure that the measures taken concerning the review procedures specified in Article 1 include provision for the powers to:

(a) take, at the earliest opportunity and by way of interlocutory procedures, interim measures with the aim of correcting the alleged infringement or preventing further damage to the interests concerned, including measures to suspend or to ensure the suspension of the procedure for the award of a public contract or the implementation of any decision taken by the contracting authority;

(b) either set aside or ensure the setting aside of decisions taken unlawfully, including the removal of discriminatory technical, economic or financial specifications in the invitation to tender, the contract documents or in an other document relating to the contract award procedure;

(c) award damages to persons harmed by an infringement.

2. The powers specified in paragraph 1 may be conferred on separate bodies responsible for different aspects of the review procedure.

3. Review procedures need not in themselves have an automatic suspensive effect on the contract award procedures to which they relate.

4. The Member States may provide that when considering whether to order interim measures the body responsible may take into account the probable consequences of the measures for all interests likely to be harmed, as well as the public interest, and may decide not to grant such measures where their negative consequences could exceed their benefits. A decision not to grant interim measures shall not prejudice any other claim of the person seeking these measures.

5. The Member States may provide that where damages are claimed on the grounds that a decision was taken unlawfully, the contested decision must first be set aside by a body having the necessary powers.

6. The effects of the exercise of the powers referred to in paragraph 1 on a contract concluded subsequent to its award shall be determined by national law.

Furthermore, except where a decision must be set aside prior to the award of damages, a Member State may provide that, after the conclusion of a contract following its award, the powers of the body responsible for the review procedures shall be limited to awarding damages to any person harmed by an infringement.

7. The Member States shall ensure that decisions taken by bodies responsible for review procedures can be effectively enforced.

8. Where bodies responsible for review procedures are not judicial in character, written reasons for their decisions shall always be give. Furthermore, in such a case, provision must be made to guarantee procedures whereby any allegedly illegal measure taken by the review body or any alleged defect in the exercise of the powers conferred on it can be the subject of judicial review or review by another body which is a court or tribunal within the meaning of Article 177 of the EEC Treaty and independent of both the contracting authority and the review body.

The members of such an independent body shall be appointed and leave office under the same conditions as members of the judiciary as regards the authority responsible for their appointment, their period of office, and their removal. At least the President of this independent body shall have the same legal and professional qualifications as members of the judiciary. The independent body shall take its decisions following a procedure in which both sides are heard, and these decisions shall, by means determined by each Member State, be legally binding."

In 1993 a new Directive was issued (93/37) of 14 June 1993. It both consolidated amendments to Directive 71/305 and made further amendments to the body of existing Directives It was itself amended by Directive 97/52 but the amendments are not applicable to the claims in this action. . The first of the recitals in 71/305 was reproduced in 93/37. The following recital was added:

"WHEREAS it is necessary to provide common rules for participation in public works contracts, including both qualitative selection criteria and criteria for the award of the contract.

The basic scheme is that for contracts covered by Directive 93/37 (see articles 1-6) the contracting authority has to decide which procedure is to be used - open, restricted or negotiated (see article 7) and must generally publish its intention to do so (for which elaborate provision is made in articles 11- 17) and explain why an application to tender was rejected (article 8). There are rules for the qualification and selection of tenderers (articles 18-29) and for the criteria for the award of contracts (articles 30-32). The most relevant parts of this Directive are as follows:

Contracts shall be awarded on the basis of the criteria laid down in Chapter 3 of this Title, taking into account Article 19, after the suitability of the contractors not excluded under Article 24 has been checked by contracting authorities in accordance with the criteria of economic and financial standing and of technical knowledge or ability referred to in Articles 26 to 29.

Where the criterion for the award of the contract is that of the most economically advantageous tender, contracting authorities may take account of variants which are submitted by a tenderer and meet the minimum specifications required by the contracting authorities.

The contracting authorities shall state in the contract documents the minimum specifications to be respected by the variants and any specific requirements for their presentation. They shall indicate in the tender notice if variants are not permitted.

Contracting authorities may not reject the submission of a variant on the sole grounds that it has been drawn up with technical specifications defined by reference to national standards transposing European standards, to European technical approvals or to common technical specifications referred to in Article 10(2) or again by reference to national technical specifications refer to in Article 10 (5) (a) and (b).

Any contractor may be excluded from participation in the contract who:

(a) is bankrupt or is being wound up, whose affairs are being administered by the court, who has entered into an arrangement with creditors, who has suspended business activities or who is in any analogous situation arising from a similar procedure under national laws and regulations;

(b) is the subject of proceedings for a declaration of bankruptcy, for an order for compulsory winding up or administration by the court or for an arrangement with creditors or any other similar proceedings under national laws or regulations;

(c) has been convicted of an offence concerning his professional conduct by a judgment which has the force of res judicata;

(d) has been guilty of grave professional misconduct proved by any means which the contracting authorities can justify;

(e) has not fulfilled obligations relating to the payment of social security contributions in accordance with the legal provisions of the country in which he is established or with those of the country of the contracting authority;

(f) has not fulfilled obligations relating to the payment of taxes in accordance with the legal provisions of the country in which he is established or those of the country of the contracting authority;

(g) is guilty of serious misrepresentation in supplying information required under this Chapter.

Where the contracting authority requires of the contractor proof that none of the cases quoted in (a), (b), (c), (d), (e) or (f) applies to him, it shall accept as sufficient evidence:

- for points (a), (b) or (c), the production of an extract from the "judicial record" or, failing this, of an equivalent document issued by a competent judicial or administrative authority in the country of origin in the country whence that person comes showing that these requirements have been met;

- for points (e) and (f), a certificate issued by the competent authority in the Member State concerned.

Where the country concerned does not issue such documents or certificates, they may be replaced by a declaration on oath or, in Member States where there is no provision for declarations on oath, by a solemn declaration made by the person concerned before a judicial or administrative authority, a notary or a competent professional or trade body, in the country of origin or in the country whence that person comes.

Member States shall designate the authorities and bodies competent to issue these documents and shall forthwith inform the other Member States and the Commission thereof.

1. Evidence of the contractor's financial and economic standing may, as a general rule, be furnished by one or more of the following references;

(a) appropriate statements from bankers;

(b) the presentation of the firm's balance sheets or extracts from the balance sheets, where publication of the balance sheet is required under the law of the country in which the contractor is established.

(c) a statement of the firm's overall turnover and the turnover and construction works for the three previous financial years.

2. The contracting authorities shall specify in the notice or in the invitation to tender which reference or references they have chosen and what references other than those mentioned under paragraph 1 (a), (b) or (c) are to be produced.

3. If, for any valid reason, the contractor is unable to supply the references requested by the contracting authorities, he may prove his economic and financial standing; by another document which the contracting authorities consider appropriate.

1. Evidence of the contractor's technical capability may be furnished by:

(a) the contractor's educational and professional qualifications and/or those of the firms managerial staff and, in particular, those of the person or persons responsible for carrying out the works.

(b) a list of the works carried out over the past five years, accompanied by certificates of satisfactory execution for the most important works. These certificates shall indicate the value, date and site of the works and shall specify whether they were carried out according to the rules of the trade and properly completed. Where necessary, the competent authority shall submit these certificates to the contracting authority direct;

(c) a statement of the tools, plant and technical equipment available to the contractor for carrying out the work;

(d) a statement of the firm's average annual manpower and the number of managerial staff for the last three years;

(e) a statement of the technicians or technical bodies which the contractor can call upon for carrying out the work, whether or not they belong to the firm.

2. The contracting authorities shall specify in the invitation to tender which of these references are to be produced.

Within the limits of Articles 24 to 27, the contracting authority may invite the contractor to supplement the certificates and documents submitted or to clarify them.

1. Member States who have official lists of recognised contractors must adapt them to the provisions of Article 24 (a) to (d) and (g) and of Articles 25, 26 and 27.

2. Contractors registered in the official lists may, for each contract, submit to the contracting authority a certificate of registration issued by the competent authority. This certificate shall state the reference which enabled them to be registered in the list and the classification given in this list.

3. Certified registration in the official lists by the competent bodies shall, for the contracting authorities of other Member States, constitute a presumption of suitability for works corresponding to the contractor's classification only as regards Articles 24 (a) to (d) and (g), 25, 26 (b) and (c) and 27 (b) and (d).

Information which can be deduced from registration in official lists may not be questioned. However, with regard to the payment of social security contributions, an additional certificate may be required of any registered contractor whenever a contract is offered.

The contracting authorities of other Member States shall apply the above provisions only in favour of contractors who are established in the country holding the official list.

4. For the registration of contractors of other Member States in an official list, no further proofs and statements may be required other than those requested of nationals and, in any event, only those provided for under Articles 24 to 27.

5. Member States holding an official list shall communicate to other Member States an address of the body to which requests for registration may be made.

1. The criteria on which the contracting authorities shall base the award of contracts shall be:

(a) either the lowest price only;

(b) or, when the award is made to the most economically advantageous tender, various criteria according to the contract: e.g. price, period for completion, running costs, profitability, technical merit.

2. In the case referred to in paragraph 1 (b), the contracting authority shall state in the contract documents or in the contract notice all the criteria it intends to apply to the award, where possible in descending order of importance.

3. Paragraph 1 shall not apply when a Member State bases the award of contracts on other criteria, within the framework of rules in force at the time of the adoption of this Directive whose aim is to give preference to certain tenderers, on condition that the rules invoked are compatible with the EEC Treaty.

4. If, for a given contract, tenders appear to be abnormally low in relation to the works, the contracting authority shall, before it may reject those tenders, request in writing, details of the constituent elements of the tender which it considers relevant and shall verify those constituent elements taking account of the explanations received.

The contracting authority may take into consideration explanations which are justified on objective grounds including the economy of the construction method, or the technical solution chosen, or the exceptionally favourable conditions available to the tenderer for the execution of the work, or the originality of the work proposed by the tenderer.

If the documents relating to the contract provide for its award at the lowest price tendered, the contracting authority must communicate to the Commission the rejection of tenders which it considers to be too low.

However, until the end of 1992, if current national law so permits, the contracting authority may exceptionally, without any discrimination on grounds of nationality, reject tenders which are abnormally low in relation to the works, without being obliged to comply with the procedure provided for in the first sub-paragraph if the number of such tenders for a particular contract is so high that implementation of this procedure would lead to a considerable delay and jeopardize the public attaching to the execution of the contract in question. Recourse to this exceptional procedure shall be mentioned in the notice referred to in Article 11 (5)."

The Council of Ministers and the Commission have made the following statement about article 7(4) of this Directive (OJ L 111 of 30.4.94, page 114):

"The Council and the Commission state that in open and restricted procedures all negotiations with candidates or tenderers on fundamental aspects of contracts, variations which are likely to distort competition, and in particular on prices, shall be ruled out; however, discussions with candidates or tenderers may be held but only for the purpose of clarifying or supplementing the content of their tenders or the requirements of the contracting entities and provided this does not involve discrimination."

Harmon maintain that this statement has the force of law since in Commission v Belgium , Case 87/94, [1996] ECR I-2043 , a similar statement in respect of utilities was endorsed by the Court.

There is in any case a principle that tenderers should be treated equally. In a well-known case concerning the Storebælt bridge, Commission v Denmark , Case 243/89, [1993] ECR I-3553, Advocate-General Tesauro said:

"18. It is true that Directive 71/305 does not contain any specific rule regarding reservations; nor does it expressly codify the principle of equal treatment. That does not mean, however, that all matters related to public contracts may be governed by national law without taking into account such a fundamental principle. And quite frankly, I find it astonishing that the parties have expended so much energy in demonstrating, or denying, that the principle of equal treatment lies at the heart of Directive 71/305. On that point, it is hardly necessary to point out that, where a public contract falls to be awarded, it is precisely because the procedure is a competition that it must be ensured that all those who take part have an equal chance; otherwise, it would no longer be a public tendering procedure but private bargaining. In sum, equal treatment underlies any set of rules governing procedures for the award of public contracts since it is the very essence of such procedures.

Furthermore, both the preamble to Directive 71/305 and its provisions, taken as a whole, are more than indicative in this respect. Suffice it to say that it is expressly stated that the fixing of objective criteria for participation constitutes one of the fundamental principles, observation of which must be ensured throughout procedures for the award of public works contracts (third recital); that tenders must be submitted in accordance with the conditions contained in the contract notice, in order to ensure 'development of effective competition', and all the more so in the context of restricted procedures (penultimate recital).

19. As regards the joint statement of July 1989, attached to Council Directive 89/440/EEC - which in open or restricted procedures rules out all negotiation with tenderers on fundamental aspects of contracts, variations in which are likely to distort competition, and in particular on prices - it does not seem to me possible to accept the Danish Government's view that the statement in question has no legal consequences and that, in any case, since it postdates the events in issue, it is of no significance in these proceedings.

Nor do I believe, given the observations set out above, that the Danish Government may rely on the Court's statement in the judgment in Antonissen Case C-292/89 [1991] ECR I-745 according to which the relevance of a declaration depends on its content and on whether reference is made to it in the wording of the provision in question. In my opinion, it is indisputable that the statement referred to is purely declaratory, since the principle of equal treatment of tenderers - whose purpose in this particular context is, in particular, to ensure that competition between those taking part in the tendering procedure is not distorted - lies at the very heart of the rules under consideration in this case."

In its judgment in that case the Court said:

32. Since the Commission claims in its pleadings, which were re-worded in its reply, that Storebælt acted in breach of the principle that all tenderers should be treated alike, the Danish Government's argument that that principle is not mentioned in the directive and therefore constitutes a new legal basis for the complaint of breach of State obligations must be considered first.

33. On this issue, it need only be observed that, although the directive makes no express mention of the principle of equal treatment of tenderers, the duty to observe that principle lies at the very heart of the directive whose purpose is, according to the ninth recital in is preamble, to ensure in particular the development of effective competition in the field of public contracts and which, in Title IV, lays down criteria for selection and for award of the contracts, by means of which such competition is to be ensured.

34. In its reply the Commission based its claims on a series of provisions in the final version of the contract which, in its view, constituted amendments to the tender conditions and had some effect on prices. However, as was explained above (paragraphs 14 and 15), only the amendments relating to Condition 3, Clause 3, of the general conditions may be taken into consideration by the Court.

35. The Commission's second ground of application, so defined is essentially that the Kingdom of Denmark infringed the principle of equal treatment of tenderers by reason of the fact that Storebælt, on the basis of a tender which did not comply with the tender conditions, conducted negotiations with ESG, which, in the final version of the contract, led to amendments to Condition 3, Clause 3, concerning price-related factors which favoured the tenderer alone.

36. In order to assess the compatibility of the negotiations so conducted by Storebælt, with the principle of equal treatment of tenderers, it must first be considered whether that principle precluded Storebælt from taking ESG's tender into consideration.

37. In this regard, it must be stated first of all that observance of the principle of treatment of tenderers requires that all the tenders comply with the tender conditions so as to ensure an objective comparison of the tenders submitted by the various tenderers.

38. This confirmed by Article 11 of the directive, which, whilst allowing a tenderer, where there is the option of submitting variations on a project of the administration, to use a method for pricing the works which differs from that used in the country where the contract is being awarded, nevertheless requires that the tender accord with the tender conditions.

39. With regard to the Danish Government's argument that Danish legislation governing the award of public contracts allows reservations to be accepted, it should be observed that when that legislation is applied, the principle of equal treatment of tenderers, which lies at the heart of the directive and which requires that tenders accord with the tender conditions, must be fully respected.

40. That requirement would not be satisfied if tenderers were allowed to depart from the basic terms of the tender conditions by means of reservations, except where those terms expressly allow them to do so.

41. The tender submitted by ESG, concerning an alternative project for the construction of a concrete bridge, did not comply with Condition 3, Clause 3, of the general conditions in so far as it failed to satisfy the requirements stipulated therein, that is to say that the proposed price was not based on the fact that, as tenderer, it had to undertake the detailed design of a project and assume full responsibility for it, as regards both its planning and its execution, as well as accept the risk of variation in quantities in relation to those envisaged.

Member States of the EU are obliged to implement directives (see Article 5 of the Treaty). Some do so by specific legislation. Some the legal systems of some countries easily treat directives as automatically enforceable without further domestic legislation, as indeed they are here. Because it was thought the Public Works Directives had limited application the Government of this country originally thought that it was sufficient to issue departmental circulars. The European Commission took a different view so the Public Works Contracts Regulations 1991 (PWR) were made to implement the Directives. They state, in part:

2. (1) In these Regulations-

"to award " means to accept an offer made in relation to a proposed contract;

"carrying out", in relation to a work or works, means the construction or the design and construction of that work or those works;

"the Commission " means the Commission of the Communities;

"contract documents" means the invitation to tender for or negotiate the contract, the proposed conditions of contract, the specifications or description of the work or works required by the contracting authority and of the materials or goods to be used in or for it or them, and all documents supplementary thereto;

"contract notice" means a notice sent to the Official Journal in accordance with regulation 11(2), 12(2), 13(2), 25(2) or 26(3);

"contracting authority " has the meaning ascribed to it by regulation 3;

"contractor" has the meaning ascribed to it by regulation 4;

"Official Journal" means the Official Journal of the Communities;

"public works contract" means a contract in writing for consideration (whatever the nature of the consideration)-

(a) for the carrying out of a work or works for a contracting authority, or (b) under which a contracting authority engages a person to procure by any means the carrying out for the contracting authority of a work corresponding to specified requirements;

"restricted procedure" means a procedure leading to the award of a public works contract whereby only persons selected by the contracting authority may submit tenders for the contract;

"work" means the outcome of any works which is sufficient of itself to fulfil an economic and technical function;

3. (1) For the purposes of these Regulations each of the following is a "contracting authority"-

(c) the House of Commons,

(5) Where an entity specified in paragraph (1) above does not have the capacity to enter into a contract, the contracting authority in relation to that entity means a person whose function it is to enter into contracts for that entity.

4. (1) For the purposes of these Regulations a "contractor " means a person -

(a) who sought, or who seeks, or would have wished, to be the person to whom a public works contract is awarded, and

(b) who is a national of and established in a member State.

(2) When these Regulations apply a contracting authority shall not treat a person who is not a national of and established in a member State more favourably than one who is.

5. These Regulations apply whenever a contracting authority seeks offers in relation to a proposed public works contract other than public works contracts excluded from the operation of these Regulations by regulations 6 and 7; except that in Parts II, III, IV and V of these Regulations and in regulations 24, 27 and 28 references to a "public works contract " shall not include a public works concession contract.

Regulation 9 requires the proposed public works to be advertised in the Official Journal of the European Union (OJ) in the form set out in the Regulations. Regulation 10 calls for a decision as to which form of the procedures is to be adopted: open, restricted or negotiated. The restricted procedure is set out in Regulation 12.

12. (1) A contracting authority using the restricted procedure shall comply with the following paragraphs of this regulation.

(2) The contracting authority shall publicise its intention to seek offers in relation to the public works contract by sending to the Official Journal as soon as possible after forming the intention a notice, in a form substantially corresponding to that set out in Part C of Schedule 2, inviting requests to be selected to tender and containing the information therein specified in relation to the contract.

(3) Subject to paragraph (14) below, the date which the contracting authority shall fix as the last date for the receipt by it of requests to be selected to tender shall be specified in the contract notice and shall be not less than 37 days from the date of the despatch of the notice.

(4) The contracting authority may exclude a contractor from those persons from whom it will make the selection of persons to be invited to tender only if the supplier may be treated as ineligible on a ground specified in regulation 14 or if the contractor fails to satisfy the minimum standards of economic and financial standing and technical capacity required of contractors by the contracting authority; for this purpose the contracting authority shall make its evaluation in accordance with regulations 14, 15, 16 and 17.

(5) The contracting authority shall make the selection of the contractors to be invited to tender in accordance with regulations 14, 15, 16 and 17; and in making the selection and in issuing invitations the contracting authority shall not discriminate between contractors on the grounds of their nationality or the member State in which they are established.

(6) The contracting authority may predetermine the range within which the number of persons which it intends to invite to tender for the contract shall be fixed but only if-

(a) the lower number of the range is not less than 5 and the higher number not more than 20,

(b) the range is determined in the light of the nature of the work to be carried out under the contract, and

(c) the range is specified in the contract notice.

(7) The number of persons invited to tender shall be sufficient to ensure genuine competition.

(8) The contracting authority shall send invitations to each of the contractors selected to tender and the invitation shall be accompanied by the contract documents, or the invitation shall state the address for requesting them.

(9) The invitation shall be sent in writing simultaneously to each contractor selected to tender.

(10) The following information shall be included in the invitation-

(a) the address to which requests for the contract documents (if not accompanying the invitation) and further information relating to those documents should be sent, the final date for making such a request and the amount and terms of the fee which may be charged for supplying that material;

(b) the final date for the receipt of tenders, the address to which they must be sent and the language or languages in which they must be drawn up;

(c) a reference to the contract notice published in accordance with paragraph (2) above;

(d) an indication of the information to be included with the tender which the contracting authority may require to be provided in accordance with regulations 15, 16 and 17; and

(e) the criteria for the award of the contract if this information was not specified in the contract notice published in accordance with paragraph (2) above.

(11) Subject to paragraphs (12) and (14) below, the date which the contracting authority shall fix as the last date for the receipt by it of tenders made in response to the invitation to tender which shall be specified in the invitation to tender in accordance with paragraph (10)(b) above shall not be less than 40 days from the date of the despatch of the invitation but, if it is necessary that contractors should be given the opportunity to inspect the premises on which the works under the contract are to be carried out or documents relating to the contract documents, then that minimum period shall be extended to allow for such inspection.

(12) Subject to paragraph (14) below, where the contracting authority has published a notice in accordance with regulation 9 in relation to the public works contract, it may substitute for the period of not less than 40 days in paragraph (11) above a period of not less than 26 days.

(13) Subject to paragraph (14) below, the contracting authority shall supply such further information relating to the contract documents as may reasonably be requested by a contractor selected to tender provided that the request for such information is received in sufficient time to enable the contracting authority to supply it not less than 6 days before the date specified in the invitation to tender as the final date for the receipt of tenders.

(14) Where compliance with the minimum periods referred to in paragraphs (3), (11), (12) and (13) above is rendered impracticable for reasons of urgency, the contracting authority may substitute for the period specified in paragraph (3) a period of not less than 15 days and for the periods specified in (11) and (12) periods of not less than 10 days and for the period specified in paragraph (13) a period of not less than 4 days and, in those circumstances, the contracting authority must send the invitation to tender by the most rapid means possible.

(15) A contracting authority shall not refuse to consider an application to be invited to tender if it is made by letter, telegram, telex, facsimile or telephone provided that, in the last 4 cases, it is confirmed by letter before the date fixed by the contracting authority as the last date for the receipt of requests to be selected to tender.

Schedule 2, Part C, which is referred to in Regulation 12(2) states:

Regulations 9, 11(2), 12(2), 13(2), 25(2), and 26(3)

1. The name, address, telephone number, telex and facsimile numbers of the contracting authority.

2. (a) The award procedure chosen.

(b) Where applicable, justification for the use of the shorter time limits. (1)

(c) Nature of the contract which tenders are being requested.

(a) The site.

(b) The nature and extent of the services to be provided and general nature of the work.

(c) If the work of the contract is subdivided into several lots, the size of the different lots and the possibility of tendering for one, for several or for all of the lots.

(d) Information concerning the purpose of the work or the contract where the latter also involves the drawing up of projects.

4. Any time limit for completion.

5. Where applicable, the legal form to be taken by the grouping of contractors to whom the contract is awarded.

6. (a) The final date for receipt of requests to participate.

(b) The address to which they must be sent.

(c) The language or languages in which they must be drawn up.

7. The final date for despatch of invitations to tender.

8. Any deposit and guarantees required.

9. Main terms concerning financing and payment and/or provisions in which these are contained in accordance with regulation 12.

10. Information concerning the contractor's personal position and minimum standards of economic and financial standing and technical capacity required of the contractor to whom the contract is awarded.

11. The criteria for the award of the contract where they are not mentioned in the invitation to tender.

12. Where applicable, prohibition on variants.

13. Other information.

14. Date of publication of the prior information notice in the Official Journal of the European Communities or reference to its non-publication.

15. Date of despatch of the notice.

Part IV of the Regulations deal with the criteria for the selection of contractors, as does Regulation 15:

15. (1) Subject to regulation 18 and paragraph (2) below, in assessing whether a contractor meets any minimum standards of economic and financial standing required of contractors by the contracting authority for the purposes of regulations 11(7), 12(4) and 13(7), and selecting the contractors to be invited to tender for or to negotiate the contract in accordance with regulations 12(5) and 13(8), a contracting authority shall only take into account any of the following information (and it may require a contractor to provide such of that information as it considers it needs to make the assessment or selection)-

(a) appropriate statements from the contractor's bankers;

(b) statement of accounts or extracts therefrom relating to the business of the contractor where publication of the statement is required under the law of the Member State in which the contractor is established;

(c) a statement of the overall turnover of the business of the contractor and the turnover in respect of works in the 3 previous financial years of the contractor.

(2) Where the information specified in paragraph (1) above is not appropriate in a particular case a contracting authority may require a contractor to provide other information to demonstrate the contractor's economic and financial standing.

(3) A contracting authority which requires information to be provided in accordance with paragraphs (1) and (2) above, shall specify in the contract notice or in the invitation to tender the information which the contractor must provide.

(4) Where a contractor is unable for a valid reason to provide the information which the contracting authority has required, the contracting authority shall accept such other information provided by the contractor as the contracting authority considers appropriate.

Regulations 19, 20, 21, 22 and 31 state:

19. (1) In this regulation a "consortium " means 2 or more persons, at least one of whom is a contractor, acting jointly for the purpose of being awarded a public works contract.

(2) A contracting authority shall not treat the tender of a consortium as ineligible nor decide not to include a consortium amongst those persons from whom it will make the selection of persons to be invited to tender for or to negotiate a public works contract on the grounds that the consortium has not formed a legal entity for the purposes of tendering for or negotiating the contract; but where a contracting authority awards a public works contract to a consortium it may require the consortium to form a legal entity before entering into, or as a term of, the contract.

(3) In these Regulations references to a contractor or to a concessionaire where the contractor or concessionaire is a consortium includes a reference to each person who is a member of that consortium.

20. (1) Subject to paragraphs (6) and (7) below, a contracting authority shall award a public works contract on the basis of the offer which-

(a) offers the lowest price, or

(b) is the most economically advantageous to the contracting authority.

(2) The criteria which a contracting authority may use to determine that an offer is the most economically advantageous include price, period for completion, running costs, profitability and technical merit.

(3) Where a contracting authority intends to award a public works contract on the basis of the offer which is the most economically advantageous it shall state the criteria on which it intends to base its decision, where possible in descending order of importance, in the contract notice or in the contract documents.

(4) Where a contracting authority awards a public works contract on the basis of the offer which is the most economically advantageous, it may take account of offers which offer variations on the requirements specified in the contract documents if the offer meets the minimum requirements of the contracting authority and it has indicated in the contract notice that offers offering variations will be considered and has stated in the contract documents the minimum requirements which the offer must meet and any specific requirements for the presentation of an offer offering variations.

(5) A contracting authority may not reject a tender on the ground that the technical specifications in the tender have been defined by reference to European specifications (within the meaning of regulation 8(1)) or to the national technical specifications specified in regulation 8(7)(a) and (b).

(6) If an offer for a public works contract is abnormally low the contracting authority may reject that offer but only if it has requested in writing an explanation of the offer or of those parts which it considers contribute to the offer being abnormally low and has-

(a) if awarding the contract on the basis of the offer which offers the lowest price, examined the details of all the offers made, taking into account any explanation given to it of the abnormally low tender, before awarding the contract, or

(b) if awarding the contract on the basis of the offer which is the most economically advantageous, taken any such explanation into account in assessing which is the most economically advantageous offer, and, in considering that explanation, the contracting authority may take into account explanations which justify the offer on objective grounds including the economy of the construction method, the technical solutions suggested by the contractor or the exceptionally favourable conditions available to the contractor for the carrying out of the works or the originality of the works proposed by the contractor.

(7) If a contracting authority which rejects an abnormally low offer is awarding the contract on the basis of the offer which offers the lowest price, it shall send a report justifying the rejection to the Treasury for onward transmission to the Commission.

(8) For the purposes of this regulation an "offer" includes a bid by one part of a contracting authority to carry out work or works for another part of the contracting authority when the former part is invited by the latter part to compete with the offers sought from other persons.

21. (1) A contracting authority which has awarded a public works contract shall, no later than 48 days after the award, send to the Official Journal a notice, substantially corresponding to the form set out in Part E of Schedule 2 and, subject to paragraph (2) below, including the information therein specified in relation to the contract.

(2) Any of the information specified in Part E of Schedule 2 to be included in the contract award notice may be omitted in a particular case where to publish such information would impede law enforcement, would otherwise be contrary to the public interest, would prejudice the legitimate commercial interests of any person or might prejudice fair competition between contractors.

22. (1) A contracting authority which has awarded a public works contract shall, within 15 days of the date on which it receives a request from any contractor who was unsuccessful (whether pursuant to regulation 11(7), 12(4), 12(5), 13(7), 13(8) or 20), inform that contractor of the reasons why he was unsuccessful and, if the contractor was unsuccessful as a result of the evaluation of offers made in accordance with regulation 20, the name of the person awarded the contract.

(2) A contracting authority shall prepare a record in relation to each public works contract awarded by it specifying-

(a) the name and address of the contracting authority;

(b) the work or works to be carried out under the contract and the value of the consideration to be given under it;

(c) the names of the persons whose offers were evaluated in accordance with regulation 20 and, where the contracting authority has used the restricted or negotiated procedure, the reasons for their selection;

(d) the names of the persons who were unsuccessful pursuant to regulation 11(7), 12(4), 12(5), 13(7) or 13(8);

(e) the name of the person to whom the contract was awarded and the reasons for having awarded the contract to him;

(f) if known to the contracting authority, the works under the contract which the person to whom the contract has been awarded intends to sub-contract to another person;

(g) in the case of a contracting authority which used the negotiated procedure, which of the circumstances specified in regulation 10(2) constituted the grounds for using that procedure.

(3) If the Commission requests a report in relation to a public works contract containing the information specified in paragraph (2) above, the contracting authority shall send a written report containing that information, or the main features of it, to the Treasury for onward transmission to the Commission. (4)Where a contracting authority decides not to award a public works contract in respect of which a contract notice was published nor to seek offers in relation to another public works contract for the same purpose it shall inform the Official Journal of that decision and shall, if so requested by any contractor who submitted an offer or who applied to be included amongst the persons to be selected to tender for or negotiate the contract, the reasons for its decision."

Part VII of the Regulations deals with enforcement:

31. (1) The obligation on a contracting authority to comply with the provisions of these Regulations other than regulations 8(6), 10(7), 20(7), 22(3), 28 and 29(1), and with any enforceable Community obligation in respect of a public works contract (other than one excluded from the application of these Regulations by regulations 6 and 7), and the obligation on a concessionaire to comply with the provisions of regulation 26(3) is a duty owed to contractors.

(2) In this regulation and notwithstanding regulation 4, references to "contractor" include, where the duty owed pursuant to paragraph (1) above is the obligation on a concessionaire to comply with regulation 26(3), any person -

(a) who sought, or who seeks, or would have wished, to be the person to whom a contract to which regulation 26(3) applies is awarded, and

(b) who is a national of and established in a member State.

(3) A breach of the duty owed pursuant to paragraph (1) above shall not be a criminal offence but any breach of the duty shall be actionable by any contractor who, in consequence, suffers, or risks suffering, loss or damage.

(5) Proceedings under this regulation may not be brought unless-

(a) the contractor bringing the proceedings has informed the contracting authority or concessionaire, as the case may be, of the breach or apprehended breach of the duty owed to him pursuant to paragraph (1) above by that contracting authority or concessionaire and of his intention to bring proceedings under this regulation in respect of it; and

(b) they are brought promptly and in any event within 3 months from the date when grounds for the bringing of the proceedings first arose unless the Court considers that there is good reason for extending the period within which proceedings may be brought.

(6) Subject to paragraph (6) below, but otherwise without prejudice to any other powers of the Court, in proceedings brought under this regulation the Court may-

(a) by interim order suspend the procedure leading to the award of the contract in relation to the award of which the breach of the duty owed pursuant to paragraph (1) above is alleged, or suspend the implementation of any decision or action taken by the contracting authority or concessionaire, as the case may be, in the course of following such a procedure; and

(b) if satisfied that a decision or action taken by a contracting authority was in breach of the duty owed pursuant to paragraph (1) above-

(i) order the setting aside of that decision or action or order the contracting authority to amend any document, or

(ii) award damages to a contractor who has suffered loss or damage as a consequence of the breach, or

(iii) do both of those things.

(7) In proceedings under this regulation the Court shall not have power to order any remedy other than an award of damages in respect of a breach of the duty owed pursuant to paragraph (1) above if the contract in relation to which the breach occurred has been entered into.

(8) Notwithstanding sections 21 and 42 of the Crown Proceedings Act 1947, in proceedings brought under this regulation against the Crown the court shall have power to grant an injunction or interdict.

The PWR largely follow Directive 93/37, but they go further in providing (in Regulation 31) machinery for enforcement, which is not confined to non-compliance with the Regulations themselves but also non-compliance "with any enforceable Community obligation in respect of a public works contract". It is therefore part of Harmon's case that the PWR provide it with a remedy for breach of the Treaty obligations to which I have referred. It is a general principle of European Union law that rights conferred by the Treaty should be enforceable by remedies available in domestic law (see for example Rewe-Zentralfinanz eG and Rewe-Zentral AG v. Landwirtschaftskammer für das Saarland Case 33/76, [1977] 1 CMLR 533 ; Rewe-Handelsgesellschaft Nord mbH & Rewe Markt Steffen v. Hauptzollamt Kie l, Case 158/80, [1982] 1 CMLR 449 ). In Harz v Deutsche Tradax GmbH , Case 79/83, [1986] 2 CMLR 430 the Court of Justice said that a sanction should be "such as to guarantee real and effective judicial protection. Moreover it must also have a real deterrent effect on the employer. It follows that where a member state chooses to penalise the breach of the prohibition of discrimination by the award of compensation, that compensation must in any event be adequate in relation to the damage sustained." These principles have been applied. For example in Brasserie du Pêcheur SA v Germany; R v Secretary of State for Transport, ex p Factortame Ltd and others , joined cases C-46/93 and C-48/93, [1996] 1 CMLR 889 the Court said:

"18. The German, Irish and Netherlands governments contend that member states are required to make good loss or damage caused to individuals only where the provisions breached are not directly effective: in Francovich the court simply sought to fill a lacuna in the system for safeguarding rights of individuals. In so far as national law affords individuals a right of action enabling them to assert their rights under directly effective provisions of Community law, it is unnecessary, where such provisions are breached, also to grant them a right to reparation founded directly on Community law.

19. That argument cannot be accepted.

20. The court has consistently held that the right of individuals to rely on the directly effective provisions of the Treaty before national courts is only a minimum guarantee and is not sufficient in itself to ensure the full and complete implementation of the Treaty (see, in particular, EC Commission v Italy Case 168/85 [1986] ECR 2945 at 2974 (para 11), EC Commission v Italy Case C-120/88 [1991] ECR I-621 at 638 (para 10) and EC Commission v Spain C-119/89 [1991] ECR I-641 at 654 (para 9)). The purpose of that right is to ensure that provisions of Community law prevail over national provisions. It cannot, in every case, secure for individuals the benefit of the rights conferred on them by Community law and, in particular, avoid their sustaining damage as a result of a breach of Community law attributable to a member state. As appears from the judgment in Francovich [1991] ECR I-5357 at 5414 (para 33), the full effectiveness of Community law would be impaired if individuals were unable to obtain redress when their rights were infringed by a breach of Community law.

21. This will be so where an individual, who is a victim of the non-transposition of a directive and is precluded from relying on certain of its provisions directly before the national court because they are insufficiently precise and unconditional, brings an action for damages against the defaulting member state for breach of the third para of art 189 of the Treaty. In such circumstances, which obtained in the case of Francovich , the purpose of reparation is to redress the injurious consequences of a member state's failure to transpose a directive as far as beneficiaries of that directive are concerned.

22. It is all the more so in the event of infringement of a right directly conferred by a Community provision upon which individuals are entitled to rely before the national courts. In that event, the right to reparation is the necessary corollary of the direct effect of the Community provision whose breach caused the damage sustained.

23. In this case, it is undisputed that the Community provisions at issue, namely art 30 of the Treaty in Case C-46/93 and art 52 in Case C-48/93, have direct effect in the sense that they confer on individuals rights upon which they are entitled to rely directly before the national courts. Breach of such provisions may give rise to reparation."

Directive 89/665 had of course called upon member states to provide effective remedies for compliance with the procedures for the award of public works contracts.

Harmon also relied on Directive 92/13 on the coordination of the laws, regulations and administrative provisions relating to the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors. This directive (the utilities directive) included the following recitals:

"WHEREAS claims for damages must always be possible;

WHEREAS, where a claim is made for damages representing the costs of preparing a bid or of participating in an award procedure, the person making the claim is not to be required, in order to obtain reimbursement of his costs, to prove that the contract would have been awarded to him in the absence of such infringement. "

These objectives were carried into effect by Article 2(7) of the Directive which provided as follows:

"Where a claim is made for damages representing the costs of preparing a bid or of participating in an award procedure, the person making the claim shall be required only to prove an infringement of Community law in the field of procurement or national rules implementing that law and that he would have had a real chance of winning the contract and that, as a consequence of that infringement, that chance was adversely affected. "

It is also a principle of European Union law that in applying a national law, in particular the provisions of a national law specifically introduced in order to implement a directive, national courts are required to interpret their national law in the light of the wording and purpose of the directive in order to achieve the result referred to in the third paragraph of Article 189 of the Treaty; see von Colson und Kamann -v- Land Nordrhein-Westfalen Case 143/83, [1984] ECR 1891 ; [1986] 2 CMLR 430 and Gebroeders Beentjes BV -v- State of Netherlands Case 31/87, [1988] ECR 4635; [1990] 1 CMLR 287 (to which I shall return later).

The provisions of the Treaty give rise to enforceable rights for public works contracts which are not covered by a Directive. In Commission v Ireland , Case 45/87, [1989] CMLR 225 the contract was for a water main and so fell outside Directive 71/305 which excluded contracts for the transmission of water. One of its provisions was nevertheless declared to contravene Article 30 as it required compliance with an Irish standard specification and the employer had declined to consider pipes which met a Spanish standard.

Contracts such as those for the NPB are contracts for public works and fall within the PWR. Accordingly the defendant as the contracting authority (see Regulation 3 (5)) was obliged to follow the procedure set out in Part III. In this instance the restricted procedure under Regulation 12 was chosen.

On 18 June 1992 the Principal Quantity Surveyor of the PWD issued a circular 12/92 which was given a wide circulation. It provided a brief summary of the effect of the PWR. Amongst things it recorded:

'Contracting authority shall not discriminate between contractors to be invited to tender on the grounds of nationality.

Furthermore, under the heading: "What Are the Criteria for Awarding the Contract?" the circular stated:

'The contract must be awarded on the basis of:-

- Lowest price; or

- most economically advantageous (e.g. quality, aesthetics and functional characteristics, technical merit)'.

Even before advertisements were place in the Official Journal (OJ), companies had begun to hear of the project on the grapevine. Harmon had retained a company called Overseas Material Consultants Inc. (OMC) (which operated from an address in East Grinstead, West Sussex) to provide it with leads to new projects. In July 1993 OMC provided Harmon with some indication about the NPB and on 27 July 1993 Mr. Eric W. Laithwaite, a director of OMC, wrote to Harmon confirming that it had supplied it with such information (through Mr. Clatworthy, the UK Sales Manager of Harmon Contract (UK) Limited). According to the letter, Mr Laithwaite obtained the information from Mr Ron Kerr, the director in charge of the project at LML, who had put the value of the work at about -9 million. OMC sought a commission fee of 4% of the total value of Harmon's contract. Even on the basis of this value the fee would have amounted to -360,000. Mr Clatworthy (who was called) thought that OMC "had a relationship with Laings, perhaps it was deeper than others, and they could help us in obtaining an opportunity to tender and then maybe some influence beyond that. That is unknown." Harmon appear to have made some contract with OMC for what on the face of it appears to have been an extravagant amount merely for providing Harmon with material which would in any event be publicly available, unless, of course OMC's connections with LML were likely to lead Harmon in getting an advantage when it came to the selection of the contractor. On 15 November 1993, Mr. Clatworthy sent a memorandum copies of which were sent to Mr. Haider and Mr. Michno in which he apparently believed that Harmon was under some obligation to OMC although, as he pointed out in cross-examination, there was no obligation unless Harmon was awarded the contract. Mr Clatworthy pursued the lead given by OMC by getting in touch with Mr Kerr. He provided him on behalf of Harmon Contract (UK) Ltd with information about work done by the Harmon group throughout the world. Mr Kerr then visited France where he met Mr Boyle. By that time Mr Kerr had submitted proposals to the PSA and other members of the project team (including Mr Makepeace) about how the work on the NPB project was to be advertised in the OJ. Mr Kerr's notes on the requirement to advertised in the OJ included this view:

"As we will be bound to accept the "most economically advantageous offer" this will enable us to consider tenderers who have offered competitive alternative solutions and materials."

However his advice on the policy that should be adopted (but which was not apparently adopted) did not (or did not necessarily) come to the attention of those responsible at the time for specifying the various packages. For example, Mr Mumford did not see these proposals until relatively close to the trial. Moreover he had not seen many of the general documents before tenders were invited for the fenestration package including, remarkably, the text of the PWR. This is particularly surprising since Mr Mumford was responsible for the preparation of the tender and contract documentation on the basis of LML's standard documents.

LML's standard documents included one concerning the "Accountability of Audit Trails (Part II)", which had been prepared about July 1993 and contained a number of recommendations which had apparently been made by Mr Kerr. The document records that LML would take the lead in compiling the tender documents. It also stated:

"Details of all queries and answers will be sent to all tenderers in writing to ensure that:

(a) All tenders submit a compliance bid which fully meets the client's requirements.

(b) All tenderers are treated in an even-handed manner."

The document also attached a "sampling" recommendation showing the level of detail and typical content of a recommendation document. This was the type of document used by LML for tenders for a project for the building of new Inland Revenue offices at Nottingham. Both Mr Mumford and Mr Morehen where also engaged on that project.

On 1 October 1993 Mr Makepeace wrote to the PSA enclosing the general guidelines which he thought necessary to lay down and which "should dictate the manner in which the trade packages are procured". In it he sought the views of the PSA as well as those of Mr Brand and Mr Terry Fleet of Berwin Leighton, the solicitors acting for the defendant. Before writing it Mr Makepeace had discussed it with Mr Webber and had got his authority for it to restate the policy of the PWD. Mr Makepeace said that he did not get any response from any of those to whom the letter was addressed. The document began:

1. As one of the largest, and certainly the most prestigious, buildings to be constructed over the next few years there will be keen interest within the construction industry to be involved. The use of construction management as the contracting vehicle provides the House with the opportunity to select and appoint direct the best for each of the individual trade packages. It also places upon the House the obligation to ensure that the high standard of competitive tendering required of the public sector are strictly adhered to and are seen to be adhered to. These requirements, together with the need to conform to EEC advertising requirements, provide a sound basis on which to proceed and develop a policy.

2. At the same time there will be a natural inclination by Parliament, the British Government, and the public, to maximise the use of British companies in order to demonstrate that they can compete in terms of quality, cost and delivery in the world's market. Ideally, the building should therefore become a showpiece for the British construction industry."

When questioned about this document Mr Makepeace accepted that its readers included members of the project team (as the guidelines were plainly intended for them), but he somewhat strangely maintained that the last sentence was merely a statement of fact and not intent. He also accepted that it was devised to be used in case pressure was brought to bear, for example by Members of Parliament (with whom Mr Makepeace himself would have little contact) to maximise the use of British companies, even though paragraph 10 stated: "there should be no bias for or against overseas companies".

In a letter of 6 October 1993, Mr. Makepeace did make some comments on Mr. Kerr's letter of 29 September. Amongst them was :-

"You refer to the need to accept the "most economically advantageous offer'. Presumably this is a quote from an EC document or a derivative. As long as this does not mean that we are bound to accept the lowest tender then it causes no problems."

As part of the process of finalising the design of the building a mock-up of a typical room and exterior elevations was commissioned and built and displayed on a site in Greenwich. The mock-up of the fenestration was provided by Harmon after a tender. Harmon's involvement on the mock-up has a certain significance. First, it enabled Harmon to gain experience of welding on aluminium bronze components for although it had certain problems at the outset they were overcome once it took advice from the French Welding Institute. Mr Blois-Brooke agreed that Harmon learned a lot and that it would have assisted it when it came to execute the package. Alvis had experience in welding non-ferrous metals but none in fenestration. Mr Noble accepted that if the tenderers had not been capable of acquiring adequate experience equivalent to that of Alvis they would not have been included on the tender list. All had worked in welding non-ferrous metals and would not have been pre-qualified unless they had been capable of handling aluminium bronze. Thus Harmon had experience not possessed by any other tenderer. Secondly, prior to tendering, Mr. Kerr got in touch with Mr. Clatworthy. According to Mr. Clatworthy, Mr. Kerr asked that Mr. Michno of Harmon CFEM Façades SA should "specifically front this project" since "he does not want any visible USA connection and that we [Harmon] should play our European card" (see Mr. Clatworthy's fax to Mr. Michno of 1 November 1993). Mr. Clatworthy said that this was because of political sensitivity rather than for any other reason: "the job was a major UK project and it would preferable if was done by a UK or European company". Mr Boyle said in evidence that Mr Kerr, from whom he had learned of the NPB and its special features, had visited the Sitraco factory at Pinon to see it and to investigate Harmon's technical expertise with the materials proposed on the NPB. He said that the purpose was to pick Harmon's brains about the types of alloys which might be used. Mr Boyle said that Mr Kerr had told him that "the employer was probably looking for a UK contractor, if at all possible, and that the American side of the Harmon operation should take a back seat so as to give the impression that the employer would be dealing with a UK company. Mr Kerr recommended that I allow the European employees to lead the project." Mr Kerr's advice was duly followed.

Mr Boyle accepted in cross-examination that at that meeting Mr Kerr also expressed concern that Mr Boyle would be able to demonstrate to H of C that the project would be managed from Europe and not from the United States, that one of the difficulties if it were managed from both Europe and the United States would be logistical, and that Mr Boyle should therefore not be seen as being involved in the project. Mr Kerr's concerns also extended to other projects, and not just the NPB, as he had general responsibility for major projects within LML.

From November 1993 discussions took place between members of the project team about how tenders should be evaluated. In a letter of 18 November 1993, Mr. Kerr put forward LML's views, as required by paragraph 1.33 of Schedule 1 to the CMA. LML was against adding or adjusting contractors tender prices to take account of the client's indirect costs as that would not be objective. In addition they put forward a proposal that each tender should be marked by the project team against a series of criteria so as to produce a score or rating by which each tender might be compared with every other tender. LML's proposals were generally endorsed by G&T but not by MHP. On 29 November 1993 MHP set out its views. It considered that indirect costs should be taken into account and that a scoring system should not be used on the basis that "numbers are no substitute for words". It seems that MHP thought that scoring would not take account of differences in quality because it assumed that every tender would be presented on a like to like basis. Nonetheless, Mr. Kerr prepared a final document concerning the appointment of works contractors and submitted it to TBV Consult on 1 December 1993 as representing the team's views. In the covering letter Mr Kerr said:

"We attach as requested the finalised document in respect of the above, which reflects the team's comments. The procurement section of the project handbook which will be issued shortly will fully reflect these procedures."

This document was also entitled "Accountability and Audit Trail". Amongst other things, it stated:

"The evaluation process to finalise the tender list will be fully documented with the reasons why contractors were rejected or considered suitable to go forward to the next stage and kept on file. In preparing the final tender the team will consider the recommendations for the DOE on tendering public sector contracts and the NJCC code of procedure as single stage selective tendering. However, the team consider that for this project a tender list of 6 should be the maximum considered...."..

A joint recommendation on the final tender list will then be made to the project sponsor which will where necessary, deal fully the reasons in need for a restricted tender list."

"The above route will ensure that the procurement activity and records are :-

- fully accountable

- able to demonstrate that all contractors have been dealt with an objective manner

- or current UK/EC legislation is complied with."

The document proposed that there should be a "tender rating" regime and it concluded with a statement:-

"All actions in this tender evaluation period will be recorded to ensure that it can be seen that the tender evaluations were carried out in an even-handed and dispassionate manner".

Once again MHP took exception to parts of this document, as set out in a letter from Mr. Selby dated 19 December 1993, which had been prepared in conjunction with Mr. Pringle. In relation to the last quotation, the letter said:

"Whereas we agree that the accountability should reflect an even-handed approach, we should be careful not to be too dispassionate in our appraisals and evaluation."

As a result of MHP's preference for a subjective approach a rating system was not implemented. No formal record was kept of the tender evaluation process.

On 23 December 1993 the notice inviting applications for pre-qualification appeared in the OJ. The notice made it clear that it was "open to U S bidders". The notice read:

"UK - London: glazing

Awarding authority : Parliamentary Works Directorate, 1 Cannon Row, UK-London SW1A 2JN. Tel. (071) 219 64 25. Facsimile (071) 219 64 09.

(a) Award Procedure : Restricted procedure.

(a) Site : Westminster, UK-London.

Package: fenestrations.

Aluminium-bronze and building-bronze vertical-ribbon window and framing system 4 814m2 (on elevation) triple-glazed units with integral bronze blinds, reflective light-shelf internally, sun-shade externally, louvres, balconies, walkways, rainwater drainage, aluminium-bronze ducts, window-seat structure supply and exhaust air-paths.

Overall estimated value, excluding VAT: 17 000 000UKL.

Completion deadline : Approximately 4/1998, but this date is to be confirmed.

Legal form in case of group bidders : In the event of a group of contractors submitting an acceptable offer it will be necessary for each member of the group to sign an undertaking that each company or firm in the group will be jointly and severally responsible for the due performance of the contract.

(a) Deadline for receipt of applications : 4.2.1994.

Final date for the dispatch of invitations to tender : 28.3.1994.

Applicants who have not been notified by the above date should assume that they have not been invited to tender. Final date to be subsequently agreed.

Deposits and guarantees : Will be stated in the detailed pre-qualification document.

Financing and payment : Payment will be in accordance with the tender documentation.

Qualifications : To obtain the pre-qualification enquiry document in respect of these works, which must be completed to provide the response to this notice, contractors should contact Mr R Morehen at the address in 6 (b). This document must be fully completed an returned to the address in 6 (b) by the date in 6 (a).

If contact is made in respect of this notice with Laing Management Limited by means other than letter e.g. telephone/facsimile, the application must be confirmed by letter before the dated fixed by the contracting authority as the last date for receipt of requests to be selected to tender.

Award criteria (other than price): Overall value for money.

Variants : Alternative tender proposals may be submitted but must be accompanied by a compliant offer.

Other information : The works will involve a large element of samples, mock-ups and trial erections.

System is a mixture of bay windows and flat on elevation.

Works contracts will include materials testing.

Notice postmarked : 8.12.1993.

Notice received on : 13.12.1993."

The advertisement was scrutinised by Mr Peter Linge, who acted as the Contracts Officer for the PWD. In a memorandum to Mr Makepeace of 5 January 1994 he said:

c. under the Public Works Contracts Regulations 1991 we are required to state the basis for the award of the contract. This can either be based on "lowest price" or that which is "the most economically advantageous to the Contracting Authority". The latter requires that the criteria used by the Contracting authority be stated. It has been DOE policy to use the "most economically advantageous" award option and to include the following wording against this item of the advert:

"The Contract will be awarded on the basis of the most economically advantageous offer, taking account of price, technical merit and overall value for money."

The form of wording currently used is not one of the recognised options."

So Mr Linge plainly explained that there were set texts for awarding a contract and, if the second text was used, then the criteria had to be stated. Mr Makepeace replied on 10 January 1994:

"Thank you for your minute of 5 January concerning the text of the EC advertisement for the Trade Contract.

You are quite right to assume that we deliberately went for a less prominent name for the Contracting Authority and the Corporate Offices. We tread a very narrow path as far as the tendering process is concerned and we are, after all, acting as the agents for the Contracting Officer.

I take it that we are not tied rigidly to DOE's policy in the statement for the basis of the award for the contract. In any event I do not believe our use of the phrase "overall value for money" diverges from the intent."

Mr Makepeace could not throw any light either on what he meant by his prophetic words "treading a very narrow path so far as the tendering process is concerned" or as to why he did not put the criteria in the next notice for the fenestration package which appeared in the OJ except that it was inadvertent on his part not to have done so. In my view, taking into account not just the documents but the whole of Mr Makepeace's evidence to me, the oversight was not inadvertent but deliberate as Mr Makepeace wanted a nebulous phrase and did not want to specify matters such as price, quality of the factories, or experience of the contractor. He was certainly not disposed to take advice from Mr Linge who was three or four grades lower than himself. LML also advised in a letter of 24 January 1994 (which was copied to Mr Makepeace) that it was essential to keep on record the reasons for rejection if a tenderer was not qualified, referring to the Project Procedures Manual.

As a result of a telephone call from LML Harmon Contract (UK) Ltd asked for a pre-qualification inquiry document on 12 January 1994 and was sent it by LML on 25 January. It was returned on 16 February. Harmon did not therefore act in response to this advertisement although it was seen later by Mr Boyle. On 24 February Mr Clatworthy (who had also not seen the advertisement) gave Mr Kerr details of the experience of Harmon in the use of brass and bronze materials. Mr Clatworthy thought that the contract would not be awarded solely on the basis of the lowest price but that other factors such as design would be taken into account. Mr Boyle also accepted that the criterion specified of "overall value for money" did not mean the lowest price (and that tenderers would were to have design responsibility might be submit alternative or variants as provided by paragraph 12 of the notice).

The minutes of meeting no 9 for the fenestration package held on 20 January 1994 record that it was agreed that LML were to investigate the market further for the "possibility of a UK consortium suitable to carry out the works". Mr Makepeace explained that this resulted from the slender response to the advertisement in the OJ and from keenness (especially on the part of MHP) to consider small and specialised UK companies. He said that there was then little enthusiasm for a consortium and that he did not want to pursue this avenue, as evidenced by his later reaction to the draft of a letter which the initial responses to the advertisement had prompted Mr. Webber to consider on 18 February 1994 for dispatch to the Serjeant at Arms:-

"When we spoke on the telephone yesterday, I mentioned my conversation with Steven Rein who has responsibility in DOE Construction Directorate for stimulating the competitiveness of UK construction project manufacture.

He was keen to have details of the limited interest we have found from UK firms for the manufacture and erection of the bronze and glass cladding to the new parliamentary building. Some active lobbying by DOE may help avoid the embarrassment of this large package of work going overseas. If you agree, I would like to write to him in the attached terms."

In the letter Mr. Webber referred to a "most disappointing lack of response from domestic manufacturers - I think only one firm on the list can be called truly British". Mr. Makepeace annotated the draft by way of reply: "I am unhappy with the sentence marked below [some active lobbying by DOE...]. In discussion yesterday I understood this was not the intention, and we are now in the process of whittling down the long list. All the advice I have is that the firms do not exist so we would be treading towards the road of forced marraiges which would not be in the interest of the project." I deal with this subject below where I find that the subject was discussed with Mr Webber. Mr. Webber sent the letter on 22 February 1994. At the same time MHP's concern about the lack of interest from UK contractors led it to produce a report of 22 February 1994 formally setting out a proposal to split the fenestration work package into a number of small packages ostensibly to obtain more competitive prices for each element of work and achieve closer control over the activities of trade contractors, particularly in relation to technical matters. The report stated:

"The primary motive is to enable the following to take place, as many of these points are inadequately addressed by the single package procurement route:

1. To obtain greater competition at tender stage than would be available through a single package. The current single package tender list is already quite limited in number and there is a large risk that several of these firms will drop out during the pre-qualification process because they lack the appropriate experience for this job. There may be insufficient firms for a fully competitive tender of the whole package and there would be no guarantee of competitive pricing for individual elements of very high value, such as aluminium bronze extrusions/castings.

2. To permit the larger number of UK firms to participate than currently proposed; there is only one UK contractor on the pre-qualification list - this is because of the size of the contract and the wide range of special list expertise required is beyond the capabilities of most firms. There are plenty of UK firms who have the capability to carry out individual elements of the work - the whole external wall could be made entirely in the UK - but those firms would only be eligible if the package were smaller or split into more specialised elements."

Later in the Report it listed possible firms from the United Kingdom who would be interested in carrying out the work. The firms did not include Harmon, but did include Alvis for assembly work (including sealing and weatherproofing). However, the Report noted that "the existing pre-qualification tender list would be eligible for the majority of the above packages, particularly 3, 7 and 8 - fabrication and erection". It then listed those Multi-Package Contractors, i.e. Gartner (Germany), Schmidlin (Germany), Secco (Italy), MBS (Germany), Früh Metallbau (Germany), TCC International (Germany), Schneider (Germany), Crittall (UK), Harmon (Canada), Supersky (USA), Permasteelisa (Italy), MBM Möckmühl (Germany) and De Schelde (Holland). Apart from Crittall, all those large enough to carry out the work as a single package were foreign.

MHP's proposal formed the basis of a report prepared jointly by LML, MHP, G&T and OAP (which was issued in March 1994) and, after discussions with Mr. Makepeace, formally submitted to him by Mr. Pringle of MHP on 15 March 1994. However, MHP's draft was altered so as to omit specific references to the UK companies that MHP had in mind, but the first reason given for an approach to procurement on a multiple package basis was still "to include a number of UK firms in addition to these firms thus increasing competition". ("These firms" were "large overseas cladding contractors with a single package approach".) Whilst Mr. Makepeace could not recall asking the project team to remove the references to UK companies, he did accept that he might well have done so "because it was not a relevant consideration". However, he readily accepted that the substance of MHP's paragraphs had not changed. Mr Pringle agreed that a letter of Mr Romaniuk in September 1995 was correct in stating:

"One of the aims behind AFE designing the complete cladding package was to try and encourage more UK-based companies on to the tender than would be expected with a performance-based contract. It was felt that by removing the design and subsequent liability risks associated with the performance-based contracts, smaller UK-based cladding companies would be able to tender."

Mr Pringle also said that his firm's experience on Bracken House influenced its attitude as it had then found small UK defence contractors with expertise in metallurgy stemming from work in the Middle East which the German contractor (MBM) had then used as it could not obtain comparable expertise in Germany. Certainly the move towards breaking up the package was mentioned later in 1994 in the technical press as of benefit to British cladding firms (see Building of 16 September 1994) (L1/70). Mr. Makepeace thought that he was probably the spokesman quoted in the article as saying that the PWD "wanted a system that would help it build "on time and on cost". He said it was not possible to introduce a system that excluded foreign firms because of European competition rules, but he was quoted as having added: "Touch wood, British firms will be in the running".

I have no doubt that the decision to split the work up into smaller packages and to transfer responsibility for the design of the fenestration to AFE was to ensure that UK companies had a much better chance of being awarded or participating in some at least of the work available and that it was taken deliberately for that purpose by Mr Makepeace on the advice of the project team which was well aware of their client's interests. The defendant relied on Mr Makepeace's assertion that he and Mr Webber never discussed how to avoid too many contracts going overseas. Since Mr Makepeace and Mr Webber worked closely together I do not find it credible that there was no discussion on what was clearly a matter of concern to the project team and to the AWC (amongst others), unless of course it was so obvious that it did not need to be discussed (and it would have been impolitic to have recorded it). Mr Makepeace's evidence about Mr Webber's letter of 18 February was typical of his careful introduction of phrases calculated to avoid a direct and open answer:

Q. .... Mr Webber was your superior?

Q. And is the director of the PWD?

Q. So he obviously considers that it would be embarrassing if too much of this package went overseas?

Q. Well, presumably you knew that was his view because you worked with him on a daily basis?

Q. Are you saying, Mr Makepeace, that all the time you worked for Mr Webber, you did not discuss with him how to avoid too many works packages going to overseas contractors?

A. Yes, that is what I am saying.

Q. So this letter must have come as a surprise to you?

A. I do not remember whether it came as a surprise, but what I am saying is a means of avoiding putting work overseas was not a subject that he and I had discussed as far as I can recall ."

Mr Makepeace tended to introduce such seemingly innocuous qualifications as "as far as I can recall" in order to avoid giving an answer which he thought could or would be damaging. Mr Webber was, surprisingly, not called to give evidence, particularly since he dealt with the AWC, the Commission and officials of the House.

I also do not accept the submission made for the defendant that the project team wanted only to generate interest in the work and to encourage competition. A trawl had already been made and the catch had been disappointing. Other measures were needed if the work was not to be lost to the UK construction industry. Opening up the tender lists to companies which did not handle curtain walling as such was needed only to give UK companies a better chance of the work as the project team already had sufficient interest from companies outside UK capable of doing work of this kind. If the real concern had been to obtain highly competent specialists Mr Pringle's evidence showed that it would have been possible to do so whilst at the same time securing a reputable principal works contractor whose management and other skills were crucial to the successful execution of an important part of the project. (I do not deal with the issue of splitting up the work into smaller contracts or packages as an issue in itself as actually or potentially discriminatory and I therefore consider it as part of the overall case against H of C.)

The aim of the body known as the Construction Procurement Group (CPG) was to ensure that the British construction industry was kept in business. Its Chairman was Mr Nigel Thompson, a senior director and partner of OAP. It had Government support and backing. It was run by Mr Malcolm Dodds, a civil servant seconded by the DOE, an appointment made by the DOE to head the Group so as to further its prime objective of safeguarding the interests of UK companies in the construction industry. Although Mr Makepeace said that he had had telephone conversations with Mr Dodds on about half a dozen times only he confirmed that Mr. Dodds was actively pursuing a "Buy British" campaign for the fenestration package throughout the tendering period. Mr Dodds had also been in touch with Mr Noble. Mr Noble explained in his statements that his connection with Mr Dodds and the CPG predated his involvement with the NPB, as he had visited the London headquarters of the CPG in relation to another project. Mr Noble also said that Mr Thompson and he and Mr Dodds had been involved in a previous body called "Better Made in Britain" (BMIB). Mr Noble had been to three or four meetings of its "cladding group" during 1992/93 and also a Defence Manufacturers' Association (DMA) seminar in 1991 or 1992, which had been arranged or supported by BMIB. That seminar had been about the use of defence contractors on non-military engineering work. As a result of the seminar Mr Noble took part in some further discussion groups with defence firms, one of which was Alvis, in 1992 and early 1993. However Mr Noble then gained the impression that Alvis had decided not to develop its connections with the construction industry. He had had no further contact with Alvis until about late March 1994 when he learned that Alvis had shown an interest in the fenestration package. (Mr Noble had also been in touch with several of the companies on the tender list, including British firms, such as Briggs Amasco and Crittall, as well as overseas companies, such as Gartners, Schmidlin and Harmon.) Mr Noble said that it was obvious that Mr Dodds was trying to influence him but that he realised that he should not take such pressure into account, which I accept.

The AWC was naturally interested in who would be carrying out work on the NPB since, almost certainly in relation to one of Mr. Makepeace's reports, the clerk of the committee prepared a briefing for the chairman in which it was suggested that the following question might be asked

"Please explain in more detail how this aspect is progressing; by what date is it hoped that most of the contract should be in place; what is the prospects of the major contracts going to UK firms; do any look as if they will go abroad?"

In a fax of 23 March 1994 MHP gave to LML names of potential UK subcontractors who might be interested in the fenestration package for the NPB. It included Alvis. It may be that the suggestion to approach Alvis originated from AFE. Mr Noble said in his supplementary statement that he recalled that "Alvis had already been identified as a potential tenderer prior to April 1994 when AFE commenced work on the package", and Mr Pringle said that Alvis was a new name to MHP (although within 18 months Mr Brand was to note that "[Sir Michael Hopkins] is very much an Alvis fan").

On 18 April 1994 the project team held a seminar at the Institution of Civil Engineers for pre-qualified trade contractors. Mr Michno attended (amongst others). On this occasion the project team told the contractors of the changes that had been made to the scheme (such as design by AFE) and of the five fundamental requirements governing its design of the fenestration package namely (1) a long design life (120 years); (2) the aesthetic appearance of the facade; (3) blast resistance; (4) integration with the ventilation system; (5) pressure equalisation. On 25 April 1994 Harmon CFEM Façades sent a letter to LML confirming Harmon's willingness to submit a tender on the new basis. The defendant relies on these requirements as being the criteria made known to contractors upon which the defendant would base its assessment of tenders. By this time, it was clear that the contractor would not be undertaking a design responsibility for the fenestration package. Accordingly these requirements might not have been regarded unless accompanied by further details.

Mr Makepeace authorised a new notice inviting pre-qualification was submitted for insertion in the OJ. This was done on 26 April 1994. The notice was substantially in the form previously used except that section 3 was altered as AFE was to be the designer and provision was made for the novation of supply packages. Sections 11 (criteria) and 12 (variants) were unchanged. Mr Makepeace therefore again ignored the advice that Mr Linge had given.

On 5 May 1994 Mr Mumford reported to Mr Collins of TBV Consult that 13 companies wished to be considered for tender:

"Following the Project Team's presentation on 18 April 1994 the response has been as follows:

Companies wishing to be considered for Tender

Harmon CFEM Façades

Crittall Windows Ltd

Briggs Amasco Curtainwall Ltd

Rosyth Royal Dockyard

Permasteelisa

Josef Gartner & Co U K Ltd

Impresa Castelli/Buiatti UK

MBS Curtain Walling Ltd

Industrie Secco SpA

Companies declining to be considered

Pollards Fyrespan Ltd

Früh Metallbau

The issue of pre-qualification documents will be in June in accordance with the dates established by the advertising of revised Scope of Work for Parcel 4200."

Harmon therefore headed the list but there was no mention of Alvis, although it had attended the April meeting. (Other UK companies were included in the list.) However on 22 May Mr Brand recorded in his diary that Mr Dodds (of the British Construction Group) had been in touch. Mr Brand noted: "Accept cannot require us to "Buy British" (which he said presumably came from Dodds) "they will review within a specified period, e.g. Alvis okay." Mr Brand accepted that he was aware that during the tendering process Mr Dodds was promoting British industry. Following a meeting between Sir Michael Hopkins, Mr Pringle and Mr Webber Mr Brand wrote a note on 24 May 1994 in which he recorded: "Arup Facade Engineering. Explain 'Buy British'". This was duly done for at the project review meeting on 26 May 1994 it was noted:

"M Dodds has contacted Neil Noble in Buy British campaign. Director of British Construction Group, AM to circulate note."

Given MHP's keenness that British contractors should not be left out I consider that Mr Brand made this note to remind him to transmit to Mr Noble of AFE the need to consider British contractors for the fenestration package. Mr Brand was not able to recall much, even when aided, so the fact that he did not remember such meetings or, rather more surprisingly, Sir Michael Hopkins' views, are of no significance. Mr Brand successfully conveyed the impression of a "teflon man" which may account for his position within LML as otherwise he did not display a grasp of the project.

On 17 June 1994 there was a piece in the "Hansom" column of Building (which is usually well-informed) about the lack of British contractors for the fenestration package. It prompted Mr Makepeace to write to Mr Brand on 1 July 1994 about unfortunate publicity and the possibility of criticisms. H of C submitted that there was no evidence to support the inference that pressure was being applied to LML to increase the proportion of UK contractors and that the letter was merely to ensure that LML did not overlook companies which in my view is tantamount to requiring LML to find more UK contractors. Not only is there ample evidence elsewhere but here there is no other conclusion to be drawn from Mr Makepeace's considered intervention, for, when placed in its context, its language is unambiguous.

It emerged in the cross-examination of Mr Brand that in 1992 LML had prepared a substantial handbook which contained in some detail the procedures which were to be adopted for the procurement of the packages and pulled together the procedures for all the activities covered by the construction management agreement. They were subsequently incorporated into the project execution plan, which was a document held by TBV Consult. In 1994 LML sent copies of it to TBV and to Mr Makepeace who clearly read it thoroughly. On 17 August 1994 Mr Makepeace wrote a lengthy letter to Mr Morehen of LML (L1/064) with his comments, one of which he described as "particularly important":

This is the one major point. We would expect that, when the documents are submitted for approval, all outstanding matters with the lowest tenderer have been resolved by the team.

I do not have any objections however to LML letters to the contractors forming part of the contract. As you will have seen from the acceptances done to date we do refer to them. At a pinch, we could also live with the minutes of the meetings being included though there would have to be a letter from the contractor confirming their agreement to the minutes.

I notice that there is nothing in the document about the basis of tender assessment. I guess that is because I never responded following the discussions held some time ago when you proposed a numeric weighting system. Let me try now to put that right. The presumption will be in favour of accepting the lowest tender which meets the requirements. This statement can be qualified to the extent that the lowest offer could be overlooked if the team has substantial doubts about the tenderer's understanding of the requirement, or the quality that has been displayed during the tender evaluation process or their general approach. I would expect, however, this to be very much the exception. If we have got our tenderer selection process right it should never happen but I accept that the unexpected will always occur.

Copies go to Steve Collins, David Selby, John Turzynski, Chris Twinn and Mike Walker."

This letter led to a revision of the project procedures manual so that the material parts followed Mr Makepeace's instructions and read [emphasis supplied]:

"2.0 Distribution and Evaluation of Tenders

2.1. These Tender documents will then be circulated to the Team by Laing Management Limited for evaluation, under cover of a record sheet (Appendix B), stating what sections were distributed to whom and the record of Tender returns. LML will also at this time circulate to the appropriate Team members the TEN/3 (records of Tender sum return (Appendix (C)).

Laing Management will also distribute the Action Schedule detailing the dates and sequence of events up to the placing of the Trade Contract. This will ensure that all members of the Team are aware of the key dates in the Evaluation process.

2.2. To protect the confidentiality of Tenders careful consideration must be given to the distribution of the Tender documents. Laing Management Limited will circulate the financial sections of the document to those parties who require them.

- LML (Financial Manager)

- LML (Purchasing Manager)

- TBV Consult (S Collins)

- AFE (N Noble) for relevant packages

All other team members would have access to the financial sections of the Tenders when required.

2.3. After the initial evaluation and cost checking, the team will meet in accordance with the agreed time scale to decide which tenders will be evaluated further. This would be on the basis of factors such as:

Technical Content

Mr Brand said that LML's Quality Assurance Manager was responsible for maintaining the manual but he would expect to be told by the client (through TBV) if there was any disagreement with it. LML appears to have complied with its obligations under the CMA to give advice on EC matters. Although Mr Makepeace in evidence tried to equate "lowest tender" as used by him and in this manual with "overall value for money" as used in the OJ advertisements it is clear that the two cannot be synonymous since the guidance given was to accept "the lowest tender which meets the requirements", ie in context of the manual, the "technical content". Thus it would be only if the tenders were indistinguishable in technical merit that the balance would be tipped in favour of the cheaper or cheapest. If they were uneven on technical merit it would necessary to evaluate which would provide "overall value for money" but for that purpose it would be necessary to establish criteria and to determine ranking. In my view the letter of 17 August 1994 was and was intended to be a clear instruction (using a modest degree of unravelling of the somewhat elliptic language used by Mr Makepeace) that the lowest tender should be accepted unless there were very good reasons not to do so. (Those reasons might include matters which if known earlier might have disqualified a tenderer from receiving an invitation to compete.)

Mr Makepeace's letter of 17 August 1994, and the revised Project Procedures Handbook were only disclosed by the defendant during the course of the trial as a result of Mr Brand confirming their existence. They were clearly important and relevant documents, and I ordered that an explanation should be given as to why they had not been disclosed earlier. The explanations given by Mr Goldmeier, a partner of Berwin Leighton, and by Mr Makepeace were each profoundly unsatisfactory and disquieting and, in the case of the latter, incredible. The absence of these documents from all the others that were covered by Mr Makepeace's witness statements, many of which are set out in his second supplementary statement, is remarkable. For Mr Makepeace to say that his letter of 17 August 1994 was "to my mind ... not one of any particular significance" is a typical but a striking instance of his ability to omit from his evidence that which did not assist him or the defendant's case. The Project Procedures Manual had in fact been on his shelf but, according to him, not referred to. I do not find this credible. His excuse that he did not include the documents in his witness statements because they were not referred to by the defendant's solicitors is, frankly, disingenuous. It seems that the defendant's solicitors had done little more than rely on the PWD and members of the project team to decide what files were relevant as a result of which they had therefore failed to examine all the files which might contain material that should be disclosed. To have overlooked one copy of a letter such as that of 17 August but to have overlooked all six copies of it both during discovery and during the preparation of the many witness statements shows a lamentable lack of proper understanding of the issues in the case or attention to them on the part of the qualified and unqualified staff of the defendant's solicitors and of proper supervision by the partner or partners responsible.

On 30 August 1994 Alvis informed LML that it wished to be considered for the fenestration package.

The decision to switch to AFE for the design led to delay. An internal memo from Mr Mumford to Mr Kerr dated 19 September 1994 indicated that there were reservations about certain aspects of the project.

"Further to our discussion last week regarding the above I feel that it may be appropriate to revisit the agreed procurement strategy for the WP4200 series of packages. This suggestion is based on the following factors;

The strategy in place at the moment is a "half way house" which we believe will meet the principle requirements of all team members, but not the full requirements of each individual. At the time of the trade presentation written commitment was obtained from those contractors attending that if selected to tender, they would submit a compliant bid in accordance with our procurement strategy.

The commitment given at that time was driven I believe by:

i) The desire by the contractor to keep himself under consideration up to the point where detailed selection commenced.

ii) The depressed market.

iii) The fact that the contractor was in reality committing himself to "nothing".

iv) Their lack of understanding of the full implications of our procurement strategy, and their need to buy time to absorb it to enable them to reach a sensible conclusion.

The market in "large" curtain wall in UK has picked up more that was anticipated and contractors may be attracted to these projects in the future, with their potential for better margins and less risk, rather than works with a unique design, non standard procurement strategy and the Hopkins factor. In my conversations with:

- Permastillisa

There has certainly been a definite cooling off of enthusiasm for the project driven by:

- Uniqueness of design

- Uniqueness of material

- "Hopkins Factor"

- Non standard procurement strategy.

But these factors on their own do not seem to be enough to discourage them from tendering, the biggest issue seems to be the involvement of AFE, and the way the above factors impact on the design being done by AFE.

- Who is responsible for design/performance of components in event of failure, as they, in some cases were specified.

- Who is responsible for failure of the system as a whole, is it the design, is ut workmanship, who is the arbiter.

- AFE has contacted all potential tenderers with requests for information and informal design assistance, and to be frank the approach of AFE has not engendered any great confidence in the trade.

- AFE have not carried out this service previously.

- All potential tenderers feel that they can carry out the design more efficiently, cheaper, and most likely produce a more cost effective end product.

Should we now be considering changing the strategy?

- Pre-selection remains

- AFE tender info only (in detail)

- Design responsibility in total with trade contractor."

It is clear that one of the biggest factors was the involvement of AFE in the design. This was to recur. Similarly it was thought that MHP and its requirements (the "Hopkins factor") would effectively make the project less attractive and thus more costly.

On 13 October 1994 LML sent TBV Consult a list of the contractors who were to be invited to submit pre-qualification documentation. (It included Harmon CFEM Façades, Seele and Alvis.)

On 8 November 1994 LML produced its report on the tenders for the mock-up. Harmon/CFEM Façades submitted the lowest tender at -218,273 and on 2 November Harmon Contract (UK) Ltd was awarded the contract.

In order to retain the interest of prospective contractors a further presentation was held on 15 November 1994. Literature was handed out which outlined the design criteria being employed (now by AFE) which would be used by AFE to assess any proposals from tenderers. The event was attended by representatives of Harmon, Seele, Josef Gartner and Alvis, all of which had also again been sent pre-qualification enquiry documents. Mr Boyle was present. He agreed that the project team emphasised quality and that it was clear that the package would not be awarded solely on the basis of the lowest price. Pre-qualification inquiry documents were sent on the same day. On 25 November Alvis returned the completed documents to LML, followed by Harmon on 29 November 1994, and Seele on 1 December 1994. In Harmon's documents, the name of the company responding was stated to be Harmon Contract (UK) Ltd, although the documents were presented by Harmon CFEM Façades SA. They also made extensive reference to Harmon's worldwide business and specifically stated that it was the intention to obtain material from within the EEC if necessary. The personnel listed were not from the UK. The long section on quality assurance was largely in French. There can be no doubt therefore that Harmon intended to fabricate the material in France and to run the contract from that country.

A minute of a meeting of the Accommodation and Works Committee held on 17 January 1995 states: -

"The Committee expressed its wish that as much work as possible in connection with the new Parliamentary building should be allocated to UK firms within the confines of statutory cost and quality requirements".

According to Harmon a "Buy British" policy was here promulgated by the AWC. Whatever may be the effect of the wish of the AWC Mr Webber and Mr Makepeace both attended the meeting and knew of the AWC's wish and of the reasons for it.

On 23 January 1995 Mr Kerr in a memorandum to the Chairman of LML, Mr Gregory, drew attention to disquiet over role of AFE and concern amongst tenderers. Some of Mr Kerr's other views are more directly relevant to the issues in this case and are worth quoting in full, although they include what Mr Mumford had said some months earlier. I have emphasised in italics particularly significant parts.

"1. The factors which make the above package of works unique are:

- Materials A selection of bronze alloys, manganese, aluminium, silicon etc.

- Performance Blast proof, integrated with services, copper/bronze alloy blinds with resultant high solar gain. 120 year design life.

- Construction Bolted/Welded, not traditional construction methods, potential for difficult extrusions and high level of castings, pressings.

2. The History of the procurement strategy is:

- LML tender submissions showed one composite package based on a performance specification with contractor design.

- On appointment it rapidly became clear that, due to the many unique aspects of the construction, that a considerable amount of development/research was required.

- Driven by their desire for 1st class quality and their need to have control of each element in a hands-on way, MH+P proposed that the only sensible strategy to procure the package would be to have the package further split into many packages.

- MH+P then suggested that, to accomplish their proposed strategy and accommodate their needs, the client's design team would have to have control of, and responsibility for Design as no one of these smaller companies would have this capability. The team agreed to look at this and identify who was available in the market.

LML considered MH+P proposed strategy completely unworkable and after several weeks' discussion the following proposal was accepted as a way forward, giving consideration to the market as it stood (Feb 1994)

* Preselect Blind supply, both of which would be novated or free issue to a main package contractor.

* Main package contractor ultimately responsible for all elements of the package, except design.

* Design carried out by A.N Other.

- Subsequent to this, a presentation to the Curtain Wall trade was made (April 94) this covered the scope of the project, timescale and proposed strategy. Written commitment was obtained from these contractors at that time, that should they be selected to tender they would accept our procurement strategy.

- Arup Facade Engineering was subsequently appointed to carry out the design. The strategy in place at the moment is a "compromise" which at the time formulated was believed would meet the principle requirements of all team members, but not the full requirements of each individual. At the time of the trade presentation in April 94, written commitment was obtained from those contractors attending that, if selected to tender, they would submit a complain bid in accordance with our current procurement strategy.

The commitment by the trade at that time was driven, I believe, by:

* The desire by the contractors to keep themselves under consideration up to the point where detailed selection of tenderers commenced.

* The depressed market.

* The fact that the contractors were in reality committing themselves to " nothing ".

* Their lack of understanding of the full implications of our procurement strategy, and their need to buy time to absorb it to enable them to reach what they consider a sensible conclusion.

The market in "large" curtain wall in the UK and Far East in the last 15 months has picked up more than was forecast and contractors may be more attracted to these projects, with their potential for better margins and less risk, rather than this project with its unique design, non standard procurement strategy and the Hopkins factor . In conversation with:

who are the main contenders for the works, it has become clear that there has been a definite cooling off of enthusiasm for the project driven by:

- Market forces

- Uniqueness of design

- Uniqueness of material

- Non standard procurement strategy

But these factors on their own do not seem to be enough to discourage them from tendering. The biggest issue seems to be with the involvement of AFE, and the way the above factors impact with the fact that the design is being carried out by AFE.

The Trade's concerns are:

* Who is responsible for design/performance of components in even of failure, as they, in some cases are specified by the client.

Where there is failure of the system as a whole, is it the design is it the workmanship, who is the arbiter , for example there will be no thermal break in the main blast posts and condensation may be a problem here, especially on the North and East Elevation.

* AFE have contacted all potential tenderers with requests for information and informal design assistance, and to be frank the approach of AFE has not engendered any great confidence in the trade and also where AFE have previously been the cladding consultants on projects where our potential tenderers have been involved, this has only in the trade's eyes confirmed to them the level of AFE experience and ability. In addition to this, I am aware that AFE have two independent cladding specialists giving them assistance.

* AFE have not carried out this service previously.

* Potential tenderers feel that they can carry out the design more efficiently and most likely produce a more cost effective solution. This may or may not be the case, but a single point of design responsibility is desirable.

* Where does the responsibility lay for non performance of preselected suppliers, as the reasons for failure in this element of a contract are always open to interpretation.

2.5 Fenestration (P/N 4200)

AFE final design information for tender purposes is now due for issue 10th February 1995 which means the package will not be forecast OTT [Out to Tender] on 3rd April 1995.

On 5th January 1995 the client was appraised of the following issues:

(i) The fact that none of the supply orders will be placed prior to the "O" date for 4200 (main package).

(ii) The problems that are going to be faced on novations and/or free issue items.

(iii) The limited nature of the tender list for 4205.

(iv) The extremely limited nature of the tender list for 4210.

(v) The "potential" impact the late procurement of the blinds (4215) may have on this package.

(vi) The forecast of a limited tender list on this package (MBM Fabriclad, Harmon/CFEM, Schmidlin and Gartners).

The client has accepted the unideal situation that confronts LML.

- The design being late

- The real assurance that AFE can produce exactly what is required.

- Potential issues with Novation/free issue.

- Risk of contractual issues being raised, should either AFE or the preselected suppliers fail to deliver on time, to the main Package Contractor.

- Potential for issues being raised due to failure of any part of the system "is it design?" or "is it materials?" or "is it workmanship?"

Even though the procurement process is progressively slipping and it is unlikely that we can preselect the necessary components prior to the planned OTT date for the main Package 4200, due to late design the client has made it clear that he does not wish to transfer the responsibility for obtaining the preselected items, into the main package 4200 based on the information available at present, which would maintain the I.T. date.

- The Procurement strategy is confirmed, AFE are appointed (c -1m fee) and it would be both embarrassing and perhaps politically awkward to do an about turn now, even though some of the factors on which the current procurement strategy was based no longer prevail.

Sustain proposed O T T date and programme.

Achieve a single Point of Responsibility.

Allow design team maximum opportunity to ensure that suppliers of the correct calibre are appointed.

Minimise cost.

It should be noted that AFE fee is approx -1.1m, with -100K for R+D plus expenses which will run to -100K, -1.3m TOTAL . Harmon, who are doing the mock-up and are closer to it than any other, estimate that, if they were carrying out the design in-house, the cost on this project would be between -300 - 500K dependent on the level of R D. Bear in mind that Harmon are the largest curtain wall contractor in the world, with a more sophisticated fenestration design facility than AFE."

Harmon naturally relied on "be in no doubt there is a hidden agenda here regards UK supply" on the "Hopkins factor" (the full effect of which was yet to be seen) and on Mr Kerr's praise for Harmon's design capability as compared with AFE's. Just as there must be speculation on Mr Kerr's reasons for supplying Mr Boyle with inside information - he may have kept other tenderers in the picture to promote competition - so too it is not clear why Mr Kerr extolled Harmon in this way, although Harmon was more experienced in designing cladding and curtain walling than AFE, and the latter's fees were not obviously better value than asking a contractor to design and construct the fenestration. As Mr Kerr was not called, his role and relationship with Harmon remains somewhat enigmatic. Subject to that qualification (which is strictly irrelevant to the decisions that I have to make) his views as recorded in writing and as given to and by Mr Boyle are to be accepted as representing those of LML and, so far as Harmon was concerned, those of the defendant since Harmon dealt primarily with LML as the defendant's chief operational representative and had no reason not to treat them as such, including Mr Kerr's informal indications. Mr Boyle correctly did not regard as them as indiscreet and unauthorised leaks. They were given to Harmon to maintain it as a keen competitor and thus were as much for the benefit of H of C as of Harmon. Mr Mumford and others put Mr Duncan Smith of Alvis in the picture. The latter sent him a fax on 27 January 1995 saying that he was "now in touch with Crittall and Seele as you suggested and I will keep you informed of developments." On 15 February 1995 Mr Brand made a note of telephone conversation with Mr Noble in which it was recorded that Mr Makepeace wanted Alvis to be involved. It also recorded that Mr Dodds was trying to organise a consortium and that he had come to Mr Noble on this issue. The team was asked to attend a briefing meeting next Wednesday. Yet when questioned about this note, although Mr Brand confirmed that he had noted what Mr Noble had told him and said that Mr Noble was reliable and that he had no reason to doubt the accuracy of Nr Noble's recollections, he then said that he did not believe it as it would have been totally out of character for Mr Makepeace to have said it. Although neither Mr Makepeace nor Mr Noble were asked about this specific incident in cross-examination, Mr Brand's note does appear to me to have been inaccurate: Mr Noble was, as Mr Brand said, reliable and honest, the remainder of the note is plainly credible and I consider that it would have entirely consistent for Mr Makepeace to have pressed for the involvement of Alvis as a British contractor. Mr Brand's became uncharacteristically positive and precise at this point so his defensive attitude convinced me that there was indeed more to the introduction of Alvis than merely bringing in more competition.

LML was notified on 23 February 1995 by Mr Duncan Smith of Alvis's intention to form a joint venture with Seele to tender for the fenestration package. Seele and Alvis did combine (and so they are called Seele/Alvis). On 23 March Harmon asked that it should be substituted for Harmon Contract (UK) Ltd on the mock up and this was thereafter treated as an effective replacement of the former for the latter for all purposes. Mr Mumford also said that throughout from pre-qualification onwards the resources of the whole of the Harmon group were considered relevant and not those of a single company. On 4 May 1995 LML was sent documentation to establish that Harmon was in business from March 1995: VAT registration, insurance certificate; 714C certificate. Harmon CFEM Façades SA made a formal request to that effect on 23 May 1995. (Mr Makepeace agreed to the mock-up contract being assigned to Harmon on 26 June 1995.) Until the time when the plaintiff began trading and took over the mock up contract the intention had been that Harmon Contract (UK) Ltd would be the tenderer.

After this date and certainly by the end of May 1995 I accept that then or reasonably shortly thereafter the Project Team and the defendant knew

(1) that Harmon was a member of the Harmon Group;

(2) that it was a small company set up to establish business for the Harmon Group in the United Kingdom;

(3) that the tender for the fenestration package would be submitted by Harmon with a view to the contract being awarded to Harmon;

(4) that in order to submit the tender and to carry out the contract Harmon would have to call on the resources, personnel and expertise of other companies within the Harmon Group and would thus sub-contract much to such companies;

(5) that accordingly Harmon was primarily a vehicle for the Group which was established world-wide with a world-wide reputation for excellence in cladding.

The mock-up did not proceed swiftly as Harmon had difficulties in carrying out the welding. They were in part due to the materials which it had to use being out of specification and in part to the need to learn how to handle the new materials. Performance improved after the French Welding (Institut du Soudure) gave advice. Indeed Harmon lost money on the mock-up contract and made provision for the recovery of its losses in its tender for the fenestration package (see later). Harmon's difficulties however led the Project Team to agree that "the mock-up was now being used as an effective R and D exercise" and that it was to be regarded as a "working tool" and that the AWC had been so informed. Mr Makepeace also confirmed that one of the primary purposes of the mock-up was to show the tenderers for the fenestration package. Mr Noble accepted that the experience of the mock-up was of benefit. Mr Boyle acknowledged that the mock-up was used to assess the quality of Harmon's work.

On 17 March 1995 LML sent to the OJ a notice inviting tenders, using the restricted procedure, for the Courtyard and the Roof. Interestingly it set out specific criteria of the award of the contract:

"Previous experience of works with Glulam laminated structures and frameless glazed systems

Appearance and Quality of Workmanship

Overall value for money."

Harmon tendered for the contract but was unsuccessful. Mr Brand agreed that if specific criteria were stated it was not permissible to take different criteria into account when assessing tenders. Other such changes were made to introduce additional and specific criteria, for example for the reinforced concrete structure ("technical ability and quality and workmanship") until by 1997 the notice said "factors that would be taken into account in determining the best submissions are quality of workmanship, price, quality and sufficiency of design facilities and programme." Mr Makepeace said that the changes evolved through discussion between LML and TBV Consult of which he was "probably aware" but not "actively involved in". I think it unlikely that his authorisation was not sought for changes from the policy set out in his letter of 17 August 1994 for the fenestration package. In July 1995 the Treasury's Central Unit on Procurement published an introduction to the EC procurement rules (J1/097) which Mr Makepeace said that he saw soon after. He also said that he then knew generally what it set out by way of summary of the legal position.

On 3 April 1995 LML submitted a short list of contractors to Mr Makepeace: Harmon, Gartner, MBM and Seele/Alvis with the recommendation:

"All the companies have demonstrated a positive commitment to the Package and with appropriate organisation all companies have the capability and capacity to effectively perform this package of work".

There were however reservations so that, in relation to Harmon, LML recorded its concern about Harmon's handling of a contract for SmithKline Beecham and about the "ghost factory" in France.

The minutes of the AWC of 26 April 1995 show that it thought that "the contract for the construction of the [NPB] should be so arranged as to ensure the greatest possible participation by British companies in the tendering process including, if appropriate, the separation of the contracts into smaller elements". Similarly the Chairman's notes for a meeting of the AWC on 17 May 1995 read that he had conveyed

"the views of the Committee to the Finance and Services Committee, especially our wish to keep as much of the new building construction as possible in the hands of British companies, and to make the contracts a suitable size to encourage tenders. The Finance and Services Committee endorsed the programmes and PES Bid and asked us to continue to monitor the costs of the new building - which is the subject of the next item of the agenda".

A report had been prepared by the PWD for a meeting of the ad hoc steering group on 19 April 1995 in which the process of tendering for the NPB was described. It recorded that the sifting and recommendation of companies for inclusion on the tender lists was carried out jointly by the Construction Manager and consultants but the tender list was approved by the project sponsor. The report then read;

5. To date 16 packages have reached the stage where a short list has been agreed. Any analysis of the companies on the short list by nationality is not easy because so many of them form part of a multi-national group and even though the company's name includes (UK)" In practice ownership is 99% if not 100% overseas. Although there is a prima facie advantage in placing a contract with a nominally UK company in practice they may be no more than a sales organisation with limited capital. In such cases it is preferable to place a contract with a parent company.

In analysing the tender lists two criteria have been used -the nationality of the company or where appropriate, its parent and where the main manufacturing will take place:-

Fenestration - Three Continental Europe plus a UK/Austrian partnership

(The overseas companies have varying manufacturing/assembly capacity in the UK.)

"Although the tender lists are predominantly UK based there are some significant areas where there will be a major input from an overseas firm. The two main areas are the concrete floor units and the fenestration."

In April 1995 AFE was in correspondence with LML about providing the tenderers with technical information including the provision of R and D Reports. There was a report by Alvis Vehicles Limited on welding trials which they had conducted with brass CZ 136 (the manganese brass specified by MHP and AFE). The report read in part :

The fusion welding of brasses in anything other than thin sections is generally regarded as very difficult.

The basic problem is that zinc boils at 903-930oC. This means that as soon as a molten weld pool is established, large volumes of zinc vapour are generated. This obscures the work-piece and de-stabilises the arc. Any significant lead contact will give the probability of hot tear cracking during solidification of the welds and it may well migrate to grain boundaries in some regions of the heat affect zone of weld. This will result in the mechanical properties of lead in those areas.

The technique used to produce the test pieces could not be used in production. The work would be encrusted with weld spatter that would be very labour intensive to remove and in any case it is difficult to imagine that the process could ever be developed to have welding conditions that are sufficiently stable to allow mechanisation of the welding process.

The laboratory report on the three welds tested which is attached at Appendix 3 confirms that the extrusions used in the weld test confirmed to BS287:CZ136 although the lead content at 0.34% was below the 0.5% specified. The tensile test resulted in failure in the parent metal at a stress well above the minimum requirement of the CZ136 specifications, and the bend test showed cracking only after bending through 120o over a 4T diameter formed (where T is the material thickness). The macro section shows good root penetration but the profile is irregular and some lack of fill/undercut is evident. The second butt weld (300mm long) does show lack of root penetration but nevertheless withstood a 90o bend over a 4T former prior to cracking. The short length of TIG weld produced also appears to be a reasonable weld from examination of the macro-section but this 30mm long section was the only TIG weld considered worth testing from the efforts of 6 welders over about 4 hours.

The Laboratory report on the three welds submitted takes no account of the effort required to produce these. They were not the result of welding under stable welding conditions and a large measure of 'luck' was involved.

The lack of success with TIG welding was disappointing. This process requires more precision from the welder in controlling the weld pool and adding filler metal than the MIG process which is semi automatic. The large volumes of fume destablise the arc so that it cannot be positioned accurately with respect to the weld pool and the welder cannot see to control the filler metal. Only one section of the TIG fillet weld (30mm long) was satisfactorily produced.

1 It was possible to produce a 6mm thick butt weld using Pulsed MIG with a UTS of 526 N/mm2. This was done with a single bead as it was not possible to lay down multiple beads.

2 The Welding of brass to itself in the section thicknesses above 3mm is a significant technical risk.

3 TIG Welding, which requires good control by the welder for the arc and addition of filler metal, was defeated by the voluminous evolution of zinc fumes.

4 MIG welding was more successful but stable welding conditions were never achieved and large amounts of spatter and fume were produced.

5 The difficulties of welding brass increases as the thickness increases due to the necessity of using a more intense heat source.

6 The zinc content is responsible for most of the problems experienced during welding but any significant lead content is likely to result in hot tear cracking during weld solidification and/or very poor mechanical properties of the parent metal heat affected zone.

7 The welding of brass by either the MIG or TIG process has not been satisfactorily demonstrated by these trials, with the exception of the butt weld produced using pulsed MIG referred to in 1 above."

The four companies selected were then invited to tender. In its letter of invitation of 19 May 1995 LML informed the tenderers (including "Harmon/CFEM Façades"):

"If you wish to submit a tender which differs from the strict requirements of the tender invitations or to use materials or sub-contractors other than those specified you must clearly identify your proposal and its effect on the Tender Price or submit an additional, alternative, tender; otherwise the Authority will be entitled to assume that your offer is entirely in accordance with the stated requirements. Any initiative by an individual tenderer will be treated in confidence, but where it is a matter of clarification rather than initiative we will advise the other tenderers".

So far as Mr Mumford was concerned there were no discussions about the implications of the last sentence. In the pricing notes there were standard provisions (in A and G) to price the tender as a lump sum contract notwithstanding the use of quantities and also provided both fixed and fluctuating prices. The General Preliminaries within the contract documents also included the following:

"4.10.2 The tenderer, after consideration of all the criteria which in his specialist knowledge are relevant to the design and construction of the Works, may wish to make proposals for changes to details, dimensions and materials shown on the drawings or referred to in the Specification. Such proposals should be incorporated as alternatives to be returned with the compliant Tender. In no way shall any proposal fail to meet the minimum requirements specified in the Tender Documents and Specification".

The Special Preliminaries provided:

"2.2 Any proposed changes to the existing fenestration design, required by the Trade Contractor, shall be raised at Tender stage for discussion, as the scope for change after the award of the Trade Contract is limited due to design programme constraints on other packages."

Interviews took place with the tenderers in June and July 1995. One of their purposes was to enable tenderers to get the tender documents clarified. The meetings with Harmon took place on 21 June and 10 July and were attended by Mr Boyle and M. Michno. The possibility of submitting alternative materials was discussed. Harmon's tender was prepared by a number of people, under the leadership of Mr Boyle, including M. Georges Voisin (whose evidence was the subject of a notice under the Civil Evidence Act Notices were given also in respect of Messrs Nassour, Keen, Piantoni, Bogacz and Avtus.), M. Michel Michno, and M. Robert Cazalet, assisted by others such as Mr Kurt Larson. Mr Gary Haider and Mr Gabriel Sahyoun were naturally also involved and had the final say. Later Harmon gave LML a copy of the tender summary - but not the real one as it had been suitably edited so as not to reveal everything. It appears to have struck a nice balance between giving the project team what they were looking for and what Harmon thought they actually needed. The detailed make-up was disclosed in the course of the proceedings. Mr Nisbet, was critical of certain aspects of the compilation of the tender, though this was partly due to his lack of experience (or recent experience). LML and G & T had no significant difficulties in understanding the documents that they were given, and in realising that the summary was deliberately incomplete. In my view the tender was carefully prepared in the precise and logical manner customary in France which can take some time to understand. As with any such compilation there were slips, and with the advantage of hindsight, errors, largely of judgment. I deal later with certain points that arise on its sufficiency but otherwise I conclude that it was well prepared, comprehensible, and sound.

The tenders were submitted at the end of July and opened on 31 July. Harmon's tender was signed by Mr Boyle "Duly authorised to sign for and on behalf of [Harmon], although the documents themselves came from Harmon CFEM Façades SA, and the experience proferred was not that of Harmon itself. In view the change of company that had been notified and LML's requirement that Harmon CFEM Façades should be prominent the tender is to be treated as having been submitted by Harmon. The tenders were all well above the amount previously budgeted: -20,000,000 on a fluctuating basis; -22,000,000 on a fixed price basis. Mr Baxter said that the difference was horrifying, even though it was the most expensive fenestration system that he knew of. G&T said that the cost/m2 was -3500 as against -1000/m2. The figures were:

Harmon: -40,479,469 (fixed price) (H3)

Seele/Alvis: -45,532,269.82 (H1) which was corrected following Seele/Alvis' discovery of an error within their calculations and became -41,152,738.82 (fluctuating);

MBM Metallbau Möckmühl: -56,246,122.96 (fluctuating);

Joseph Gartner & Co. (UK) Ltd: -59,125,345.00 (fixed price).

Very soon afterwards Mr Boyle had a telephone conversation with Mr Kerr of Laing (with whom he was by that time on good terms socially) who told him that Harmon had submitted the lowest tender, that all tenders were significantly over budget, that it would be contacted in due course by the project team. The budget overrun came as no real surprise to Mr Boyle since the advertisement in the OJ had stated an overall estimated value of -17 million. There was however consternation in the project team about the extent to which the tenders were over budget. A meeting was held on 3 August 1995 at which it was decided to set up a task force:

2.1 Tender returns on package 4200 have shown a considerable excess, in the order of 100% - 180% above the package budget of -21m. Action has to be taken to bring costs back within the budget. The Project Team have commenced the analysis of tenders and are simultaneously conducting a wide ranging tender reduction exercise (the principle Actions 1 and 2 described below). Limited reductions which do not achieve the budget requirement will not be acceptable. Failure to achieve the required reduction will call into question the future of the project.

2.2 The objective of the meeting was to define the immediate and short term actions and the decisions that need to be taken at this time, with a view to their long term implications upon the current project strategy, following the initial review held on 1st August.

2.3 It is fully recognised that the Project Team's credibility will be judged on its determination to address and solve the problem with which they are faced. The gravity of the issue and the consequences to the future of the project are such that particular measures must be taken to ensure effective management of the team's actions. These have been identified as:

(i) The creation of a "task force" made up of Project Team members who have a wide ranging brief to examine all options.

(ii) The appointment of a dedicated manager to maintain the required momentum within the "task force", keep track of the key issues and who has the authority to direct the team in taking necessary actions.

(iii) The need to demonstrate that the required action is being taken, and the reasoning behind decisions, through the creation of an auditable record.

It is also recognised that, whilst it is clearly up to the Project Team to resolve the situation, it may be of value to expose the team's actions to independent and detached scrutiny through the employment of an external adviser who may also provide a catalyst for ideas.

Decision required on 9th August - Composition of "task force" and appointment of task force manager.

2.4 A further meeting will be held at 12 a.m. on Wednesday, 9th August at which the actions will be reviewed and decisions put to the Project Sponsor (decision points are identified in bold type).

3.1 The Project Team are already conducting an analysis of the tenderer's pricing documents.This exercise is hampered by the fact that only one tenderer has returned a properly priced document. LML will contact the remaining tenderers immediately with a view to them providing compliant documents by 7th August, together with details of financial alternative proposals to allow initial financial analysis to be completed by 11th August. Each tenderer will be visited to explain to the team the details of their tender.

3.2 Following initial analysis and visit, the Project Team will select those tenderers

considered worthwhile for detailed discussions subject to the receipt of outstanding

information.

Decision required on 11th August - Selection of Tenderers for further discussions.

3.3 AFE have conducted an initial review of the compliant pricing document contained within the tender returned by Seele/Alvis and identified how costs are spread. A comparative more detailed exercise is required on the remaining tenders, when these have been provided, to inform decisions to be taken on design options.

3.4 It has been agreed that there is no benefit in entering discussions with tenderers until fully compliant pricing documents have been analysed. The next stage will be to analyse the areas where pricing is excessive and review the estimators' build ups to these rates in detail at the selected tenderers offices, in order to understand and/or eliminate incorrect assumptions.

3.5 Alternative offers within returned tenders will be reviewed for viability and savings following the initial analysis of all compliant tenders.

4.1 It is recognised that it is highly unlikely that the excess over the tender budget can be eliminated by the process of attrition that has been successfully used on other over budget tenders. An unrestrained review of options for amending the facade design is required in which performance requirements are reassessed. In addition alternative procurement options will be considered .

4.2 The Project Team have therefore already begun a review of the fenestration component design in which the potential for amendment is being assessed against performance, materials, fabrication methods and procurement. A draft schedule has been prepared by AFE, based on the meeting held on 2nd August , on which team comment is sought.

4.3 The potential for savings is being assessed against AFE's schedule. AFE are drawing up a matrix chart based on the criteria described in 4.2 above and which when fully priced information is available, will identify areas of greatest savings and the

impact on other aspects of the project.

4.4 It is then proposed that the Team will draw up a short list of 4 to 5 cost saving scenarios extending over the range of options, for more detailed consideration.

A further meeting was held on 9 August 1995:

2.1 To determine and agree the strategy to be adopted in dealing with the considerable excess in the tendered price for this package above the approved budget.

2.2 To review actions arising from the meeting held on 3rd August and to agree the immediate and further short term actions and programmes.

2.3. The Project Sponsor advised that, in the absence of the A&W Committee it had been decided to use as a precedent the decisions on the Roof tender to preserve the quality of the building and its long life characteristics through their insistence on aluminium bronze being maintained as a cladding material. This, combined with the fact that the programme delays likely to result from a radical re-design of the fenestration are likely to be unacceptable to the Committee, indicates that the cost reduction exercise will follow a similar form.

2.4 The approach to be taken by the Project Team will therefore primarily be concerned with the options for reducing costs contained within submitted tenders and within the parameters of the existing fenestration design philosophy, retaining the use of aluminium bronze.

a) within the restrictions of time available the Project Team will prepare an alternative "semi-radical" scheme in which the feasibility of using steel of similar finished appearance to aluminium bronze will be investigated.

b) the cost of using flat windows throughout the building would be established.

2.6 The Project Team will be required to have completed sufficient actions on both exercises described in 2.4 and 2.5 above in time for a comprehensive report to be presented to the A&W Committee by 16th October. It was agreed that presentation of an immediate report to the Committee, were this possible, might not be desirable, as the level of information would be limited. Consideration would however be given to providing a situation report to the Committee Clerk at the end of August.

2.7 The Project Sponsor stated that the basic security brief criteria, judged by the Team to be highly influential to the nature of the design and consequent cost, will not be amended.

TASK FORCE

3.1 At the meeting on 3rd August it was agreed that the gravity of the problem created by the fenestration tenders warranted special action by the Project Team. It was agreed then, that a Task Force with a dedicated manager should be set up. These measures have been set up.

3.2 The Task Force will be made up of the following Project Team members:

Duncan Richards

MHP - John Pringle/David Selby

(Post meeting note: P Romaniuk will lead for MHP)

G&T - Mike Walker

Jimmy [sic] Mumford

Paul Nettleship

3.3 The Task Force Team Leader has not been selected. The Project Sponsor and TBV were currently considering suitable candidates. It is likely that the team leader will be appointed from within the consultancies engaged on the project but not necessarily from within the Project Team. The Project Team will be advised on the appointment by close of play 10th August.

3.4 The Project Team's view that the appointment of an outside consultant would also be of benefit in providing independent detached guidance has been noted by the Project Sponsor but, for the time being, will not be acted upon.

3.5 It was agreed that Task Force action would be centred upon a small core group drawn from the list given in 3.2 above, who will act as a focal point for the full range of activity carried out by the Task Force.

3.6 The Project Sponsor will draw up a statement on the Task Force's terms of reference, brief and methods of reporting by close of play 10th August.

3.7 The first Task Force meeting is likely to be early in week commencing 14th August.

3.8 The Task Force will be based in AFE's offices.

THE TASK FORCE BRIEF

4.1 At the project meeting on 3rd August three principal Actions were identified to initially address the fenestration tender problem (items 3, 4 and 5 of meeting notes). The actions now to be taken have been clarified by the statement given within item 2.3 to 2.7 of these notes and are set out in items 4.2 - 4.5 below.

4.2 Strategy and Brief (Action 3): From the original wide-ranging list of items to be reviewed, the following headings have been identified and are amplified in the attached Schedule A tabled by OAP:

A. Blast loading

B. Design life and maintenance - strategy

D. Environmental Performance

In considering these, the following points were noted:

i) Blast loading: The directions given within item 2.7 indicates that the review will concentrate on the 2nd of the two options, i.e. fine tuning. It is not anticipated that this will provide very significant savings in view of the fact that economics of scale will limit the reduction of material costs and that material supply packages so far tendered have broadly been within budget.

ii) Design Life: It is believed that the welded fabrication method is a very significant cost element. It is also a major aspect in providing low maintenance and longevity in the fenestration system. Alternative jointing methods employing bolted and gasketed connections will reduce costs but will increase the maintenance requirements. They will, however, preserve the appearance of the fenestration. An assessment of the life cycle costing and associated disruption arising from cyclical maintenance is required.

iii) Materials: The review of alternative materials will be guided by the need to maintain the use of aluminium bronze as the principal facade material. Within this, the use of clad steel blast frames will be considered. The separately identified exercise, looking into the potential of steel with similar finished appearance to bronze aluminium, will require an initial assessment of its full implications. The Task Force will report on this assessment by 18th August.

iv) Environmental performance: The chief criteria in considering any changes will be the preservation of the basic environmental design principles and the control of any consequential effects on other packages. Thus radical changes such as the installation of chilling plant within the 6th floor, will not be considered at this time and changes will be limited to the boundaries of the fenestration zone.

v) Procurement: Alternative procurement routes will be investigated. The following variations have already been identified:

a) additional direct purchase of materials.

b) Greater degree of processing/manufacturing to be carried out within supply packages.

4.3 Financial Analysis of Returned Tenders (Action 1):

The Task Force are to continue the action described in item 3 of the notes to the previous meeting. The completion of the initial analysis of all compliant tenders has progressed as follows:

Harmon -Further information was to be released

on 4th August and the company is to

be visited on 10th August.

Gartners -The company is on a two week holiday

shutdown and therefore further delay

action is delayed for this period.

MBM -The company is reluctant to provide

further information without assurances

that an order is likely to be placed

with them. Nevertheless they will

be pressed for further information.

A meeting is planned on 16th August.

Seele/Alvis -A detailed review has commenced and a

visit is planned for 11th August.

The analysis has revealed a tender

error with approximate saving of

-4.3m. The details of the analysis

are contained within attached notes

4.4 Alternative offers: Alternative offers will be examined. Further information will be sought on the extent of the proposal put forward by Gartners.

4.8 The team's concern that value for money could be questioned in relation to the increased cost was registered. The analysis and cost reduction exercise will seek to ensure that this principle is maintained in relation to the current briefing criteria."

Paragraph 2.3 shows that had the AWC been available M Makepeace would have sought its views.

When asked about paragraph 2.4 Mr Baxter agreed that some of the ideas discussed a week earlier were not being followed through and that the items listed in paragraph 4.2 had not previously been identified by the project team as critical. In paragraph 14 of its defence H of C says that the fundamental requirements were (1) long design life; (2) aesthetic appearance; (3) blast resistance; (4) integration with ventilation system; (5) pressure equalisation and in paragraph 36A(6) these are said to be required by Regulation 20(4) of the PWR. Paragraph 38 of the defence says that Regulation 20(3) made the specific criteria: price, quality of finished product; technical superiority; manufacturing and technical capabilities; programming and organisational capabilities; and maintenance requirements.

On 11 August Mr Makepeace set out the terms of reference for the Task Force whose objectives were to reduce the costs of the tenders whilst maintaining:-

"(a) security requirements as previously specified;

(b) concept of a long life building;

(c) use of bronze;

(d) environmental requirements and design philosophy;

(e) project programme."

Contacts took place between LML and the tenderers in August. On 10 and 11 August LML held meetings with Harmon in France (at Pinon) and with Seele/Alvis. Although Mr Mumford's statement contained a lengthy list of how Harmon's tenders were non-compliant in many respects he confirmed that other tenders were similarly deficient but that these respects played no part in the evaluation of Harmon's tenders since -500,000 was allowed by the project team for the possibility that, in any post-tender negotiations, the investigation and clarification of such points might result in an overall increase in the price. I do not therefore intend to consider them or their effect in any detail. It is quite normal for such tenders to be subject to numerous reservations. (The issues however raise a number of questions about other aspects of post-tender contacts.)

Mr Boyle was concerned to learn that the project team was going to speak to all tenderers since Harmon was the lowest and Harmon therefore thought that any discussions ought to take place with it. He said that on 10 August 1995, just before meeting the project team, he telephoned Mr Brand asking why it was necessary to look at Harmon's figures and that he was told the client needed to understand the reason why all the tenders were over the budget. Mr Brand explained that two Task Force teams had been set up, one to review the commercial aspects of each tender, ie to understand the costs, the other to work on design modifications so as to reduce the overall cost of the package. Mr Boyle said that he questioned Mr. Brand as to whether or not this action was in keeping with the EC procurement regulations and was told by Mr. Brand that if we did not cooperate with the Task Force we would be removed from further consideration: if Harmon did not play ball, its tender would go no further and it would be out. Mr Brand also told Mr Boyle that none of the present tenders would be accepted. This was borne out by Mr Kerr who also told Mr Boyle to co-operate with the Task Force since Harmon was the preferred contractor. I accept Mr Boyle's evidence. LML was clearly determined to comply with Mr Makepeace's wish to reduce costs. Mr Makepeace appointed Mr Nigel Quick of Arup Project Management as the chairman of the first task force.

The arrangements were that each tenderer was to reveal its tender make up on an "open book" basis and that anything revealed would remain completely confidential. Mr Boyle sought and obtained a guarantee from Mr Brand that any information disclosed would be kept confidential and not revealed to other tenderers When representatives of the task force (Mr Mumford and Mr O'Farrell of LML and Mr Baxter of G & T) visited Harmon's offices at Orly on 10 August they examined a recapitulatif (summary) of the estimate for the tender which set out the cost of the works, including materials and labour. (A copy had already been sent.) Mr Boyle, accompanied by Mr Voisin, Mr Michno and Mr Cazalet took the task force through the documents and discussed "ball park figures of ... the alternatives in our tender...". After the meeting Mr Kerr told Mr Boyle that he understood that the meeting had gone well and in contrast the meeting with Seele/Alvis had not been particularly good and that the task force was left with the impression that it did not fully comprehend the project. Mr Boyle also said that Mr Brand and Mr Kerr of Laing told him that omissions would lead to a revised package value of around -35 million. Mr Kerr assured Mr Boyle that Harmon was the preferred choice of the project team and that Seele/Alvis had been invited to tender by the client and was not a serious contender as far as LML and the project team were concerned. In my judgment Mr Boyle's account is again to be accepted but I consider that it was no more than the early reaction of the project team and was subject to the work of the task force and thus was not mentioned in Mr Boyle's internal briefing note of 17 August 1995 which set out the approximate figures that he had obtained from Mr Kerr for all the other tenderers. (However, looking ahead to the issues, the answer to issue 5(6) must be in part: Yes, in conversations with LML in August 1995.) Mr Boyle's note was also criticised for not mentioning that price was the sole or dominant criterion. I do not find this remarkable since cost was the manifest pre-occupation of the project team and of the task force, both which were striving to reduce it.

The figure of -35 million stems from the discussions on 10 August 1995. In its tender Harmon had put forward some alternatives (H3/262). There were four "Technical Alternatives:

"(a) Silicone weather seal in lieu of specified weld;

(b) Bronze anodised aluminium system in lieu of material specified;

(c) Structural aluminium system with bronze castings and cover caps. Mechanical fixings and silicone weather seals.

(d) Float glass in lieu of low iron glass. "

There were also four "Commercial Alternatives:

"(a) Payment for fabricated material stored in our factory assuming ownership transfer.

(b) Multiple currency payment.

(c) Neutral Cash Flow, whereby specific payments are to be made on specified dates against a previously agreed schedule. Payment on these dates would be unconditional. Advances to be secured by bonds.

(d) Delete Parent Company Guarantee and bind Apogee jointly and severally to the Trade Contract".

At the meeting on 10 August 1995 Harmon had given figures for three of the technical alternatives. For option (b) (the bronze anodised aluminium system) potential savings between -6 million to -20 million were forecast; for option (c) savings of between -12 million to -20 million were suggested. For option (d) a saving of -1 million was offered. After the meeting Harmon also indicated that the removal of a weld and its replacement by a silicone weather seal (option (a)) could result in a saving of about up to -2 million. Options (b) and (c) were however difficult to pursue since they would require a change of supplier, as Mr Josey also agreed. Gartners had also made a proposal for an aluminium solution which was similarly not viable.

Harmon's tender also contained a number of "clarifications": "Our Tender submission is based upon the following allowances and assumptions". They included :

"11. We have assumed that all the Suppliers of the novated items have fully accepted the terms and conditions as set out within their Tender Documentation, and that all rights and benefits of the Supply Contracts were passed on to us within the novation.

25. The Trade Contract specifically p. 5, para. B5, pp.9-12 para. 3, and schedule 1, p.41, will be modified and agreed between the parties thereby deleting design responsibility.

28. Clause 12.15.4 Co-ordination and Co-operation, General Preliminaries.

Responsibility Design Development has been recorded at the mid-tender meetings being the responsibility of others. To that end we have excluded from others submission, design development and all costs associated therewith.

37. Harmon CFEM shall assure liability only for the work that it has sub-contracted to do including that of its sub-contractors."

I shall consider later the effect of these reservations although they were not thought to be significant at the time.

Returning to the project team's discussion of the tenders, I do not accept Harmon's case that there was never a comparison between the July 1995 tenders. I think that the reaction to the tenders was probably such a comparison but obviously only a superficial one since the high levels of the tenders received made it necessary to look for alternatives. There was certainly a thorough investigation of the make up of the tenders. There was also concern about the need to re-advertise this package. Mr Kerr asked for advice and on 21 August was informed by the Euro Information Centre that

"The regulations do not address how to handle change in technical specification, however, I would suggest that unless it is a major change that you do not readvertise rather that you re-tender with a new specification to all the list of tenderers even though you know some may not be able to bid as a result of the change. This ensures fairness and openness... ".

A design report of 22 August 1995 suggested that the design should be altered in order to reduce costs, such as by abandoning welding as a weather seal and using instead a wet silicone sealant on the lines suggested by Harmon as one of its technical alternatives in its tender. The specification was altered to produce what was known as Option A and on 30 August 1995 LML invited re-tenders). Harmon had been told of this beforehand. However it must not be forgotten that other changes were made as part of the redesign which reduced the cost of the scheme and are not the subject of this action. About this time Mr Mumford again suggested that cost might be reduced by asking contractors to tender on a performance specification. Not surprisingly this was opposed by the designers, AFE, who said:

"I refer to Jerry Mumford's letter dated 5 September 1995 regarding the above, and his comments with respect to the option for performance specification with trade contractor design.

This approach represents a total departure from the current method of procurement. We do not believe that this alternative route would necessarily afford considerable savings, or achieve minimum delay when compared to the current route. This is particularly so if the Design Brief remains unchanged. If the Brief was to change, for example, the acceptance of increased maintenance as currently being detailed, then the existing team is more than capable of continuing the revised design for pricing.

This proposal fundamentally affects our role and responsibility on the project, and as such, I do not think it is appropriate for the Task Force to be charged with considering this as an option or not. I would therefore request that a meeting be called with Andy Makepeace, to establish whether this option needs to be pursued any further."

Mr Romaniuk of MHP gave the additional reason that it might "deny Alvis, for example, or any other U.K. based company access to the re-tender, as well as the supply packages":

"We are in receipt of LML's letter of the 5 September 1995 (ref: 4102JM/gse) and further to our telephone conversation this afternoon, would like to comment and take issue on a number of key areas contained in Jerry's letter.

We do not believe that "performance specified, trade contractor designed" procurement was specifically stated in the 'Task Force List'. Indeed the only procurement alternatives listed were quite the opposite where it was suggested that the 4200 package could be further broken down increasing the number of work packages. To date this alterative has not been fully examined by the Task Force or more particularly by LML. We also understand from the procurement meeting on the 7th September 1995 that the client is reluctant to pursue performance contracts at this stage.

One of the aims behind AFE designing the complete cladding package was to try and encourage more UK based companies onto the tender, than would be expected with a performance based contract. It was felt that by removing the design and subsequent liability risks associated with performance based contracts, smaller UK based cladding companies would be able to tender. At the same time key supply packages were also tendered separately to further spread the production of specialist elements across more UK and European based companies. What has finally evolved is not necessarily the desired position, (where Alvis are the only UK firm), however the intent and the decision to fully design the cladding system we believe was correct and is still worth pursuing to its conclusion.

Leaving aside the programme issues, our concern is that to change to a performance based contract at this stage will probably mean a revised tender list, which may deny Alvis, for example, or any other UK based company access to the re-tender, as well as the supply packages. We also feel that it will be virtually impossible to hold onto the visual requirements of the design, all elements which have been thoroughly examined by the statutory and planning bodies, (in accordance with our letter of the 30th August 1995) and which we believe will definitely need to be maintained, unless a complete re-planning exercise is to be undertaken.

Having now had the opportunity to meet Harmon CFEM, LML's claim that there is a genuine -12--20m estimate on the table for a composite system, appeared to be no more than a 'throw away comment' and should be treated with extreme caution as there is no substance to this offer.

Whilst LML are keen to pursue a performance based contract, we are not clear that it has any basis as a clear strategy to reduce the cost of the presently designed cladding system."

The letter was circulated. The reference to -12-20m was again a reference to the meetings on 10 August.

On 7 September LML met Harmon and Seele/Alvis to explain the design changes. The drawings had been sent on the same day. The possibility of further alternatives was raised. On 11 September 1995 LML invited Harmon to submit a revised tender. Harmon was told that it might again put forward other alternatives (which obviously had to meet the basic principles) in the following letter:

"As Construction Managers for the above Project and on behalf of the Parliamentary Works Directorate, we invite you, in accordance with the Briefing Meeting to revise your submission for the above mentioned package of works. As previously stated our aim is to effect significant cost savings on this package and to enable you to make these savings we enclose the following:....

(iv) Pricing Schedule (Revised Submission)

All other Tender Documents remain as previously issued under cover of our letter reference 3162JM/azs dated 19th May 1995, or, as revised during the Tender period.

You must not tell anyone else what the Tender Price is, or will be, even approximately, before the expiry of the time limit for the delivery of tenders. The only exception is if you need an insurance quotation to calculate the Tender Price, you may give your insurance company or broker any essential information they ask for so long as you do so in strict confidence. You must not try to obtain information about anyone else's tender or proposed tender before the time limit for delivery of tenders. You must not make any arrangements with anyone else about whether or not he should tender, or about his or your Tender Price.

The Authority at its sole discretion may refuse to consider any tender which is incomplete or qualified. If you wish to submit a Tender which differs from the strict requirements of the tender invitations or to use materials or subcontractors other than those specified you must clearly identify your proposal and its effect on the Tender Price or submit an additional alternative Tender, otherwise the Authority will be entitled to assume that your offer is entirely in accordance with the stated requirements. Any initiative any an individual Tenderer will be treated in confidence, but where it is a matter of clarification rather than initiative we will advise the other tenderers.

Would you please confirm to the undersigned that it is your intention to submit a bona fide tender in accordance with these instructions and that you can comply with the return date of Monday 25 September 1995."

In my judgment Mr Boyle was absolutely right when he said when cross-examined that at the time this letter was received it was clear from his meetings with the project team that the emphasis had shifted to cost as the dominant factor: "Well, the project team was, if you will, moving the goal posts. They were changing the design. They were changing what we were tendering for. They were trying to achieve a budget and they were doing everything that they could think of to achieve that budget, and that was the emphasis that was expressed to us at every meeting." When asked about other considerations being in still in play and effective considerations in the tender process he replied: "Well, they had been examined, I would say, from our meetings in terms of what the project team and the client was willing to compromise on in order to achieve cost savings." In my judgment the letter was plainly telling tenders that the defendant was now interested in the tender which was the cheapest: "As previously stated our aim is to effect significant cost savings on this package.... ", with a reference back to earlier discussions in which this had been made plain. Harmon submitted that a second tender was not sought, merely a revised submission and not an offer capable of acceptance. In my view the terms of LML's letter are clear: a tender or offer was being requested. In addition the phraseology had changed so that, if anything, it was clearer that a tenderer was not entitled to put forward a new design. This was also the view of Mr Josey. Furthermore tenders were being sought for a revised design which was to replace the "base scheme" and which to be the basis for evaluating all tenders. H of C was avoiding having to re-advertise the fenestration package. The new design was thereafter treated as if it had been advertised. Therefore I do not regard this second request for tenders as simply a pricing exercise; it was a request for a tender capable of acceptance.

Seele's quotation of 22 September read in part:

"Further to our tender submission for the above project and works package and subsequent meetings correspondence, namely your letter dated 11 September 1995, we are now pleased to forward 4 No. copies of your document:

- "Pricing Schedule (Revised Submission)"

- Fenestration

for your due perusal and consideration.

In addition we enclose explanations of our submission together with an alternative offer "B2" which we believe is the optimum manufacturing method for these frames, therefore being the most economical.

The panels required for the New Parliamentary Building will be manufactured in relatively large numbers, to stringent quality standards in a short space of time. The design of the product will determine whether this is achieved.

We understand that to effect cost savings the design life of the components has been reviewed and the maintenance programme altered to compensate for these changes.

It's our view that, if treated as an engineering component, the panels can be value engineered without compromising the original design. We propose to do this by:

a. Selecting appropriate modern engineering methods.

b. Designing a durable blast frame with strong welds.

c. Protect the programme by ensuring repeatable quality for all 700 panels.

Operations performed manually are the most expensive manufacturing process. We do not see wholesale elimination of machining as a valid approach to cost saving. Machining is specified to save money where it will reduce time spent carrying out manual operations, produce the necessary quality and speed production. Also where a component is put on a machine to drill and tap, say, a row of holes it costs very little more to then machine, for example, a weld prep or drill more holes. Our Option B2 makes full use of machining to keep expensive manual operations to a minimum, ensure quality and repeatability and protect the programme.

Throughout the Cost Saving Review there is extensive use of wet seals which we see as a retrograde step when compared to weather seal welding. By the judicious selection of materials and the combining of structural and weather seal welds the principles of two lines of vapour control and removal of glazing units without cutting back seals can be retained.

We propose to replace the inner glazing clamp with one machined from either an aluminium bronze extrusion or abrasive water jet cut aluminium bronze plate. This would then be welded in position as shown in Sketch AVL 101, thus providing a seal and eliminating the glazing clamp mounting holes.

We also propose to manufacture the duct cover support bracket from aluminium bronze plate which is cut into strips using abrasive water jet and the mechanise welded to the mullion (see Sketch AVL 103) thereby eliminating mounting holes and bolts and providing a durable weather seal.

If sand cast mullions are specified the casting would include the gravity bracket. If con-cast mullions are specified we would prefer to weld the bracket to the mullion as in the original tender scheme. This gives a good weld which is easily X-rayed.

The fixing of the spandrel to the mullion we propose to do as shown in Sketch AVL 103. The weld root is tightly closed and each of the welds would be made in one run using mechanised welding with an enhanced appearance as there would be no stops or starts. A similar technique would be used for joining the transom and the lightshelf to the mullion.

The external glazing clamps would be welded at the mitred corners and any weld in the groove for the gasket cleared by means of a fly cutter.

If produced as described above a saving of -4,085,593.25 compared to original tender could be achieved.

Option B2 offered two important and technically attractive features: first, Options A1 and A2 involved the use of wet silicone seals to provide weatherproofing whereas Option B2 offered a welded seal which was preferred by AFE on the grounds that they had two main advantages: longevity and certainty, ie ease of maintenance; secondly, it was similar to Option A1 and would therefore would have taken less time to modify the detail design drawings, as compared with Option A2; thirdly, it avoided the need to weld aluminium bronze to brass. A comparison of the approaches was helpfully illustrated by Mr Josey in his reports and in a number of sketches such as those in exhibit P4. Mr Josey was of the opinion that there was a significant design difference between Option B2 and Option A1. He highlighted the fact that Seele/Alvis had not proposed a permutation of option B as the procedures for the fabrication or manufacture of the glazing clamps were not the same. The original glazing clamps had been brass extrusions, very finely sculpted, in reasonably long lengths. In Option B2 the glazing clamps were machined from flat plate and cut and formed in a different fashion, with welding replacing a large number of bolt holes in the brass mullions (68 or more on certain types of panel and the clerestorey units. He adhered to this opinion when cross-examined and I accept it as summarised by Mr Josey in paragraph 3.18ff of his first report:

"The question as to what constitutes an alternative detail arises. In this instance, the contract was in relation to fabrication and installation works. It excluded design and the supply of copper-based alloys from which the chassis and framing were to be fabricated. Consequently, an alternative detail would be one which related to the fabrication and installation, and not one which significantly affected the design or the supply of the materials. An alternative detail would be of the sort suggested by Harmon. They proposed omitting weatherseal welds between inner glazing clamps and chassis framing. This was an alternative detail. It did not affect the appearance of the building, significantly affect the drawn details or affect the supply of specialist materials."

Mr Noble said that on a highly prestigious building of this kind, any risk of water penetration had to be reduced to an absolute minimum and that it was important also to keep maintenance costs and disruption to a minimum since the building's occupants were likely to be vociferous if things went wrong. Welding instead of bolts was therefore attractive. However the basis upon which Option B2 was put forward, namely "commercial in confidence", subsequently caused concern, as Mr Mumford acknowledged, as it prevented H of C obtaining a competitive tender from any other tenderer so as to make a comparison with it. On the other hand Seele/Alvis could hardly be criticised since it only followed H of C's requirement set out in the letters soliciting new tenders. H of C had thereby disabled itself from obtaining competitive tenders in any normal sense. The effects of this policy are examined later. Seele/Alvis's proposals were and were treated by the project team and Mr Makepeace as entirely complete. The savings were stated by reference to Seele/Alvis' previous tender so that there was a basis of comparison with a basic compliant tender.

On 25 September 1995 the results of the second round became known when four re-tenders were opened. Harmon offered a fixed price of -37,875,746 for option A. It was presented in the form of a modification of the original tender (ie as stipulated by LML) and purported to be a "fully compliant submission". It was just as much an offer capable of acceptance as the first tender. This second tender was -2,589,634 lower than the first tender. The adjustments are to be found in Harmon's internal documents. (The reduction was rather more than Mr Sahyoun would have wished.) Seele/Alvis's tenders were: for Option A on a fixed price basis -38,522,053; with fluctuations -34,889,393. It offered Option B at a fixed price of -37,237,447, with fluctuations at -33,604,787 and the variant option (B2) for the sum of -36,246,705. In summary therefore the position was:

(fixed) -37,875,746.00 No Tender

(fluctuating) No Tender No Tender

(fluctuating) -34,889,393.96 -33,604,787.31

(fluctuating) -39,082,722.00 -38,773,371.00

(fixed) -49,808,526.00 No Tender

(fluctuating) -37,875,746.00 No Tender

Seele/Alvis's fixed price tender for Option B was fractionally lower than Harmon's tender for Option A. Harmon then thought that Option B would result in a higher price. (MBM was thereafter excluded from further consideration.)

On 3 October 1995 Alvis wrote to the Chairman of the Accommodation & Works Committee to point out that Alvis were the only UK tenderer on the fenestration package. Seele/Alvis wrote further on 6 October:

"This information is forwarded on a strictly Commercial in Confidence basis, any divulgence is considered a serious offence.

We have considered all points raised from recent meetings and correspondence reviews, opinion and believe that we have considered, in our opinion, the important matters to the professional team and client of Security, Commitment, Capability Whole Life Costs and respond accordingly:

Ea Enclosed are 10 number copies of our joint venture companies brochures and information to remind yourselves of our integrity, commitment and capability.

We will be pleased if you will forward copies of these documents to the Parliamentary Works directorate in support of our tender and reviews, to enable full evaluation.

We will also welcome the Works Directorate to inspect our Respective Factories and offices to assist with final adjudication, to see how and where their windows will be manufactured. Additionally we have enclosed sketch details of A1 variant c window box assembly with sketch details of "Stormer" chassis assembly to demonstrate that this type of fabrication and assembly has been Alvis methodology for many years.

Eb Revisions to programme have an impact on labour resourcing to Seele/Alvis, however, these are manageable with no cost implications.

Ec The finished assembled chassis is manufactured from very expensive materials, on a long purchase time, therefore, security and handling are of the utmost importance.

Ed Throughout the development, manufacture and storage phase prior to installation on site all information and materials will be located at our factory in Coventry which, as a key defence site has "LIST X" status meeting Ministry of Defence security requirements. The factory site which is ringed with a single entry, intruder sensitive, 8 foot fence has 24 hour security and infra-red time elapse video cameras. In addition the industrial estate where the factory is located is protected by a security system funded by the local council.

In view of the sensitivity of the final use of the panels at the heart of the nation's government and the long periods of storage which result from the programme this is a key issue. If stored on normal commercial premises the high value of the base metal could attract the attention of metal thieves and the panels could also be accessible to people with more sinister motives.

The Seele/Alvis JV is in a good position to meet any special security requirements which the Parliamentary Security Authority considers necessary (Section 3.1.3.)

Ee Alvis has ambitions to move into the niche world market for advanced high security cladding (in 41 countries there is a long standing Alvis presence due to our core business manufacturing aluminium armoured fighting vehicles). Given the opportunity to demonstrate our aluminium engineering skills in the U.K. construction sector by being the manufacturers of the aluminium bronze cladding panels for the N.P.B. we will then have the all important bridgehead for attacking the world market in high security cladding. This would play a valuable role in protecting and creating skilled jobs at our Coventry facility. Hence our very considerable commitment to this project.

Following our reviews we believe that our B2 option is the optimum design and pricing solution, offering the design parameters of the original scheme for a more agreeable cost.

We trust that the above information is of interest to prompt further discussions."

Mr Boyle and Mr Michno met LML on 29 September 1995. The purpose of the meeting was to investigate Harmon's pricing. LML wrote subsequently to confirm its requirements - see LML's letter of 2 October 1995. I doubt that Mr Boyle said that either at this meeting or a little later that Mr Mumford told him that Harmon's tender should ideally be less than -34,000,000 since Mr Mumford was by nature unforthcoming. That information probably came from Mr Kerr. However I am sure that he asked Mr Boyle for savings and for a price for Option B. Mr Kerr had telephoned him to inform him of the other prices that had been received. Mr Boyle was told that all other tenderers were being asked to put in lower prices and alternatives. Accordingly Harmon wrote on 10 October 1995 reducing its fixed price for Option A1 to -33,969,939 (by reconsidering certain elements so as to arrive at -35,287,626, and then making a commercial reduction of -1,317,687. In its letter of 10 October 1995 Harmon asked for a meeting to discuss further reductions. Two days later Harmon put forward a price on a fluctuations basis of -30,969,968. This reduction was about -3m less than the second tender. Harmon also offered a further saving of -970,000 (suggested by Mr Gabriel Sahyoun who by then had been persuaded of the need for reductions) if it were awarded the roof light package (4350) as well as the fenestration package 4200. These letters were presented as revisions of the tender of 25 September and in my judgment each was a further offer which replaced the previous tender and offer.

It is surprising that both Gartners and Harmon were encouraged to submit a revised price on either Options A or B1 since both MHP and AFE thought that Option B2 was so technically superior to AFE's own design. It is now clear that B2 was technically superior to Options A1 and A2 and was buildable - see the evidence of Nr Noble; Mr Josey (paragraph 2.3.2 of his report) and Mr Blois-Brooke. Mr Noble agreed that from a simple, narrow technical perspective there was no point in asking for a re-tender on Option A1. However by this stage there was an increasing awareness of the need to comply with the PWR so in my view the reason was to generate the appearance of a competitive process whereby Option B2 would be eligible for selection. The pressure became even greater by the end of the month. (Mr Mumford had now read the PWR; it is remarkable that LML left him in ignorance of them for so long.) I do not consider that Harmon is to be criticised for not submitting a price for Option B. It was not obliged to offer one. (The letter of 11 September asked only for a revision of its previous submission.)

The task force met on 10 October. Notes were made of the meeting by Mr Brand. Mr Pringle agreed that Mr Quick had said that it was "OAP's preference is to go British if possible." However as there was a split view amongst the project team he might suggest proceeding with both. He would therefore go forward on both solutions which would give "the Committee [ie the AWC] the option to steer towards Alvis (UK based company)". Mr Pringle confirmed that the project team knew that Parliament and the AWC would have liked to have seen as many British companies awarded contracts on this package as possible. In my judgment taking into account other evidence about Mr Quick, Mr Brand's note was accurate.

The task force worked on producing a report throughout October 1995. Mr Pringle thought that Mr Mumford had caricatured him in his note of a meeting held on 12 October 1995 when he recorded MHP as advocating "Buy British". It was also agreed at that meeting that Sir Michael Hopkins would present the report to the AWC. Mr Pringle was with Sir Michael Hopkins on that occasion and, when questioned about it, did not deny that the AWC was told by Sir Michael that not only was Seele/Alvis's proposal technically better but that it was put forward by a British company which was in its favour. Mr Pringle agreed that the AWC had expressed a preference, if possible, to have a British contractor appointed. On 13 October 1995 LML sent to Mr Quick a cost comparison of all the options for the fenestration package submitted by each tenderer. This showed that Harmon's tender for Option A1 was the cheapest at -31,448,354. By comparison Seele/Alvis' tender on the same basis was -37,211,679. A note said of the price for Option B2 offered by Seele/Alvis at -34,559,127 (fixed):

"Option B2 is an Alvis Seele option which has been presented and developed solely by Alvis Seele and other tenderers have not been given the option to price".

A few days after 12 October a meeting of the project team took place at which, according to Mr Mumford and his notes, it was accepted that Harmon was the front runner, and MHP (who was represented by Mr Pringle, Mr Romaniuk and Mr Dunster) said that options A1 and B2 were technically very similar, but Mr Mumford felt that nevertheless since the package was over budget it was necessary to see whether pursuit of the others might reduce the cost. Nevertheless despite its views on technical similarity Mr Mumford noted:

- Harmon "the Big Shed"

Mr Mumford loyally refused to accept that Buy British meant Seele/Alvis, although I cannot see what else his note could have represented, especially since it was followed by the somewhat derogatory appellation "Harmon - the Big Shed" - a reference to Harmon's factory in France. On 18 October all tenderers were asked to provide more information about their abilities. The letter to Harmon read in part:

"As discussed on the telephone, it is our intention to visit your works on Monday 23rd October 1995 at 11:00 hours, and the purpose of this visit is to assess your capability to perform the above mentioned package of works. This assessment will be made with regard to your facilities, equipment, staff and organisation to achieve the revised programme of works discussed and subsequently agreed by yourselves as a basis for the contract programme.

The following are the areas/questions we wish you to address:-

vii Please provide a detailed analysis of the manufacture of the windows:

- How many and of what type of window will be manufactured in each week.

- How long do each different type of window take to pass each stage of manufacture, i.e. initial machine welding of sub-assemblies, chassis assembly, glazing, patination etc.

- What and when do your QA procedures enter this process, where does QA of procured/novated components appear.

- What is the management structure on the shop floor and who is responsible for instructing/planning the work on the shop floor.

viii What is your current directly employed workforce, what manpower level have you assessed for this package, what relevant experience does your workforce possess for our specified materials, what elements of the manufacture would be subcontracted and to which companies (714's and self employed personnel to be advised).

ix As the performance testing requirements no longer calls for full window tests, how will you address this shortfall in your learning curve. What in-house early manufacture will you perform and will this require procurement of components.

x As welding is a key process, please advise as to the welding procedures you will be developing, who will develop them, what experience they have relative to our specified materials, what are your current welder qualifications, how many welders are currently employed, how long would it take to qualify welders for our materials, who is responsible for QA on welding within your production facility."

A draft report was produced dated 18 October. It was called a "Cost Saving Review. It read in part:

The Task Force has worked to reduce prices for the Fenestration Package from the -40m to -60m range tendered in July 1995. It has done this by refining the design to suit specific manufacturing methods and making other design changes which do not impact severely on the quality of the building but in some cases they increase maintenance to obtain the same overall durability.

The Task Force's work concluded with retaining two packages for further programme and management appraisal. The first Harmon/CFEM whose estimate was priced at -29.7m for Option A1 and the second from Seele-Alvis was priced at -32.4m for Option B2. These tenders compare with the budget of -20m and the earlier lowest tender of -40m.

This conclusion is reached because Options A1 and B2 estimated by Harmon/CFEM and Seele-Alvis offer optimum combinations of capital cost maintenance cost, risk of price escalation and designs that are technically superior to Option A2.

The designs favoured by the two contractors differ in their manufacturing method and consequently in their maintenance requirement. The designs also impose different magnitudes of risk to the total project. The Task Force has attempted to quantify the risks with reference to technical, commercial and maintenance parameters and the design development. We conclude that the risk of cost escalation through design development should be included in the project budget and this means allocating a budget of -32.7m for Harmon/CFEM and -34.8m for Seele-Alvis.

The consequential costs of delay to the project from the Fenestration contract could be very large. Therefore the Task Force does not believe it can conclude its findings without considering the programme and management implications of the favoured bidders. This it plans to complete with works visits and a report in the week commencing 7 November 1995. Design work on Option A1 will proceed in parallel with these inquiries.

An alternative offer put forward by Gartner to their own design and at a price of -18.4m will also be considered further. It is suspected that this design does not meet the security criteria. If it is compliant it will be fully explored. If it does not comply, but has merit a complete retender of the package would be more appropriate than a negotiation with Gartner alone.

The committee [ie the AWC] is asked to endorse the increase in budget including design development contingency from -21m to -34.8m (i.e. the highest acceptable option plus a 7.5% design development risk).

The committee is asked to endorse the Task Force's next actions i.e. to test the management and programme capabilities of Harmon/CFEM and Seele/Alvis and to technically audit the Gartner proposal.

TERMS OF REFERENCE

1.1. Based on the post-tender analysis of the offers received and ideas generated by the consultants engaged on the project and the tenderers, to identify the means and implications of bringing the cost of the package down to the budget while maintaining the:

a. security requirements as previously specified;

b. environmental requirements and design philosophy; and

c. project programme;

d. use of bronze;

e. concept of a long life building.

1.2. To consider the implications of substituting for the balcony and bay windows the flat window used for the support staff offices.

1.3. To consider the implications of a more radical approach using alternative materials for the fenestration while maintaining as far as is practical the appearance as currently proposed.

1.4. To provide a report on the outcome of the Task Force's deliberations.

The Task Force was to report by the October A&W Committee meeting.

MEMBERSHIP

The Task Force was drawn from the Design Team and the Construction Management Team. Contributions were made by many persons from those teams, but the main members were:

Arup Facade Engineering - Neil Noble

Gardiner and Theobald - Peter Baxter

Laing Management Limited - Jerry Mumford

Michael Hopkins and Partners - Peter Romaniuk

and the Task Force leader was Nigel Quick of Arup Project Management.

APPROACH

The approach was to:

a. understand which work elements dominate in the cost of the package;

b. identify the options for change and rank them;

c. select Favoured Option(s) and obtain a revised price submission from all the contractors;

d. explore the cost of more radical design options with some of the lowest tenderers;

e. study the programme implications of the options;

f. report with a recommendation.

WORK CARRIED OUT BY THE TASK FORCE

The Task Force has met eleven times in eight weeks. Six alternative design solutions coded A - F have been considered and sketches and specifications have been produced for four (A, B, C and F) of these solutions. In addition a contractor initiated his own proposal and the alternative of a trade designed solution have been considered. Options A and B have been considered in as much depth as time would allow and prices were obtained from all four contractors for these alternatives which would form a good basis for proceeding towards and early contract award. Option C has only been developed on an indicative price basis by producing sketches for one panel type only and applying the contractors stated savings for this panel pro-rata across the other panels. Option F has been developed in a similar manner but the indicative prices has been determined by the Task Force. Options D and E have been technically developed to the point where there merits could be considered by the Task Force.

The programme implications of all the technically and commercially advantageous solutions have been discussed in as much detail as time has allowed.

DISCUSSION OF THE OPTIONS AND PRICES

8.1 Comparison of Bronze Alternatives

Options A1 A2, B1 and B2 all meet the security requirements, the use of bronze for exposed parts of the fenestration, the environmental requirements and the contractors state they can meet the programme constraints. Although some details have yet to be developed they meet the concept of a long life building to varying degrees as has been set out in the section 6.0 Maintenance above. Discussion is here limited to the most commercially advantageous offers ie. that by Harmon/CFEM for Option A1, Joseph Gartner for A2 and that of Seele-Alvis for Option B2.

The lowest prices as submitted are:

A2 Joseph Gartner -30.5m

A1 Joseph Gartner -32.8m

The A1 option priced by CFEM/Harmon is a technically superior product and it will be less expensive to maintain and requires less design development than A2. This fact is accepted in the Task Force. Should it not be justified to the lay reader. Similarly the Seele-Alvis solution B2 is preferred to the Gartner solution A2.

The procurement of Package 4200 is presently in considerable delay to the extent of 20 weeks against original forecast, and the on-going and necessary review of the tendered value of this package (without extraordinary measures being taken), can only compound this delay.

Considering purely programme, not commercial factors, if the decision was to revert to the original tender scheme and using the durations set out in the tender programme then a delay to the project of some two months is forecast. This delay could probably be negated in full by overlapping production and erection for these two months at an increased risk or asking the contractors to accommodate the acceleration.

If the decision is to proceed with one of the A or B type options, and based on current design release dates, procurement durations and supplier lead in periods then the delay to the project is forecast at six and a half months.

By producing components against incomplete design, expediting procurement activities and by overlapping production with erection then this project delay may be reduced to three/four months, again with increased risk.

To overcome the resultant project delay mentioned above with the selection of an A or B type option. The Task Force presented the tenderers at the end of October with a radical programme which maintains the required site start date of 1 November 1997 but considerably revises the fabrication and assembly period, from approximately eighteen months (inclusive of advance machining) to a total of thirteen months, which considerably increases the required output of windows.

The report's conclusion was:

CONCLUSION

We conclude that Option A1 by Harmon at -29.7 million and B2 by Seele/Alvis at -32.4 million represent the most advantageous solutions and a substantial improvement on the tenders received in July 1995. It is difficult to draw out a single conclusion from the data we have established in a few weeks. However, we conclude that vigorous discussions should proceed with both contractors to test their project programmes and management. The relatively small number of design changes needed to progress Option A1 should commence immediately and the effect of changes in the materials supply contracts should be assessed as soon as quantities can be established with reasonable accuracy."

At the time Mr Mumford queried a part of the report which read:

"An alternative offer put forward by Gartner to their own design and at the price of -18.4 million will also be considered further. It is suspected that this design does not meet the security criteria. If it is compliant, it will be fully explored. If it does not comply, but has merit, a complete re-tender of the package should be more appropriate than a negotiation with Gartner alone."

He annotated his copy : Why? It is clear that there was now no suggestion to the AWC that there was to be any comparison between A1 and B2 to see which might be technically superior. The change of approach came from Mr Quick, the task force leader, who was of course closest to Mr Makepeace and his thinking.

The progress report submitted to the AWC for October 1995 stated in part:

2. Revised tenders for the fenestration have achieved a significant reduction but the likelihood is still for an excess over budget of -10m plus.

9. Fenestration. Negotiations with the two lowest tenderers have succeed in further reducing the capital cost of -39m though the two proposals are now significantly different. The task force appointed to drive this package forward is therefore considering which of the two will provide the better offer in the round taking into account the capital cost and programme certainty and the total life costs. A decision is required in early November if the redesign programme is not to be adversely affected. The way forward is still too uncertain to reopen discussions with the component suppliers.

14. Advance Warnings. The reduction of -5.5m arises mainly from the reduced tenders for the fenestration ( --25m) and the transfer to the Unapproved Estimates of the raised floor (+-0.5m). Apart from low value changes there was also an addition of -0.1m for the light reflectors in the courtyard roof.

17. The various issues mentioned last month - pin joint detail, extended post tender negotiations and pre-tender cost tender checking within the industry - together with the concentration of effort on the fenestration and roof tenders are still preventing agreement of the details of a revised programme. The aim has to complete the exercise before the end of the year."

The minutes of the AWC meeting of 18 October read:

"New Parliamentary Building: Construction

The Committee deliberated.

On 23 October there was another visit to France. Harmon put together a written and oral presentation to answer LML's letter of 18 October, the contents of which were also contained in a substantial letter which was then handed over. Harmon thus gave answers to the detailed questions about its management and technical capacity that had been posed to it:

"Whilst your letter was particularly addressed to our Mr E Boyle, you will be aware that as President of Harmon Contract W.S.A., Inc. I have from the conception of our involvement in this project maintained a personal involvement in support of my Project Team lead by Ed Boyle to demonstrate the sincere importance we place upon securing this project.

You will be aware that, due to the significance of this project and the U.K. construction market, we have restructured our European management to cater to the needs of this and other projects with Laing Management Ltd.

Therefore, with immediate effect, following a meeting with your Bernard Ainsworth and Ronald Kerr, Ed Boyle has been totally committed to our U.K. operations as managing Director of Harmon CFEM Facades (UK) Ltd. with full authority and responsibility that such a task demands. Ed Boyle, therefore, will report directly to me with full access and influence to resources available within Harmon's global operation.

In responding to your questionnaire we have attempted to demonstrate our management ability to question the paradigms that have become time honoured procedures to the detriment of construction industry.

We have in the time available responded to your questions as best we can, however, we will be pleased to expand further in finer detail to any and all of the questions if necessary.

Regretfully, I am not able to attend the meeting requested by yourselves on Monday 23 October, however should the need arise for further dialogue, be assured to reasonable notice I will be pleased to address any outstanding matters.

I am in no doubt that our response to your questionnaire and our presentation on Monday 23 October 1995, together with our management restructuring will successfully meet the demand of this project.

Finally, you may be assured of my personal ongoing commitment to this prestigious project.

Yours very truly,

Harmon Contract W.S.A., Inc.

Mr Boyle, Mr Larson and Mr Michno naturally all agreed that these inquiries into Harmon's managerial and technical abilities would be used in the evaluation of Harmon's tenders. Mr Boyle had arranged for Mr Kurt Larson, the project director of the Petronas Towers project in Kuala Lumpur to fly over as he had been proposed as project director for the fenestration package in association with Mr Michno. Mr Gabriel Sahyoun and Mr Voisin were also present with others from the proposed team. Mr Larson gave a presentation on project management and control systems. Mr Michno gave a presentation on manufacturing, specifically the staffing, equipment and proposed organisation and explained the resources available. (Mr Larson and Mr Michno when giving evidence struck me as highly competent and well able to harness and to maintain the resources necessary for the NPB.) It was accepted that Harmon would have to buy a CNC machine for the Sitraco factory. There were then very few welders at Pinon since there was not a lot of work in the factory at the time. Harmon had provided a full answer to the inquiry about welding and M. Michno's amplification in cross-examination satisfied me that Harmon should have been able to obtain welders of the requisite calibre, eg from the team working for M. Rayjal. However Mr Boyle pointed out in evidence that the project for the NPB was just as challenging as that for the Bibliothèque Nationale which had been handled primarily from Pinon. In addition Harmon's submission listed projects that it would be undertaking over the next few months. Their total value was over -10 million and they would clearly have revived or maintained operations at Pinon. Following the visit Mr Kerr telephoned Mr Boyle to say that the presentation had been well received. Harmon had moved ahead of Seele/Alvis as they were unable to identify where or how the project would be manufactured, and that Seele/Alvis did not appear to know what was needed for the project.

Another meeting of the project team was held on 25 October. By this time the team realised the difficulties that they faced as they were heading for a breach of the PWR, as both Mr Mumford and Mr Makepeace acknowledged. Mr Brand had a meeting with Mr Makepeace on that day at which Mr Makepeace took up LML's stance. Mr Brand noted "AM will be put in position of clarifying requirements , ie reasons for rejecting either G[artner] & A2, A1 or B2 must be clear - PWD may well have to have final word on this subject." He also recorded that Mr Quick had said that Harmon's factory was busier and that it had a "positive attitude". Nevertheless Mr Makepeace was well aware of the problem facing him since he asked the question:

"How do we get a comparative offer for B2? Agreed with Mr Quick and AM - at this stage would you make any reductions on the original offer. This to try to not make Alvis stand out as a single tender offer ." [Emphasis supplied]

Mr Baxter too was concerned about the decision that the task force should attempt to quantify the risk involved in placing the order for the fenestration package with each individual tenderer, by the addition of a percentage allowance to the tender price. The percentages would be used to weight the prices of the tenderers to indicate the differential in the team's assessment of risk as between the different tenderers. Mr Baxter accepted that the team should deal with differences in technical and management capabilities of the three tenderers, but he saw that as a matter of subjective judgment which could not be converted into money which is not subjective. He thought that the team was "straying into a very dangerous area". G&T took steps to warn Mr Makepeace of its misgivings at a meeting on 26 October.

LML and MHP conducted assessments of the tenders, each adopting a form of scoring or rating (which had been discarded at an earlier stage). Mr Mumford, for example gave (out of 10) for project manager: Harmon 7, Seele/Alvis 8, and Gartner 9; and, for project team, Harmon 8, Seele/Alvis 8, and Gartner 9. Indeed Gartner came out top of Mr Mumford's assessment with 131 against Harmon 100 and Seele/Alvis 117. MHP prepared a report on 6 November 1995 which gave Gartner 75%, Seele/Alvis 75% and Harmon 49%. However in cross-examination Mr Pringle (who did not appear to have had much real experience of contractors who carried out specialised welding) accepted that the document was an internal one "to clarify our thinking"; that it was not scientific and that MHP were reluctant to table it (which I do not accept) although they circulated it to everyone "to be discussed". The overall picture that they wished to paint was "what we were trying to establish". "It was subjective; it was intended to influence the task force." Although H of C relied on these assessments I consider that they are of little or no value, especially MHP's, as the cross-examination of Mr Pringle demonstrated how biased that firm was against Harmon. In addition as Mr Josey pointed out Harmon was not like many other curtain walling companies since it had project-managed some of the largest cladding projects in the world, by a process assembling very good designers, very good planners, and components from various different suppliers which are then be sub-assembled in a factory which has been purposely acquired. He therefore it thought almost incredible not to have sought references so as to assess Harmon's technical and managerial skills as they had been applied on previous projects. He said in paragraph 6.15 of his first report: "Normally one would expect references to be taken up, enquiries to be made of the architects of those projects and of the end users." In my experience it ought to be done at the prequalification stage so that the short list was properly complied. In my view the absence of these inquiries shows that Harmon's reputation had preceded it and that H of C's advisers did not consider it necessary to seek references at any stage. It is therefore all the more surprising that LML and others maintained at the trial that Harmon was not capable of organising the requisite teams and facilities.

Although Gartner had not been excluded, the project team and task force now concentrated on Harmon and Seele/Alvis. On 25 October Mr Makepeace sent a memorandum to Mr Webber with his views on Mr Quick's draft report. Amongst other things he said:

"With no clear front runner as far as the offers are concerned, nor when the offers are subject to an initial risk analysis (page 17) there is no clear way forward. The team recommended that further work should be concentrated on Harmon's A1, as being the lowest of the three for the revised tendered option, and Alvis' B2. I have instructed, however, that Gartners should not yet be ruled out. Not only is the price difference too little, and it may be possible to shave off more, but their reputation as a market leader cannot be ignored, particularly with the increased timetable problems.

Although, the cost difference between A2 (the bolted "shorter life" version) and the other options is small, in the light of the views expressed by the Accommodation and Works Committee, and the suggestions at officer level that the Finance & Services Committee is unlikely to take a different view, I have agreed that it should not be pursued further. Similarly Option B1, because it involves more redesign, has been put aside.

I have been concerned that there is no competitive price for the Alvis B2 option. The advice is that we could not put this proposal direct to the other two companies because it was made as a commercial offer. However, I have agreed with Mr Quick that Gartner and Harmon should be asked if there is any savings still to be achieved on the original tender figures (top of page 16). On the basis that there is little between the original scheme and B2 it would mean, if we were eventually to accept Alvis' offer, it would have been after competition.

The current stage of the exercise is to visit the three companies to form a view on their capabilities against the reduced timetable and to assimilate the result into the risk analysis. The discussions will also seek further assurances on their ability to meet the reduced programme and establish where the work is to be carried out so that the soft costs can be taken into consideration.

The study presumes that the existing procurement arrangements, with the House arranging the contracts for the components, will be maintained. On the face of it the three tenderers should be much more familiar with the sort of companies who will supply the components than any member of the Phase II team. Against this, however, is the fact that aluminium bronze is used rarely and we do not know yet the extent to which existing supply tenders will have to be revised. My particular concern is that the 3 companies could have said they can meet the reduced timetable on the basis that they know we shall not be able to meet the supply arrangements. Mr Quick concedes this must be a risk but also made the point that to try to introduce the alternative approach at this stage would only make the exercise more complicated than it is and cause delay. This must be right. I have therefore accepted that, after we have chosen the preferred option, but before we have finalized the choice of company, we will discuss the procurement route with them.

The bottom line is that if we are to have any chance of meeting the existing timetable, a decision on which of the options i.e. A1 or B2 must be made by 6 November. Ideally, we should know by then which company to pursue but I doubt if the final considerations on the management issues will have been resolved. But at least Arup Facade will then be able to proceed with their drawing programme."

Mr Makepeace, when asked about this letter, said: "The concern was that we had a price from Alvis for the B2 version and we had no comparable price for B2. Effectively, it was looking rather like a single tender offer for a very large package and, in normal public procurement rules, one tries to avoid single tender packages." He agreed that single tenders were not allowed on this package. It is therefore clear that Mr Makepeace thought that Option B2 was so different from the others that it could not be treated as a permissible alternative or variant but as a new proposal which warranted competition but he saw the way out might be by getting revised prices for the base scheme. However he decided against that route.

Following the meeting it was decided that in order to ensure competition all three remaining tenderers would be asked to tender on both Options A1 and B2, but for the latter AFE was to produce a scheme that embodied the design concept of B2 without infringing Seele/Alvis' rights protected by the "commercial in confidence" tag. However Mr Makepeace got cold feet and he ultimately decided that the tenderers were all to be asked to re-tender with Seele/Alvis being asked to reprice Option B2, and Harmon and Gartner Option A1, although his first instruction in his fax of 26 October was that "all three companies should confirm their prices for options A1 and B2". Having given it further thought he revoked this instruction Had it been implemented there would have been competitive prices for both options but Mr Makepeace did not want this.

On the day of the meeting Mr Noble sent a fax to Mr Quick:

"I took a phone call from Phil Brand and tried to contact you before you left, but I just missed you. Laings have had a discussion with Andy Makepeace and have persuaded him that inviting prices from the tenderers for all the options is not absolutely necessary. Therefore, they will simply be asking the French tenderer and the German tenderer to confirm their prices for options A1, and the British tenderer to confirm his price for option B2. Therefore the delicate wording of the letter is no longer an issue. Also, option A2 will no longer be an issue after the end of the week as you stated.

I am happy with this situation - I hope that you are too.

Mr Brand said that the fax was not entirely accurate as the decision was taken by Mr Makepeace himself. In my view Mr Brand is right as his recollection is consistent with Mr Makepeace's letter to Mr Webber. Mr Brand's note of the meeting recorded:

"It must be clear that Alvis are repricing B2 option. It would make PWD's life politically better if Alvis came in as the cheapest, i.e. the -2 million."

These views were not those of either Mr Brand of Mr Mumford but of those then present almost certainly Mr Quick expressed them (or possibly Mr Noble or Mr Sakula). Mr Brand thought that it was a foolish thing to say. It was obviously true. (The notes taken by Mr Brand and the fuller notes taken by Mr Mumford were accurate within their respective limitations.)

I do not accept Mr Makepeace's evidence that LML told him that the "commercial in confidence" restriction imposed by Seele/Alvis could not be broken. Mr Mumford said that no one in the project team even considered inviting Seele/Alvis to remove the "commercial in confidence" restriction on Option B2. The effect of Mr Makepeace's instruction was that H of C had no basis upon which there could be a "like for like" comparison of the revised tenders of Harmon and Gartner for Option A1 and of Seele/Alvis for Option B2. This was recognised by Mr Mumford to be like comparing "apples with pears". It is hard not to accept Harmon's submission that the tendering process was by now a charade. The project team had already decided that Option B2 was technically superior to Option A1 and that accordingly Seele/Alvis would be recommended as the successful tenderer. Nonetheless they went through the motion of asking for Harmon's best price for Option A1 knowing that it was not going to be accepted.

Mr Makepeace wrote a long letter to LML on 3 November in which he endeavoured to put on record a justification for his decision:

"I am writing to follow up my fax of 27 October and the interim report of the task force. I do so with the benefit of the views expressed by the Accommodation & Works Committee. Basically, the requirement for a long life high quality solution remains, though we are instructed to seek to reduce the cost as far as possible within this objective.

Before dealing with the main thrust of the way forward perhaps I should deal first with the two alternative offers.

As I understand it Gartners have queried the validity of the security specification on which the scheme was designed and have claimed that an alternative approach would result in significant savings. Quite clearly this cannot be ignored. But, as was established at the outset, it is not the intention to change the security brief. It is important therefore to establish, which means confirmation by EEB, whether the Gartner proposal meets the security requirements. If it does not, then it should not be pursued further.

Unlike Gartner's offer I understand the one from Alvis/Seele (B2) conforms to the security requirements and is in fact closest to the original specification which was approved by the House and on which tenders were first sought. For these reasons it too must be pursued particularly as it is close in price to the other conforming offers.

It is unfortunate that we do not have comparable offers for this option from the other two contenders. When I discussed the matter with Nigel Quick it was understood that we could secure virtually comparable offers by asking Gartner and Harmon to confirm their prices for the original scheme. Later advice indicated that this would not achieve the objective because Alvis/Seele offer took account of the core changes. The firm advice now is that Alvis offer was made on a commercial basis and that it would not be possible to ask their two rivals to provide tenders on a comparable basis. If that is the case, and I believe it was the unanimous view of the team, then there is nothing further to be done at this stage than to ask them to confirm their offer price.

The Committee has made it clear that they regard the timely completion of the project as important as the cost. It is therefore necessary to reduce the options being pursued as quickly as possible so that the resources available are concentrated to the greatest effect. The main thrust of the discussion therefore will be on option A1. And the bolted version, A2, which has a shorter life span, should not be pursued further.

It was also agreed that it was important to resolve as quickly as possible the outstanding points with the three companies and, more particularly, to form a view on their management capabilities (which are of enhanced importance as the time available has reduced), and on the confidence which can be attached to their ability to meet the reduced timescale. While this assessment is taking place for incorporation in a further report with a revised risk analysis the three companies should be asked to confirm their prices in the light of the discussion which have taken on the basis set out in my fax. (this has in fact been arranged and they will be returned today).

I recognise only too readily that securing revised offers and forming a view on which of the companies is best able to meet the requirement is only one step on the way. Neil Noble has indicated that a firm decision has to be made by 6 November if he is to have the opportunity to proceed with the new timetable. However, it emerged at the last meeting, that the team will not be meeting until that date to form a view on the management capabilities of the companies. At that meeting it will therefore be necessary to look at the programme implications. We must be in a position to decide very quickly thereafter, on the basis of price and performance, whether to proceed with the A1 or B2 solution. I would hope that the task force could quickly reach a unanimous view; but if it cannot do so it must not prevaricate. In these circumstances I will simply accept a majority report, with the dissentions included.

I know we share a concern that the component suppliers will have become disenchanted and that they should not be approached until we are clear on the direction to be taken. But, once we know which option is to be pursued we must broach with the firm(s) still in the running for the 4200 contract whether they would take on the procurement direct. This would place the programme responsibility firmly in their hands, which has great attraction.

I am available for discussion as and when needed.

Copies go to Nigel Quick, John Pringle, John Thornton, Neil Noble and Mike Walker."

In this letter Mr Makepeace thus acknowledges that it is not possible to obtain tenders comparable to Seele/Alvis' tender from either Harmon or Gartners. In my view the letter also plainly gives clearance to the task force not to make cost the dominant factor as the key issue was now whether the package will be completed in time. (At this date Westminster Underground station was to be handed back by LUL in January 1997 - a date that was missed by a year.) Mr Makepeace confirmed that but for the time factor the package might have been retendered. Thus "management capabilities" are now of great importance and are to be an important criterion.

In accordance with Mr Makepeace's instruction LML on 30 October requested Harmon and Gartners to submit their current prices for Option A1 (the welded solution as opposed to the silicone sealant solution) and Seele/Alvis was similarly asked for its latest price for Option B2:

"Following receipt of your revised submission, the ongoing dialogue/correspondence of the last two weeks, and our recent visit to your facility, you are hereby requested to formally submit to the Parliamentary Works Directorate by 11:00 hours on Friday 3rd November 1995 your current offer (with detailed financial and programme breakdown) for Alternative Option (B2) (discounting any bolted alternative).

Please use the attached label C415 to submit your tender and comply with the tendering procedure previously advised. Your co-operation is appreciated."

Harmon's prices for Option A1 were -31,262,154 (fixed price) and -29,562,154 (fluctuating) - see its letter of 2 November, which is in my judgment an offer which replaces the previous tender of 12 October as it was presented in a form of a revision or amendment to that offer. Therefore as a result of the fourth round H of C now had in law only two offers available to accept from Harmon: Option A1 with either a fixed or a fluctuating price. Seele/Alvis's prices for Option B2 were -34,153,276 (fixed) and -32,363,375 (fluctuating). They similarly replaced the earlier offers. Subsequently Mr Kerr told Mr Boyle that Harmon was on the short list with Seele/Alvis. He said that the feedback was that AFE and MHP thought that Harmon's system would ultimately cost more because it would involve countless drawings on the part of AFE. Mr Kerr told Harmon that Seele/Alvis were higher but did not explain the differences between the options.

Mr Boyle therefore telephoned both AFE and MHP to find that whether Harmon's tender had been accepted "and not discounted for any technical reason". He said that on 7 November Mr Dunster confirmed that the tender was technically compliant, and that he had a similar conversation with Mr Noble. He therefore wrote to both on 9 November 1995 confirming the conversations:

"We greatly appreciate the opportunity you afforded us to speak on the telephone on Monday the 7th regarding the referenced project. We are pleased that you were able to confirm that our submissions are technically compliant, that we have addressed all queries and that there are no outstanding technical matters.

If I can be of any further assistance in this or any other matter please do not hesitate to call."

Mr Boyle also spoke to Mr Mumford and on 9 November 1995 sent him copies of the letters to MHP and AFE:

"Further to our telephone conversation of Monday the 7th, in respect of the above we confirm our conversation that on speaking to both the architect and his consultant, our overall submission is technically compliant in full accordance with the documentation and their requirements. In addition they also confirmed that there were no outstanding issues regarding our submissions."

Enclosed herein, copies of my correspondence to the architect and his consultant regarding this matter."

Mr Mumford noted on his copy of the letter that Harmon had written "to make a point". He discussed the letters with MHP and AFE but did not think it necessary to challenge Mr Boyle's accounts. He merely sent the following reply:

"We hereby acknowledge receipt of your letter dated 9th November 1995 and the attached letters addressed to Michael Hopkins & Partners and Arup Facade Engineering comments contained therein are noted but not accepted."

When questioned about this letter Mr Mumford agreed that Harmon's tender was competitive and that although it might not have been fully compliant any non-compliance in its final tender was not a factor which the task force had taken into account in preferring the Seele/Alvis offer. This was undoubtedly the case as every tenderer had not complied strictly with the invitation in some respects but none was rejected or even the subject of material criticism at the time for non-compliance (nor indeed was it a reason for rejecting Harmon's tender). Mr Boyle immediately sent Mr Mumford a fax on 21 November 1995 asking him to explain why it was not accepted:

"Thank you for your letter dated 17th of November, 1995, reference 4627JM/gse in respect of the above, received on the 20th November 1995.

We are shocked by its contents.

We believe and have been advised by the design team that our final offer is competitive and fully compliant in every respect.

Please advise by return with a full detailed and proper explanation if this is not so.

Until receipt of such an explanation proving the contrary, we stand by our letter of the 9th November, 1995 and the attached letters to Michael Hopkins & Partners and Arup Facade Engineering."

The only answer that Harmon received was a letter dated 22 November 1995 from LML stating that Mr. Mumford would respond "in due course", but Mr Mumford never did so, despite a further letter from Mr Boyle. Discussions with Seele/Alvis started on 23 November as soon as Mr Makepeace had formally decided in its favour. I am sure that the project team evaded giving Mr Boyle an answer to what had without doubt taken place as it would have revealed that although Harmon's tender was competitive on price it was being compared with a materially different proposal which Harmon had not been asked to price.

Whilst this correspondence between Harmon and LML was taking place the task force report was nearing its final stages. At this point the CPG made another intervention, the timing of which was surely not fortuitous. On 2 November Mr Dodds sent a letter to Mr Noble:

"I gather that you are reaching the closing stages of preparing your advice on the cladding package, and I thought you may like to have a relevant extract from the recent Government White Paper setting out its strategy for government procurement, including the procurement of construction. It is always nice to be able to show an understanding of the client's latest thinking on their construction needs. The reference is "Setting New Standards - a Strategy for Government Procurement May 1995 Cm2840 ISBN 0-10-128402-0"

While the whole document is a very worthwhile read, chapter 4 deals with construction and other procurement. Of particular relevance to the cladding package, is paragraph 4.23 on page 25:

The capital cost of a building, and of many other capital assets is typically only a small part (10 to 20%) of the cost of owning and operating it over a long period. To secure value for money emphasis throughout the project will be on the whole life cost of ownership, including maintenance, services and other costs of use, rather than on capital costs only. Building which have low maintenance costs, are energy efficient or otherwise provide for efficient operation will make a major contribution to value for money. The residual net value of the asset on disposal will also be an important consideration. Even when capital costs alone are considered, the lowest tender price will not necessarily be the lowest outturn price.

I hope you find this helpful. In any event, I wish you well and I hope that the best man wins!"

Mr Noble agreed that the letter was written at a critical time. He said that he read it as certainly saying that there was good government support for not necessarily accepting the lowest tender and that it expanded on the concept of "overall value for money" so that other matters might be taken into account, but nevertheless he maintained that he did not treat it as an attempt to influence him. (It apparently failed in its objective.) In addition on 10 November 1995 Mr Dodds also sent a memorandum to Mr Nigel Thompson, the chairman of the CPG (and a partner of OAP), Mr Noble and to Mr Duncan Smith of Alvis plc which enclosed the following extract from Hansard (L1/136):

"New Parliamentary Building

Mr Spellar: To ask the Chairman of the Accommodation and Works Committee, pursuant to his answer of 23 October, Official Report , column 460 , what percentage of existing contracts have gone to British firms; when he expects the award of the cladding contract to be announced; and how many (a) UK cladding firms and (b) other firms have been invited to tender for the cladding contract.

Mr Ray Powell: Many of the companies which are invited to tender for the new parliamentary building contracts are multi-national in either their ownership or their operations, or both. Consequently it is not possible to provide a precise answer about the use of "British firms".

Of the three major contracts let to date, two went to a British-based company. Numerous smaller contracts have been awarded for work which has been carried out almost entirely in the UK although the companies may not have been UK owned.

The tender list for the fenestration units reflected the fact that the cladding industry tends to be dominated by continental European companies. Initially, five companies were invited to tender, at least two of which have a significant UK presence. Negotiations are still underway to determine which of the offers is the most competitive in terms of both time and cost. An announcement is not expected this year."

In my view one would have had to be pretty naive (which Mr Noble was not) not to realise that Mr Dodds' interventions were plainly signalling not just that it would be permissible not to accept the lowest tender but that Seele/Alvis' tender was to be accepted. For what other reason did Mr Dodds copy Alvis in to the circulation of the memorandum? I conclude that Mr Dodds knew that Seele/Alvis' tender was not the lowest and that other factors would have to be evaluated in order to justify selecting it in preference to the lowest tender.

Mr Quick prepared a further draft report dated 9 November 1995. It contained on page 2 a comparison of the offers submitted. Against an item "maintenance costs" OAP had inserted -400,000 for Seele/Alvis (B2) and -2,090,000 for Harmon (A1) and for Gartner (A1). These figures which were produced for Mr Quick by OAP (and not G & T) and were questioned by LML. Mr Mumford annotated his copy with LML's comments: "How is this calculated? In 19 Oct '95 report the difference in maintenance cost was -90,000. It is now -1600000." The adjustments for Risks had not been agreed. LML's view was that "all risks are to be controlled by the project team". Mr Nettleship who Mr Mumford said was a respected experienced engineer made the following additional remarks: "This is an ironic presentation. Then why were not all parties asked to price a scheme based on the original principles?" ... "We would be made to look incompetent if a report in this form became available to an unsuccessful tenderer!" Mr Mumford agreed that if the report had gone out in this form that Mr Quick had drafted without amendment, it would have been inaccurate. In my view there was nothing in this draft which, if inaccurate, was to the disadvantage of Seele/Alvis.

On 10 November 1995 Mr Mumford sent a letter with LML's views to Mr Quick:

The 'Draft' Executive Summary is not currently acceptable to Laing Management Limited and we have attached the comments we would wish to see discussed and included in the Report.

Although there exists some small doubt as to the precise figures which should be included as the Base Offer, these figures do represent Tendered values with limited adjustment/ assessment. What these figures show is that the most competitive submission by a considerable margin is that of Harmon/CFEM.

It has also been established following the Team's visits that Josef Gartner, the Tenderer preferred by LML and with the lowest Technical and Performance Risk as adjudged by the whole Team is not competitive.

LML do concur that the better design solution is that of the Seele/Alvis alternative submission "B2" when compared with the Task Force Design Solution A1 and we would be pleased if this option were selected. Whether the Risk Analysis can justify the selection of Seele/Alvis is yet to be established as LML have not been a party to the figures now included. This must be especially so in the Maintenance comparison (B2 vs. A1) which in the Draft Report of 16 October 1995 showed a difference of -90,000.00 in favour of B2 but this has now grown to -1,600,000.00 in the Draft Executive Summary of 9 November 1995. The other areas of "Risks" which give LML concern are the Additional Supervision costs, which LML have advised are in excess of -400,000.00 for all Trade Contractors to overcome weaknesses in their management/programme/supplier supervision areas, and, the requirement for a contingency allowance, which in LML's opinion should be 7-% as originally advised."

By "more competitive" LML meant that Harmon was the lowest. Mr Baxter also sent detailed and critical comments on the draft in which he set out what he considered to be the true adjusted figures which in total were (fluctuating);

Mr Quick did not reply with a letter although he telephoned Mr Mumford on 13 November 1995. Mr Mumford recorded the points made that Mr Quick had made in a fax to Mr Brian Zelly, the managing director of LML:

"Please find attached our response to the Executive Summary issued by Nigel Quick of OAP on Thursday 9th November 1995 for internal team comments.

In response to this letter Nigel phoned me yesterday and advised me of the following in respect of our comments:

3. (1st Para) Nigel does not concur that the final report of 16 October 1995 could be considered a "draft".

3. (General Comment)

Nigel felt concerned at the "General Tenor" of our comments and that they were derisive and present disharmony. He suspected there was division in the team that would "end in tears" - Nigel likely to stay with his words.

3. (3rd para) Nigel advised that this paragraph also gives concern to AFE and would be re-written and included in the final version of the Executive Summary.

3. (5th para) In respect to our concerns on guarantee, and the fact that anticipated life periods have been included in calculations, Nigel advised, "AFE's words have been used" - "they are confident of the figures".

4. (4th para) On programme LML reinforced that they were not in a position to judge Seele/Alvis programme performance - due to lack of information.

4. (5th para) Nigel advised that it was his positive intent not to discuss the budget, as we are not yet there in our deliberations (could be the next step)."

"Off the record" discussions:

1. Nigel advised the following:

The relative positions of the Team were:

MHP - Fine to go ahead.

G & T - Mike Walker has made his position clear, the tendered figures are what they are, the budget is what it is, there should be a comparison in the report - he has copied his fax to the Client. Does not want "to play the game" on the risk figures.

AFE - Basically okay, couple of technical issues.

LML - Lots of wording issues.

2. I stated that LML's position remains that they are not convinced that the risk assessment is either auditable or establishes Seele/Alvis selection.

3. Nigel stated that if LML do not wish to "play the Game" such as G&T, he would be faced with a split decision (G&T/LML) and (AFE/MHP). In this instance he would "stick his neck out" and go with the design specialists who were convinced of the superior technical merit of the "B2" solution as against the "A1" solution and therefore the selection of Seele/Alvis.

Meeting "pencilled in" with Nigel Quick for 11:00 hours to discuss LML's position.

Mr Mumford professed not to know what was meant by "play the game" but I am sure that he understood what Mr Quick was driving at, as he did not ask what he meant although he made a careful note it. LML, like G&T, was unhappy both with some of the figures that were being introduced in risk assessment and with the risk assessment itself as it could not be justified to an auditor. The "game" was to make enough adjustments so as to reduce the gap between the two tenderers to a margin that would justify the choice of Seele/Alvis for otherwise Harmon would be well ahead. (LML was however happy with the figures for maintenance.)

The task force report written by Mr Quick was submitted on 20 November. It recommended that Seele/Alvis tender for Option B2 should be accepted. It read:

ACTIONS TAKEN SINCE 16 OCTOBER 1995.

These are as follows:

1.1. The Gartner alternative design was tested against the blast loading specification by Arup Facade Engineering. It failed to meet that specification. The loading criteria applied were confirmed to be correct by EEB. In addition, Michael Hopkins and Partners and Arup Facade Engineering confirmed that a thermally broken facade incorporating standard thermal breaks does not offer the specified durability. Therefore this solution has been considered no further.

1.2. Seele-Alvis, Harmon/CFEM and Gartner confirmed their offers for the bronze options B2 and A1.

1.3. Visits were made to the three contractors' manufacturing plants to assess in depth their managerial and technical capability.

1.4. The Task Force carefully considered the probable comparative performance of the options in terms of function, maintenance, design development and the technical, managerial and programme capability of the trade contractors.

FINANCIAL COMPARISON

The offers were made on both fluctuating and fixed price bases They were subject to differing cash flow conditions, their effect on the supply packages differed, there were certain savings applicable only to the Seele-Alvis bid and certain additions which had to be made to all bids to arrive at a common basis of comparison.

The common basis prices are given in the following table. However, it must be noted that the contractors' prices quoted for facade designs of unequal quality.

The Harmon/CFEM and Gartner offers are for the same product. As the Gartner offer is significantly higher than Harmon/CFEM it has been discounted from further discussion.

The product offered by Seele-Alvis is an alternative which is of a superior quality to that priced by Harmon/CFEM. The Value for Money aspects of this are discussed in Section 3 of this report. It should also be noted that the figures stated in the above table are for comparison purposes only. In due course it will be necessary to recalculate the budget for these packages to include or exclude cost additions associated with the lightshelf internal reflector, low iron glass, curved glazing to the corner units, contingencies, fees and any additional management costs which may be appropriate. These extra costs have not been fully assessed at present but the Task Force agrees that they should not affect the choice of trade contractor.

QUALITY COMPARISON

It was stated in our report dated 16 October 1995 that the quality of the technical option priced by Seele-Alvis is superior to that proposed by Harmon/CFEM.

Functionally the Seele-Alvis option very closely resembles the Base Scheme tendered in August 1995.

It is the view of the Task Force that this facade system will have a design life of 120 years as was stated in the original brief. The offer by Harmon/CFEM was to a design conceived in the Task Force to provide a cheaper solution using a less robust silicone sealing system which will also bring a greater maintenance liability.

It is in maintenance terms that the Seele-Alvis option demonstrates its advantage. For Seele-Alvis the major maintenance interval for the facade system will be 50 years.

For the Harmon/CFEM priced option major maintenance will be required every twenty five years with further inspections taking place every twelve and a half years. The cost of this work will be significantly greater than that required for the Seele-Alvis alternative and is likely to outweigh the capital cost advantage. In addition to cost, the maintenance requirement of the Harmon/CFEM solution will mean a severe disruption with the probable loss of use of each room for a period of two weeks once every twenty-five years.

The Seele-Alvis all welded offer is technically very similar to the Base Scheme. Because of this, there will be less development of the design into construction drawings. Therefore, there will be significantly less risk of cost escalation during design development than for the Harmon/CFEM solution. The latter has been developed during the limited life of the Task Force.

The Task Force has appraised and compared the technical and managerial capabilities of Seele-Alvis and Harmon/CFEM. The output from this appraisal was that Seele-Alvis were ranked equal first in technical capability and second in managerial capability. Harmon/CFEM were rated third in technical quality and third in management capability. The supply and erection of the facade is one of the elements which are critical to completion of the project on time and therefore the ranking of the facade contractor is an important criterion in the selection process. The cost implication of delaying the project is in the order of -250,000 per week. Preventions of delay through good performance will obviate the severe impact of such a cost penalty wherever it falls.

CONCLUSION

The financial comparison demonstrates that the Gartner solution can be discounted on grounds of cost.

The final conclusion therefore rests on balancing issues of the superior quality of the Seele-Alvis option with the lesser capital cost option priced by Harmon/CFEM.

We believe that those issues weigh in favour of Seele-Alvis being the offer which gives best value for money on long term maintenance and performance grounds. We have therefore recommended that Arup Facade Engineering should proceed with drawings for the Seele-Alvis solution. We have also asked Laing Management Ltd to enter into talks with the material suppliers and Seele-Alvis to satisfy ourselves that the project can proceed without further programme delay.

We seek your endorsement of these actions."

The events leading to the preparation of the task force report leave no doubt that the objective or "game" as understood and endorsed by Mr Quick, MHP and AFE was to ensure that Seele/Alvis was presented as the preferred tenderer largely by "fudging the figures", both by introducing elements of "soft costs" which had previously not been considered either at all or as material and by the substitution of figures where they could or would not be supported by G & T or which were highly subjective. The effect was marked as the difference between Harmon and Seele/Alvis widened to about -2.4 million. Mr Quick obviously wanted the task force to recommend the acceptance of Seele/Alvis and when faced with the prospect of lack of unanimity sought clearance from Mr Makepeace to produce a majority report. It is clear to me that Mr Quick had been appointed for this very purpose. Mr Quick was the only member of the task force who Mr Mumford thought might possibly be in favour of a British contractor. He maintained that otherwise the project team had no such bias, although that is not a view that I share. MHP was plainly biased towards a UK contractor and towards Alvis (see for example Mr Pringle's evidence and the opposition to a shift to a performance specification) and AFE wanted Alvis for its skills. In my view Mr Fernyhough was entirely right to have put to Mr Mumford that Mr Quick's original draft was "a travesty of the truth", and to describe this part of the tender process in November 1995 as "a charade". Both descriptions are apt and accurate. I accept Harmon's case that the final report was slanted towards Seele/Alvis and I also accept that on the evidence before me Mr Quick was determined that the tender of Seele/Alvis would be recommended. The defendant did not call Mr Quick to explain what he did or why he did it. Thus the project team recommended Seele/Alvis even though its tender was about -2.4 million higher than the Harmon's price of -31,370,996 without any calculation to support its conclusion that it represented "best value for money".

Nevertheless on 23 November Mr Makepeace accepted the recommendation contained in Mr Quick's report and authorised further work to be done to overcome the lacunae in the report and discussions to commence with Seele/Alvis. (The discussions with Seele/Alvis turned out to be prolonged.) Mr Makepeace accepted that he knew that Seele/Alvis' tender was -2.4 million higher than Harmon's, that he had no facts, and only the opinions of the project team, to show that it gave overall value for money, that he was plainly not accepting the lowest tender. The adjustments made by Mr Quick were obvious although Mr Makepeace would not accept that the books were cooked.

The project team recognised that there were potential dangers in proceeding with a tender which was not explicitly the lowest and suggested in two places getting legal advice from Mr Fleet of Berwin Leighton, as appears from the package meeting minutes of 23 November 1995 which was attended by Mr Makepeace and from LML's letter to TBV Consult of 30 November 1995, which was copied to Mr Makepeace. Mr Makepeace accepted that it had been agreed to do so but he said that he reached his decision not to obtain legal advice having discussed the matter with Mr Webber although in his letter to Mr Webber of 28 November he himself proposed "not to do so on the basis that, at this stage, we are not actually rejecting Harmon's offer":

"I attach a copy of the task force's second report bringing their deliberations to a conclusion. They recommend that of the two options available we should proceed to negotiate with Alvis Seele for its better all round value and lower risk.

The team's first report identified that Alvis Seele offered a more robust long life solution. Their main concern this time was to assess the capabilities of both the companies, in particular how they would respond to the reduced manufacturing period - from 19 to 13 months. Both firms confirmed their ability to meet the reduced timetable but Alvis Seele were rated more highly. Although it does not come out in the report, Alvis Seele's intention is to carry out the work at the Alvis works, using their expertise in meeting the exacting demands of the defence industry, with Seele inputting their knowledge of curtain walling and cladding manufacture.

On current figures the cost differential between the two offers varies between -2.8m and -2.25m in favour of Harmon depending on which figures are used. The fees will be a proportion of the capital costs though, potentially, the Harmon scheme involves more work being based on the rapid redesign for the revised Tender. The soft costs are likely to be about 50% more for Harmon's scheme; the difference between travelling to Doncaster (with some trips to Austria) and to Pinon, France. But since the soft costs might be only -0.1m - -0.2m this is marginal. Using Alvis Seele would also avoid the possible cost of currency fluctuations.

As the report recognises, the costs quoted are neither firm nor all embracing. Apart from the additions mentioned above, the negotiations have still some way to go whichever company is selected, the supply packages have to be renegotiated, and there will be design contingencies (though potentially less so with Alvis Seele). In total the cost might come to around -35m.

There is one potential major saving. The task force was advised that in order to try to maintain the programme the security brief should remain unchanged. Gartners put forward an alternative solution using hollow tube section which they believed would achieve significant savings. After discussions between EEB and AFE this has been rejected as inadequate. However, the blast performance criteria for the courtyard fenestration is less demanding though the scheme has adopted a consistent standard throughout, partially for aesthetic reasons. In the next stage of the negotiations the team will be instructed to explore with the selected company whether a more economical solution overall could be achieved by adopting a reduced specification for the courtyard elevations."

As I mentioned in my minute concerning AFE's fees a decision should have been taken by 6 November. To have any chance of meeting the programme negotiations should continue now with only one company, which it is proposed should be Alvis Seele. As the report identifies, to proceed with Harmon would be to proceed with a lesser product for a prima facie lower cost, though this is subject to greater risk given that the tenders were based on a rapid redesign exercise. Harmon have over the past week made sure that all members of the team are aware of their continuing interest and they have undoubtedly invested considerably, including in the mock-up. However, the EC advertisement (copy attached) set "overall value for money" as the criteria for award and allowed alternative tenders. Laings suggested we should touch base with the legal advisers. I propose not do so on the basis that, at this stage, we are not actually rejecting Harmon's offer, (though they will soon become aware of our waning interest), that the Alvis Seele product is superior and that when the cost comparison is made with Harmon's original bid (-40.5m) to which it is analogous it is much less expensive."

The last part of the last paragraph is a further example of not comparing like with like. It is very misleading.

In other respects Mr Makepeace's letter to Mr Webber is a remarkable gloss on the facts so here as elsewhere I noted Mr Makepeace's careful choice of words and his attempt to distance himself from reality and the consequences of his own actions all of which were in my view calculated not to give a completely straight and truthful account, which I am sure he would have given had it been in the defendant's interest to do so.

The AWC had met on 22 November 1995:

On 28 November the Chairman sent a pointed letter to Sir Michael Hopkins about cost overrun.

On 29 and 30 November 1995, the Chairman of the AWC, accompanied by Mr Webber and Mr Makepeace, visited Brussels where they met members of the European Parliament and others. The purpose of the visit was said to be in order to discuss the new building which was then being built for MEPs. However Mr Brand subsequently met Mr Makepeace and recorded in his diary:

"4200 Seele Alvis or not. Brussels did accept higher offers but PWD never. 11.00 am Seeing Mr Webber."

Mr Makepeace maintained that on that visit there had been no discussion about whether or not acceptance of the Seele Alvis tender would conflict with EC Law and the PWR. However, this denial does not square with Mr Makepeace's own diary notes (and Mr Brand's note) and I do not accept it. Mr Makepeace's diary (exhibit P7) does of course record discussions concerning the new building in Brussels and comparisons between it and the NPB. There was however this note:

"EC advertising - abide by it. Don't accept lowest tender. Have cttee decide if go above. Contractors have objected."

Mr Makepeace said that the discussion referred to the building in Brussels, although it is by no means clear that EC procurement regulations applied to that project. However I can make no further findings about what took place on that visit or about advice (if any) was given, beyond saying that the NPB project was raised and that there were discussions about procurement procedures.

At the request of Mr Makepeace Mr Quick was asked to improve its report in order to overcome its patent weaknesses:

"Thank you for your letter of 20 November with the second report from the Task Force I am grateful for the effort which has gone into these further deliberations. As you are out today I have set down our thoughts so that we can speak tomorrow.

It is recognised that the stage has been reached where the negotiations should continue with only one company and the line advocated seems likely to gain acceptance. However, before a decision can be taken, it would be necessary to seek to expand and update the cost table to include some of those which appeared in the corresponding table in the first report and possibly additional items.

I have seen only some of the correspondence which led up to the second report, but obviously Jerry Mumford's letter to you of 10 November is particularly germane. As I understand it, items 9, 10 and 11 were accepted by all members of the team. Since the report, some further work has been done on the "soft" costs, (item 13), which suggests that the Harmon costs might be -50,000 higher, but since the total cost with either tenderer is not likely to be more than -200,000, then obviously this is marginal.

I think it was acknowledged that the additional supervising costs were understated, but that Laing's felt that these were a neutral factor. I wonder if that is so. We know how Harmon's operate by putting together teams. That may work well for a conventional fenestration product; but that description does not apply to our requirement. On the other hand we know that Alvis are geared to working with specialist metals, albeit in a different industry, but have Seele to input the fenestration expertise. Therefore while the attributes behind the two offers differ, the latter seems better balanced to meet the particular needs and potentially needs less support.

The maintenance costs are clearly crucial. While I have no difficulty in accepting that, as a result of further consideration, the variation in the costs between the two options could have altered since the first draft report, obviously the reasons for the suggested increase have to be clearly set out. Can this be done? I appreciate too that there were differences within the team about these costs, but is there a maximum figure to which all members are prepared to subscribe.

It would also be helpful to put into the new table a quantification of those additional items covered by the second report, i.e. the difference in their technical and managerial capability, which were unknown when the first table was compiled.

The final area of risk which perhaps should be addressed further is the knock on impact of a failure to complete the fenestration on time. Although the contract contains the standard provision about bearing responsibility for any additional cost to subsequent packages caused by failure to complete on time, we all appreciate that it would not be as simple at that. There would be escalating management costs to try to keep the project as close as possible on track, apart from dealing with claim and counter claim.

I should be grateful if you could address this matter quickly. I would look for a unanimous report, but if that is unachievable then I would accept a majority report with the minority view clearly stated."

It can be seen from the last paragraph in particular that Mr Makepeace was well aware of the problems that might be created by LML and G & T. His reference in the penultimate paragraph to the cost of delay is also remarkable as it was a constant.

Mr Quick produced a revised report within a few weeks. In his covering letter of 19 December 1995 Mr Quick said:

"I am pleased to attach the Task Force's unanimous recommendation to proceed to contract with Seele-Alvis. We have addressed all the issues raised in your letter of 5 December and they have been evaluated in financial terms wherever possible. We have not evaluated the performance risks of the two trade Contractors but we have agreed that the statements made in the Executive Survey dated 20 November 1995 stand unchanged. I trust this will conclude the matter. Please let me know if you require any further help."

The Report read:

"Fenestration

Addendum Report, 18 December 1995

1. Brief: Following receipt of a letter dated 5 December 1995 from PWD, the Task Force was reconvened to consider the matters raised therein.

2. Action: The Task Force met on 11 December and reached agreement on the content and form of its response. The sums to be entered into the Risk Analysis attached have now been agreed by all members of the Task Force.

3. Conclusions: The Risk Analysis shows in financial terms the benefits of the low maintenance costs of the Seele-Alvis solution referred to in our earlier reports. The output figures in this table have been computed using a DCF of 8 percent. We would also refer you to our report of 20 November in which we stated that the technical and managerial ability of Seele-Alvis was more highly rated than that presented by Harmon/CFEM for this project.

4. Future Action: It is the unanimous recommendation of the Task Force that the dialogue with Seele-Alvis as preferred contractor proceed to establish the basis for Contract.

Analysis of Tenders

[Secondary glazing] (62,804)

Hinges change (199,506)

Novated Adjustment (682,000) (701,000)

Advanced Payment (20%) Included (679,631)

64,536

Machining 68,625 Not Available

Interlayer Included (Estimate) 136,000

Total Adjusted Tender -30,206,963 -31,362,959

1. As can be seen from the above, each Contractor has very different levels of pricing for each element, this is especially noted on Harmon/CFEM for the lightshelf and Seele/Alvis on the hinges, and could easily change in Post Tender dialogue.

2. The low iron glass substitution with float glass is still under review by PWD, if not accepted an addition is required of -86,569 to Harmon/CFEM and -183,255 to Seele/Alvis totals.

Adjusted Tender Figure -30,206,963 31,362,959

*Price Risk/Negotiation 500,000 500,000

Likely Order Value -30,706,963 -31,862,959

* This figure covers the commercial issues which will be addressed in the Post Tender dialogue, such as Terms and Conditions qualification/clarification included in their original submissions.

Likely Order Value -30,706,963 -31,862,959

Contract Escalation up to

Const. Issue Drawings (5%) 1,535,348 (2,5%) 796,574

Contingency Post Contract (5%) 1,535,348 (5%) 1,593,148*

Total Capital Spend 33,777,659 34,252,681

Travel Costs (differential) 50,000 -

Additional Contingency (2.5%) 767,674 796,574

Supervision (differential) 100,000 -

Total with risk/soft costs -35,553,333 -35,442,255

When giving evidence Mr Baxter of G & T was asked about the report in the light of his previous contribution to the work of the task force. He said that the figure of -679,631 which had been deducted from the Seele/Alvis price on account of advanced payment had been calculated on an assumption of 20% whereas previously he had assumed that 10% had been included in Harmon's tender. The addition of -150,000 for the interlayer had been reduced to -136,000 although he did not know of any good reason to do so. Furthermore although he had allowed an addition of -273,000 for the lightshelf this had become -167,000. Mr Baxter had used -300,000 for the lightshelf in adjusting Harmon's price which he had thought sufficient. He thought that the Seele/Alvis allowance should be -273,713. It was now -953,125. He said that he would have asked that the original figures should be retained. His replacement, Mr Walker, had also been unhappy about the favourable treatment of the Seele/Alvis' tender in the case of the advanced payment and the lightshelf. Had the items for the lightshelf and the advance payment been so stated the balance in favour of Harmon would have been about -1 million. In this report the differential for maintenance had reverted to -424,000, as compared to -1.6 million in the November report. Mr Barry's report contains a useful summary and discussion of the changes. He said that from beginning to end the tender process conducted by the project team was unusual at all stages and that he had not seen it before. He had seen nothing in the documents that he identified as a traditional tender evaluation process being undertaken. I entirely agree with Mr Barry's views. Although there are naturally various ways in which tender evaluations are carried out and reported on I too have never seen one such as this. Even if it had not been slanted it would have been unusual. One might have expected something like a rating or scoring system such as that proposed by LML (and partially used by it) which have would been aligned to the ranking of the criteria (and carefully weighted) and published alongside them so its operation could not override the ranking and so that the tenderers could see that it had been operated fairly. To try to put sums of money on subjective judgments, as was proposed on 25 October, was not sensible, as Mr Mumford said when he confirmed that the team had not agreed in advance the criteria that were to be used to assess the tenders.

The report was further revised on 2 January 1996. I am sure that the purpose of Mr Makepeace's request was that the final version should bridge any gap between the Seele/Alvis tender and that of Harmon since he was soon referring to the tender of Seele/Alvis as the "lowest", which was of course not true. First, in his report to the AWC for December 1995 Seele/Alvis are so called, which Mr Makepeace accepted was factually incorrect. Secondly, in his report of February 1996 to AWC he said:

"9. It proved impossible to reach agreement with the lowest tenderer for the fenestration by the end of January, not simply because they failed to produce the required information, but on 2 February they sought over 20 changes to the contract conditions and made changes to the pricing document which would have made them no longer the lowest tenderer even on a value for money basis. The Chief Executives of the tenderer's parent companies were called in by the Director of Works to assess whether they were still seriously interested in the contract and advised that they were only marginally the lowest tenderer. The companies professed keenness; admitted their lawyer inspired letter was unhelpful and withdrew it in favour of a much abbreviated version. Subsequent negotiations have been more fruitful but the results are now being examined by their lawyers before advising the parent companies' boards. The change to the pricing document has also been reduced significantly and may have been withdrawn. The company is due to respond next week."

Mr Makepeace also said, revealingly, that his audience knew "what was going on".

On the basis that the effective decision to engage Seele/Alvis had been taken on the basis of the November report, that of December 1995 might conceivably be regarded as part of an internal budgeting exercise but if that were so it would not have been necessary to have considered Harmon's tender or to have made notional adjustments to it so as to arrive at any comparison with Seele/Alvis. It is curious, for example, that adjustments are made for fluctuations but not on the same basis, that there are marked differentials against Harmon for travel (-50,000) and supervision (-100,000), and that a very substantial amount for maintenance (about -450,000) was added beyond Seele/Alvis' figure (although it might fairly represent the difference between Options A1 and B2). It is noteworthy that higher maintenance cost was deliberately omitted by H of C when reasons came to be given for rejecting Harmon's tender, even though Mr Pringle said that it was one of the new criteria which was actually used to assess the tenders. Mr Barry said that the financial adjustments made in paragraphs 5.3-5.5 were not legitimate for the purposes of assessing tenders. Since they had been excluded from the task force report they ought not to have been used in this report without qualification. In my judgment they were put in and had to be put in as the choice had to be justified on grounds of cost. Mr Noble in its witness statement gave engineer's reasons:

"...the B2 scheme for the 4200 Package .... was the best solution on offer. It was technically superior to the A1 option and when taken over the lifetime of the NPB, I believed it would be cheaper to the Authority than the A1 solution because of its more limited maintenance requirements. I should say that even if the cost analysis set out in the December Task Force report had shown that Harmon's tender for option A1 was cheaper than Seele-Alvis' tender for the B2 design, I would have continued to recommend to the Authority that it awarded the 4200 Package contract to Seele-Alvis. This was because I believed that technically, option B2 was infinitely superior to option A1 and would provide the House with a much better quality of finished product. In the end, to me, the merits of the product proposed by Seele-Alvis overrode matters of price."

On 12 and 16 January 1996 Mr Boyle, prompted by a conversation with Mr Kerr, wrote to LML to offer further savings and assistance and to maintain contact with the project team. LML however declined these overtures.

During the negotiations with Seele/Alvis there were changes in H of C's policy about the terms upon which tenders had been invited. During the tender period it was made very clear to all tenderers that alterations to the terms would not be entertained. Once it was clear to Seele/Alvis that they were successful and that the contract was virtually in the bag and that H of C could not afford further delay they took a hard line in the negotiations. Seele/Alvis were able to exploit the fact that the preferred Option B2 was their proprietary product that they would not allow changes to it. LML was so concerned about their stance that it seriously considered an alternative. On 20 February 1996 it said:

"I attach a summary of the technical restraints imposed by our following alternative procurement routes to that for the B2 solution.

I conclude that the only positive alternative option appears to point to the contractor design route. However the feasibility of such a scheme may take time to prove and costs could be uncertain until a late stage in the design development. It is a high risk strategy."

First, it had been assumed that contracts made by H of C with designated suppliers would be novated with the trade contractor and for that purpose the terms of trade contracts provided for back to back liability. In reality H of C could not get satisfactory terms from the suppliers so the terms of the trade contract had to be renegotiated so that Seele/Alvis were permitted a limited degree of negotiating rights with the suppliers, and secondly their liability to H of C in respect of suppliers under the trade contract was limited. I deal later with the implications of these moves. An indication of the difficulties can be seen from the Mr Makepeace's report to the AWC for February 1996 to which I have referred. Mr Makepeace said that it was necessary to obtain legal advice on these points and on whether to award the contract to Seele/Alvis would comply with EC procurement law, as by mid February 1996 he was moving in the direction of entering into a contract with them. The steps then taken by Mr Makepeace (when a change of a contractor would have wrecked the programme for the project) contrast with his decision some three months earlier not to seek legal advice about the award of the contract to Seele/Alvis. (I shall not draw any inference about the nature of the legal advice that may or may not have been given.)

On 1 March 1996 LML sent TBV (with copies to Mr Makepeace and G & T) a reasonably detailed assessment of the costs which Harmon could have expended when tendering. It came to -164,000 (inclusive of 15% for overheads). An inquiry of this kind could only have been prompted by a belief that Harmon might have to be compensated.

Mr Boyle wrote again to Mr Brand of LML on 21 March 1996:

"We are disappointed that we find ourselves with the need to write to you to obtain a response to our numerous verbal enquiries to ascertain our position in securing this project.

You are aware that we have made several telephone calls to you and your colleagues since our last meeting on Monday 30th October 1995 and our correspondence of 16th January 1996, reference EMB/1166/NPB/COMMON/LM2.

Our correspondence of 21 November 1995 confirmed our understanding that we were, and still believe we are in light of your advice to the contrary, the lowest conforming tender. Our market intelligence tells us that this is still the case. However, despite this fact you have been and are currently involved in negotiations with one of our competitors.

We were led to believe that this was a public bid governed under European bid rules.

You are equally aware that we have targeted this project within our organization and have provided unlimited resources throughout our involvement in the project as a matter of support to you and the Team, namely:

Construction of the mock-up to the satisfaction of all concerned parties;

Technical, commercial and contractual advice;

Preparation of the Tender; and

Post bid detailed presentations and responses.

We are sure that you fully understand and appreciate that the cost to provide this service has been substantial. Therefore, we seek your confirmation that in the final conclusion for the appointment of the works that it will have been on a fair and equitable basis.

Your advice as to our position in this regard would be appreciated."

Mr Mumford took advice from Mr Fleet of Berwin Leighton about this letter as there was a standing instruction to that effect. Mr Makepeace wished to give the impression he was not consulted about these letters or the answers ("I do not believe so"; "not that I can recall") but I do not believe him as I am sure that he would not have left Berwin Leighton to decide H of C's policy and to draft letters that either had not been approved by him (which required him to have seen Harmon's letter) or were in accordance with his instructions. When asked about Mr Boyle's letter Mr Brand agreed that Harmon's tender was the lowest although he jibbed at agreeing that there were then negotiations with Seele/Alvis. The first reply proposed by H of C's legal advisers was:

"Thank you for your letter of 21 March 1996 in connection with the above.

We confirm that we are unable to add any further information to our letters of 22 November 1995 and 15 and 22 January 1996 in response to your previous enquiries, both by post and telephone calls.

We reiterate that we will respond at the appropriate time when our Client gives us permission."

The letter which Mr Brand sent on 26 March was also in accordance with advice given to H of C. It read:

"Thank you for your letter of 21st March 1996 regarding the current position on your tender for the above Package.

I appreciate you would like to know the outcome of your bid. However, at this stage, I can confirm only that we are continuing to review with the Authority's professional team, the competing tenders received for this complex package. This review is being conducted in accordance with the notified and required criteria for selection and award under the EC rules.

We will advise you and the other tenderers as soon as the deliberations have been completed."

Mr Brand accepted that if the letter meant that the team were still assessing the tenders then it was not true as the client had instructed the team to follow the recommendation of the task force. He also agreed that he signed letters on the instruction of Mr Makepeace to implement legal advice.

On the other hand Harmon was also taking legal advice. On 19 April 1996 it replied to a letter from LML's letter of 17 April:

".....it does not address our concerns.

So as to avoid any misunderstanding, we are particularly concerned with the inference made in the press release [a reference to Building of 4 April 1996 which had reported that Alvis had got the contract] that the British Government has interfered with the bid process. We therefore, request by return your confirmation whether or not this the case."

The letter was overtly copied to no less than three firms of lawyers (including Norton Rose) and to Mr Makepeace.

LML sent a predictable reply

"We thank you for your letter of 19th April 1996.

As indicated in our letter of 17th April we will not comment on media speculation and confirm that there has been no "press release" by the Authority as implied by your letter.

However, in response to your specific enquiry we can confirm that the procurement procedure is being carried out by the Authority and their professional team in accordance with the notified and required criteria for objectivity of selection under the rules. The Authority advises that such procedure has not been fettered by any external influences whether by H M Government or any other third party."

On 2 April 1996 LML sent a letter to Mr Makepeace listing numerous significant amendments which had resulted from the negotiations. They included the fact that Seele/Alvis' off-site programme was very different as Seele/Alvis would not complete performance testing of the prototype joints etc until fabrication was well-advanced. In the cross-examination of Mr Mumford it became apparent that Seele/Alvis had taken advantage of the delays to the NPB and the elastic wording of the tender documentation to achieve better programming of the off-site work without affecting the price (indeed almost certainly saving them money).

The PWD sent Seele Alvis Fenestration Ltd a letter of intent on 4 April 1996 and another on 16 April 1996, as it took two weeks to deal with what Mr Mumford called "a small number of exceptions" raised by the company. Mr Brand agreed that after the first letter of intent had been sent there was no longer any reason not to withhold information from Harmon and that such a move had been discussed with H of C's legal advisers and their recommendation not to tell Harmon until the contract had been signed had been followed. Mr Brand would not be drawn as to whether the reason for the delay was to avoid the possibility of Harmon seeking an injunction. However all the evidence points to that conclusion. H of C was, I am sure, well aware that it had not followed the correct procedures and that its actions were open to challenge by Harmon.

Even after the second letter of intent had been signed by the contractor on 18 April 1996 Mr Mumford continued to hold discussions with the company. On 18 April 1996 Mr Dodds of CPG at the request of the DOE sent Mr Makepeace a fax with some additional wording to the text of a speech which the Rt Hon Selwyn Gummer MP, the Secretary of State for the Environment, was shortly to make to order to cover the advantages that the award of the contract would bring to Alvis, as UK manufacturer. Mr Dodds' draft referred to Alvis having "beaten the field of very tough international competition" and said "this diversification by Alvis from defence into construction marks the culmination of three years work by the Construction Procurement Group....". The draft had been cleared by OAP as well as Alvis which once again shows the close connection between OAP and CPG and the extent to which OAP and CPG had a common agenda to secure Alvis as the UK contractor. Mr Makepeace replied telling Mr Dodds not to "believe everything you read in the Press! Alvis have not secured the contract. A letter of intent has been issued..... but there is a major hurdle still to be cleared on contract value. We will not know the result until the end of the month.... . ...this is a Parliamentary not a Government project.... . In the circumstances at the very least a much more circumspect line is called for than in your present draft." This was written for the record as it is strikingly at variance with the facts. The final contract sum was -33,686,066.95.

The trade contract was sent to Mr Makepeace on 23 April and, after it had been approved by him and signed by the contractor it reached the Clerk to the House who signed it on 8 May 1996. That date was treated as the date of the award of the contract, notice of which was sent on 14 May.

The criterion given for the award to Seele/Alvis was "overall value for money". On 16 May 1996 LML informed Harmon that its tender was not successful:

"We refer to your Tender for the above package relating to the New Parliamentary Building.

We regret to inform you that after comprehensive evaluation, your Tender has been unsuccessful.

The successful Tenderer is Seele Alvis Fenestration Limited.

We confirm that formal notification of this contract award has been despatched to the Official Journal of the European Community this week.

On behalf of the Authority and the professional team, we take this opportunity to thank you for your Tender submission."

Around this time the AWC was concerned to know the sources of the materials and work for each of the packages so Mr Makepeace formally asked LML for that information (L1/142). This was not the first such request from Mr Makepeace. The reply showed that for the fenestration package, 62% was thought to be of UK origin; 18% "European other"; 2% French; 6% Swiss and 12% German. The latter evidently comprised -1.5m profit for Seele and -2.5m for Seele's preliminaries (ie overheads). -2.5m was considered to be the management fee payable to Seele and Alvis.

In accordance with Regulation 22(1) Harmon wrote on 24 July 1996 asking for the reasons why it was unsuccessful:

"We refer to your letter dated 16 May 1996, reference 5877/J/gse informing us that our tender for the above package relating to the New Parliamentary Building was unsuccessful.

We are entitled under Procurement legislation to receive from you the reasons why we were unsuccessful.

Please treat this letter as a request for reasons why we were unsuccessful and provide us with the detailed reasons within 15 days from the receipt of this letter."

Mr Leake of LML prepared a draft reply, the existence of which only became apparent on Day 12 of the trial. The parts placed in evidence read:

"We refer to your letter dated 24 July 1996 and our acknowledgement letter dated 2 August 1996.

On behalf of the Authority we are now in a position to inform you, in accordance with the Public Works Contracts Regulations 1991, ("the Regulations") of the reasons why you were not awarded the Contract. Our comments are conclusive and are not intended as the basis for any discussion or comment.

Your tender dated 29 July 1996 and subsequent submissions were judged against the criteria stipulated in the O J Notice dated 23 December 1993, Reference S250.

In assessing your tender against the criteria, we would advise that your Pricing Submission was competitive but that the following elements were significant in the Award decision.

In accordance with the OJEC advertisement and Tender Documentation, the successful tenderer offered an alternative tender proposal that was considered by the Project Team to be technical and commercially superior to the design issued for tender. Along with the technical advantages the chosen alternative tender was deemed to offer significant improvements in respect of long term maintenance when compared to your submission.

The successful tenderer offered a modern well equipped factory deploying manufacturing techniques (especially welding) not normally available to the Construction industry that were particularly suited to the Project and this was considered important in terms of technical capability and in achieving a high quality product. With respect to yourselves, no specific operational facility could be evaluated as your proposal was to mobilise in vacant areas of your factory for this Package. We were particularly interested in Tenderer's welding proposals and facilities, which in your case we understood that this expertise was to be subcontracted or supplemented with subcontractors.

The successful tenderer was considered to have proposed staff that were thought to possess the best technical and managerial skills of all those interviewed including yourselves.

All Tenders were evaluated by comparing the initial construction costs, added to which were the Tender optional items, long term maintenance costs and sundry cost factors. Your submission proved uncompetitive in comparison with other in respect to the optional items, the analysis of maintenance costs and sundry cost factors.

The information we have provided to you in respect of each of these elements, when placed against the award criteria, resulted in our decision not to award the Contract to yourselves.

We hope that the above information will be of assistance to yourselves in assessing your performance in relation to the Contract."

In these draft letters, LML set out its understanding of the basis of the decision to award the contract to Seele/Alvis. The salient factors were:

(1) The alternative tender from Seele/Alvis was technically and commercially superior to the base scheme design.

(2) The alternative design also offered significant improvements in respect of long-term maintenance when compared with Harmon's submission.

(3) Seele/Alvis' modern factory and manufacturing techniques were superior to those of Harmon.

(4) Seele/Alvis' welding proposals and facilities were of particular interest compared with those of Harmon.

(5) Seele/Alvis' staff were thought to possess the best technical and managerial skills of all those tenderers interviewed.

(6) Although Harmon's pricing submission was competitive, when other costs including long-term maintenance and optional items were added, Harmon's submission proved to be uncompetitive.

Mr Leake then sent the draft to H of C's solicitors (Berwin Leighton). As a result of his discussions with that firm (L1/172) Mr Leake then prepared a shorter letter which he sent to Mr Makepeace. In the form amended by Mr Makepeace it stated:

"We refer to your letter dated 24 July 1996 and our acknowledgement letter from Mr Leake dated 2 August 1996 during our Mr Mumford's absence on leave.

On behalf of the Authority we are now in a position to inform you, in accordance with the Public Works Contracts Regulations 1991, ("the Regulations") of reasons why you were not awarded the Contract.

Your tender dated 29 July 1995 and subsequent submissions were judged against the criteria stipulated in the OJ Notice dated 23 December 1993, Reference S250 ("the OJ Notice").

In assessing your tender against the criteria, we would advise that whilst your pricing submissions were competitive they represented only part of the assessment criteria considered in reaching the final Award decision.

The Project Team considered that your proposals for manufacturing, organisation and skilled staffing were uncertain and judged to carry a high level of risk to the overall quality of the Project. This was particularly manifest in respect of your proposal to mobilise a new manufacturing facility and engage subcontract support for significant elements of the manufacturing process.

The factors specified above when placed against the overall award criteria, resulted in the Authority's decision not to award the Contract to yourselves.

We hope that the above information will be of assistance to yourselves in reviewing your performance in relation to the Contract."

As a result of the advice given by Berwin Leighton the defendant suppressed factors (1) and (2) above - which were the decisive reasons - as well as factors such as (4) and introduced reasons which I consider never formed part of the decision. Mr Makepeace who as project sponsor took and was responsible for both the decision and for the letter characteristically gave no satisfactory explanation for not telling Harmon the true reasons for his decision why they were not awarded the contract. He said that he thought that the purpose of giving reasons was to give contractors information which they might be able to use to improve their performance in subsequent tendering exercises" and he gave other patently evasive answers to simple and direct questions. I have no doubt that he deliberately decided

(a) not to mention the fundamental reasons for not awarding the contract to Harmon;

(b) to remove references in the letter which might lead back to "overall value for money" since by then he knew that he had been wrong not to follow Mr Linge's advice and to give proper criteria and that those words did not comply with the law (I deal later with whether they do or do not comply with the law);

(c) not to state that the successful tenderer had won with an option which he had decided should not be available to any other tenderer even though it was materially different so that there was no tender comparable to it;

(d) not to express the reasons in the terms of the OJ notice or (if it were the case) of identified selection criteria or minimum requirements.

Even the reasons given do not stand up to scrutiny. Harmon was not creating a new manufacturing facility but re-activating one that was still in use. It had a worldwide reputation for cladding, curtain walling and fenestration systems, and as Mr Josey said, its skills lay in project management and in starting from scratch so it was well able to revive a dormant factory. As for engaging "subcontract support for significant elements of the manufacturing process", Mr Mumford admitted that this was untrue. Harmon was proposing to do no more than the successful contractor: each was a company that was the vehicle which would not be carrying out anything other than administration (and in the case of Seele Alvis Fenestration Ltd even that was going to be handled by other companies) and which would subcontract to other associated companies all manufacturing, assembly and installation operations. Seele Alvis even subcontracted the machining of all the aluminium bronze components. Mr Josey rightly said that it was common for welders to be acquired and, I am sure that Harmon would have had no difficulty in securing sufficient competent welders who could if necessary be brought to the standards required. Accordingly H of C did not comply with Regulation 22(1) of the PWR either in giving the true reasons or in giving the reasons by reference to the basis upon which it was purporting to award the contract to Seele/Alvis and in so doing, once again, failed to treat Harmon fairly and openly. This is not an example of a semantic dispute about the expression of reasons. One has only to look at the successive reports of the task force to see that there never was any clear basis and that the reasons varied. The first report of 18 October said:

"Options A1 and B2 estimated by Harmon/CFEM and Seele-Alvis offer optimum combinations of capital cost, maintenance cost, risk of price escalation and designs that are technically superior to Option A2."

It proposed that the next stage was "to test the management and programme capabilities of Harmon/CFEM and Seele/Alvis...". So both A1 and B2 were level in terms of capital cost (including the so-called "soft costs") and maintenance costs but the second report of 20 November fastened on the superior quality of option B2, its low maintenance requirements and less risk of cost escalation in design development, and like the third report rated Seele/Alvis more highly for technical and managerial abilities. So it was or ought to have been essential for there to have been some record of the decision and the reasons for it, as LML had advised..

Mr Boyle said that the decision to start proceedings was taken in the light of the answer of 6 August and the project team's efforts to dissuade Harmon from further action, in particular conversations with Mr Aikenhead and Mr Kerr, as recorded in Mr Boyle's file note of 13 August which I find entirely plausible. (It is also consistent with and foreshadows certain respects in which this action has been defended.)

"Ron called two (2) times this morning.

First call Ron informed me that he has located Gary Haider but, that Gary has not returned his call or answered his fax. Ron confirmed that Gary was in Minneapolis with Kathy Brown who also confirmed that his fax had been delivered to Gary.

Ron informed me that filing the writ would do irreparable damage to Harmon going as far as to say that Harmon would never work in the UK again.

I asked Ron why Laing was so concerned especially in light of the fact that they are not a defendant in the suit. Ron responded by saying that it was their Client.

Ron asked me to intervene and to ask Gary to return his call as a matter of urgency.

Ron called back at approximately 11:30 a.m. CET. Ron reiterated statements from this morning.

Ron told me that our Variation Account on SmithKline Beecham will be adversely affected by our actions and to quote him "all bets are off." Ron suggested that SmithKline Beecham will now be resolved legally and could as a result thereof take 2 years to resolve.

I told Ron that I understood from both him and Tony Aikenhead that the two projects were separate and not linked in any form or fashion. Ron said that the two projects are not directly linked but, indirectly they are. Indicated that it will also impact what we are doing on Daiwa and Scottish Widows.

Ron related the British Government to the Mafia and said they have their own rules. I asked him why even have a judicial system to which he responded the need exists but it does not apply to the Government.

Ron told me it was obvious that Harmon did not understand the way the Good Old boys in the UK worked.

Ron had a conversation with a legal representative of the Government. He informed me after this conversation that only 9 cases have been brought to bear. Of these only 2 have been progressed in the last 5 years. Ron said that the gentlemen, representing the British Government, to whom he was speaking, suggested that the British Government tells people to "FUCK OFF" and they obediently cease in their action."

Not surprisingly at this point Mr Boyle fell out with Mr Kerr. The writ was issued on 13 August 1996. The notice required by Regulation 31(5)(a) was given by Harmon's solicitors' letters of 13 August 1996.

On 24 July 1996 Seele/Alvis Fenestration Limited wrote to LML offering to construct the weather seal by welding aluminium bronze and manganese brass, instead of bronze to bronze. It estimated the cost saving to be about -300,000. Mr Noble said that this proposal resulted from trials which the company had been carrying out into the feasibility of welding bronze to brass and because they had found that option B2 would not necessarily produce a weather tight seal. This change (rightly, in my view, described by Mr Fernyhough as a volte-face) naturally came as a surprise to AFE as there had been no prior reports that Alvis had run into any problems, although of course Alvis had experienced problems in carrying out the welding trials in April 1995. This proposal was swiftly followed up by another proposal on 25 July 1996 by which Seele/Alvis offered further savings of around -313,500 in the method of fabricating the cast on inner glazing clamp. Both proposals were very quickly accepted by the project team and implemented. On 5 August 1996 Mr Leake issued a Construction Manager's Instruction no. 534 authorising the later proposal. Both changes meant that the scheme was now virtually the same as the original base scheme in these respects. Mr Noble agreed that Harmon might well have been able to build such a scheme and that in terms of performance it was virtually identical to the base scheme. The net result is that in these two important features, the window rebate and the clamp, the scheme was effectively back to square one and that all the effort spent on endorsing the Seele/Alvis proposal as technically superior to Option A1, in developing alternative proposals and seeking alternative tenders was, to that extent, wasted. Although Mr Noble was naturally reluctant to express an opinion about why these changes were made, I conclude that Seele Alvis Fenestration Limited found that it would be in serious problems in attempting to implement Option B2 which it had put forward and that it was almost certainly likely to lose substantial sums on it unless it could devise alternatives and offer them as technically equivalent and financially attractive to H of C.

I now turn to the issues. Some will be considered individually; others will be grouped together so the order in the parties' list will not be followed slavishly. Some overlap or are repetitive. The formal answer to each is to be found in the list of the issues at the end of the judgment. That list reproduces the parties' references to the pleadings but I shall not generally refer to them, but since the defendant's case was directed to the pleadings I ought to say that I have taken them into account.

This issue masks or is the precursor to a number of questions, eg :

1. Is Harmon a contractor for the purposes of the Public Works Contracts Regulations 1991?

2. Is Harmon able to make a claim for any breach of Regulations or any other obligation committed by H of C before Harmon itself became involvement in the project?

3. Is Harmon able to recover damages in respect of losses suffered by other Harmon companies, suffered either before or after Harmon's involvement?

Harmon pleaded in paragraph 1 of the statement of claim that it was such a company prior to ceasing operations in March 1998. It did not specifically allege that another company in the group acted as agent for it or that it was not necessary to distinguish between the various companies in the Harmon group. H of C therefore argued that Harmon could not have been a company specialising in the supply, construction and/or installation of cladding and facades for buildings with operational and management headquarters established at Harmon CFEM Façades in France at any material time prior to its beginning to trade in 1995.

Clearly the main facts relied on by H of C are incontestable: Harmon Contract (UK) Limited was the company that was originally used as the vehicle for the Group's interest; it completed the February and November 1994 pre-qualification documents; it was intended to be the operative company; no one knew of Harmon CFEM Façades (UK) Limited until LML was notified in the spring of 1995. In addition H of C relied on the fact that fabrication was to be carried out in France, the project team dealt with French companies, and that Harmon's UK offices were little more than an accommodation address.

However, it is clear, first, that there was no objection to Harmon taking over: there was for example consent to the assignment or novation of the contract for the mock-up. Secondly, the project team was interested in the Harmon group with its worldwide expertise which was comparable to the other principals that were invited to tender (see for example paragraphs 62-64 of Mr Mumford's first statement). The investigations that had been made which led to the decision to accept Harmon's predecessor as pre-qualified were of the companies that would be able to harness the resources necessary to execute the fenestration package, not of an individual subsidiary. Thirdly, once LML had been notified of Harmon, ie the plaintiff, in the spring of 1995 other members of the project team, the PWD, and, in so far as can be discerned, H of C, all treated it as if it had been in existence from the outset, not as a newcomer, as pre-qualified and as equally capable of tapping the resources of the Group as the French company that was the previous vehicle, following LML's urging that a European company be used, although these European credentials were openly retained in the tender submissions. Fourthly, by the time the first tender was submitted in July 1995, Harmon, and not another company in the group, was treated as an acceptable tenderer. There were very good reasons to continue to deal with a UK subsidiary and not with a company that was not at least nominally resident here. Fifthly, it was thereafter treated as the contractor, whatever other companies were involved, and was specifically accepted as eligible to be given reasons for being unsuccessful. It is of course common for a group to operate through different companies.

Harmon also relied on Ballast Nedam Groep NV v. Belgian State [1994] ECR I-1289 . In it the Court of Justice had to consider whether a group could be registered and thus pre-qualified (see PWR Regulations 14(1)(a) to (e), (h) and (i), 15(1)(b) and (c), 16(1)(b) and (c) and 17). The Court held that a holding company might be assessed by reference to the capabilities of its subsidiaries. It said:

"[17] When, in this connection, a company produces references relating to its subsidiaries in order to prove its economic and financial standing and technical knowledge and ability for the purpose of registration on the official list of recognised undertakings, it must establish that, whatever the nature of its legal link with those subsidiaries, it actually has available to it the resources of the latter which are necessary for carrying out the contracts. It is for the national court to assess, in the light of the factual and legal circumstances before it, whether such proof has been produced in the main proceedings.

[18] The reply to the question referred to the Court for a preliminary ruling must therefore be that Council Directive 71/304 concerning the abolition of restrictions on freedom to provide services in respect of public works contracts and on the award of public works contracts to contractors acting through agencies or branches and Council Directive 71/305 concerning the co-ordination of procedures for the award of public works contracts must be interpreted as meaning that they permit, for the purposes of the assessment of the criteria to be satisfied by a contractor when an application for registration by the dominant legal person of a group is being examined, account to be taken of companies belonging to that group, provided that the legal person in question establishes that it actually has available the resources of those companies which are necessary for carrying out the works. It is for the national court to assess whether such proof has been produced in the main proceedings."

The Court considered that decision again when Ballast Nedam returned as Case-5/97. It then affirmed its earlier opinion in paragraph 13:

"It follows from all the foregoing considerations that a holding company which does not itself carry out works may not be precluded from participating in procedures for the award of public works contracts, and, therefore, from registration on an official list of approved contractors if it shows that it actually has available to it the resources of its subsidiaries necessary to carry out the contracts, unless the references of those subsidiaries do not themselves satisfy the qualitative selection criteria mentioned in Articles 23 to 28 of Directive 71/305."

Ballast Nedam shows that it is permissible to look beyond the immediate company to test its worth for the purposes of registration and pre-qualification. In my judgment it would be artificial to require a contract only to be let to the person who had been pre-qualified if in pre-qualifying account had been taken of the group or other resources available to it. It would mean that it would be impossible for an employer or a tenderer to agree to the substitution of another person as contractor. Where a joint venture had tendered it would prevent the joint venturers contracting in the form of a corporation or other legal person specially formed for that purpose. This is common practice and is recognised by Regulation 19 of the PWR and indeed was followed when, quite late in the negotiations, H of C permitted Seele/Alvis to substitute Seele Alvis Fenestration Ltd as the actual contractor. Similarly it might prevent a tenderer qualifying on the basis that it the bulk of the work would be executed by one or more sub-contractors whose performance had been perfectly acceptable to a contracting authority. It would be absurd if the worth, experience and abilities of such contractors were not to be taken into account, as either the tenderer or the contracting authority could be prejudiced as a result. This issue has therefore little merit or purpose.

In my judgment the answer to this issue is: Yes. Furthermore, Harmon is also plainly within the definition of a "contractor" under PWR since it was seeking to be awarded the contract. In addition I consider that Harmon may make a claim for breach of the Regulations or other obligation that may have been committed before it came on the scene in the spring of 1995, provided that it can establish that the breach had a continuing effect and would have affected its predecessor had that company continued to be the tenderer or "contractor" and that it also affected Harmon. Since Harmon was treated as the successor for all purposes of the company that had been pre-qualified, the defendant is not entitled to say that Harmon would not have been so affected. I shall deal later with whether Harmon can recover damages in respect of losses suffered by other Harmon companies.

Harmon's case was that all these members of the project team were agents of H of C for whose acts the defendant was liable within the principles set out in Bowstead on Agency , 16th ed., paragraphs 8-174 and 8-180, which were summarised as follows:

"If an agent is the servant of his principal, the principal is liable for loss or injury caused by the wrongful act of the agent when acting in the course of his employment; and/or

Where the wrongful act amounts to a breach by the principal of a duty personal to himself, liability for non-performance or non-observance of which cannot be avoided by delegation to another.

In the case of a statement made in the course of representing the principal made within the actual or apparent authority of the agent; and for such a statement the principal may be liable notwithstanding that it was made for the benefit of the agent alone and not for that of the principal. This third category is in truth an extension of the first category of circumstances."

H of C did not dispute that these entities were agents, but not in so far as they may have applied a "Buy British" policy and if LML were found to have acted as set out in paragraph 14B of the statement of claim. Thus if it were established that the project team initiated, propagated or applied a policy to ensure that the fenestration package was awarded to a UK contractor they did so outside their actual, or apparent or implied authority, and unless the defendant ratified that policy it is not bound by it.

Some of the terms of LML's contract are annexed to this judgment. They include paragraphs 1.33 (to which I have referred), 1.38 and 1.40 of Schedule 1 upon which Harmon relied:

"1.33 To report on and recommend to the Authority, the Architect and the Cost Consultants the most effective procedures to be adopted (having regard, inter alia, to the provisions of the EC Public Works Directive) in inviting pre-qualifications, in inviting and evaluating tenders, in awarding Trade contracts and in administering Trade Contracts having regard to the time available and the quality and cost.

1.38 To interview, where appropriate or where required by the Authority, each tenderer during the tender period to ensure their tender bids will comply with the tender documents.

1.40 To analyze the tenders received in detail in conjunction with the Project Team and issue to the Authority a written tender placing report (to be prepared by the Construction Manager and commented upon and/or amended by the Architect, the Cost Consultants and such other members of the Project Team as my be appropriate) setting out the results of such analysis and recommending a contractor with whom the Authority should enter into each Trade Contract or, if they cannot jointly so recommend, setting out the recommendations of each of the Construction Manager, the Architect, the Cost Consultants and other members of the Project Team and the reasons for such recommendations."

The authority conferred by the agreement on LML plainly did not permit it to apply a "Buy British" policy. Even if Mr Brand or Mr Mumford had not read the PWR, paragraph 1.33 of Schedule 1 of the CMA, in referring to the Public Works Directive, expressly required LML to act in accordance with it and not contrary to it, quite apart from the unreality of supposing that LML was authorised to act in a discriminatory fashion. Any other member of the project team would be similarly constrained. However if the defendant thereafter acting through the Project Sponsor, Mr Makepeace, had authorised, encourage or sanctioned such a policy and if any member of project team had sought to implement it then clearly the defendant would be bound by its actions.

Otherwise the defendant held out these firms or companies as members of the project team having authority to negotiate and set the terms upon which tenders would be invited and contracts placed (including deviations from the technical specifications) within the scope of project as advertised in the OJ and as subsequently altered after the first tenders were received. This issue will be therefore be answered in the affirmative but with the reservations made by the defendant: that the project team had no express authority to apply a "Buy British" policy and LML were not authorised to make certain representations or to have said things as set out in paragraph 14B of the Re-re-amended statement of claim.

This issue may be relevant if Harmon cannot succeed in its case for damages under Regulation 31(3) of the PWR. In order for Harmon to succeed in an action for damages for breach of this Directive or these Articles it must establish:

(1) That the House of Commons is an organ or an emanation of the State;

(2) That Articles 6, 30 and/or 50 - 59 of the Treaty of Rome were intended to confer rights on individuals;

(3) That any breach by the House of Commons was "sufficiently serious"; and

(4) That Harmon's loss and damage has been caused by such a breach or breaches.

These conditions or propositions are established by (in the case of the first) Marshall v. Southampton AHA ( Marshall I ) [1986] ECR 723 and, in the case of the other three, by Factortame III , Case C-48/93 [1996] QB 404 . I here deal only with the first two of these pre-conditions.

As to the first, Harmon argue that the legislature is an organ of the State just as much as the executive and that, since the defendant has been created to enable the legislature to function, it should be treated as an organ or emanation of the State in the same way as if liability would attach if the project had been commissioned by a department of the executive. Counsel submitted that a broad approach was required and that the definition in Foster v. British Gas , Case 188/89, [1990] ECR I-3313 , applied to an entity such as a public utility:

"It follows from the foregoing that a body, whatever its legal form, which is being made responsible, pursuant to a measure adopted by the State, for providing a public service under the control of the State and has for that purpose special powers beyond those which result from the normal rules applicable in relations between individuals is included in any event among the bodies against which the provisions of a Directive capable of having direct effect may be relied on."

Harmon relied upon Johnston v. Chief Constable of the Royal Ulster Constabulary , Case 222/84, and Beentjes [1988] ECR 4635; [1990] 1 CMLR 287 in which the Court stated (at paragraph 12):

"A body such as that in question here, whose composition and functions are laid down by legislation and which depends upon the authorities for the appointment of its members, the observance of the obligations arising out of its measures and the financing of the public works contracts which it is its task to award, must be regarded as falling within the notion of the State for the purpose of the above mentioned provision, even though it is not part of the state administration in normal terms."

Counsel helpfully referred to a comment on this case (Prechal, Directives in European Community Law , page 79):

"[T]he Court interprets the concept of the "State" in the way which best achieves the objectives of the measure at issue... [T]here is no generic definition at Community level of the types of entities which should be assimilated to the State. The approach of the Court is highly functional, i.e. the interpretation is related to the objective pursued by the rules within which the concept figures and, moreover, the interpretation is more or less tailored to the factual situation of the entity in question."

H of C maintained that, since it did not provide a public service but rather one of property management and, since it had no special powers beyond those resulting from the normal rules applicable in relations between individuals, it could not be regarded as an organ or emanation of the State. Reliance was placed upon the Preamble and section 2 of the Parliamentary Corporate Bodies Act 1992 (which has already been set out). Counsel submitted that the powers provided to the defendant by virtue of section 2 (3)(a) and (b), amount to no more than powers ordinarily exercised by any individual whether corporate or incorporate, namely the power to deal with property and to enter into any contracts for the purposes of the House of Commons. The functions performed by the defendant were set out by Mr Makepeace in his supplemental statement (E4/40-91). They were provided for the benefit of the House of Commons and, it was submitted, somewhat boldly, that the House of Commons performed no public function. The defendant only came into contact with the public when it entered into such contract or arrangements as it made to enable it to discharge its functions which were essentially domestic and a service to the House of Commons. As such it was under no liability to comply with the provisions of the Treaty of Rome which were intended only to apply to a State (nor was it a legal person capable of committing the tort of misfeasance in public office).

In my judgment the answer to this issue is: Yes. I do not consider it too simple to start with the PWR for they were made to give effect to the Public Works Directives which in turn were made to give effect to the obligations contained in the Treaty of Rome. Under the PWR Parliament has decided that the House of Commons is, for the purposes of procurement of public works, at least, to be regarded as a contracting authority. When one looks at the contracting authorities listed in the PWR (not reproduced in my extracts from them) most, if not all, could also be characterised as organs or emanations of the State. The defendant has been created by the Parliamentary Corporate Bodies Act to perform certain functions on behalf of and for the purposes of the House of Commons including obtaining tenders for and entering into contracts for the construction of the NPB. It must therefore be regarded as the agent of the House of Commons. In any ordinary and functional sense, the House of Commons must be regarded as an organ of the State, certainly if the State comprises legislative, executive and judicial elements. I do not consider that the definition in Foster v. British Gas is exhaustive. The court was there dealing with the position of a public utility.

In argument I asked what would be the position if, for the benefit of the Foreign Office, a similar corporation sole had been created to look after embassies in other member states of the European Union - would it not also be subject to Treaty obligations as an organ of the State? Mr White suggested that the distinction was that the defendant was performing a housekeeping function and not a massive public service buildings function. Yet here the defendant is providing a building whose estimated cost was -250 million. Mindful of the Bill of Rights, I would nonetheless expect our legislators to be embarrassed if people thought that they considered expenditure of that order to be mere "housekeeping". If the NPB had been built by a government department for occupation by Parliament there could be no doubt that the department responsible would be an organ of the State. Does it make any difference that the building is being built with public funds but by the legislature directly? I think not. The State comprises a number of elements: legislature, executive, judiciary. They are in my judgment all organs of the State for the purposes of the European Treaties and European law. None are, as such, immune from suit for performing or not performing an obligation which is required of an organ of the State under the public works regime.

Put another way, the defendant is plainly a public authority for it was created by Parliament to serve the House of Commons which is obviously a public body. If it were not it could not have been included in the definition of "contracting authority" in the PWR. Section 2 (6) of the Parliamentary Corporate Bodies Act puts the defendant in the same position as any other person: it is not to have Crown immunity, which might otherwise attach to it as a particular class of public body. No doubt the purpose for which the defendant exercises its powers as conferred by section 2 (3) might be regarded as "domestic" in as much as it is "any purpose of the House of Commons", but many statutory bodies are created for the private functions only. The test is whether the functions for which they are created are public or private functions. I cannot believe that anyone would regard the erection of NPB as a private function or purpose. Its use may be confined to 210 Members of Parliament and their staff but it is just as much a public building as is the Palace of Westminster whose accommodation it is intended to supplement.

Furthermore, if it were necessary, I also conclude that the defendant is a person holding public office, on the basis that such a person is not confined to individuals but is also apt to describe a legal person such as a corporation. The powers set out in section 2 (3) are of a public nature. Section 2 (2) appoints an individual holding a public office (the Clerk to the House) as the defendant, so in my view the defendant is a person holding a public office.

In addition in Commission v. Kingdom of Belgium , Case 323/96, the court held that a legislature, the Vlaamse Raad, which had decided to have new premises built in Brussels, was obliged to follow the Public Works Directives. The court said:

"25. In order to resolve the dispute now before the Court, it is first necessary to consider whether the Vlaamse Raad is a contracting authority within the meaning of Article 1(b) of Directive 71/305 as amended by Article 1(1) of Directive 89/440, and within meaning of Article 1(b) of Directive 93/37.

26. The definition of contracting authority, which is identical in both directives, states that, for the purposes of each, '"contracting authorities" shall be the State, regional or local authorities, bodies governed by public law, associations formed by one or several of such authorities or bodies governed by public law'.

27. The term 'the State' referred to by that provision necessarily encompasses all the bodies which exercise legislative, executive and judicial powers. The same is true of the bodies which, in a federal state, exercise those powers at federal level.

28. Furthermore, in Case 31/87 Beentjes [1988] ECR 4635, paragraphs 11 to 13, the Court, after stating that the term "the State", within the meaning of Article 1(b) of Directive 71/305 should be interpreted in functional terms, held that a local land consolidation committee fell within that definition notwithstanding the fact that it was not an integral part of the State administration in formal terms. It would be inconsistent to hold that a legislative body does not fall within the definition of the State for the purposes of the Community directives on public works contracts, when a body which is not an integral part of the State administration in formal terms has been held to fall within that definition for the purposes of the application of one of those directives.

29. It follows that a legislative body such as the Vlaamse Raad must be held as falling within the definition of the State and thus constituting a contracting authority within the meaning of Article 1(b) of Directive 71/305 as amended by Article 1(1) of Directive 89/440, and within the meaning of Article 1(b) of Directive 93/37."

"40. The Belgian Government also submitted that, at national level, the Law of 14 July 1976, which was in force at the material time, Article 2(1) of which provides that "Every Minister has authority, within the limits of his powers, to adopt decisions concerning the conclusion and performance of contracts of the State and the bodies which fall under its hierarchial authority"', did not apply to legislative bodies, inter alia, because the independence and supremacy of the legislative authority under the Belgian Constitution prevented the legislative chambers, and thus the Vlaamse Raad, from being subject to Ministerial authority.

41. First, it should be pointed out that this plea, based on national law, affects neither the finding that the Vlaamse Raad constitutes a contracting authority within the meaning of Article 1(b) of Directive 71/305 as amended by Article 1(1) of Directive 89/440, and within the meaning of Article 1(b) of Directive 93/37, nor the resulting obligation to comply with the provisions of those directives as regards publication and award procedures.

42. According to settled case-law, a Member State cannot rely on provisions, practices or circumstances existing in its internal legal order in order to justify its failure to comply with the obligations and time-limits laid down by a directive (see, in particular, Case C-144/97 Commission v. France [1998] ECR I-613, paragraph 8)."

In my judgment it must follow from the reasoning of the court that, if the Vlaamse Raad fell within the definition of a State for the purposes of public works directives such as 71/305 and within the meaning of Article 1(b) of Directive 93/37, then the defendant must also be an organ or emanation of the State and liable for damages for breach of Articles 6, 30 and/or 50-59 of the Treaty of Rome or for breach of Directive 93/37. The PWR were made to give effect to Directive 93/37 and should be interpreted in a manner consistent with its meaning. If the PWR have failed to implement the Directive, Harmon are entitled to rely on the Directive so H of C would then be liable for any non-compliance with its provisions since it is certainly an organ of the state for its purposes.

For the purposes of this issue the relevant date or dates are those in the spring of 1995, namely either 23 March 1995 when LML was informed of the wish to transfer the mock-up contract to Harmon, or 23 May 1995 when LML was told that Harmon would be the contractor or tenderer for the fenestration package. Harmon accepts (and it is clear) that it did not seek or wish to be a person to whom the fenestration package was awarded before 15 May 1995 when it was substituted for Harmon Contract (UK) Ltd or 23 May 1995 when it was first notified as the successor of Harmon Contract (UK). No issue therefore arises on the defendant's contentions in so far as they were that since Harmon did not become involved in the tender process until May 1995 it therefore can have no claim in relation to alleged failures before then.

However the defendant also contends that thereafter Harmon acted as agent for Harmon CFEM Facades SA ("Harmon SA") and would have contracted as agent for that company in the event that its tender had been accepted so any duty owed by the defendant was owed to Harmon SA and not to the Harmon. I reject this submission. For the reasons that I have already given, first, I consider that the tender was submitted by Harmon and, secondly, Harmon acted throughout as principal and not as agent so any duty owed by the defendant was owed to it. This issue will therefore be answered: Yes, from 23 May 1995.

I deal only with the main questions required by these issues since in so doing I shall inevitably cover the subsidiary points about the various events that occurred. Harmon no longer pursues issue 5(2) (the circumstances in which Alvis Vehicles Ltd and Seele Alvis became involved). I have already answered or effectively answered the following sub-issues of issue 5 in my conclusions on the factual background:

(4) Whether the plaintiff completed the Pre-qualification Enquiry Document. (para 10(b) Re Amended Sof C; para 16 Re-Amended Defence).

The answer is: No, it was submitted for Harmon Contract UK Ltd by Harmon CFEM Façades SA.

(5) Whether the tender dated 29 July 1995:

(a) was submitted by or on behalf of the plaintiff;

(b) was complete;

(c) complied with the terms of the ITT;

Insofar as the tender was not complete and/or did not comply with the terms of the ITT, whether such omissions or non compliance was waived by the defendant. (Para 10(f) Re-Amended S of C; para. 21 Re-Amended Defence)

The answer to (a) is: Yes. The tender of 29 July 1995 was signed by Mr Boyle as a director of the plaintiff company even though it was largely prepared by Harmon CFEM Facades SA. It was in any event treated as having been submitted by or on behalf of the plaintiff so any irregularity is of no consequence. The answers to (b) and (c) are No. Harmon's tender was not complete and did not comply with the invitation to tender in that, for example, the pricing schedule had not been completed and it was subject to numerous qualifications and reservations. So too were all the other tenders to some extent non-compliant. H of C made a provision of -500,000 against the possibility that agreement of outstanding matters might increase the amount of the relevant tender amount and thus did not treated any non-compliance as insuperable. Mr Mumford admitted as much. Thus none of the respects in which the tender was incomplete or non-compliant was considered sufficient to disqualify the tender from further consideration or to require it to be treated as non-compliant. Harmon was not told that its tender would not be considered and by considering it and by inviting Harmon to submit further tenders based on the July tender without requiring them to be fully completed and complaint in all respects the defendant led Harmon to believe that there was nothing in its tenders that H of C thought to be incapable of negotiation and agreement and thereby waived the omissions and non-compliance.

(6) Whether in meetings between Laing and the defendant's other consultants and the plaintiff, following the first tender Laing and others expressed the view that the plaintiff's tender was in all respects to be preferred to that of Alvis. (Para.10(h) Re-Amended S of C; para.24 Re-Amended Defence).

The answer is Yes, in conversations with LML in August 1995, and in conversations with MHP and AFE in November 1995 Harmon was assured that its tender was technically compliant.

It will or should be apparent that some of the answers to issue 8(1A) are:

(1A) Did the defendant or its Project Team ever agree among themselves any common selection criterion other than price? Did the defendant or its Project Team ever apply any common selection criterion other than price that had been stated in advance of the selection criterion?

Did the defendant or its Project Team make clear to the plaintiff that the sole or dominant selection criterion was price either (i) before the submission of the first tender on 31st July 1995

or (ii) thereafter?

Under the later heading of Other Issues I give formally the answer to issue 8(7):

(7) Was the defendant in breach of the Regulations in the manner in which it notified the plaintiff of the reasons for its failure to be awarded the fenestration package? (Paras 14(v),(vi),(vii),(e); Re-Amended S of C; paras 48, 49, 50(5) Re-Amended Def.)

The answer is Yes, H of C did not comply with Regulation 22(1) either in giving the true reasons or in giving the reasons by reference to the basis upon which it was purporting to award the contract to Seele/Alvis and in so doing failed to treat Harmon fairly and openly. In so far as it means that the defendant did not give the true reasons the answer is: Yes. Under that heading I also state that the answer to Issue 8(8) is: Yes.

Thus the remaining principal questions under this head are as follows:

(1) Whether the matters contained within the Schedule of Deliverables (section 2 part 3) and contract documents constituted compliance with Regulation 20 and were either:

(i) selection criteria, or;

(ii) minimum requirements

for the purposes of Regulations 20(3) or 20(4) respectively (paragraph 13 Re-Amended Defence).

(3) Whether it was the defendant's policy that the greatest possible proportion of the work to the Building was carried out by UK Companies and to prefer UK companies in the tender procedure. (para 10(ccc) Re-Amended S of C; para 17B Re-Amended Defence).

(7) Were any of the tenderers entitled to submit alternative tenders based upon alternative designs and if so, whether such an alternative tender had to be additional to and accompanied by a compliant tender. (para 10(o) Re-Amended S of C; para 30 Re-amended Defence).

(8) Whether, at the time when the Plaintiff submitted its second tender in September 1995 it knew or ought to have known that it was entitled to submit an alternative tender. (para 24 Re-Amended Defence).

(9) Whether the defendant's negotiations with Seele Alvis after 2.11.95 results in the awarding of a contract to Seele Alvis on materially different terms to that upon which the Plaintiff had tendered. (paras 10(p), 10(q) and 10(r) Re-amended S of C; paras 30A, 30B and 30C Re-Amended Defence).

(11) Did the changes to the contract terms pleaded in paragraph 14 (viii) of the Re-amended Statement of Claim actually distort competition, and in particular price competition?

Was the defendant in breach of the Regulations in any of the respects pleaded in paragraph 14 and 14B of the Re-Amended Statement of Claim and if so which? (Re-Am. S of C para. 14, Re-Am. Defence paras. 35-57.)

[Note by the parties: The particulars of breach and hence the defence do not appear in an entirely logical sequence.]

The key issues, ranked in logical sequence are as follows:

(1) Whether the defendant was in breach of Regulation 20 in:

(a) seeking tenders on the basis of "best overall value for money";

(b) awarding the contract for the fenestration package on the basis of "best over all value for money"

(c) awarding the contract for the fenestration package on the basis of the most economically advantageous tender.

In the circumstances, should the defendant have only awarded the contract on the basis of the lowest price? (para. 14(ii) and (iv) Re-Amended S of C; Reply 2, FBPs of C; para 36A(1)(2), 38, 38A, 38B, 38C, 40, 43-46; Re-Amended Defence; para 5 Reply).

(1A) Did the defendant or its Project Team ever agree among themselves any common selection criterion other than price? Did the defendant or its Project Team ever apply any common selection criterion other than price that had been stated in advance of the selection criterion? Did the defendant or its Project Team make clear to the plaintiff that the sole or dominant selection criterion was price either (i) before the submission of the first tender on 31st July 1995 or (ii) thereafter? Was the defendant or its Project Team entitled to rely upon matters that ought to have been dealt with as part of the pre-qualification exercise when selecting the contractor either (i) as a matter of law or (ii) as a matter of fact given that the Task Force Leader recorded that the further inspections did not give rise to anything that ruled either tenderer out?

In the circumstances, should the defendant have only awarded the contract on the basis of the lowest price?"

(2) On the basis that the defendant was in principle entitled to consider tenders and to award a contract for the fenestration package on the basis of the tender that was the most economically advantageous, was the defendant in breach of Regulation 20 in failing to identify the criteria or to rank the criteria that would be applied in identifying the most economically advantageous tender:

(a) in seeking tenders: and/or

(b) in the award of the contract for the fenestration package.

(Para 14(ii) and (iv) Re-Amended S of C; Reply 2 FBPS of C; paras 36A, 38, 38A, 38B, 38C Re-Amended Defence.

(3) If the answer to (2) is "No"; was the defendant entitled to consider alternative or variant tenders pursuant to Regulation 20(4). ((i.e.) did the defendant comply with the requirements of Regulation 20(4)). Further was the defendant entitled to compare alternative tenders with compliant tenders, and if so, upon what basis should such a comparison have been made? (para. 14(vii)(b), 14 (ix); Re-Amended S of C; para (c) Reply 2 FBPS of C; para 36A(6) 52 Re-Amended Defence.)

(4) If the answer to (2) is "No", did the defendants in fact apply the identified criteria when assessing tenders? (i.e those criteria identified in the contract documents and/or made known to tenderers in the manner particularised in paragraphs 38, 38A, 38B and 38C of the Re-Amended Defence) (paras 14(vii)(e)(f)(g) Re-Amended S of C; paras 50(5), (6) and (7) Re-Amended Defence.)

(5) If the answer to (3) is "Yes" (i.e. the defendant was entitled to consider variant tenders) were the plaintiff's tenders the most economically advantageous/or represent best overall value for money when compared with the tenders of Seele Alvis for option B2?

(The plaintiff contends that its tenders were to be preferred on basis of price, management and technical skill, experience, accuracy of tender, completeness of tender (paras 14(i)(iii) Re-Amended S of C; Reply 3 FBPS of C). The defendant contends that B2 tenders were to be preferred on basis of price, quality, technical superiority, manufacturing and technical capabilities programme and organisation and maintenance (paras 37, 39, 42 Re-Amended Defence; replies 19-34 FBP Defence).

Accordingly was the defendant in breach of Regulation 20 in:

(a) considering the tenders of Seele Alvis for option B2: and

(b) in awarding the contract for the fenestration package to Seele Alvis?

(6) Was the defendant in breach of the Regulations/other enforceable Community obligations in failing to treat the plaintiff equally or fairly? In particular, did the defendant:

(a) initiate, encourage or permit to continue a policy that the fenestration package should be awarded to a UK owned contractor, and if so did that policy affect the tendering procedure?

(b) apply arbitrary methods in an attempt to favour Seele Alvis' tender at the expense of the plaintiff?

(c) unlawfully enter into post tender negotiations with Seele Alvis?

(Paras 14(vii)(a),(d),(g) Re-Amended S of C; paras 50(1)(4)(7) Re-Amended Defence.)

(6A) (i) if the answer to Issue 8 (6) (c) is "yes", is it necessary for the plaintiff to establish, either as a matter of fact or principle, that it would have reduced its tender price if it had been given the opportunity of reflecting the changes to the contract terms pleaded in paragraph 14 viii of the Re-re-Amended Statement of Claim in its tender price?

(ii) If the answer to Issue 8 (6A) (i) is "yes", would the plaintiff have made a reduction in its tender price if it had been given the opportunity of reflecting the changes to the contract terms pleaded in paragraph 14 viii of the Re-re-Amended Statement of Claim in its tender price? If so, how much would that reduction have been?

(iii) Alternatively, is there a real chance that such a reduction in tender price would have been made by the plaintiff?

I shall try to treat each of these questions in a broadly chronological sequence. I shall first examine the standards by which tenders were to be assessed, and whether Harmon's tender satisfied those standards before considering whether there were any other factors which influenced the selection of Seele-Alvis of which Harmon may legitimately complain.

Harmon's complaint is that H of C did not comply with the requirements of the PWR but specified "overall value for money" as the criterion by which tenders were to be assessed and in not specifying standards by which "overall value for money" was to be determined. It will be recalled that Mr Makepeace had been explicitly warned by Mr Linge that words such as "overall value for money" were contrary to Regulation 20 and that LML had unsuccessfully put forward a system of scoring or rating by which tenders might be assessed.

Harmon's case was that the provisions of Regulation 20(1) were mandatory and that by stating the award criteria in the OJ notices as "(other than price): overall value for money", H of C had elected for wording which was nebulous and imprecise, capable of different interpretations, not referable to either of the tests set out in Regulation 20(1)(a) and (b) and which was therefore not permitted by Regulation 20. H of C's case was that Harmon had construed the Regulations too narrowly (both Regulation 12 and Regulation 20). It submitted that the term "overall value for money" which had been used in both notices on December 1993 and April 1994 did not in itself constitute a breach of the Regulations since Regulation 20(1) did not require a contracting authority to identify in the advertisement whether it intended to award a contract on the basis of lowest price (Regulation 20(1)) or "most economically advantageous to the contracting authority" (Regulation 20(1)(b)). I reject this submission since the words of Regulations 12(2) and 20(1) are mandatory. It is true that the statutory notice required by Regulation 12(2) is loose in that item 11 in Part C of Schedule 2 only requires "The criteria for the award of the contract where they are not mentioned in the invitation to tender" when at that time those interested will not have access to the invitation to tender. However here the notices purported to state the criteria so Regulation 12(10)(e) and the invitation to tender therefore does not come into play. I deal later with the argument that nevertheless the requirements of the PWR were satisfied by the tender documents. Secondly, the words of Regulation 20 mean that a contracting authority shall not award a public works contract unless it either offers the lowest price or is the most economically advantageous to the contracting authority, and the contracting authority has to state which of those two options it intends to use.

Mr White submitted that a reader of the notices would have understood that H of C intended to award the contract to a contractor who had submitted the most economically advantageous tender. Reliance was placed on the evidence of Mr Barry in which, naturally, he had agreed that the advertisements conveyed to the reader that the award was not to be based on the lowest price. He also accepted that if "most economically advantageous" meant the same as "overall value for money" then he would have read the advertisement as an election for the second option. However, he also said, in answer to a question from myself, that the terms were elastic and that they were "both fairly loose terms that need definition". H of C also relied upon evidence from Mr Clatworthy and Mr Boyle although neither of them in fact accepted that the advertisement was to be read as referring to the second option.

H of C submitted that, as a matter of law, wording such as "overall value for money" could comply with Regulation 20. In Beentjes -v- The Netherlands , case 31/37 [1988] ECR 4635 the criterion had been whether the tender "appears the most acceptable to the awarding authority". The Court held that the compatibility of such provision with the requirements of Article 29 of Directive 71/305 which is not materially dissimilar to the wording of PWR Regulation 20 is a matter for interpretation by the National Courts. It said at page 4659:-

"...If it is to be interpreted as giving the authorities awarding contracts discretion to compare the different tenders and to accept the most economically and advantageous on the basis of objective criteria, such as those listed by way of example in Article 29(2) of the Directive."

Similarly, H of C referred to R v. Portsmouth ex parte Coles (1997) 1 CMLR 1135 in which the criterion had been "best value for money". Tenders had been received from a number of private contractors and from the council's own in-house contractor. Although the latter had not submitted the lowest tender, it was awarded 40% of the value of one contract (the maintenance contract) and 60% of the value of another (the improvement contract). Keene J. held at first instance that the decision to award a proportion of the contract was made on the sole basis of the additional cost to the council for redundancy payments if its own contractor had not been awarded this proportion of the work. He held that it was important that the tenderers should have been told about the consequences that an award would have on its liability to make redundancy payments. However, he held that although the council had broken the requirements of Regulation 20(2) it did not mean it was obliged to award the contracts to the lowest tenderers. On appeal the Court of Appeal reached a different conclusion. It held that the council ought to have identified the criteria which it was going to apply to choose or select contractors and, having failed to do so, it could only award the contract on the basis of lowest price. Leggatt LJ referred to Gebroeders Beentjes BV -v- State of Netherlands Case 31/87, [1988] ECR 4635; [1990] 1 CMLR 287 and Commission v Kingdom of Belgium ( Walloon Buses ) Case C87/94, [1996] ECR 2043. He said at page 1142:

"[11] It follows that since the Council had not mentioned in the contract documents the criteria which it applied, it was not entitled to take account of them as award criteria. Since it was not entitled to take account of them, it was unable to award the contracts on the economically advantageous basis. It was therefore obliged to adopt the lowest price basis."

Hobhouse L.J. said at page 1146:-

"[20] This, in turn, leads on to the Public Works Contracts Regulations 1991 (1991/2680). The Regulations state that they have been made under the European Communities Act 1972 and have the clear intention of giving effect to the Public Works Directives. But they go somewhat further. Regulation 31 contains additional provisions relating to the enforcement of obligations relating to public works contracts: it is under this regulation that the question of the adequacy of the notice of claim of Colwick Builders arises. Regulation 20 which deals with the award of public works contracts expressly provides in paragraph (8) that:

"For the purposes of this regulation an "offer" includes a bid by one part of a contracting authority to carry out work or works for another part of the contracting authority when the former part is invited by the latter part to compete with the offers sought from other persons."

Thus, the fictional feature of the 1980 Act has been carried through into the 1991 Regulations and has consequently been included in a scheme where a breach can give a disappointed tenderer a civil remedy.

[21] The Appellants accept the decision of the Judge that the 1991 Regulations cannot apply to anything done in relation to the "maintenance" contract. It follows that, if Mr Coles and George Austin Ltd are to recover more substantial damages, they must make out that right under the Directives. Colwick Builders on the other hand, subject to the notice of claim point, can rely upon the Regulations.

[22] It is convenient to take first the question whether the obligations of the Local Authority and the rights of the tenderers involve only the stages which precede the placing of any contract or extend to the actual decision making process itself. The Judge held that neither the Directives nor the Regulations imposed any relevant obligation upon the County Council as to what it could and could not properly take into account in deciding between tenders. Neither party before us submitted that different answers to this question should be given under the Directives and the Regulations: like Leggatt L.J., I consider that this is clearly correct. I also agree with him that the Judge was in error in adopting the approach which he did.

[23] Article 20 of the 1971 Directive states that "contracts shall be awarded on the basis of the criteria laid down in chapter 2...". This word clearly imposes an obligation in relation to the actual award of any contract. Chapter 2, Article 29, provides:

1. The criteria on which the authorities awarding contracts shall base the award of contracts shall be:

- either the lowest price only

- or, when the award is made to the most economically advantageous tender, various criteria according to the contract: e.g. price, period for completion, running costs, profitability, technical merit.

2. In the latter instance, the authorities awarding contracts shall state in the contract documents or in the contract notice all the criteria they intend to apply to the award, where possible in descending order of importance.

Regulation 20(1) to (4) of the 1991 Regulations repeats these provisions. In my judgment they impose the obligation upon the awarding authority to award the contract only by reference to certain criteria. The authority is at liberty to award the contract on the basis of which is most economically advantageous only if the criteria it is going to use have been stated beforehand. It follows that, unless the authority has in advance sated other criteria, it can only use the criterion the lowest price and that if it should do anything else it will be in breach of the Directive and the Regulation. This was the submission of Miss Boswell and it was in my judgment correct.

[24] The same conclusion follows from the Judgment of the european Court in Case C-87/94, Walloon Buses . A contract for the supply of buses had been awarded after tenders had been invited and submitted. The successful tenderer, EMI, had made certain cost-saving suggestions to the authority which went beyond the scope of the invitations to tender. The other tenderers had not been give the opportunity to match them or make counter-offers. The Court held that whilst some latitude in the tendering procedure could be accepted, "the principles of equal treatment of tenderers and of transparency of procedure" must be observed. This has not been done. The Court concluded:

"It must be concluded that, by taking into account, in its comparison of tenders for lots Nos 4, 5 and 6, the cost saving features suggested by EMI without having referred to them in the contract documents or in the tender notice, by using them to offset the financial differences in the tenders in the first place and those of EMI placed second and by accepting some of EMI's tenders as a result of taking those features into account, Belgium failed to fulfil its obligations under the Directive."

The same applies to the present case. By using, when deciding upon the award of contracts, criteria which had not been spelt out in the invitations to tender (nor at any other stage), the County Council was in breach not only of its obligations in relation to inviting tenders but also in relation to the award of contracts.

[25] Miss Boswell had an additional point that certain of the criteria which the County Council had used were in any even impermissible since they related to certain secondary consequences of the failure to award any of the relevant contracts to its direct labour department. These criteria concerned whether, if work was not given to it, the remainder of the department's activities would be sufficient to support its managerial and fixed costs - a criterion which did not relate to the cost of carrying out, or not carrying out, the relevant work but to other separate activities. Before the Judge, Miss Boswell argued this point on the basis that such a criterion was not "objective" (e.g. see the preamble of the 1971 Directive and Case C-31,87, Gebroeders Beentjes ). The Judge not surprisingly declined to accept this submission since such criteria can be as objective as any other. Before us the argument was put on the basis that it was implicit in Article 29 and Regulation 20 that the criteria must be germane to the contracts to be awarded and not extraneous to them. In this form the submission has force but, as pointed out by Leggatt L.J., it is not necessary for this Court to decide it.

[26] In view of our decision on the scope of the duty imposed by Regulation 20 and the County Council's breach, it follows that the ground on which the Judge decided against Colwick Builders on the time limit point falls away: the notice they served was sufficient. The appeal succeeds."

H of C argued that the judgment of Hobhouse L.J. showed that a failure to comply with the Regulations in not spelling out criteria in the invitation to tender might be made good at a later stage. Both that decision and the decisions of the European Court referred to in it (eg Walloon Buses and Beentjes ) showed that compliance in substance was required rather than in form. In Walloon Buses the Court had held that there ought to be "observance of the principles of equality of tenderers and of transparency (see paragraph 88) and that there had been a breach of Article 27(2) of Directive 90/531 in that the contracting authority had taken account of the contents of letters submitted by one of the tenderers after the date for receipt of tenders. In Beentjes tenderers had been assessed on the basis of three criteria: experience for the work in question; ability to employ long term unemployed; and whether the tender "appears the most acceptable to the awarding authority". The Court held that the first was a legitimate criterion but did not require to be specifically publicised, and that the second criterion had been included in the notice requirements. However, the third criterion ought to have been set out in the contract documents or the contract notice. The Court said ([1988] ECR 4635 at 4658 and 4660):-

"21. Finally, in order to meet the Directives' aim of ensuring development of effective competition in the award of public works' contracts, the criteria and conditions which govern each contract must be given sufficient publicity by the authorities awarding contracts."

"34. Nevertheless, in order for the notice to fulfil its role of enabling contractors in the community to determine whether a contract is of interest to them, it must contain at least some mention of specific conditions which a contractor must meet in order to be considered suitable to tender for the contract in question ..."

H of C therefore argued that the test was whether the tenderers would know of the basis upon which the tenders were to be assessed. It was submitted that the tender documents were understood by Harmon to set out the criteria by which its tenders would be judged, namely:-

(b) Technical superiority of the products;

(d) Manufacturing and Technical Capabilities of Contractors;

(e) Programming and Organisational Abilities of Contractors;

(f) Maintenance.

"It is our intention to visit your works... and the purpose of this visit is to assess your capability to perform the above-mentioned package of work. This assessment will be made with regard to your facilities, equipment, staff and organisation to achieve the revised programme of works discussed and subsequently agreed by yourselves as a basis for the contract programme."

Mr Boyle and Mr Larson (and M. Michno, although in my view he was not a decision-maker) both knew that such matters would be used and could determine the outcome of the tenders. Therefore the defendant contended that it met the substantive if not the formal requirements of Regulation 20(3).

H of C also submitted that the criteria were set out sufficiently since Regulation 20(3) stated that the criteria on which contracting authority intended to base his decision should "where possible [be set out] in descending order of importance in the contract notice or in the contract documents". Regulation 2(1) defines "contract documents" as including "...the invitation to tender for or negotiate the contract, the proposed conditions of contract, the specifications or description of the work or works required by the contracting authority and of the materials or goods to be used in or for it or them, and all documents supplementary thereto;" Contract notice means of course the notice sent to the OJ in accordance with Regulation 12. It was therefore submitted that, given the wide definition of "contract documents" in Regulation 2(1), all that was required was that the criteria should be identified and publicised so that tenders had a sufficient opportunity of meeting them. This would be both consistent with the PWR and compliance with the principles of equality and transparency. H of C submitted that each of the criteria were known to Harmon:

Price

This was implicit in the words "overall value for money" in the OJ notices and from clauses A and G of the pricing documents enclosed with the May 1995 invitation to tender.

Quality of finished product :

This was clear from the general preliminaries e.g. clauses 1.3.7, 1.3.8, 4.7, 10.5 and the quality assurance specification as well as the Schedule of Deliverables annexed to the Special Preliminaries. From these a tenderer knew that quality was important: it had to submit an outline of its quality system and a sample quality plan with its tender "for evaluation"; it had to include items 11, 12, 13, and 21 in its Schedule of Deliverables to support its proposals. Harmon acknowledged the importance by including a quality plan and outline quality system in its July 1995 tender and at the same time it submitted its testing proposals, its inspection procedures and the designated inspection authority. Mr Boyle said that the project team agreed to treat Harmon's mock-up as a sample of the quality of its work. Mr Clatworthy accepted that H of C would be concerned about quality. Mr Boyle accepted that Clause 6.2 of the Special Preliminaries showed that the contracting authority was looking for a good quality product. He accepted that the importance of quality was made clear at the meeting with the project team on 15 November 1994 and that welding was important. Mr Josey, Harmon's cladding expert, agreed that Clause 4.7.1 of the General Preliminaries made quality a criterion to be used in the assessment of tenders and Mr Barry accepted that Clause 1.3.7 of the General Preliminaries also communicated the importance of quality to tenderers, and that Clause 6.2 of the Special Preliminaries amounted to an "inferred suggestion" that samples would be used to evaluate tenders.

Technical superiority of the product .

H of C submitted that this criterion was set out in the documents included with the May 1995 Invitation to Tender, ie in the Special Preliminaries, Clause 6 (relating to samples and in the Schedule of Deliverables, as well as in the Specification (relating to welding). In addition, contractors have been required to submit method statements for patination, welding in aluminium with their tenders. Even if these requirements were not sufficiently made known to tenderers, then by the time of the second invitation to tender on the basis of Options A and B, it was made clear that H of C would consider the technical merits of those options when assessing the tenders. Mr Josey acknowledged that it would be self-evident to any tenderer that there would be a comparison carried out between A1, A2 and B. Mr Barry agreed that because of alternatives then there would be issues other than price under consideration.

Manufacturing and Technical Capability

H of C maintained that "manufacturing and technical capability" was made a criterion by Clauses 4.6.1 and 4.6.2 of the General Preliminaries. The method statement referred to in Clause 4.6.2 was also listed in the Schedule of Deliverables appended to the Special Preliminaries as a document that the tenderers were to return with their tenders "to support their proposals". Clause 4.6.2 said that the tender method statement will be used "to assess tenders". These statements were accepted at face value by Mr Boyle, Mr Josey and Mr Barry although he did not read it as one of the expressed criteria required by the PWR. In any event, LML's letter to tenderers of 18 October 1995 and the other subsequent visits on 23 October 1995 made it clear to Harmon that manufacturing and technical capability was clearly a matter of concern to H of C's advisers. H of C submitted that the letter of 18 October 1995 was part of the "contract documents" within Regulation 2(1) as it was a document supplementary to the Invitation to Tender and that the letter itself stated that the information required from tenderers would be used to assess their tender submissions, i.e the purpose of this visit is to assess your capability to perform the above mentioned package of works. This assessment will be made."

Programming and Organisational Abilities

H of C submitted that these became selection criteria by reason of clauses 3.3.1, 4.4, 4.5 and 4.6 of the General Preliminaries, as well as Clause 9.4. In addition, reliance was placed on the Schedule of Deliverables and the Special Preliminaries. Mr Boyle said in evidence that he knew that managerial and technical assessment would be taken into account when considering tenders but that there was nothing in the documents which said that it was going to be a specific criterion. Mr Josey too agreed that clauses 4.5 and 4.6 told tenderers that the programme that had to be submitted would be used to assess the tenders.

Maintenance Requirements

H of C intended that "maintenance requirements of the proposed Scheme" became a selection criterion under the General Preliminaries: 1.3.6, 10.5.2 and also because of clause 1.10 on the specification. Even if these provisions did not convey that maintenance was a criterion, Mr Josey agreed that being asked in September 1995 to tender for two different designs implied a comparison between the two in terms of maintenance requirements.

Harmon submitted that H of C's case was wrong. The decisive criterion for selection which was actually used by H of C, namely, technical superiority of the proposed option was not stated in any of the documents, nor was it brought out at any of the meetings by H of C. A distinction had to be made between the criteria set out in the tender documents and those which would be "the selection criteria". The Schedule of Deliverables could not contain the relevant selection criteria: Mr Mumford accepted that it was no more than a guide and that for example it did not even state "price" as a criterion. Mr Mumford stated that LML was not even aware at the time of the need to state selection criteria, so that they were not stated. Meetings could not be relied on. Mr Boyle had said that criteria were not in fact identified at the meetings and the notes of the meetings did not support H of C's case. In any event, notification at meetings would be insufficient since there had to be some documentary evidence in order to comply with the Regulation 20(1) and (3). Finally, Regulation 20(3) required that the criteria should be stated "where possible in descending order of importance". There was no ranking whatsoever in the documents relied upon by the defendant. Moreover, by the time of the second invitation to tender of August 1995, the dominant motivation of H of C was to reduce cost (see the invitation to tender itself) and Mr Boyle's evidence. Price was therefore dominant, at least superficially.

Mr Fernyhough criticised Mr White's submission that "overall value for money" was more comprehensible than "most economically advantageous" and submitted that the former although in common currency in English, did not have any precise meaning, whereas "economically most advantageous" was a term of art, with a precise meaning in each Community language as there is a direct equivalent phrase in each language. Thus in French the two selection criteria are "le prix le plus bas" or "l'offre économiquement la plus avantageuse". I do not think that the latter is precise in either language, although it may have meaning as a term of art.

I accept H of C's general submission that one should not be too concerned about the form but rather look to the substance. First, the words "overall value for money" are, in my judgment to be equated to "most economically advantageous" since a contracting authority, such as H of C, has only one of two options, as provided by the PWR. Although the notices were prepared carelessly and although Mr Makepeace deliberately ignored the advice which was given to him, apparently for the somewhat conceited reason that he knew better than Mr Linge, a lower grade official, as if somehow he could not have been right. Nevertheless it is to be presumed that a contracting authority such H of C for such a project as this is likely to have intended to have complied with the Public Works Regulations rather than to have intended to deviate from them. However both terms require further definition - a view confirmed by Mr Josey's practical experience. This can only be achieved, in my judgment, by a statement of the criteria that the contracting authority considers applicable to the tender and project in question. Neither "overall value for money", nor "most economically advantageous" are concepts which have any real meaning except in their context. They are not terms which mean the same whatever the subject-matter of the contract. Both require guidance as to how the subjective judgments implicit in them will be made. Both require criteria to make them meaningful: see Beentjes at paras 34 and 37. "Overall value" implies that "value will be assessed in a number of different ways, all of which will have to be taken into account before an "overall" value is found which in turn is seemingly refined by the pleonastic words "for money". "Most economically advantageous to the contracting authority" requires even more information since a tenderer preparing a tender or, more probably, one or more variants has to be given clear and precise guidance as to what from the point of view of the contracting authority may be the " most economically advantageous to " it. Unless a tenderer knows something about the economics of the contracting authority (not just its annual finances which are only part of the picture, although they might be determinative of running costs if that criterion were included) it will be impossible to work out what might be thought to be most economically advantageous in terms of maintenance or running costs or in terms of the elusive concept of technical merit. Assuming that such a concept is a proper element, which in my judgment it is not, technical merit is an intrinsically separate consideration which needs to be specifically identified. Price is the starting point for the exercise and it hardly needs to be stated. "Overall value for money" begs the question; how far is the contracting authority prepared to pay "more" to get something which is "better"?. One tenderer might well regard its proposal as providing excellent "overall value for money" and would challenge a competitor, for example, on the grounds that although its proposal might require higher running costs by way of maintenance, over the long term, the costs of maintenance would be lower than the costs that the competitor's product would incur in requiring replacements at short intervals. Ease of access for, and the duration of maintenance works could be decisive. Therefore it seems to me the real question is whether H of C provided selection criteria.

I reject H of C's case that the selection criteria were to be found in the extraneous contract documents. They might have been found there but they were not. I leave aside, for the moment, Harmon's case that the criterion actually applied was not that stated. In my judgment, the approach must be that set out by the European Court in Walloon Buses and Beentjes and applied by the Court of Appeal in this country in R -v- Portsmouth . The principles of transparency and fairness require a tenderer to know, without doubt, what objective criteria are going to be applied and, as Regulation 20 makes clear, their order of importance. All the criteria have to be stated - this is obvious but it is now made clear by Article 30(2) of Directive 93/97 - and to be identifiable as such, either because they are grouped in the same place or because they are clearly marked out. Indeed, the requirement that they should be stated in descending order of importance is perhaps the most significant pointer to the need for the criteria to be clearly identifiable as such and not merely requirements which must be complied with before the tender can be considered as a qualifying or compliant tender. In my judgment, all the references relied on by H of C in the general preliminaries, the special preliminaries and the specification are no more than standard requirements so that the tenderer presents the prospective client with the information which the client and his advisers want. Listed together or separately they do not in themselves convey to the tenderer the basis of the award leaving the tenderer to suppose that the basis must be the lowest price. They are no more than the general information which is called for on most tenders. They are not placed in any order of ranking, even (or especially) in the Schedule of Deliverables which formed an important part of H of C's case. The Schedule was, as Mr Mumford rightly said, no more than an "aide-memoire". It is headed:

"These documents call for a number of items to be submitted at Tender to support your proposals. The following schedule highlights the information which must be returned with your Tender."

Particularly when compared with the post tender Schedule it is clear that both were provided to remind the tenderer (or contractor) of what was needed to be submitted and when. That relied on by H of C does not state that the crtieria by which the information is to be assessed, still less any order of importance. For example, the requirement to submit a method statement or programme is usually important so that the client can be satisfied both that the tenderer understands the nature of the work and its demands and that its approach to the contract will fit in with the overall requirements of the project. This is particularly the case with works or trade contractors working alongside each other. Obviously this information (and the other requirements relied on by H of C) might also be used in the assessment of tenders for the purposes of the award of the contract, as the experts and Mr Boyle naturally agreed. But precisely how it will be used will depend upon the criteria which are to be employed. It is not for the contractor to state the maintenance requirements (see clause 10.5.2) as the scheme designers should state what is called for. In my judgment, it is verging on the naive to suggest that price was stated to be a criterion: money is never out of the picture. The question, however, is if a tender is to be assessed on the basis of "overall value for money" or, "most economically advantageous to the contracting authority" is the place that the money is to play in the order of assessment. In this instance it became clear from July onwards that it was the criterion.

Even if cost were not the criterion Mr Pringle admitted that the criteria that were ultimately taken into account were very different from the ones he had thought the team was dealing with at the beginning:

"At the beginning we were dealing with one design and price and also technical ability of the contractors, which we had identified as a concern, would be the two main factors. We had to alter the criteria as the content of the package changed, or the performance of the package, you know, of the options that would be considered, came into play.

Q. So, what then, Mr Pringle, were the criteria that you eventually had to judge the tenders by which you had not anticipated at the beginning you would have to use?

A. The long-term life cycle costs of the product, essentially. That was the main one. Maintenance costs."

Mr Pringle also identified six additional criteria beyond those listed in his witness statement as the key criteria: experience of the contractors; manufacturing facilities and experience; price; programming ability; if a variant was proposed, the technical quality of the variant; samples. Some of these overlap or are repetitive which in itself provides further evidence of lack of agreement on meaningful criteria. Mr Pringle's evidence typically established that not only there never was any real agreement amongst the project team about the criteria which to be applied and that they changed over the period but also by the same token that the tenderers could not have known of them. They were never set out in any definable manner. Only cost or price was clearly brought home to the tenderers after July 1995.

H of C plainly never complied with the requirements of the PWR in its original notices in the OJ and that default was not made good by the invitation to tender and the tender documentation. It is, frankly, absurd to suggest that a contractor has to sift through hundreds of pages of what are, in the main, routine documents to identify those requirements which will be used to decide whether one tender is more appealing than another. A tenderer if treated fairly, which these tenderers were not, would be told at the outset of the documents: (a) here are the relevant criteria and (b) they are arranged in descending order of importance. Without the latter the former cannot be used to determine what might be "most economically advantageous to the contracting authority". They have also to be objective criteria - see Beentjes , which emphasised that they were needed so as not to involve "an element of arbitrary choice". Regulation 20 of the PWR following the Public Works Directive also refers to "objective grounds". So as regards selection criteria the answer to issue 5(1) is No.

Did the situation change after July 1995? In my judgment it did not get any better since although criteria such as those proposed by H of C were bandied about they were still not presented either as the determinative criteria (as opposed to extensions of the pre-qualification process) or in any order of importance. Furthermore I find it impossible to see how Harmon or Gartner could have been treated fairly or equally along with Seele/Alvis if they were not told of the proposal with which their tenders were to be compared. All that they were told (repeatedly) was that they had to bring their prices down. Harmon did do so. Harmon was not then told either that some trimming exercise would be carried out in order to factor in costs to increase the value of its tender over which it had little or no control given that it had been required to price only one or two options.

In my judgment H of C was bound in law to award the contract on the basis of price alone. First, it had failed to comply with the obligation to set out criteria in descending order of importance. In my judgment it is in exactly the same position as the contracting authority in R v Portsmouth which is directly applicable. Were the PWR not to be applicable the result would be same on the same authority and applying Beentjes and Walloon Buses . In Beentjes the Court held that Directive 71/305 required that if criteria other than price were to be relied upon in awarding a contract, they must be stated in the contract notice or contract documents and if they were not stated, the sole criterion for the award of a contract was the lowest price (paragraphs 18, 19, 21, 22, 31, 32, 33, 34, 35, 37 (ii) of the judgment). Secondly, the fresh invitations to tender, in themselves but particularly having regard to numerous contacts between LML (and other members of the project team) and Harmon made it clear that price was the dominant factor. Unless therefore there was something untoward (for example as mentioned in Regulation 20(6)) H of C was bound to accept the lowest tender. On the facts there is no doubt Harmon was the lowest if like is compared with like. The answer to Issue 8(1) overall is Yes, and to each of questions (a), (b) and (c) it is Yes (but it was not so awarded). The answer to Issue 8(2) is Yes to both parts.

This sub-head covers the following issues:

5(7) Were any of the tenderers entitled to submit alternative tenders based upon alternative designs and if so, whether such an alternative tender had to be additional to and accompanied by a compliant tender. (Para 10(o) Re-Amended Sof C; para 30 Re-Amended Defence).

8(3) If the answer to (2) is "No"; was the defendant entitled to consider alternative or variant tenders pursuant to Regulation 20(4) ((i.e. did the defendant comply with the requirements of Regulation 20(4)). Further was the defendant entitled to compare alternative tenders with compliant tenders, and if so, upon what basis should such a comparison have been made? (Para. 14(vii)(b), 14 (ix); Re-Amended S of C; para (c) Reply 2 FBP S of C; para 36A(6) 52 Re-Amended Defence.)

8(5) If the answer to (3) is "Yes" (i.e. the defendant was entitled to consider variant tenders) were the plaintiff's tenders the most economically advantageous/or represent best overall value for money when compared with the tenders of Seele Alvis for option B2?

Regulation 20(4) of the PWR states:

"Where a contracting authority awards a Public Works Contract on the basis of the offer which is the most economically advantageous, it may take account of offers which offer variations on the requirements specified in the contract documents if the offer meets the minimum requirements of the contracting authority and it has indicated in the contract notice that offers offering variations will be considered and has stated in the contract documents the minimum requirements which the offer must meet and any specific requirements for the presentation of an offer offering variations."

This Regulation might profitably have been re-considered in its transition from Article 19 of the Directive. In essence it appears to permit an authority which intends to award a contract on the basis of "most economically advantageous" to award it to a tenderer who submits an alternative proposal provided that such a tender complies with certain specified minimum requirements. In the OJ notices, under the heading "Prohibition on Variants" (where applicable), H of C had stated that:

"Alternative tender proposals may be submitted but must be accompanied by a compliant offer".

Clause 4.10.2 of the General Preliminaries states:-

"The tenderer, after consideration of all the criteria which in his specialist knowledge are relevant to the design and construction of the works, may wish to make proposals for changes to details, dimensions and materials shown on the drawings or referred to in the Specification. Such proposals should be incorporated as alternatives to be returned with the compliant tender. In no way shall any proposal fail to meet the minimum requirements specified in the Tender Document and Specification."

Clause 2.2 of the Special Preliminaries states:-

"Any proposed changes to the existing fenestration design, required by the Trade Contractor, shall be raised at Tender stage for discussion, as a scope for change after the award of the Trade Contract is limited due to a design programme constraints on other packages."

Harmon contended that the effect of Regulation 20(4) was that an alternative or variant could not be considered unless the tenderer had, at the same time, submitted a compliant tender. In my judgment, this is a correct reading although, on the facts, it may not ultimately be material. The reference to variants implies that in addition to the tender that was sought an alternative may be submitted. In any event the OJ notice followed that interpretation and accordingly it would not be fair to other tenderers to consider a variant unless it were accompanied by a compliant tender. Harmon also submitted that just as no selection criteria were ever stated so too there were no minimum requirements set out in the documentation as required by Regulation 20(4).

In practical terms the evidence of Mr Josey brought out an additional reason for requiring a tender which conformed to the invitation to tender to be submitted as well as any alternative tender since, if this were not the case then a contracting authority could not accept the alternative without first giving the other tenderers the opportunity of considering it for otherwise the tenderer would not have competed with the other tenderers which would contravene the principles of transparency fairness and equality.

LML's letter of 19 May 1995 however appeared to give a slightly different choice in that it suggested that the tenderer might submit a tender "which differs from the strict requirements of the tender invitations... or [my emphasis] submit an additional, alternative tender." However, the letter (and its successors) must be read together with the remaining documents, and in particular the general and special preliminaries. In my judgment, these make it clear that tenderers were only expected to submit alternatives on matters of detail relating to the execution of the basic design for the implementation of which tenders were being submitted and that the tenderers were not expected to submit alternative designs. Mr Josey, for example was of the same opinion, which I accept. For convenience I repeat what he said in his report (and when cross-examined adhered to this opinion):

"As set out in paragraph 3.6 above, following the pre-tender briefing sessions, the design team decided to permit tenderers to submit their own alternative details or specifications. The design team placed themselves under no obligation to adopt any alternative details, but accepted that if they did so, design responsibility would be retained by AFE. This was not an unusual arrangement where normal procurement procedures were being adopted."

"The question as to what constitutes an alternative detail arises. In this instance, the contract was in relation to fabrication and installation works. It excluded design and the supply of copper-based alloys from which the chassis and framing were to be fabricated. Consequently, an alternative detail would be one which related to the fabrication and installation, and not one which significantly affected the design or the supply of the materials. An alternative detail would be of the sort suggested by Harmon. They proposed omitting weatherseal welds between inner glazing clamps and chassis framing. This was an alternative detail. It did not affect the appearance of the building, significantly affect the drawn details or affect the supply of specialist materials."

H of C submitted that even if it had not complied with Regulation 20(1) and was not entitled to make an award other than on the basis of the lowest price, it could nevertheless award the contract to a tenderer who put in a variant provided that it complied with the five basic principles or requirements to be found in the Specification and otherwise met the other requirements of the contractual documents. The award to Seele/Alvis could therefore be justified even if Harmon was the lowest tenderer.

In my judgment, as I have already indicated, the contract does not indicate that these requirements relied on as selection criteria are the minimum requirements for the purposes of Regulation 20(4), contrary to H of C's case. In addition Regulation 20(4) only applies if the authority is seeking the "most economically advantageous" tender. This must mean that it is entitled to do so, ie that it has complied with the Regulations by specifying criteria in descending order of importance. It does not apply if the authority is bound to accept the lowest price. In my judgment an authority which has not complied with the Regulations so that it is not entitled to award the contract on a "most economically advantageous" basis cannot still bring itself within Regulation 20(4) simply because it purported to comply with it. That would mean that an authority could pretend to elect for "most economically advantageous" and then contract on a basis which would not have been open to it.

The Regulations have of course been framed to cover a wide variety of situations. Many will be where the contracting authority will simply set out its requirements and then see how the tenderers propose to meet those requirements which may lead to the need to compare a variety of different ways or designs. Here, however, H of C had retained AFE and MHP as its designers and did not set out the requirements which their design was to attain so even if Regulation 20(4) had been available to it the statements made in the documents fall far short of a performance specification which is what "minimum requirements" in this context connote. It was not to be expected that the tenderers were to re-consider the consultants' fundamental design which had been considered by them and which had resulted in the schemes shown on the drawings and in the specification. The most obvious example is, of course, the basic principle of "blast loading". Even if a tenderer had wished to submit a radically different design it could not have done so without obtaining the information which was not to be found in the tender documentation, which was only known to the designers and which was subject to important security restrictions, since a vital part of the design had to take into account explosive forces which might be encountered in the event of a terrorist attack.

Accordingly, although H of C pointed to the evidence of Mr Clatworthy and Mr Boyle in which there were acknowledgements that alternative proposals could be submitted, I do not consider these do more than show a recognition of the obvious: that in relation to the detailed implementation of the design, it was open to tenderers to put forward alternatives, particularly bearing in mind that the tenderers might have skills and experience which were not available to AFE. However, the skills and experience would, in my view, be largely concerned with questions of fabrication and installation even though the tenderers were no doubt all well capable of carrying out the design work, which had been entrusted to AFE as indeed most of them had originally been treated as pre-qualified for that very purpose (before the decision was taken to use AFE as the designer).

Thus I do not consider that H of C complied with its obligation to set out the minimum requirements by which any variant could be assessed, whether under Regulation 20(4) or pursuant to the invitation to tender, other than matters of detail, in that they were not identified in the documents either as such or recognisably as such amongst a mass of other requirements. Accordingly since no other documents can be relied on, it must follow that there were no other requirements stated by which any alternative tenders could be assessed - at least requirements publicised and known to the tenderers. It was part of H of C's case that it was nevertheless open to the contracting authority to consider variations. Reliance was placed upon some observations of Professor Sue Arrowsmith in her treatise The Law of Public Utilities' Procurement at page 619:

"It is not clear what is the position where the required information is not given to bidders. In particular, if variations are not mentioned in the contract notice and no minimum requirements are specified, is the purchaser permitted, or required, to accept such variations?

One possibility is neither to require nor to permit variations in any case where minimum requirements are not specified. Another is to permit providers to request or seek a remedy, for amendment of the documents to require the purchaser to include its minimum requirements and to require variations to be considered where this has been done, but not otherwise. A third approach is to require the authority to consider variations but on the basis that there are no minimum requirements. It is not clear which interpretation is correct."

It was submitted that the third approach was permissible and would be consistent with the principles of transparency and equality of treatment in that all tenderers would know that they could submit alternative offers. In my judgment, the principles of transparency and equality point in precisely the opposite direction. First, I do not consider that tenderers can be treated equally or fairly if they are not given the criteria by which any variants are to be assessed. Obviously, if no criteria or minimum requirements are stated, then all tenderers are necessarily equally in the dark. However, the principles that have emerged from the decisions of the Court of Justice and applied by the courts of this country show in my judgment that that is not a fair or correct way in which tenderers are to be treated. In addition to the authorities to which I referred above, in the "Storebælt" case ( Commission v Denmark Case 243/89), the Court made it clear that if variants were to be considered, then they had to comply with the requirements set out in the invitation to tender. That means that such requirements must there be stated clearly for otherwise the principle of fairness and equality will not be observed. Secondly, there can be no transparency if the contracting authority keeps to itself the criteria or requirements and does not reveal it to the tenderers. The only possible circumstance in which the third option might be permissible would be if the contracting authority not only did not state the requirements, but also said expressly that there were no requirements by which the variants would be assessed. Even that approach would have its difficulties. It might only be appropriate where the very nature of the project required the tenderers to ascertain the authorities' requirements, eg to carry out a feasibility study where apart from price each tenderer might have different ways of tackling the tasks. Even then it seems to me to run completely counter to the fundamental principles set out in the PWR and in the Directives.

Therefore if issue 8(2) had been answered: No then the answer to the first part of Issue 8(3) would have been: No, because the H of C had not set out the minimum requirements for the purposes of Regulation 20(4), because the variant permitted was of detail only and not a change of design and for the independent reason that Regulation 20(4) requires the tenderer of a variant to submit a compliant tender capable of being compared with the tenders of those who had not submitted such a variant. The second part of issue 8(3) will not be answered, even hypothetically. On my other conclusions Issue 8(4) does not arise but the answer would have been No. Issue 8(5) similarly does not arise but the first part would not have been answered although the answers to the two questions in the second part are obviously: Yes. If issue 8(5) had arisen for decision and if it was not common ground then I do not consider that it raises issues that are not justiciable for it could be shown that the project team's assessments were not reasonable.

This sub-head is the subject (in part) of the following issues:

5(3) Whether it was the defendant's policy that the greatest possible proportion of the work to the Building was carried out by UK Companies and to prefer UK companies in the tender procedure. (para 10(ccc) Re-Amended S of C; para.17B Re-Amended Defence)

8(6) Was the defendant in breach of the Regulations/other enforceable Community obligations in failing to treat the plaintiff equally or fairly? In particular, did the defendant:

(a) initiate, encourage or permit to continue a policy that the fenestration package should be awarded to a UK owned contractor, and if so did that policy affect the tendering procedure?

(b) apply arbitrary methods in an attempt to favour Seele Alvis' tender at the expense of the plaintiff?

(c) [see later]. (Paras 14(vii)(a),(d),(g) Re-Amended S of C; paras 50(1)(4)(7) Re-Amended Defence.)

Issue 5(3) is a preliminary to the main "Buy British" issues, upon which the parties took diametrically opposed positions. As it stands, the first part has to be answered: No. It was clearly the policy of the AWC that the greatest possible proportion of the work was carried out by UK companies (see the minute of 17 January 1995 the meaning of which is put beyond question by the Chairman's notes for the meeting 17 May 1995). However the AWC strictly could not direct the defendant to implement that policy. There is no evidence that the defendant ever formed that policy although I have no doubt that it was the policy that H of C thought had to be followed since on such an issue Mr Makepeace deferred to the views of the AWC. The defendant evidently delegated complete authority to Mr Makepeace as the Project Sponsor but I do not think that I can formally ascribe the policy (which he is said to have followed) to the defendant itself without more. It is inconceivable that the defendant and all others responsible for a building such as the NPB would not have wished it to have been built to the greatest possible extent by companies from this country (in the same way that it had been designed and managed by UK companies and firms). However, the more prominent and the more public the works, the less easy it is for authorities in the United Kingdom to realise such aspirations. First, the building was subject to the law and practice of public procurement which requires that contractors from other countries must be permitted to tender and, once permitted to tender, must be treated as fairly as a national company. Secondly, it would be commercially foolish to have pushed for UK participation at the expense of cost and quality. On the other hand, it would have been embarrassing if the major elements or trade contracts for the NPB had been awarded to companies that are either not based within the United Kingdom or which were subsidiaries of foreign companies. The building would not then have been a show piece for the UK construction industry. In the case of the fenestration package, the policy which the defendant must have taken to have adopted, was to try and ensure that UK companies were found which were capable of tendering successfully for the package in the hope that one of them would be successful. This is clear from the steps taken in 1994 to interest contractors from this country. They were only partially successful as a result of which it is clear that determined efforts were made which resulted in the formation of Seele/Alvis Consortium. From the point of view of AFE this joint venture had the additional advantage of ensuring that there would be at least one contractor known to it who was capable of handling the materials specified. Accordingly, the first part of issue 5(3) will be answered No, the defendant had no such general policy. So too for the purposes of issue 8(6)(a) there is no evidence that the defendant initiated any such policy.

I now turn to the wider and more controversial questions. Harmon's case was that there was a policy to encourage or permit the award of the fenestration package to a UK owned contractor and that the policy did affect the tendering procedure. (In this judgment I shall refer to UK contractors in the same way so as to exclude contractors registered in this country but owned or controlled by entities not resident here). Harmon did not of course criticise anyone for wishing to see that British contractors obtained a substantial part of the work available on the project. Mr Fernyhough accepted that it was necessary to show that the selection of Seele/Alvis, because Alvis was a British contractor, was a material factor in the award of the contract to that consortium. He maintained that it need not be a decisive or central, crucial factor or a dominant cause. In addition to the evidence gleaned from the cross-examination of Mr Makepeace, Harmon relied on the evidence contained in and concerning a number of documents such as Mr Webber's letter to the Serjeant at Arms of 18 February 1994, MHP's proposals in early 1994; Mr Kerr's memorandum to Mr Gregory of 23 January 1995; Mr Brand's notes of Mr Makepeace's views as recounted to Mr Noble; minutes of the AWC; Mr Mumford's note; MHP's letter of September 1995; and the evidence of Mr Pringle; the notes of meetings of the task force in October 1995 and the minutes of a meetingof the AWC. In addition Harmon relied upon the facts contained in exhibit D12A produced by Mr Makepeace which showed that of the forty three contracts which had then be awarded for the NPB only four had gone to companies which were obviously not British, the total value of which was -14.4 million.

In examining exhibit D12A Mr Makepeace rightly pointed out that even though a contract had been awarded to a British contractor it could well contain substantial foreign elements, or the contractor might be owned by an overseas company, e.g. Kvaerner Rashleigh and the prominent tower cranes which are manufactured by Wolff but which were supplied by a British company.

For H of C it was submitted that the decision to recommend Seele/Alvis was not influenced by the nationality of Alvis. Until a very late stage the project team considered that Gartner (a British company ultimately owned by a German company) was highly rated (both for its alternative solution and for its managerial, technical, programming kind of organisational skills). Furthermore, Mr Makepeace had consistently denied that his decision to accept the recommendation to proceed with Seele Alvis was influenced because Alvis were a British company. Harmon had not been able to rely upon any resolution of the AWC, or any action on the part of the DOE. H of C contended that a "Buy British" policy would only be relevant if Harmon had established that it would not have tendered for the fenestration package had it known that the defendant would operate a "Buy British" policy, alternatively that but for such a policy it would have been awarded the fenestration contract.

In my judgment, quite apart from the provisions of the Treaty the principles of equality, fairness and transparency require that a contracting authority should not allow national preferences to intrude into the procedure for inviting tenders or selecting contractors (although a contracting authority is, of course, entitled to know whether, for example, a contractor is likely to provide employment in the country in question, but only if that factor is a criterion for awarding the contract: see Beentjes ). I accept Harmon's submission that it is not necessary to show that a national preference was a decisive or critical factor or the dominant cause. If it were, then it would almost certainly be blatant discrimination. In my judgment, it is sufficient if a particular tenderer who later becomes the contractor obtains a preference because of its nationality. Under the European Public Works regime the nationality of a European contractor or the origins of the work, goods, services or personnel must, as such, be immaterial. In the case of a consortium the preference may be for one member who need not necessarily be the major partner.

I found this part of Harmon's case especially difficult, not just because the allegations are unusually serious - is it not no more than natural inclination to keep work within one's own country or more than that?- but also because the conclusion that I was invited to reach had to be drawn from a number of indicia, some of which could well be regarded as flimsy taken individually and as no more than expressions of mundane patriotic feeling. In addition it is necessary to be sure that Harmon's criticisms are of the defendant, or of Mr Makepeace (who as project sponsor had the requisite authority to act in the interests of the defendant and whose views may in this aspect of issue 8(6) be equated to that of the defendant), and not of members of the project team whose views and actions might not be treated as those of the defendant. In addition, in parliamentary circles and in the civil service (as in commerce) care is usually taken to see that sensitive or controversial views are not recorded too clearly or at all so it was not to be expected that Harmon would have found clear evidence of discrimination in favour of Seele/Alvis and against it. Equally paucity of such evidence might well indicate that there was no real case but merely expressions of human nature. As I have said, there was nothing inherently wrong in the early steps taken to interest UK contractors in the project, by presentation and at MHP's instance (see Mr Romaniuk's letter of September 1995) to split the work into manageable packages with design being carried out by AFE, even if it was not otherwise necessary for technical or commercial reasons: see MHP's draft report of 22 February 1994, which was written at a time when the PWD (both Mr Webber and, more importantly, Mr Makepeace) was very concerned about the lack of British contractors, and which went out of its way to identify the nationality of contractors - a feature guiltily removed from the report when it was formally re-presented on 15 March 1994. It was when these steps came to naught that the problems arose. I am sure that in January 1995 Mr Kerr reflected the views of LML and of the defendant: "This view by the client is driven I believe by the following factors: There is a greater possibility of U K suppliers for metal being appointed, as the client/LML will place the order, as be in no doubt there is a hidden agenda here as regards UK supply . " At that time the AWC was expressing views about the participation of UK contractors. None had been listed in Mr Kerr's memorandum to Mr Gregory. It is noteworthy that there are no comparable documentary notes or other evidence (apart from denials, which are not of course to be discounted) which negative these views, which continued - see Mr Pringle's letter to Mr Romaniuk of September 1995. I do not accept that Alvis was brought in solely for its special skills. If the technical requirements of the project meant that it was desirable to look for special skills then it is obvious that a search would have been made beyond the contractor known to MHP, namely, Alvis. Mr Makepeace would have wanted others apart from Alvis to be involved (see Mr Brand's note of 15 February 1995). It is in my judgment clear that Alvis was found as it was the only British entity apparently capable of handing the metals to which MHP and AFE were wedded. If the materials had been beyond the capability of the other tenderers they could not have been treated as pre-qualified or allowed to continue to submit tenders. Harmon's experience on the mock-up is telling: it encountered problems but they were overcome once advice had been taken and implemented and its difficulties did not in the eyes of the project team suggest that it would be incapable of carrying out the fenestration package for otherwise it would not have been invited to continue submitting tenders. None of the specialist cladding tenders had worked with these esoteric materials. All would have had to find or train people capable of achieving what was required; none thought it insuperable; nor did the project team. The fact is that the skills required were all ones which any specialist contractor could secure with proper training and experience. Mr Josey's evidence demonstrated beyond doubt that, for example, welders (such as M. Rayjal and M. Roussel) could and would have been "bought in", (as M. Michno had said) and that the machining of the materials was not so difficult that it could not be carried out by sub-contractors. Alvis owes its participation to the hard work of Mr Dodds, MHP and OAP. For example, I have no doubt that MHP was all for Seele/Alvis so that Alvis would get the work and, although Mr Pringle denied it, there is clear evidence of bias by MHP against Harmon in its frequent expressions of preference for a UK contractor and in its assessment of Harmon's tender and capabilities which could not in my judgment be justified objectively. A British contractor having been secured as one of the eligible tenderers, it does not of course follow that that contractor will be preferred.

However, given the preference for MHP and OAP and AFE for Alvis, I am, secondly, completely satisfied that a material factor in the decisions to consider and to push for option B2 was that it would enable the Seele/Alvis consortium to gain a lead on grounds of technical superiority. Although Mr Makepeace denied it, it was clearly in the interests of all those responsible for making recommendations and taking decisions if a substantial contract of this kind was awarded to a consortium which contained a significant British element. The fenestration is one of the most distinctive features of this prominent building. Other elements are not so visible; others are temporary so there was less concern about the contractors for those packages being from other countries or UK subsidiaries (which comes to the same thing). When the facts are assembled it is in my judgment manifest that the dominant members of the project team, the architects and engineers, aided and abetted by Mr Makepeace, wanted Seele/Alvis to be the contractor. The evidence is that MHP was rooting for Seele/Alvis - as Mr Mumford recorded it: "Buy British!". Mr Quick from OAP, the project team leader chosen by Mr Makepeace, was pushing the task force towards option B2 because it was OAP's preference "to go British if possible" and because it would give the AWC "the option to steer towards Alvis (UK based company)". As Mr Brand also recorded "it would make PWD's life politically better if Alvis came in as the cheapest...". Notes such as these might not be sufficient in themselves were it not for other factors (such as the lack of a search for skilled enterprises supposedly comparable to Alvis which shows that reason was a pretext). But Seele/Alvis were not the cheapest so Mr Quick in consultation with Mr Makepeace produced reports which made them, if not at first the cheapest or cheaper, then, by fiddling the figures, sufficiently close to Harmon's tender that the choice could be justified on other grounds. If there had been another plausible explanation Mr Quick would have been the obvious person to give it. Mr Makepeace's explanations were not credible. Finally, of course, there is the debacle of trying to find reasons for the unjustifiable which perhaps says as much about the true motives of Mr Makepeace and those that must be imputed to the defendant, for by that time there can be no possible distinction between the two. However, thirdly, the steps taken to bring in and then to prefer Seele/Alvis because Alvis was British were not taken by the project team alone, influenced by the chauvinism of MHP and OAP, and by AFE's desire to have Alvis for its assumed in-house skills, without looking elsewhere, but were steps taken either with the full knowledge of Mr Makepeace, who if he was not at the relevant meetings, was kept fully in the picture by documents being copied or by telephone calls, or at his instance, of which perhaps the crucial examples were his refusals in November 1995 to obtain tenders that might have been truly comparable and to obtain legal advice about the propriety of going ahead with Seele/Alvis when the process had become in effect a one-horse race, despite warnings about taking this course which had been given since the latter part of October 1995. In my view the decisions which were initiated by Mr Makepeace and followed through by Mr Quick were intended to avoid the contract going to Harmon (for Gartner were out of the picture, even though it had technical advantages). Accordingly I have come to the conclusion that the defendant in the words of issue 8(6)(a) the defendant encouraged or permitted to continue a policy that the fenestration package should be awarded to a UK owned contractor, that that policy affected the tendering procedure, and, as I have already found, the defendant through Mr Quick and the task force applied arbitrary methods to favour Seele Alvis' tender at the expense of Harmon. These conclusions are plain breaches of the defendant's obligations to Harmon, whether those obligations arise from European law or purely in contract in domestic law. Thus the answer to issue 8(6)(a) and (b) is: Yes (although qualified in relation to (a)).

This head embraces the following issues:

Harmon's case was that a unilateral preliminary contract came into existence since by issuing invitations to tender H of C made an offer to the respective tenderers that by submitting a tender it would treat that as acceptance of an offer whereby it was under the following obligations:

(a) it or its agents would open each of the tenders and consider each of them alongside any other tender;

(b) it or its agents would act fairly in considering each of the tenders submitted;

(c) it would award the contract for the fenestration package to the tenderer who submitted the offer that represented the best overall value for money;

(d) it and its agents would comply in all respects with the provisions of the Public Works Regulations 1991 in considering the tenders submitted to it.

Harmon submitted that this approach was consistent with that of the House of Lords in Harvela Investments Limited -v- Royal Trust [1986] AC 207 in which Lord Templeman said at page 233:

"The task of the court is to construe the invitation and to ascertain whether the provisions of the invitation, read as a whole, relate a fixed bidding sale or an auction sale. I am content to reach a conclusion which reeks of simplicity, which does not require a draftsman to indulge in prohibitions, but which obliges a vendor to specify and control any form of auction which he seeks to combine with confidential bidding. The invitation required Sir Leonard to name his price and required Harvela to name their price and bound the defenders to accept the higher price. The invitation was not difficult to understand and the result was bound to be certain and to accord with the presumed intentions of the vendors, discernible for the express provisions of the invitation. Harvela had named the price of $2,175,000; Sir Leonard failed to name any price except $2,100,000, which was less than the price named by Harvela. The vendors were bound to accept Harvela's offer."

Harmon based its case upon the judgment of Bingham L.J. in Blackpool and Fylde Aero Club -v- Blackpool Borough Council [1990] 1 WLR 1195 at pages 1201-1202. Reliance was also placed upon the decision of the Court of Appeal in Fairclough Building Limited -v- The Borough Council of Port Talbot (1992) 62 BLR 82, particularly the judgment of Parker L.J. at pages 90-91. Counsel also relied on Commonwealth cases: a number of Canadian cases including in particular Emery Construction Limited -v- St John's (City) Roman Catholic School Board (1996) 28 CLR (2d) 1 and George Wimpey Canada -v- Hamilton-Wentworth (Regional Municipality) (1997) 34 CLR (2d) 123; from New Zealand, Pratt Contractors Limited -v- Palmerston North City Council [1995] 1 NZLR 469; and from the Federal Court of Australia, Hughes Aircraft Systems International -v- Air Services Australia [1997] 558 FCA, 30 June 1997. Harmon submitted that as regards the contents of the implied contract, obligation (a) was supported by Blackpool Aero ; obligation (b) was supported by Fairclough, Hughes Aircraft , and Pratt Contractors ; obligation (c) required no authority; and obligation (d) was supported by Emery which also showed that such a contract might exist even though there was a statutory context.

Mr White submitted that no contract should be implied since the statutory scheme of the PWR provided not only a remedy but an adequate remedy for dissatisfied contractors and thus made it not only unnecessary to infer a contract but its very existence precluded any contract arising. Blackpool was distinguishable since there was no other remedy available to the tenderer and there were special circumstances including the tenderer's prior history of having successfully tendered for the contract which was the subject of the procedure. Even in the special circumstances of Blackpool the implied contract was limited to one in which a tenderer was entitled, as a matter of contractual right, "to be sure that his tender w[ould] after the deadline [for submitting tenders] be opened and considered in conjunction with all other conforming tenders...." (see Bingham L.J. at page 1202C-D). In Hughes Aircraft it was also claimed that the parties intended to form a contract.

In my judgment Mr White's submissions are correct as regards the original tender. In Blackpool the plaintiff had delivered its tender before the expiry of the deadline but it was never considered since the Town Clerk's staff failed to put it before the committee. In fact the successful tender was lower than that submitted by the plaintiff but the council had made it clear that they would not be bound to accept the lowest tender. Accordingly, the plaintiff commenced proceedings maintaining that the express request for tenders gave rise to an implied obligation on the part of the council to consider all tenders duly received. It was on that basis that the Court of Appeal dismissed the defendant's appeal against the trial judge's decision to accede to the plaintiff's contentions. The case is perhaps no more than authority for the proposition that a contracting authority undertakes to consider all tenders received. As the judgment of Bingham L.J. at page 1202 makes clear, that is the least to what a tenderer is entitled "not as a matter of mere expectation but of contractual right, to be sure that his tender will after the deadline be opened and considered in conjunction with all other conforming tenders, or at least that his tender will be considered if others are." The background for the decision included, in part, the following passage:

"The invitation to tender may itself, in a complex case, although again not here, involve time and expense to prepare, but the invitor does not commit himself to proceed with the project, whatever it is; he may not accept the highest tender; he need not accept any tender; he need not give reasons to justify his acceptance or rejection of any tender received. The risk to which the tenderer is exposed does not end with the risk that his tender may not be the highest, or, as the case may be, lowest."

However here the facts were that H of C was bound to proceed with the project; it had to accept some tender; and it had to give reasons if it rejected a tender. In Fairclough Building the issue was whether the defendant was in breach of contract in removing the plaintiff from the tender list because of a connection between the tenderer and the wife of its construction director who was a senior assistant architect employed by the council. In deciding that the council had acted properly and not in breach of contract, the Court of Appeal held that the defendant council was under a duty "honestly to consider the tenders of those whom they had placed on the short list, unless there were reasonable grounds for not doing so." That passage was held to be consistent with Blackpool , see Parker L.J. at page 92 and Nolan L.J. at pages 93-94. The only issue before the court therefore was whether the council had acted reasonably.

In examining the Canadian cases, it is at first necessary to bear in mind that the key factor is the commitment of the tenderer to the person to whom the tender was submitted. In The Queen in the Right of Ontario -v- Ron Engineering & Construction (Eastern) Limited [1981] 1 SCR 111 the tender had been supported by a tender bond. Estey J said at page 122-123: "The principal term of Contract A is the irrevocability of the bid... ". In a later case (Northern Construction -v- Gloge Heating & Plumbing (1986) 27 DLR (4th) 265, a sub- contractor was not able to withdraw a tender on the strength of which the main contractor had, to the sub-contractor's knowledge, submitted its own tender to an owner). However, a more generous approach was applied in Best Cleaners & Contractors Limited -v- R. in Right of Canada [1985] 2 FCR 293 and in Chinook Aggregates Limited -v- Abbotsford (Municipal Districts) (1989) 35 CLR 241 . In the former case, after the tenders had been submitted, discussions took place with one tenderer about the possibility of awarding the contract for a longer period than that originally sought. The plaintiff was not consulted. In the event, the contract was awarded to the other tenderer but on the original basis. The decision turned on whether there should or should not be a new trial. The dissenting judgment of Pratt C.J. shows that he thought that there was an obligation to treat the tenderers fairly and equally, so the division of opinion was largely as to whether that had in fact occurred. In Chinook the plaintiff had not been informed that the defendant had a policy whereby if any local bidder was within 10% of the lowest price, then the local bidder would get the contract. By failing to communicate the policy to all tenderers, it was held that the defendant was in breach of its duty to treat all tenderers fairly. The decision was that of the British Columbia Court of Appeal. The judgment of the Court was delivered by Legg J.A. who said at page 248:

"By adopting a policy of preferring local contractors whose bids were within 10% of the lowest bid, the appellant in effect incorporated an implied term without notice of that implied term to all bidders, including the respondent. In so doing, it was in breach of a duty to treat all bidders fairly and not to give any of them an unfair advantage over the others. This duty was recognised in Best Cleaners & Contractors Limited -v- R ... where Mahoney J. said:

The views of other courts of these cases is instructive. In Pratt Contractors the contracting authority had its own specific procedure which it had publicised and incorporated as part of the tender documents. Gallen J. said (at page 481):

"In selecting a particular tenderer, the council is in my view bound by the terms it has itself imposed, as well as the requirements of fairness and equity which may well have an application."

He later said (at page 483):-

"There is also an aspect of fairness. It was conceded by counsel for the defendant, that the council was obliged to proceed in a manner which meant the general requirements of that rather indefinable term "fairness". To accept as an alternative tender and thus deprive the lowest conforming tenderer of such opportunity as that qualification gave it, a document which is indefinite in terms of price, which required elucidation and confirmation, was I think unfair. That comes close to negotiating with one of the tenderers within the tender process, but not on terms which apply to other tenderers."

I do not consider that the decision is therefore of direct assistance as there was a concession. (This decision is relevant also to some of the issues on damages and is considered again later.)

Similarly, whilst the judgment of Finn J. in Hughes Aircraft Systems is a valuable analysis of the law, it does not really assist me. Under the heading "Good faith and fair dealing" (at page 41) Finn J. felt obliged not to depart from the judgment of Gummow J., then of the Federal Court of Australia, in Service Station Association -v- Berg Bennett & Associates Pty Limited (1993) 45 SCR 84 in which, having considered North American jurisprudence, that judge said at (page 96):

"Anglo-Australian contract law as to the implication of terms has heretofore developed differently, with greater emphasis upon specifics, rather than the identification of a genus expressed in wide terms. Equity has intervened in matters of contractual formation by the remedy of recision, upon the grounds mentioned earlier. It has restrained freedom of contract by inventing and protecting the equity of redemption, and by relieving against forfeitures and penalties. To some extent equity has regulated the quality of contractual performance by the various defences available to suits for specific performance and for injunctive release. In some, but not all, of this, notions of good conscience play a part. But it requires a leap of faith to translate these well-established doctrines and remedies into a new term as to the quality of contractual performance, implied by law."

Finn J. went on to say that his own view inclined to that of Priestley J.A in Renard Constructions (ME) Pty Limited -v- Minister of Public Works (1992) 26 NSWLR 234 in which he had said :

"People generally, including judges and other lawyers, from all strands of the community have grown used to the courts applying standards of fairness to contract which are wholly consistent with the existence in all contracts of a duty upon the parties of good faith and fair dealing in its performance. In my view, this is in these days the expected standard, and anything less is contrary to prevailing community expectations."

Finn J. went on to say:

"Fair dealing is a major (if not openly articulated) organising idea in Australian law. It is unnecessary to enlarge upon that here. More germane to the present question, the implied duty is, as is well known, an accepted idea in the contract law of the United States and, probably, of Canada: see E A Farnsworth "Good Faith in Contract Performance" in J. Beatson and D Friedmann (Eds) Good Faith and Fault in Contract Law... [He cited many other sources.]

Finn J. also referred to the remarks of Gallen J. in Pratt Contractors at pages 478 - 479:

"Authority makes it clear that the starting point is that a simple uncomplicated request for bids will generally be no more than an invitation to treat, not giving rise to contractual obligations, although it may give rise to obligations to act fairly. On the other hand, it is obviously open to persons to enter into a preliminary contract with the expectation that it will lead in defined circumstances to a second or principal contract, along the lines of the analysis in the Canadian cases. Whether or not a particular case falls into one category or the other will depend upon a consideration of the circumstances and the obligations expressly or impliedly accepted."

In my judgment it is clear from Blackpool and from the other authorities that there must be something more than a request for a tender which is to be submitted competitively along with others. An invitation to tender is by its nature not normally an offer; it solicits offers. It does not carry with it an obligation to accept any offer that is made in response to it, even if the customary disclaimer is not made. It would be quite a change if the very fact that tenderers were informed that competitive tenders being were sought was treated in law as an offer that any tenderer who submitted a tender would accept that to be treated fairly. It would intrude into the ordinary commercial freedom or discretion to accept or reject a tender or to negotiate with whoever seemed best in the eyes of the person seeking tenders. There must therefore be some good reason why obligations of the kind suggested by Harmon can arise.

In this instance tenders were sought using the restricted procedure under the Public Works Regulations which provides tenderers with some protection in as much as they should not be tendering along with any one who was not considered to be qualified to carry out the work in question and had satisfied other requirements. The restricted procedure is intended both to provide the contracting authority with a mechanism whereby tenders are only sought from a selected short list and to provide the tenderers with the knowledge that the competition will come from true competitors. In addition tenderers who had not been selected can challenge that decision. The PWR are seemingly comprehensive. They give disappointed tenderers rights to prevent the procedure from being abused and to obtain reasons and to question the award. The requirement to give reasons itself imports an obligation of fairness even if it were not grafted on by the decisions of the ECJ governing the interpretation of the parent legislation. I therefore consider that H of C is right in its primary submission.

On the other hand, the procedure of the PWR was not followed. H of C did not inform the other tenderers it would be considering Seele/Alvis' option B2 alongside tenders based on the new specification. If I am right in my conclusion that H of C only sought alternative details then can Harmon complain of the decision to consider Seele/Alvis's tender on the basis that it offered an alternative design? The discussions in the autumn of 1995 deviated from the PWR procedures in that they went beyond mere negotiations and clarifications. They entertained an alternative design, of which the other tenderers were unaware (at least formally). If Harmon cannot complain of the result under the PWR does this not mean that the PWR are not as comprehensive as they might first appear - or that they do not effectively control deviations of the kind adopted by H of C? In my judgment by repeating the offer to consider alternatives, on 11 September and on 2 and 30 October 1995, it was to be implied in that offer that by submitting a tender any alternatives would be equivalent to the schemes or schemes for which revised tenders were being sought and would be options only in terms of refinements of detail design which would reduce cost, albeit confidential to the tenderer but falling short of different proposals which were more than matters of detail but ones of changes of design, of which tenderers were not informed and therefore were entitled to assume were not matters which they needed to take into account. In my judgment even though all tenderers accepted that they would not be entitled to see alternatives of detail which were considered to be commercially confidential to a given tenderer, H of C in soliciting new or revised tenders under the European public works regime (to which effect is given by the PWR) impliedly undertook towards any tenderer which submitted a tender that its submission would be treated as an acceptance of that offer or undertaking and:

(a) that the alternative submitted by any tenderer would be considered alongside a compliant revised tender from that tenderer; and

(b) that any alternative would be one of detail and not design;

(c) that tenderers who responded to that invitation would be treated equally and fairly.

These contractual obligations derive from a contract to be implied from the procurement regime required by the European directives, as interpreted by the European Court, whereby the principles of fairness and equality form part of a preliminary contract of the kind that I have indicated. Emery shows that such a contract may exist at common law against a statutory background which might otherwise provide the exclusive remedy. I consider that it is now clear in English law that in the public sector where competitive tenders are sought and responded to, a contract comes into existence whereby the prospective employer impliedly agrees to consider all tenderers fairly: see Blackpool and Fairclough .

H of C was in breach of all these obligations. In my judgment it also broke the implied duty to treat all tenderers fairly and equally by considering an alternative design without giving any other tenderer the opportunity of competing with it on its terms.

Thus my answers are: to Issue 6 - Yes, as regards the requests or invitations of 11 September, 2 and 30 October 1995; to Issue 7 - Yes, there were implied terms as follows:

(a) that the alternative submitted by any tenderer would be considered alongside a compliant revised tender from that tenderer; and

(b) that any alternative would be one of detail and not design;

(c) that tenderers who responded to that invitation would be treated equally and fairly;

Issue 5(9) is: Whether the defendant's negotiations with Seele Alvis after 2 November 1995 resulted in the awarding of a contract to Seele Alvis on materially different terms to that upon which the plaintiff had tendered. (Paras 10(p), 10(q) and 10(r) Re-Amended S of C; paras 30A, 30B and 30C Re-Amended Def.). It is complemented by Issue 8(6)(c) which asks whether the defendant was in breach of the Regulations/other enforceable Community obligations in failing to treat the plaintiff equally or fairly. ... In particular, did the defendant ...(c) unlawfully enter into post tender negotiations with Seele Alvis? (Paras 14(vii)(a),(d),(g) Re-Amended S of C; paras 50(1)(4)(7) Re-Amended Def.). Both are followed by Issue 8(6A) which deal with what might have happened.

Harmon's case was that under EU law under the 1991 Regulations there were limited opportunities for post tender negotiations. It referred to the statement concerning article 7(4) of Council Directive 93/37 which stated that all negotiations with tenderers which distorted competition or which discriminated against other tenderers were inadmissible. In addition in this country in 1986 the Central Unit on Purchasing of H M Treasury published a Guidance Note No. 1 on Post Tender Negotiation (J/59), which was intended to be "a statement of good professional practice". In its introduction it said :

"Post tender negotiation is not a licence to indulge in unprincipled and unethical standards of buying. It is just one of a number of techniques which buyers can use to improve value for money. This guidance attempts to lay a few ghosts and dispel the myth that the buyer is committing an unpardonable sin by looking beyond the price on the bottom line.

Later, in paragraph 3.1 by way of a "definition" it stated "the term" Post Tender Negotiations" may, by implication, suggest connotations with sharp practices to extract commercially and ethically unacceptable terms by the use of government muscle on the part of spend irrespective of the consequences. Rather, it is a means of negotiation to ensure that the Procurement Organisation obtains true value for money (not necessarily the cheapest) by purchasing an acceptable finished product at a competitive but fair market price within the time stipulated.

The guidance note dealt with EC directives. Paragraph 2.2 stated:

"Under the EC directives... on government procurement, tendering procedures for orders/contracts above the thresholds are subject to particular requirements. All potential bidders must be treated equally and given identical opportunities to bid for the contract. In the context of post tender negotiation, this means particularly that any contracts should be let in accordance with the specification and be awarded on the basis of the evaluation criteria published with the invitation to tender. Thus, where the negotiation indicates that a change in the specification or in the evaluation criteria as published would be in the buyer's interest, it is necessary to re-tender so that all potential bidders have the opportunity to take advantage of a revision."

In a later publication of July 1989 the CUP gave guidance on post tender negotiation as follows, in paragraph 2.1 (J/70):

"Negotiation after receipt of formal bids or tenders and the formal letting of contracts with those companies submitting tenders offering the best value for money with a view to obtaining an improvement in content in circumstances which do not put the other tenderers at a disadvantage, distort competition or affect adversely trust in the competitive tendering process."

Harmon's case was that H of C entered into lengthy, detailed and difficult negotiations with Seele/Alvis between November 1995 and May 1996 which resulted in the contract with Seele/Alvis Fenestration Limited containing terms which were materially different from those upon which tenders had been sought in 1995. Harmon submitted that they conferred advantages on Seele/Alvis which would have been reflected in the price had they been offered to Harmon which would have been able to have improved its competitive edge over Seele/Alvis, had it been given the opportunity to do so in 1995. The changes are summarised in LML's letter to H of C dated 2 April 1996. The changes were then described by LML as "significant". Harmon pleaded an extensive list in the Further and Better Particulars of the Statement of Claim but ultimately the changes upon which it relied may be considered under three typical and decisive heads:

1. Novated suppliers, ie the opportunity to negotiate directly with them and liability for them;

2. Compression of the contract programme.

3. Reduction of materials minimum guarantee period.

The background to this subject may be found in Mr Mumford's evidence which confirmed that all tenderers had been told on more than one occasion that H of C would not allow amendments to the tender conditions.

I have combined the separate complaints of direct negotiations with novated suppliers and the provision of "back-to-back" liability. The original scheme was that tenderers had to accept the novation of contracts already made between H of C and certain designated suppliers and to accept those suppliers as sub-contractors with full "back-to-back" liability. As Mr Boyle said this arrangement would have meant that he would have had to have dealt with five different contractors in as many different countries and therefore an allowance had to be made for that factor in the tender. Indeed, tenderers were apparently given copies of the proposed terms and conditions of the contracts that might be novated and were to allow a provisional sum of some -6,150,000 as the value of these sub-contracts. In the bill of quantities specific provision was required for an allowance within the tender price for "transport, waste, scheduling, checking, handling, storing, managing, risk and profit".

It appears that by November 1995 H of C had failed to tie down any of the proposed supply contractors and had not made any contracts which could have been novated. Mr Makepeace decided that Seele/Alvis should negotiate and conclude arrangements with the proposed suppliers - see paragraph 91 of his witness statement and paragraph 216 of Mr Mumford's statement. Seele/Alvis then discovered that there had been material changes to the terms and conditions of supply contracts which had been circulated to tenderers with the original invitation to tender. The contractors were apparently no longer to be "back-to-back" and required to accept the same responsibilities as the contractor under the principal trade contract. By this time Seele/Alvis were in a commanding position in the negotiations and were evidently in a position to exploit it to the full. Extensive revisions (indicated by underlining) were made to clause 22 of the trade contract so that it read, in part:-

22.2 The Trade Contractor shall not, without the prior written consent of the Authority, sub-let any portion of the Works save that consent is hereby given for the Trade Contractor to sub-let portions of the Works to Alvis Vehicles Limited, Seele GmbH Germany, Seele GmbH Austria and Seele UK Limited . Such consent, if given, shall not relieve the Trade Contractor from any liability or obligation under this Agreement.

Thus Seele/Alvis were able to negotiate with the suppliers but H of C was to have the last word as to the terms under the contract whereby Seele/Alvis had to have clause 22.6. Harmon's case was that, on the one hand, if it also had been able to negotiate directly with the sub-contractors, it might have been able to have avoided incurring the costs for which provision was made in its tender. Equally, the result of the new terms of the trade contract effectively gave Seele/Alvis a release from what might otherwise have been effective liability for the performance of all novated suppliers, whatever the circumstances. This too was clearly an advantage.

H of C maintains that the changes of which Harmon complain merely brought Seele/Alvis back to the position in which Harmon would have been in had it been awarded the contract on the basis on which it originally tendered, namely, that the contract would be back-to-back with those of the novated suppliers. Furthermore, there was no evidence of any possible allowance in for Harmon's tender which would have meant that its price could have been materially improved if it had been able either to negotiate directly with the suppliers, or to have contracted on the terms ultimately secured by Seele/Alvis. The changes are not therefore of a substantially different nature to those upon which the tenderers originally tendered, nor did they distort competition.

I do not consider that Harmon can complain about not having had at tender stage the right to negotiate with the novated suppliers since this was due to H of C's failure to line up the suppliers on the terms that had originally been contemplated when tenders were sought for the fenestration package. Harmon, if successful, would have been in the same position as Seele/Alvis and would have been able to exploit H of C's predicament. This is not therefore a case in which an authority makes post-tender changes which are to its benefit and which might produce different results from different tenders. Nor is it a case where an authority settles minor details or matters left unclear or unresolved at the tender stage, eg Harmon's list of clarifications and reservations which was matched by other tenderers and for which -500,000 was allowed by LML for possible increases in cost to H of C. What is here of consequence is the effect that H of C's default might have had on Harmon's tender for it might not have been as affected as Seele/Alvis. The changes secured by Seele/Alvis as reflected in the revision of clause 22 of the Trade Contract are detailed and complex and evidently were seen by it as highly necessary. Harmon too had flagged the position - see clarification 11 to its July 1995 tender which demonstrates the importance of the position of novated suppliers. In my judgment the changes were significant. Liability for suppliers selected by an employer is a very sensitive subject in the construction industry primarily for reasons of control and management risk and in turn for legal reasons (there is some case law which illustrates the points). It was, indeed, also so regarded by Mr Mumford in his letter of 2 April 1996 in which he stated:-

"Drafting amendments had been made to ensure that the obligations and liabilities of the Trade Contractor in respect of the Selected Materials will be limited in each to the same extent of the obligations and liabilities which the Selected Suppliers... have assumed under the terms of their respective supply contracts - despite our attempts the Joint Venture would not accept pricing any shortfall and totally rejected acceptance of the risk between each of the agreed Supply Contracts and their Trade Contracts; this effectively means that the authority will have to accept responsibility for the shortfall."

The implication of this statement is that the risk which Seele/Alvis declined to accept was a significant and material one which it was not prepared to price. Clearly, it regarded itself as potentially subject to an open ended liability and possibly exposed to having to withstand claims by H of C for failures on the part of the suppliers without effective recourse against them. In other words, if Seele/Alvis had not been assured of the original "back-to-back" liability, its price would inevitably have been higher. It therefore follows that if Harmon had been awarded the tender or had by November known of what transpired, its prices would also have been higher, or it would have sought to secure the same changes as Seele/Alvis made. Since, however, all tenderers were told firmly that there could be no alterations in the terms of the trade contract, the latter option would not apparently have been available at tender stage. It is sufficient for my present purposes to conclude that H of C's failure to realise the thinking behind the original tender could have affected any individual tenderer's approach to its tender. It is not in my view an answer to say that all prices would have gone up: the questions are: by how much, given that it was a competitive tender, or whether another tenderer would have insisted on the same or different changes in the contractual conditions, or both? Since H of C's predicament was known at a time when Harmon were being kept on hold as a potential lever in the negotiations which H of C was conducting with Seele/Alvis, it was not only open to H of C (which was asserting that it had not awarded the contract to Seele/Alvis) to have invited Harmon to re-consider its position in the light of the circumstances which were known to Seele/Alvis and H of C but not to any other tenderers. The failure to line up the suppliers was a very material alteration in the terms of tender and to negotiate only with one tenderer distorted competition and, particularly discriminated against Harmon whose competitive position vis-a-vis Seele/Alvis remained close and could not be ruled out, particularly since the position of the novated suppliers played a part in the assessment of the tenders. There was a failure to be transparent, fair and open and to treat Harmon equally.

The original invitation to tender provided that the maximum overall duration of the works might be of the order of 172 weeks, since 103 weeks were allocated for off-site activities, and 69 weeks for on-site activities (see exhibit D2). Harmon tendered accordingly, allowing 53 weeks for manufacturing only but with a possible overlap with on-site activities, since the earliest and latest starts for the installation works were earlier than the earliest and latest finishes for the off-site manufacturing operations. On 2 October 1995 LML wrote to both Harmon and Seele/Alvis confirming points arising out of post tender meetings. In each of the letters LML stated:

"The joint venture [sic, in the case of Harmon] were also requested to review the following programme information for the off-site activities, noting that all on-site activity durations remain constant but now start 1 November 1997 and the performance test is no longer on the critical path.

(a) The assembly/manufacturing period for all windows is 1 October 1996 until 1 November 1997.

(b) The sequence for assembly/manufacture of all windows is to be defined by package 4200 contractors.

(c) All supply packages will be placed by 1 March 1996 and completed by 1 March 1997, components to suit the manufacturing sequence can be collected from the Suppliers from 1st October 1996".

When Harmon submitted its revised price on 12 October 1995, it included in its "total commercial savings" of nearly -3 million a sum of -504,971 for "programme", to reflect the reduction in the period for window manufacture from 67 weeks to 56 weeks (i.e. between 1 October 1996 and 1 November 1997).

In the Seele/Alvis contract 89 weeks were allowed for off-site work from April 1996 to December 1998 with the start of the manufacture of windows commencing at the end of December 1996, and 70 weeks overall allowed for on-site work with an earlier start date of 1 August 1997 (later start 31 October 1997) and earliest finish, mid December 1997 (latest finish mid-March 1999). A further 16 weeks was however specified for a return to site to clean. This period had not previously been identified.

Harmon's case was that if it had known that there was to be a further reduction in the overall programme and in the overlap between the on-site and off-site activities it would have been able to offer a further reduction which Mr Boyle estimated might have been of the order of some -375,000. Otherwise, as Mr Boyle said, LML was against changes in programme. Harmon in particular relied upon the fact that they were being supplied with inside information by Mr Kerr and were determined to be the lowest tenderer so that they would have seized every legitimate opportunity to make savings.

H of C maintained that the compression to be found in the Seele/Alvis contract would not necessarily have occurred since Seele/Alvis were not in control of its earliest start dates. however, it seems to me that this would apply to any of the programme periods. H of C also challenged the estimates made by Mr Boyle, particularly since some of them appeared to overlap with the reduction of -504,971 offered in October 1995.

In my judgment it is clear by the time the Seele/Alvis contract was concluded, there had been a further significant reduction in the overall period which must have led to some savings in staff or overhead costs which were calculated on the overall duration of the project. It may well be that Mr Boyle's estimates were faulty but I am of the opinion that Harmon might well have been able to have allowed up to -200,000 if they had known of the reduction in the periods (overall and off-site) set out in the Seele/Alvis contract. H of C relied upon the supplemental report of Mr Nisbet, the defendant's quantity surveying expert, to the effect that there was no reduction, or at least a minimal reduction. However, for reasons given elsewhere I am not disposed to accept Mr Nisbet's opinion in preference to that of Mr Boyle which appears to me to be soundly based upon Harmon's internal and verifiable calculations. Again H of C in negotiating solely with Seele/Alvis on a sensitive matter such a programming was in breach of its obligation to treat Harmon openly, fairly and equally in not inviting them to state what its portion might be. There is an obvious distinction between revisions to programming pre-contract (where the terms of contract and the incidence of risk and cost are yet to be agreed) and those post-contract (where the contract will define the apportionment of risk).

Harmon's case depended largely on the fact that Mr Mumford had noted this in his letter of 2 April 1996. Provision was made for this liability was made in Harmon's tender. This is a minor matter of degree and is not material.

In my judgment the defendant made material changes in the post tender-negotiations with Seele/Alvis and in doing so it was in breach of its obligations in failing to treat Harmon fairly, openly and equally. Issues 5(9) and 8(6)(c) (and thus issue 8(6)) will be answered in the affirmative.

In order to succeed under this sub-head Harmon would in my judgment have to establish either that if it had been given the opportunity of competing with Seele/Alvis on these changes it either would have beaten Seele/Alvis or that it stood a reasonable chance of doing so in each case by making its tender more competitive. The effect of the changes had therefore to be quantified but of course, it is not possible to quantify the changes in respect of the novated suppliers. Harmon was clearly determined to be awarded the contract so I am sure that it would have made a reduction if appropriate. In my view Harmon would have reduced its tender by about -200,000 in respect of the programme. Thus all parts of issue 8(6A) will be answered: Yes, as regards the novated suppliers and the programme. The amount of reduction for the novated suplliers could have been around -300,000 and that for programme would have been about -200,000 but larger reductions could have been made.

The following issues are consequential. For completeness Issue 8(7) - was the defendant in breach of the Regulations in the manner in which it notified the plaintiff of the reasons for its failure to be awarded the fenestration package? (Paras 14(v),(vi),(vii),(e); Re-Amended S of C; paras 48, 49, 50(5) Re-Amended Def.) - will be answered: Yes, the defendant did not comply with Regulation 22(1) of the PWR either in giving the true reasons or in giving the reasons by reference to the basis upon which it was purporting to award the contract to Seele/Alvis and in so doing failed to treat Harmon fairly and openly.

The answer to this issue does not therefore deal with the questions arising out of issue 8 (8):

Is the defendant now entitled to rely upon reasons for rejecting the plaintiff's tender which are different from the reasons stated in their letter dated 6 August 1996 served under Regulation 22? (Para 14(vii)(f) of the Re-Amended Statement of Claim, para 50(6) Re-Amended Def.)

H of C argued that it was entitled to rely on reasons which were not relied on at the time or which were not set out in the letter. There were also submissions about the extent to which an authority could rely on reasons which, if correct, ought to have led to the tenderer not being treated a prequalified. Here the answer in principle is clear from paragraph 37 of the opinion of Advocate General Darmon in Beentjes (see page 4649):

"An awarding authority belatedly informed of a reason for a contractor's unsuitability must be able to rely on it up to the last moment, so long as it is not a disguised refusal to allow the criteria for awarding to operate in the normal way."

Issue 9 : Was the defendant in breach of its alleged obligations under Articles 6, 30, 59-65 of the Treaty of Rome in any of the respects pleaded in paragraphs 14 and 14B of the Re-Amended Statement of Claim and if so which? (Re-Am. S of C para.15, Re-Am. Def. para.53).

It was accepted by H of C that if I were to decide that it was an organ or emanation of the state (as I have done) and that it was liable for the pursuit of a "Buy British" policy (as I have done) then there would be a breach of article 6 of the Treaty. Mr White submitted, correctly, that Harmon's case for breach of Treaty obligations had been confined to discrimination on the grounds of nationality and not on the grounds on lack of openness and transparency, and he was not obliged to deal with such a case. I am not persuaded that there are any such obligations under Articles 30 and 59-65 for reasons which it is not necessary to elaborate since on my other conclusions the point is not determinative of Harmon's overall case. However that is not to say that the selection and pursuit of Option B2 might not have been a breach of the Treaty as it discriminated against other tenderers. I shall therefore answer this issue: Yes, but only as regards article 6 in awarding the contract to Seele/Alvis and in not awarding it to Harmon. The answer is given on the basis that it is sufficient if discrimination is a material factor in the decision.

During the course of the trial, Harmon applied to make further amendments to the statement of claim to introduce a case that the defendant was liable in the tort of misfeasance. Harmon also sought to introduce new claims for exemplary and aggravated damages. The amendments did not rely upon any facts or matters that had not already emerged and accordingly Mr White opposed the amendments primarily on the ground that the facts set out in the proposed new pleading, even if they were established, would not justify Harmon's case in law and that therefore leave to amend should not be given since the claim was bound to fail. However, I came to the conclusion it would not prejudice H of C if the amendments were to be allowed whereas there might be substantial prejudice to Harmon if leave to amend were refused in the case so that they could not advance its proposed claims. (I had rather more hesitation about the claim for aggravated damages.) Accordingly, I granted leave to Harmon, but subject to clarification of its case. The relevant issues are therefore:

(1) When acting in its capacity as the authority responsible for procuring the construction of the NPB, is the defendant a public authority or a person holding public office so that it is capable of committing the tort of misfeasance? (Para. 14A of the Re-Amended S of C and para. 52A of the Re-re-Amended Def.)

(2) If the answer to Issue 8A(1) is "yes", did the defendant commit the tort of misfeasance in public office in any of the respects identified in paragraph 14B of the Re-re-Amended Statement of Claim and, if so, in what respects? (Paragraph 14B of the Re-re-Amended S of C and paragraph 52B of the Re-re-Amended Def.)

(2) Do the matters pleaded in paragraphs 14B and/or 14C of the Re-re-amended Statement of Claim entitle the plaintiff to exemplary or aggravated damages for misfeasance in public office?

(3) Do the matters pleaded in paragraphs 21C and 21D of the Re-re-amended Statement of Claim, whether or not in conjunction with the matters pleaded in paragraph 14C thereof, entitle the plaintiff to aggravated damages for misfeasance, breach of the Public Works Contracts Regulations 1991, or its obligations under the Treaty of Rome?

(4) How is any award of aggravated or exemplary damages to be assessed in relation to the other damages to be awarded?

(5) Is the plaintiff entitled as a matter of principle to general damages pursuant to the matters pleaded in paragraphs 21C and 21D of the Re-re-amended Statement of Claim?

I deal now only with the claim for misfeasance. Harmon's case was that H of C awarded the contract to Seele/Alvis when it knew or believed that, in doing so, it would be in breach of EU law and the 1991 regulations, and that Harmon would thereby be injured; alternatively, H of C was reckless as to these matters. Harmon also alleged in support of its claim for damages that H of C concealed from Harmon the true position regarding the award of the contract and at that time knew or believed that its conduct was unlawful and that Harmon would be injured thereby and it also intended to deny Harmon access to the courts in order to obtain an order preventing the award of the contract to Seele/Alvis. However, again in the alternative, it was said that H of C was reckless as to either or both of these matters. In essence, the case turns upon an allegation that Mr Makepeace awarded the contract to Seele/Alvis when he knew that he had no power to do so lawfully, and he knew that, in so doing, Harmon would be injured.

The elements of the tort of misfeasance have recently been considered by the Court of Appeal in Three Rivers District Council -v- Bank of England [1999] Eu LR 211. The decision was the subject of written submissions by counsel for the parties delivered subsequent to the close of oral submissions, for which I am indebted. (It was not necessary to call for further submissions whether written or oral.) It was an appeal from judgments of Clarke J. ([1996] 3 All ER 558 and 634). I shall return to these judgments later. I have first to decide whether the defendant could be liable for the tort of misfeasance: was it the holder of a public office?

For Harmon, it was submitted that the defendant had been created by statute in order to carry out certain activities for the benefit of the House of Commons. The definition of a "person holding public office" is wide. It included any person paid out of public funds and will owe duties to the public as to how the duty should be exercised (see Tampion -v- Anderson [1973] VR 715 at page 720. However, the principles were established in Henley -v- Mayor of Lyme (1828) 5 Bing. 91 at page 107 per Best C.J. who said:-

"Now it has been insisted, in the first place, that the plaintiff claims a degree of protection which the charter does not give him. I think there is no foundation for that argument; for the charter was given expressly for the purpose of protecting the land, and the walls which the corporation were to keep up for that purpose, have been suffered to become in such a state of run, that they are incapable of protecting the land and consequently the houses put on the land have suffered; the plaintiff, therefore, does not make a larger claim for protection than he is warranted to make under the grant, provided he is entitled to any protection under that grant.

Lords of manors hold courts, which courts they are obliged to hold, as one of the considerations on which the lands have been granted to them. If a lord of the manor were to refuse or neglect to hold a court, by which a copyholder should be prevented from having admission to his copyhold, does any man doubt an action could be maintained against such lord?

It seems to me that all these cases establish the principle, that if a man takes a reward, - whatever be the nature of that reward, whether it be in money from the crown, whether it be in land from the crown, whether it be in lands or money from any individual, - for the discharge of a public duty, that instant he becomes a public officer, and if by any act of negligence or any act of abuse in his office, any individual sustains and injury, that individual is entitled to redress in a civil action. If that be so, then it is quite clear that the plaintiff in this case is entitled to maintain this action. The plaintiff may say to the corporation, "you have a compensation from the crown for discharging the duty which you have neglected to discharge; and in consequence of that neglect I have sustained an injury; I am, therefore, entitled to have a compensation from you".

Those who have held been liable for misfeasance included people who were not agents of the government or members of the executive. In Australia the definition of a public officer extended to a Member of Parliament ( R v Boston (1923) 33 CLR 386 ). In Jones v. Swansea City Council [1990] 1 WLR 1453 Slade L.J. said at page 1471:-

"It is not the juridical nature of the relevant power, but the nature of the council's office which is the important consideration."

Mr White argued that the nature of the defendant's office did not have the requisite characteristics of a public office. It was established "to hold land and perform [its functions] for the benefit of the Houses of Parliament" (see the preambles to the 1992 Act) in exercising its powers, particularly under section 2 of the Parliamentary Corporate Bodies Act 1992 , it was not discharging a public duty since providing property, administrative and other services for Houses of Parliament were mere matters of housekeeping.

There is evidently no distinction between those who might be liable for the tort of misfeasance and those who might be guilty of the common law offence of misconduct in a public office. In R v. Bowden [1996] 1 WLR 98, which was referred to by Mr White, the Court of Appeal had to consider whether the maintenance manager of a local authority works department was liable for that offence. In dismissing an appeal against conviction on following a preliminary ruling by the trial judge, Hirst L.J. said at page 103:

"In our judgment the theme which runs through all these cases over the past 200 years is, in the words of Lord Mansfield C.J. in Rex v. Bembridge , 3 Doug. 327, 332 that "a man accepting an office of trust concerning the public... is answerable criminally to the King for misbehaviour in his office," and most significantly that "this is true, by whomever and in whatever way the officer is appointed."

The same principle is to be found in Henly v. Lyme Corporation , 5 Bing. 91 where, in our judgment, even though it was a civil case, a public office is correctly defined, at page 107, as embracing "every one who is appointed to discharge a public duty, and receives compensation in whatever shape whether from the Crown or otherwise." (Emphasis added.) In that case, significantly, the public officers in question were not servants of the Crown, but the mayor and burgesses of a borough (the same applied, mutatis mutandis, in Reg. v. Hall [1891] 1 QB 747 ).

Nothing in the later cases, in our judgment, in any way affects or qualifies this general principle. The fact that, as it happened, most of the cases are concerned with officers or agents of the Crown does not establish any curtailment of the well-established general principle, since in no case has it been laid down that the offence is limited to officers or agents of the Crown. Indeed, the 20th century cases, in our judgment, proceeded on the basis of this general principle, which there was no need to restate.

So far as the defendant's personal position is concerned, he was responsible to his employers, the City of Stoke-on-Trent, for the upkeep of their council housing and in that capacity was accountable for the receipt and disbursement of public money derived by the city council either from the rates (or their modern equivalent) or from central government grants. Moreover, his salary was paid from the same public funds. He thus, in our judgment, falls fairly and squarely within the definition of "public officer" laid down in the authorities and we are unable to accept the submission that, with these responsibilities, his position was too lowly to qualify."

"In the present context, however, the suggested distinction between "private" powers and powers having a "statutory or public" origin on the other hand is not, in my judgment, the relevant distinction."

Mr Lindsay referred us to a number of reported cases where, as it so happens, alleged abuses of what were manifestly statutory powers were under consideration: Cannock Chase District Council v. Kelly [1978] 1 W.L.R. 1: Davis v. Bromley Corporation [1908] 1 KB 170 ; Smith v. East Elloe Rural District Council [1956] AC 736 and David v. Abdul Cader [1963] 1 W.L.R. 834. In Bourgoin itself the claim for breach of statutory duty was formulated as a claim for breach of a right conferred by article 30 of the E.E.C. Treaty. No authority was cited to us which explicitly affirms that a person or corporation may be guilty of the tort of misfeasance in public office if he or it exercises a right conferred by a lease, or indeed by any other contract, with the intent to injure another, so that in this sense this field of law is open.

Mr Lindsay also drew our attention to the decision of this court in Reg. v. East Berkshire Health Authority, ex parte Walsh [1985] QB 152 in which a senior nursing officer who had been employed by a health authority and was subsequently dismissed unsuccessfully applied for judicial review of his dismissal. This court held that even assuming a breach of contract on the part of the authority, this did not import the "public law" element which was necessary to found an action for judicial review.

While this court's decision in Reg. v. East Berkshire Health Authority, Ex parte Walsh might conceivably have been different if personal malice on the part of the dismissing officer had been shown, it is not necessary to pursue this point, since I think the boundaries of the respective remedies of judicial review and damage for the tort of misfeasance in public office are by no means necessarily co-terminous. There are clearly many decisions by public bodies or officer which will give rise to the former remedy but not the latter (for example a decision of Wednesbury type unreasonableness [ Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation [1948] 1 KB 223 ], but nevertheless taken in good faith and without malice). On the other hand, I see no reason why a decision taken by the holder of a public office, in his or its capacity as such holder, with the intent to injure the party thereby affected or with knowledge that the decision is ultra vires should be incapable of giving rise to an action in tort for misfeasance in public office merely because the decision is taken in the exercise of a power conferred by a contract and in this sense has no public element. Mann J. in his judgment in the court of first instance in Bourgoin S.A. v. Ministry of Agriculture, Fisheries and Food [1986] Q.B. 716, included a careful review of the authorities relating to this tort. The essence of the tort, as I understand it, is that someone holding public office has misconducted himself by purporting to exercise powers which were conferred on him not for his personal advantage but for the benefit of the public or a section of the public, either with intent to injure another or in the knowledge that he was acting ultra vires. All powers possessed by a local authority, whether conferred by statute or by contract are possessed "solely in order that it may use them for the public good;" see Wade, Administrative Law 6th ed. (1988) page 400. In the present context, in my judgment, it is not the juridical nature of the relevant power but the nature of the council's office which is the important consideration. It is the abuse of a public office which gives rise to the tort. Mr Lindsay frankly accepted that there is no authority which would preclude this court from holding that (assuming the truth of the facts alleged in the statement of claim) an action would lie at the suit of the plaintiff. I would so hold."

In my judgment the defendant must be regarded as a person who is capable of committing the tort of misfeasance. The question is not the status of the person for in R. v. Bowden a local authority maintenance manager was not too lowly an office holder to be criminally liable for actions which were considered culpable for reasons which stem from the same authorities which recognise the tort of misfeasance. The question is the nature of the office: is a person responsible for the discharge of certain functions the holder of a public office? As Slade LJ said in Jones v Swansea the nature of the power is not the test since a private power may held for the public good. So to describe the services provided by the defendant to the House of Commons as "housekeeping" not only understates them but is not relevant. The supremacy of Parliament was established over three hundred years ago. A person created specifically by Parliament to enable one of its Houses to have the services necessary for the discharge of its functions must be the holder of a public office in the provision of land, buildings, staff and other facilities and services. I cannot believe that any ordinary person would consider that the defendant was anything other than a public office holder and to describe its activities (which cover virtually all the support services required for the proper functioning of the House of Commons) as merely "housekeeping" denigrates the defendant's role in the maintenance of the House of Commons. In addition the appellation "an office of trust concerning the public" does not mean that an ordinary public office holder must be placed in some special trustworthy position. It is sufficient that the office holder is entrusted with certain powers and is relied on to discharge those powers properly. Issue 8(A) (1) will be answered: Yes.

The other elements of the tort which it is alleged were not present are "knowledge that the defendant's acts were unlawful"; "knowledge that the defendant's acts would probably injure the plaintiff"; and the broad general question of motivation or intuitive motivation also described as "targeted malice or dishonesty". In order to place the submissions made on behalf of the parties in their context it may be helpful to set out the conclusions of Clarke J. in Three Rivers District Council v. Bank of England (No 3) as summarised in the head note at [1996] 3 All ER 558 (which was accepted by counsel of both parties as accurate and as a useful starting point) and then to consider whether and to what extent that summary needs alteration in the light of the decision of the Court of Appeal and other authorities. The head note reads :-

"Held - (1) The tort of misfeasance in public office was concerned with a deliberate and dishonest wrongful abuse of the powers given to a public officer and the purpose of the tort was to provide compensation for those who suffered loss as a result of improper abuse of power . It was not to be equated with torts based on an intention to injure, although it had some similarities to them. The tort could be established in two alternative ways: (a) where a public officer performed or omitted to perform an act with the object of injuring the plaintiff (ie where there was targeted malice ); and (b) where he performed an act which he knew he had no power to perform and which he knew would injure the plaintiff . Accordingly, malice , in the sense of an intention to injure the plaintiff or a person in a class of which the plaintiff was a member, and knowledge by the officer both that he had no power to do the act complained of and that the act or omission would probably (but not that it would necessarily or inevitably) injure the plaintiff or such a person, were alternative , not cumulative, ingredients of the tort. To act with such knowledge was to act in a sufficient sense maliciously (see page 569 h j, page 582 e f, page 583 c d, page 629 g to page 630 a and p 632 h j, post); Bourgoin SA v. Ministry of Agriculture Fisheries and Food [1985] 3 All ER 585; and Northern Territory v. Mengel (1985) 69 ALJR 527 considered.

(2) For the purpose of establishing the requirement that the officer knew that he had no power to do the act complained of, it was sufficient that the officer had actual knowledge that the act was unlawful or, in circumstances in which he believed or suspected that the act was beyond his powers, that he did not ascertain whether or not that was so or failed to take such steps as would have been taken by an honest and reasonable man to ascertain the true position. Likewise, for the purpose of establishing the requirement that the officer knew that his act would probably injure the plaintiff or a person in a class of which the plaintiff was a member, it was sufficient if the officer had actual knowledge that his act would probably damage the plaintiff or a person in a class of which the plaintiff was a member, it was sufficient if the officer had actual knowledge that his act would probably damage the plaintiff or such a person or, in circumstances in which be believed or suspected that his act would probably damage the plaintiff or such a person, if he did not ascertain whether that was so or not or if he failed to make such inquiries as an honest and reasonable man would have made as to the probability of such damage. If the officer had such a state of mind, that amounted to recklessness sufficient to support liability even if it did not amount to actual knowledge (see page 582 g to j and page 632 j to page 633 c post); Bourgoin SA v Ministry of Agriculture Fisheries and Food [1985] 3 All ER 585; Northern Territory v. Mengel (1995) 69 ALJR 527 considered.

(3) Where the plaintiff established that the defendant intended to injure the plaintiff or a person in a class of which the plaintiff was a member or that the defendant knew that he had no power to do what he did and that the plaintiff or such a person would probably suffer loss or damage, that of itself was sufficient to establish that the plaintiff had a sufficient right or interest to maintain an action for misfeasance in public office at common law. The plaintiff also had to show that the defendant was a public officer or entity and that his loss was caused by the wrongful act (see page 594 a to c and page 633 d, post).

(5) In order to prove misfeasance in public office the plaintiffs had to prove both that the Bank knew that it had no power to do what it did or failed to do and that it knew that its act or omission would probably cause damage to a member of a class of which the plaintiff was a member. Applying the general principle in tort that the test of causation was whether the particular alleged act or omission (ie the alleged misfeasance) was an effective cause of the particular loss, there was no reason why, if the plaintiffs proved that the Bank knew that any particular act or omission would probably cause loss to a depositor or potential depositor (as a member of the class of depositors or potential depositors), it should not follow that the loss was caused by the act or omission complained of, since there would then be a direct and effective causal link between the act or omission and the loss. Since a plaintiff was entitled to succeed in the tort of misfeasance in public office if he proved that the defendant maliciously intended to injure him and that he suffered loss as a result or that the defendant knew that his act or omission would probably cause the loss, it followed that if the plaintiffs could prove that the Bank knew that the managers of BCCI would probably be guilty of fraud and thus would probably cause the loss, the Bank would be liable on the basis that its misfeasance was an effective cause of the loss (see page 629 d to page 630 c, post)".

"Dishonesty" thus remains a necessary element where the other requirements of knowledge of illegality and of knowledge or foresight of consequent injury have been established. In his judgment Clarke J. said at pages 581-582:

"The reason why recklessness was regarded as sufficient by all members of the High Court in Mengel is perhaps most clearly seen in the judgment of Brennan J. It is that misfeasance consists in the purported exercise of a power otherwise than in an honest attempt to perform the relevant duty. It is that lack of honesty which makes the act an abuse of power. In my judgment a public officer who falls within any of categories (i), (ii) and (iii) is guilty of an abuse of power of the kind that the court had in mind in Mengel ..

Anything less than knowledge or recklessness of that kind would not in my judgment be consistent with the essence of the tort, namely the deliberate and dishonest abuse of power. ..."

"When called upon to decide whether a person was acting honestly, a court will look at all the circumstances known to the third party at the time. The court will also have regard to personal attributes of the third party, such as his experience and intelligence, and the reason why he acted as he did."

However, Hirst L.J. disagreed with the submission that had been made to the effect that any knowing departure from a statutory obligation was sufficient to constitute dishonesty. The submission was based upon what Lord Nicholls had said in Royal Brunei at page 389:

"acting dishonestly... means simply not acting as an honest person would in the circumstances."

Hirst L.J. said (at page 270):-

"We cannot accept that submission. We would agree that the Bank's statutory obligations as a regulator are obligations of a grave nature. Moreover, they were not... obligations that were expressed in obscure or complicated language, or hedged about with very lengthy rules and regulations. Nevertheless, we consider that the honesty or dishonesty of any breach of a statutory obligation (where the person in breach is conscious of the breach, or suspects it, or chooses not to enquire into it, must depend upon all the circumstances. We agree with what was said by Sir Louis Blom-Cooper QC in R. v. Newham London Borough Council ex p. Watkins (1996) 2 HLR 434 at page.451:-

"There is always a spectrum of possibilities in which took place the particular non compliance, along a continuum from the trivial default, which can properly be overlooked, to the flagrant defiance of a statutory obligation, which cannot be condoned or even countenanced. The latter end of the continuum is tantamount to bad faith."

Ultimately therefore the court gave broad agreement to Clarke J.'s conclusions on the tort as set out in pages 632-633 of his judgment. For present purposes it may be sufficient to summarise the conclusion reached by the Court of Appeal in Three Rivers District Council v. Bank of England as emphasising that the tort of misfeasance may be committed where a person fails to make an honest attempt to perform the relevant duty when he has that degree of knowledge that a person in his position with his experience and intelligence and motivation might have expected to have used not to take the course that he did.

I therefore turn to the other ingredients of the tort. First, as to knowledge or the state of mind, Mr Fernyhough QC argued that Mr Makepeace actually knew that if he awarded the contract to Seele/Alvis he would in all likelihood be breaking the law. Alternatively, he argued that Mr Makepeace believed or suspected it to be the case, or that he was reckless (here used in the sense of indifference) as to whether that would be the case or not. Mr Fernyhough drew attention to Mr Makepeace's familiarity with the PWR and of the defendant's obligations under EU Procurement Law and official guidance from the CUP. For reasons which I have already covered it was the core of Harmon's case that there was a breach of the PWR and of the EC Procurement Law and that Mr Makepeace must have known of it, or certainly he was sailing close to the wind since he had been told by LML and had not taken any steps in October 1995 to resolve the question (see also). He knew that the course which was being taken in October 1995 was one which might not be competitive since he raised the problem in a letter to Mr Webber of 25 October. He knew that the problem might be solved if there was a re-tender for the base scheme which would provide a close comparison with Option B2. Interestingly, when asked how he saw the problem Mr Makepeace said:

"Our problem was one of time, obviously, and also the problem that we had to conform, obviously, with EC regulations, and as far as I know we were not breaking them at that stage."

Mr Fernyhough emphasised the words "at that stage" but, equally, Mr Makepeace said that he saw the problem primarily as one of time, namely, that H of C was under increasing pressure to award the contract since if there was a significant delay in awarding the contract, the project could be jeopardised as the breathing space granted by the difficulties created by London Underground would be exhausted. Mr Makepeace recognised that there was a possibility that acceptance of Seele/Alvis's tender might not comply with EC Procurement Policy. In cross-examination Mr Makepeace tried to make light of the problem that presented itself to him in October 1995 but his reactions to questioning showed me that he well realised that he had then been skating on thin ice, to put it mildly, was clear from the discussions that he had with LML and others. In that month LML was first instructed to seek legal advice but then Mr Makepeace told LML not to do so on the basis that no decision had been made to award the contract to anyone at that stage. Mr Fernyhough naturally suggested that this explanation was incredible because the advice that was then to have been sought was as to whether or not it would be lawful to award the contract to Seele/Alvis. If H of C had been advised that it would not have been lawful, it would have been necessary to re-start the tender process. Accordingly, it would be to the advantage of H of C to have known its position at the earliest possible opportunity in order not to run the risk of further loss of time. In addition, Mr Makepeace was asked about LML's report for November, which recorded that at the Package Meeting on 23 November arrangements were made for a meeting to be held with Mr T Fleet of Berwin Leighton to

"obtain a legal opinion on this issue in view of the risk of delay arising from a judicial review of the order being placed with an offer higher than the lowest tender".

Mr Makepeace said that the reason that advice was not sought was, again, that they were not finalising the choice at that stage. Yet the decision to award the contract to Seele/Alvis had already effectively been taken on 23 November. For all practical purposes the die was then cast. He denied that the real reason was that he thought that the advice would have been unfavourable. Advice was ultimately sought on 21 February 1996. Mr Fernyhough submitted that the inference could be drawn that H of C had then been advised that to award the contract to Seele/Alvis would or might well be in breach of the law since no competent solicitor with knowledge of procurement law could have advised to the contrary.

Privilege was claimed in respect of the advice given by Berwin Leighton at the time. Mr Fernyhough submitted that I could nevertheless properly draw certain inferences from the claim about what the advice might have been. Mr White submitted that no inferences adverse or otherwise could be drawn since it was well established that it was not permissible to do so: Wentworth v. Lloyd 10 HL Cas 589, and more recently R v Derby Magistrates' Court ex parte B [1995] 4 All ER 523 in which Lord Taylor said at page 537:

"The view that the privilege is the same whether the documents are sought for the purpose of civil or criminal proceedings, and whether by the prosecution or the defence and that the refusal of the client to waive his privilege, for whatever reason, or for no reason at all, cannot be questioned or investigated by the court."

Mr Fernyhough submitted that that traditional and well established view was subject to exceptions. He referred to Ridehalgh v. Horsefield [1994] Ch 205 in which Sir Thomas Bingham MR said:

The first of these situations can cause little difficulty. If the applicant's privileged communications are germane to an issue in the application, to show what he would or would not have done had the other side not acted in the manner complained of, he can waive the privilege; if he declines to do so adverse inferences can be drawn."

However, I consider that Ridehalgh v. Horsefield is dealing with the special situation of a wasted costs order where inevitably the questions may arise as to what has passed between the client and his lawyer. The ordinary rule is clear. If inferences were allowed to be drawn it would put pressure upon a client to waive privilege and thereby would be required to reveal matters which, in the end, might prove to have been best left secret when no adverse inference was drawn. Accordingly I decline to draw any inferences from the incontestable claim by H of C for privilege attaching to these communications between it and its lawyers.

More pertinently, Mr Fernyhough also relied upon the request to LML in March 1996 to advise on the likely quantum of Harmon's wasted tender costs which resulted LML in informing TBV Consult:

"Further to your request we have made an approximate assessment of the order of cost we believe Harmon could have expended in the tendering process. A copy is attached. We have also added a footnote re: the mock-up which may need to be considered at some point."

The assessment of the costs was that the costs were about -165,000. Mr Brand confirmed that the reason for the request was the possibility of a claim against the defendant by Harmon for not accepting its tender. In my view this step would only have been taken because H of C recognised that its actions laid it open to such a claim. From November 1995 Harmon had been writing letters which could not have left their recipients in any doubt that it thought that it should be awarded the contract and wanted to know why it was not coming its way. They were scarcely veiled threats.

Mr Fernyhough submitted that the inconclusive correspondence that took place between Harmon and LML in 1996 about H of C's intentions was intended to prevent Harmon obtaining a court order against the award of the contract to Seele/Alvis under Regulation 31(6). Mr White maintained that any application for interlocutory injunction prohibiting the award would have failed. Accordingly, Mr Fernyhough submitted that since Regulation 31(6) expressly empowered the court to grant an order without limitation there was no reason to suppose that the court would have to consider whether there was a serious question to be tried. I think that it is most unlikely that a court would grant order as a matter of discretion (except on an application without notice) unless it was satsified a a good case had been made out at first sight. In reality I doubt very much if Harmon would have obtained an interlocutory injunction if American Cyanamid principles were applied even if it had been capable of giving the customary undertaking as damages would have been a sufficient remedy. However Regulation 31(6) in providing for a specific remedy without prejudice to the other powers of the court confers on the court an additional power the exercise of which is not fettered, for example, by the need for an undertaking or by damages being an adequate remedy. Indeed in very many cases it would be impossible for a disappointed tenderer to give such an undertaking, particularly where the damages payable would be disproportionate to the value of the contract. In my judgment the purpose of Regulation 31(6) is to provide an effective alternative remedy. It will not be effective (certainly within the principles of von Colson ) if its exercise has to follow the principles applicable to the grant of interlocutory injunctions, or if there were to be any significant delay (which could be equally prejudicial to the contracting authority) before the merits of the application were heard and disposed of. Applications of this nature should be heard quickly, especially if they relate to the tendering procedure. The Regulation also contemplates permanent remedies. The measures granted by Regulation 31(6) will not be effective deterrents if they are not all readily available to a wronged contractor. In my view therefore H of C knew that it faced the prospect of action which would seriously disrupt the project and thus intended to prevent Harmon from being in a position to apply for an order under Regulation 31(6). On my other findings Harmon would have secured an order had it sought one.

Finally, reliance was placed upon the circumstances in which LML's draft of the letter giving reasons for the rejection of Harmon tender was altered so as to set out reasons which were untrue and did not give the true reasons of the contract award. This letter had been written on the instructions of Berwin Leighton who were in turn acting on the express instructions of the defendant. Mr Fernyhough maintained that H of C was trying to cover its tracks. Mr White however maintained that it was necessary to establish that H of C knew that such letters broke the Regulations.

Did Mr Makepeace know that what he was doing was wrong or did he believe or suspect it or was he reckless? Did he have an honest belief that he was doing right? Did he act as an honest person would have done in all the circumstances? Mr Makepeace was a highly experienced official and in charge of placing numerous contracts required for this massive project. Having had heard him give evidence over a number of days, I have no doubt whatsoever that he is very intelligent and capable, despite a somewhat deprecating manner which at times conveyed the impression that he could not know everything, that he might not be on top of his job, and that he deferred and had to defer to others, but which apparently belies a tough attitude which may verge on the arrogant and in which little room seems to exist for true self-criticism or correction. As I have found, he is well able to anticipate lines of questioning and to choose his words carefully in order to avoid making overt admissions, even if by so doing he inadvertently reveals that he is hiding something and he knows more than he is prepared to say. So far as I could judge he was left to run the project without any material supervision, as one would expect from someone of his standing, but with the customary consequence that he had to take decisions himself. Mr Webber took no active part and so far as I could see both he and Members of Parliament were only to be told as much as Mr Makepeace thought necessary. I am sure that he was always very familiar with the rules relating to the placing of contracts under the PWR and the European regime. He had been given LML's procedures manual and had required it to be altered. He knew perfectly well, for example, that "overall value for money" was not correct and was not pleased to be corrected by Mr Linge, so much so that he arrogantly refused to make the change when he could and should have done in the ensuing advertisements so that it took this action for there to be complete compliance. He knew that there ought to be criteria but did not want to tie himself down as he would lose flexibility. He knew that there had to be at least one strong UK contender for this major and prominent package. He encouraged and promoted the "Buy British" approach favoured, amongst the project team, by MHP and, for different reasons, by AFE. Once the second round of tenders was opened he knew that these consultants' favourite, Seele/Alvis, would be driven out of the running by Harmon unless their option B2 could be preserved. He therefore appointed Mr Quick in order that this could be achieved. Mr Makepeace saw the manner in which the task force under Mr Quick went about its work and acquiesced in it even though it resulted in a travesty of tender evaluation designed to shut out Harmon. Mr Makepeace knew that there was no competition for Option B2 and that the award to Seele/Alvis was not permissible under the PWR, he tried to create the semblance of a competition by asking for prices from Harmon and Gartner before formally making a decision. This might have worked had he not also decided to limit their participation and to exclude them from pricing anything which resembled Option B2, in flat disregard of the advice given to him.

In my judgment, it is thus clear that Mr Makepeace had more than merely well founded doubts about the propriety of the process leading to the award of the contract to Seele/Alvis for Option B2 without proper competition. These doubts were shared by others which led to discussions as to whether or not legal advice should be sought both in October 1995 and November 1995. The advice then given, eg by LML, was not taken. There is certainly a question mark over the effect of the visit to Brussels but I cannot find that it played a part in the decisions then taken. In my judgment, for the reasons that I have already given, it was obvious that to award the contract to Seele/Alvis on the basis of option B2 could and would not comply with the PWR or EC procurement law and I am sure that Makepeace knew it. Even if I am wrong in concluding that it was so obvious also to Mr Makepeace and to others in the project team, and to Mr Webber, with whom Mr Makepeace discussed these problems, I have reached the firm conclusion that Mr Makepeace did more than deliberately decide to ignore the problems but that he deliberately decided not to seek advice since he feared that the "wrong" advice (which I am sure he knew he would receive) would get in the way of what he had determined to do and would also inevitably dislocate the timetable for the project since it would require re-tendering. These were not the actions of an honest and reasonable man who would not only not have put himself at risk but would have sought advice to find out the true position. He therefore decided to award the contract to Seele/Alvis and he also decided not to explain to anybody else outside the project team and the PWD the nature of the predicament and dilemma facing H of C. Advice was sought but only when it would have been impractical to abandon Seele/Alvis, even though that consortium was taking every opportunity to drive a hard bargain - a situation which H of C could have avoided had not the decision been taken to shelve Harmon. If therefore Mr Makepeace did not know that the defendant could not lawfully award the contract to Seele/Alvis (which was bound to injury Harmon) he certainly was reckless. It was not an honest attempt to perform his duty as the defendant's project sponsor or the defendant's duties under the PWR and EU law. Mr Makepeace's bluff was effectively called when Harmon asked for reasons for the decision. He then falsified the reasons which had been correctly set out by LML. This was described for Harmon as covering his tracks and in my view provides cogent evidence of dishonest conduct on the part of a public official. Mr Makepeace plainly knew that the letter did not set out the true reasons. I have therefore no doubt in holding that H of C was guilty of the tort of misfeasance. This is not a case in which a public official was faced with a dilemma and had to form a judgment which any decision-maker has to make from time to time and which may later be criticised on its merits but not on the grounds of any lack of good faith or culpability on the part of the person entrusted with making the decision. The reasons why Mr Makepeace acted as he did explain, but do not excuse, his actions. Issue 8(A)(2) will be answered: Yes, in all material respects. (I do not think that it would seve any useful purpose to go thorough the whole of paragraph 14B.)

The following questions were presented under this heading:

(B) Did any of the breaches of paragraphs 8, 8A, 9 and 10 cause the plaintiff to sustain a loss of gross margin/profit on one of the tenders pleaded in paragraph 19 of the Re-Amended Statement of Claim. (Para. 19 Re-Amended S of C; para 57 Re-Amended Def.).

The following are the main causation sub-issues:

(1) Whether as a matter of law the defendant was obliged to award the plaintiff the fenestration package and if so whether that, without more, entitles the plaintiff to the margin that it would have earned on the tender which should have been accepted and/or its tender costs. (Paras 18A, 18AA, 18B, 18C, 18D and 18DD Re-Amended S of C; paras 56A, 56B, 56C Re-Amended Def.).

(2) Whether, in order to recover its tender costs, it is necessary for the plaintiff to establish either that it would have been awarded the fenestration package contract or that it would not otherwise have tendered for the fenestration package. (Para 58(1),(2) Re-Amended Def.).

(3) Whether, in order to recover its margin/profit, it is necessary for the plaintiff to establish that if the Regulations had been complied with one of the tenders should have been accepted. (Paras 18A, 18B, 18C, 18D, 18DD Re-Amended S of C; paras 56A, 56B, 56C, 57(a),(b) Re-Amended Def.).

(4) If the answer to (3) is "Yes", is it necessary for the plaintiff to establish which one of its tenders should have been accepted?

(5) If the answer to (4) is "Yes", whether the plaintiff is able to establish that one of its tenders should have been accepted and if so which tender? (Paras 18A, 18B, 18C, 18D, 18DD, 18E, 19 Re-Amended S of C; paras 56A, 56B, 56C, 57 Re-Amended Def.).

H of C accepted that for the purposes of Harmon's primary case under the Public Works Regulations, the provisions of Regulation 31(3) enabled Harmon to recover provided that it established, on the balance of probabilities, that there were breaches of the Regulations that caused the loss and damage for which it was claiming. Regulation 31(3) reads :

"A breach of the duty owed pursuant to paragraph (1) above shall not be a criminal offence but any breach of the duty shall be actionable by any contractor who, in consequence, suffers, or risks suffering loss or damage".

As the contract had been entered into Regulation 31(7) only gives Harmon the right to damages. Here, "contractor" means, of course, "tenderer". Regulation 31(3) gives effect to directive 89/665, article 2(1)(c) of which required members states to ensure that the measures for enforcement included the power to award damages to persons harmed by their infringement. It is common ground that the general principles of community law in respect of the recovery of damages for breach of the community obligation are set out in Francovich v. Italy , Cases C46/93 and 48/93 [1991] ECR I-5357 and Von Colson v. Land Nordrhein - Westfalen , Case 14/83 [1986] 2 CMLR 430 , namely

(1) Remedies are a matter for the national court which is to apply national legal principles;

(2) The remedy provided by a national court must be at least as favourable as any comparable rule of domestic law; and

(3) The remedy must be effective in ensuring that community rights and obligations are observed.

In view of (1) above, it is not either necessary nor indeed desirable to consider the position in other countries, although the researches of counsel found a most a comprehensive series of studies which indicated that broadly the same approach will be applied throughout the European Union. However, there were differences between the parties' submissions on, in effect, the application of these broad principles. First, Harmon suggested that the impact of community law meant that the word "in consequence" in Regulation 31(3) should be read in a way which would enable there to be an effective remedy and accordingly the application of English rules as to causation (and indeed the measure or assessment of damages) should cede place to the broader principles of European law. On the other hand, H of C argued that Harmon had to establish that but for H of C's breaches, it would have been awarded the fenestration package on the basis of one of the tenders it submitted, and thus earned the margin for profit which it claimed. Similarly, it would have to establish that it would not have tendered for the fenestration package and would therefore not have incurred tender costs. Although some of the studies to which I have referred, (e.g. that by Herbert Smith) suggest that damages might be assessed by analogy to a case in tort, H of C suggested that the cases relied on by Harmon (e.g. ( Lonrho v. Fayed ) (No. 5) [1993] l WLR 1489 and paragraphs 1930-1937 in McGregor on Damages , 16th Edition, do not support the case that anything other than the ordinary proof of causation was required.

As a matter of general approach I consider that where compensation is sought by a tenderer for being deprived of an opportunity to be awarded the contract, the approach should be to award damages on a "contractual" basis rather than on a "tortious" basis, although the remedy is a statutory remedy and usually the assessment of damages for breach of statutory duty is akin to those for a comparable tort. However, before considering whether Harmon is entitled to recover its wasted tender costs, or its loss of profit, it is first necessary to establish, independently of my earlier answers on liability, whether Harmon would have been awarded the contract or what chances Harmon would have had of being awarded the contract, had there been no breach by H of C.

Harmon's principal case is that H of C was not entitled to award the contract to Seele/Alvis on the basis of Option B2. In September 1995, when Seele/Alvis's alternative was received, H of C could have asked Alvis to remove the "commercial in confidence" restriction attached to their proposal, but it did not do so. It could have asked all the tenderers to submit prices for all of the proposals put forward by the project team; it could have abandoned the attempt and started again, for example, on the basis of a performance specification complying with certain basic design criteria. By declining to take any of these courses, H of C was obliged to award the contract as a matter of law to the lowest tenderer which would have been Harmon. My answers to Issues 8(1) and (5) endorse this case. H of C, however, argue that in so far as Harmon's approach is based upon Beentjes and R v. Portsmouth then those cases do not determine that, as a matter of causation, Harmon would have been the lowest tenderer. H of C rely, with some force, on the evidence that it never intended to award the contract to the lowest tender and was looking for a balance between cost and technical acceptability. Whilst I see the force of that submission H of C could not in law have awarded the contract for Option B2 to Seele/Alvis as it could not have done so as a variant. That then leads to the position that it is unrealistic to suppose that H of C would have awarded the contract to a contractor it did not wish to employ for a design it did not wish to have executed so had H of C been faced with the consequences of its action (eg by being so advised in November 1995) it would perhaps have started again. First, on the facts H of C was boxed in by the slippages in the project timetable and had been saved from embarrassment only by the delays to Westminster Underground Station so in my view it is improbable that it would have taken such a course. Secondly, such an approach is incorrect since it is not necessary for Harmon to establish that they would have been awarded the contract but that they ought to have been awarded the contract, had H of C complied with its obligations and dealt with Harmon fairly under the PWR even if it had not also discriminated against it. It is therefore to be compensated for being deprived of its entitlement. I do not consider that it is a sufficient defence for H of C to say that it would never have awarded the contract to Harmon: it ought never to have got itself into that position in the first place.

H of C's corollary is that damages would be payable referable to a contract that would not have been entered into and accordingly Regulation 31(3) and (7) would be a penalty for the unwary. For the reasons that I have already indicated, I do not consider this to be true: the only issue is one of linking the defendant's undoubted breaches to the loss claimed by Harmon. Nor do I consider it helpful or necessary to have to assess damages as if there might be different results depending on, for example, whether the breach of the PWR was the failure to specify in the OJ notice the criteria upon which H of C relied, or its failure to act as it ought to have done in September 1995 by declining to consider Seele/Alvis's alternative proposal. The result will or should be the same: if the criteria had been specified, Harmon would have known of the basis and would either not have tendered or, if it did tender, would have been entitled to expect that its tender would have been considered on the prescribed basis. In the former case, it would certainly recover its tender costs; in the latter case, it would need to establish that its tender either would have succeeded or would have stood a good chance of succeeding.

Harmon said that its expenditure on the tender was about -500,000 made up of staff costs of -413,745.24, and other expenses of -27,000. Harmon rely upon the provisions of the Utilities Remedies Directive 92/13. Its recitals provide, amongst other things:-

"Whereas claims for damages must always be possible;

Whereas, where a claim is made for damages representing the costs of repairing a bid or of participating in an award procedure, the person making the claim is not to be required, in order to obtain reimbursement of his costs, to prove that the contract would have been awarded to him in the absence of such infringement..."

The operative part of the directive in article 2(7) states:-

"Where a claim is made for damages representing the costs of preparing a bid or of participating in an award procedure, the person making the claim shall be required only to prove an infringement of community law in the field of procurement or national rules implementing that law and that he would have had a real chance of winning the contract and that, as a consequence of that infringement, that chance was adversely affected."

Harmon also rely upon comment in "Public and Utility Procurement" (1997) (by Judge Geddes):-

"Article 2(7) of the directive on which the Regulation is based is clearly a development in the community's thinking in relation to the enforcement of its procurement regime, and there is no reason in principle why it should not also be applied in suitable cases brought under the Public Procurement Regulations. It is submitted that the National Courts should apply the principle in those circumstances and this would be consistent with the community requirement of effectiveness."

Harmon adopted that proposition as part of its case and submitted that all its tender costs should be recoverable on that basis. H of C maintained that these words created problems for Harmon. First, even though the utilities directive (92/13) was earlier than the latest public works directive (93/37), no such words appeared in the works directive which suggested that a restrictve meaning might be given to the works directive and to the PWR, for although they stem from the earlier directives they reflect the remdies directive (89/665). Secondly, even if the wording in the utilities directive were to apply, Harmon would have to show that it had a "real chance of winning the contract" and that "as a result of the infringement that chance was adversely affected". Furthermore if the right to recover tender costs were to be as set out in the utilities directive then it was submitted that logically the right to recover loss of profits is to be determined by some other standard, i.e. something more than a real chance would need to be proved. H of C referred to the well-known observations of Stuart Smith L.J. in Allied Maples Group v. Simmons & Simmons [1995] 3 All ER 907 at pages 914-916:-

"(1) What has to be proved to establish a causal link between the negligence of the defendants and the loss sustained by the plaintiffs depends in the first instance on whether the negligence consists in some positive act or misfeasance, or an omission or non-feasance. In the former case, the question of causation is one of historical fact. The court has to determine on the balance of probability whether the defendant's act, for example the careless driving, caused the plaintiff's loss consisting of his broken leg. Once established on the balance of probability, that fact is taken as true and the plaintiff recovers his damage in full. There is no discount because the judge considers that the balance is only just tipped in favour of the plaintiff; and the plaintiff gets nothing if he fails to establish that it is more likely than not that the accident resulted in the injury.

Questions of quantification of the plaintiff's loss, however, may depend upon future uncertain events. For example, whether and to what extent he will suffer osteoarthritis; whether he will continue to earn at the same rate until retirement; whether, but for the accident, he might have been promoted. It is trite law that these questions are not decided on a balance of probability, but rather on the court's assessment, often expressed in percentage terms, of the risk eventuating or the prospect of promotion, which, it should be noted, depends in part at least on the hypothetical acts of a third party, namely the plaintiff's employer.

(2) If the defendant's negligence consists of an omission, for example to provide proper equipment, or to give proper instructions or advice, causation depends, not upon a question of historical fact, but on the answer to the hypothetical question, what would the plaintiff have done if the equipment had been provided or the instruction or advice given. This can only be a matter of inference to be determined from all the circumstances. The plaintiff's own evidence that he would have acted to obtain the benefit or avoid the risk, while important, may not be believed by the judge, especially if there is compelling evidence that he would not. In the ordinary way, where the action required of the plaintiff is clearly for his benefit, the court has little difficulty in concluding that he would have taken it.

Although the question is a hypothetical one, it is well established that the plaintiff must prove on the balance of probability that he would have taken action to obtain the benefit or avoid the risk. But again, if he does establish that, there is no discount because the balance is only just tipped in his favour.

(3) In many cases the plaintiff's loss depends on the hypothetical action of a third party, either in addition to action by the plaintiff, as in this case, or independently of it. In such a case does the plaintiff have to prove on the balance of probability, as Mr Jackson submits, that the third party would have acted so as to confer the benefit or avoid the risk to the plaintiff, or can the plaintiff succeed provided he shows that he had a substantial chance rather than a speculative one, the evaluation of the substantial chance being a question of quantification of damages?

Although there is not a great deal of authority, and none in the Court of Appeal, relating to solicitors failing to give advice which is directly in point, I have no doubt that Mr Jackson's submission is wrong and the second alternative is correct."

It was submitted that Allied Maples was not authority for the principle that damages for loss of the chance were available in tort in circumstances in which the loss of a chance was not dependent to any extent upon the "hypothetical action of the third party" but was dependent solely on matters within the control of the parties to the litigation. Accordingly, Harmon's case fell within categories (1) and (2) as set out in the judgment. Thus, it was submitted, Harmon had to establish the following on the balance of probabilities:-

(1) In the case of H of C's positive acts or mis-feasance that those acts caused its losses (a question of historical fact); and

(2) In the case of H of C's omissions or non-feasance that Harmon would have acted in such a way as to avoid its losses had the omission been rectified.

It was therefore not open to Harmon to establish that it had a real or substantial chance of avoiding its losses and should be entitled to damages that reflected the real or substantial chance lost.

Furthermore, if damages were to be assessed on a "tortious basis" then damages for breach of statutory duty must be assessed on the assumption that a defendant such as H of C would decide to discharge its statutory duties in a manner most beneficial to it and not in the manner beneficial to Harmon. Reliance was placed upon paragraph 386 of McGregor on Damages where it is stated that where the chance is dependent on the actions of the wrongdoer it is to be assumed that it will perform the contract in the manner most favourable to himself. Mr White submitted that by analogy the same principle should apply in a case such as this. I agree with such a general proposition but it is inapplicable. The interests of H of C were to get the project finished and although Option B2 was attractive or technically superior Harmon had tendered for an option which was equally suitable, and whatever reservations the project team may have had about Harmon's capabilities I do not consider that if it had come to the crunch H of C would have run the risk of further slippage by inviting fresh tenders. It would have accepted one of Harmon's November tenders.

Therefore I do not think that it is necessary to approach the matter in the interesting but somewhat sophisticated way suggested on behalf of H of C. First, I do not consider that the wording of the utilities directive detracts from the wording of the public works directive, or from the effect to be given to Regulation 31. There were probably good reasons why it was necessary to spell out in the utilities directive that which, in my judgment, is to be inferred from the works directive and the PWR. One good reason was to signal to potential claimants that they could not merely establish an infringement in order to recover the cost of preparing a bid or of participating in an award procedure where they would never have been runners in the race at all. Otherwise, a contracting authority who slipped up and had to compensate someone who had a real chance of being awarded the contract would also have to compensate all the other tenderers. In my view the words "in consequence" in Regulation 31(3) import the same concepts. A contractor will not suffer or risk suffering loss or damage in consequence of the breach if the loss would have been suffered in any case. Harmon suggested that it could recover tender costs since it had tendered in expectation that its tender would be treated equally and fairly and in accordance with the PWR, and that it would not have tendered at all if it had known that it would not have been so treated. There is however no real evidence to support this and in view of the evidence of Harmon's determination to obtain the contract, I doubt if Harmon would in reality have been deterred from tendering if, for example, the project had not been subject to the public works regulations but had been a private sector competitive tender.

In summary therefore Harmon is entitled to recover its tender costs, taken by themselves, on the grounds that it ought to have been awarded the contract and would then have recovered its costs. If, notwithstanding, H of C had decided to place the contract elsewhere then Harmon would have been deprived of the chance of recovering its costs. I assess that chance as virtually certain - say 90% - for I do not consider H of C would have been so perverse as not to accept Harmon's tender. It is not therefore truly an expression of a chance for the purposes of "loss of a chance" but more of probability. If H of C had decided to go for some other course such as to award the contract on the basis of a version of Option B2, but after giving the other tenderers the opportunity to tender on the basis of that option or to award it on the basis of a performance specification complying with certain design criteria but with the detailed design being provided by the tenderer, I consider Harmon would have stood as good a chance as any and better than most of being awarded the contract. Unlike the primary scenario (lowest price) there can be no certainty but there is surely a real and substantive chance that Harmon would been been awarded the contract. I therefore assess its chance of doing as 70%. (I develop my reasons later.) I consider it quite improbable that H of C would run the risks inherent in starting all over again, but would have accepted Haromon's tender which was the lowest. Harmon's capabilities were denigrated solely to advance Seele/Alvis and Option B2. Issues 11(A) will be answered Yes and sub-issues (2) and (3): Not necessarily, it is sufficient if it ought to have been awarded the contract.

Harmon's case was that in order to recover its gross margin or profit it had to establish that:-

(1) had the defendant properly operated the tender procedure in accordance with community law and the public works Regulations, it should have awarded the contract to Harmon, and,

(2) had the contract been awarded to Harmon it would have recovered its gross margin or profit in performing the contract.

Both parties say that the answer to sub-issues (3) (and (4)) under the heading "Causation" should be: yes, although there are obviously differences in the route or routes by which each of them arrive at the same conclusions and therefore I have given a qualified answer to sub-issues (2) and (3). Accordingly, the issue as to whether Harmon can recover its loss of margin or profit depends upon sub-issue (5): is Harmon able to establish that one of its tenders should have been accepted and, if so, which tender? I therefore answer this issue on the assumption that the answers I have previously given are incorrect, namely that H of C was obliged to award Harmon the fenestration package as a matter of law and therefore Harmon was entitled to the margin it would have earned on the tender which should have been accepted, i.e. that which it put forward in November 1995.

Harmon's case was that its fourth tender on 2 November 1995 should have been accepted by H of C. The only tender which H of C could lawfully consider at that stage was Harmon's tender; it was the only remaining tender based upon H of C's own design namely option A 1, and it offered the best overall value for money. Alternatively, Harmon contended that its first, alternatively its second, alternatively its third tender should have been accepted. Harmon also accepted that after the fourth tender in November 1995 H of C was entitled to continue negotiating with the tenderers but it argued on that basis Harmon would have still been the lowest tenderer. It wanted the contract and there was enough flexibility in its tender to allow for any further reductions in price. It would have made those reductions to be so required. Furthermore even if Harmon had been invited to submit a tender on a performance basis then with the undoubted resources of the Harmon group behind it, it would have been able to produce competitive designs of the highest quality. Indeed, that was one of the very reasons why Harmon was selected and encouraged in the first place, i.e. the ability of the resources of the Group. It was not suggested that the Harmon group was not then one of the world leaders in the design of cladding and fenestration systems.

Harmon in particular relied upon its criticisms of the work done by the task force which resulted in the report of December 1995 in which Harmon's tender was depicted as not being the best by only -111,000. If that exercise had been carried out properly then Harmon's tender would have produced the best overall value for money, using the internal criteria of the project team. Had Harmon been aware of the latitude granted to Seele/Alvis in the post tender negotiations, it would have also taken advantage of those improved terms and reduced its price.

Harmon of course accepted that it was impossible to answer sub-issue (5) as an unequivocal "yes" since, on certain scenarios, price would not have been the dominant factor, so that, just as it was not certain that Harmon would have succeeded, it was not certain that Harmon would have failed. Harmon certainly had a very good chance of success and, had it been given an opportunity to re-tender based upon its own designs, it would have been able to overcome the objections which materialised in August 1996, namely, that Harmon fell down on technical superiority and maintenance. Had these criteria been spelt out as part of a notional re-tender for design, then Harmon submitted that there was no reason to suppose that it would not have been able to meet them. If at that stage Harmon had been treated fairly and equally, why should it be supposed that it would necessarily have been unsuccessful?

H of C submitted that Seele/Alvis's November 1995 tender would still have been considered the most economically advantageous of all those received by H of C. Option B2 was technically superior; it gave better value for money on long term maintenance performance grounds; it would therefore have prevailed. I do not consider that it is really open to H of C to make this submission since in some way it supposes that option B2 may be taken into account when it is the very existence and acceptance of option B2 that gives rise to the issues which result in this sub-issue. Viewed in terms of a re-tender, it is in my view quite impossible to accept H of C's submission that the Seele/Alvis proposal would have succeeded since there is no comparable material from which one can draw the conclusion that Harmon's counter-proposal, had one been made on the same basis, would still have failed. Reliance on the work done by the task force is, once again, not comparing like with like. This part of H of C's approach seems to me to assume that it is necessary to decide what the outcome would have been had H of C complied with Regulation 20(4) which I regard as irrelevant.

H of C next submitted that if option B2 had to be discarded, then in September 1995 the project team would have carried out a comparison of the tenders for options A and option B and would have concluded that option B was technically superior because it relied upon welded joints. In addition, the maintenance requirements of option B were less onerous than those for option A - a conclusion supported by the evidence of Mr Josey. H of C assumed that tenderers would have been asked to submit their best offers for both schemes in order to ensure that the price for the fenestration package was as close to the budget as possible and that Harmon would have continued to refuse to price for option B. H of C relied on the fact that Harmon declined to re-consider its decision not to tender for option B and contended that the reason why Harmon did not do so was because option B required reliance on welding and Harmon regarded that as a high risk area, according to Mr Boyle. I find these assumptions and conclusions difficult to accept. First, Harmon had inside knowledge, through its contact with Mr Kerr (although Mr Kerr may have kept others similarly informed). Undoubtedly, if option B2 had dropped out of the picture and the race was between options A and options B, and Harmon learned (as it would have done) that option B was the front runner on technical grounds, then I have no doubt whatsoever that Harmon would have submitted a price for option B. It had not done so only because it had been led to believe that the race was on price alone. Furthermore, the fact that though Seele/Alvis and Gartner submitted lower prices for option B than for option A strongly suggest that Harmon would also, if it had re-considered its position, have offered such a lower price (see my later findings which justify this finding). By this stage H of C could not have accepted Seele/Alvis tender for Option B as it was no longer capable of acceptance but even if it had been H of C would have been bound to have asked Harmon for its latest price for that option (as it did not exist and would almost certainly have been highly competitive) and to have notified Seele/Alvis so that it too could reconsider its position.

In my judgment the resources and experience available to Harmon would have meant that it would have been able to overcome the risks of finding sufficient experienced welders and other technical problems, bearing in mind that it was well aware of the need to achieve high standards of welding on novel materials. (For present purposes I ignore that the fact that Seele Alvis Fenestration Ltd found a way to extricate itself from some of the problems although it is fair to assume that Harmon could well have done the same.) As will by now be clear none of the tenderers, apart Harmon, had practical experience of working with such materials (including Seele, unless one includes Alvis's experiments of April 1995). Its practical experience on the mock-up showed that the wishes of MHP and AFE could be realised and in this respect it was ahead of its rivals although the mock-up was available for inspection. I am quite satisfied that it would have been able to secure welders of the qualifications and experience required, especially with the help of the Institut du Soudure) just as a UK contractor has access to the Welding Institute.

H of C also submitted that it was quite unrealistic to assume that the fenestration package could have been re-advertised, eg on the basis of a performance specification and that Harmon would then have won. Other contractors would have been attracted including some who were deterred by the fact that AFE were the designers and it would be impossible to show that in those circumstances Harmon would have been awarded the fenestration package had H of C elected to go down this road. In my judgment it is not realistic to assume that H of C would have re-advertised the package on a performance or other basis. If it had taken that course, then I consider that Harmon would have stood as good a chance as any of obtaining the contract, i.e. 50:50. LML considered that it was top class designer and better qualified than AFE.

In my judgment if Option B2 were out of the picture, and if all the tenderers had been given yet another opportunity of putting forward their best prices for both options, then I have no doubt that Harmon would have risen to the challenge and would have submitted its best price and that it would have been able to reduce its existing prices to a level below that of Seele/Alvis's price for option B1: -33,604,787 (fluctuating/-37,237,447 (fixed). My reasons for this conclusion are based on Harmon's manifest determination to secure this highly important work; the resources available to it as a member of a group with a worldwide reputation; and its determination to establish itself in Europe if necessary, I have no doubt, by "buying" the contract were it necessary to do so. (The liquidator's report on its performance, if correct, bears this out.) In my view Harmon then wished to be one of the major players in the European cladding market and to re-build the share of the market which the companies which it had acquired once had. In the United Kingdom the NPB was the equivalent of the striking buildings in France some of which Harmon had effectively inherited, one of which it had successful managed to completion. However, H of C maintained that Harmon had insufficient latitude to reduce its price.

It is therefore necessary to decide approximately how much was included for gross margin and profit. Although issue 5(10) refers to all the tenders it is necessary only to consider the fourth tender as by that stage Harmon had already made certain reductions to remain competitive so that it represents the worst case. However if it were necessary to reach findings about the contents of the earlier tenders I would accept the conclusions set out in Mr Hay Davison's careful and persuasive reports, subject only to those matters that affect the fourth tender and which also affect the earlier tenders. Harmon submitted that the evidence of Mr Boyle in his third supplemental statement (as amended) showed that if necessary some of the assumptions made at tender stage would have been demonstrated to have been comfortable and more than sufficient to cover costs, e.g. in relation to management (see paragraphs 23 and 24 of his statement), in relation to installation, and in relation to matters covered by paragraph 42. Mr Hay Davison's report (F3/357;) showed that nearly -500,000 remained on page A/11 of the November tender.

Harmon pleaded that the fourth tender of -31,262,054 (fixed price); H4/22] had an estimated gross margin of -11,724,623. That calculation was based upon an assumed net estimated net cost being incurred of -19,537,501 which was the net cost in the July tender of -22,929,758 less: (1) the deductions made in September which came to -2,071,565, and, (2) the deductions made for the November tender which came to -1,320,690 (net of a 25% margin). Thus, the total reduction between July and November was -3,392,257. In its pleadings, Harmon stated that the gross margin comprised :-

General and Head Office overheads -2,344,500 : Harmon included a sum equivalent to 12% of the total net costs to it of the execution of the work: -19,537,501 x 12% = -2,344,500 (contribution to overheads).

Profit and Risk comprised allocated profit and risk and unallocated profit and risk. Allocated Profit and Risk of -488,487 was made up as follows:

Unallocated Profit and Risk -8,891,666: The unallocated profit and risk included costs obtained by deducting the contribution to overheads and the sum of the allocated profit and risk from the total gross margin. (Harmon made an error in calculating the tender sum.) The gross margin was -11,724,653, less overheads -2,344,500, less allocated profit and risk, -488,487 = unallocated profit and risk of -8,891,666.

It is not necessary to consider Harmon's case on currency rates if that assumes after acquired knowledge. In addition, if it were to be assumed that the matters which came to light after November 1995 (in relation to the novated suppliers and compression of the programme) were also to be taken into account, there would be further sums of money available, of about -200,000. H of C fielded Mr Nisbet, but his lack of experience in this field made his opinions in the main unrealistic and unreliable. I therefore accept Mr Hay Davison's figures and thus nearly all Harmon's pleaded figures, for a gross margin of about -11,724,653, before making allowances for overheads of -2,344,500 and other matters which produced a figure for unallocated gross margin of -8,498,015 (or 43.5% on net cost). I now turn to the costs which it is said would have had to come out this margin and which would have fettered Harmon's ability to compete. This section covers ground which also arises under the issues relating to damages. H of C's case was summarised in Exhibit D13 which listed items totalling -11,749,347 which if established would have reduced the gross margin to a negative figure of (-914,375). I omit some of the smaller items as my findings on them would not have affected the conclusion.

Inflation . H of C, following Mr Nisbet, suggested that the allowance of -1.4 million identified by Mr Hay Davison should be -1.7 million as this was the difference between Harmon's fixed price and fluctuating tenders. While this is correct Harmon's letter to LML of 12 October 1995 breaks the figure down into -1.4 m for inflation and -300,000 for currency hedge. This is higher than that pleaded but in my view is to be treated as covered by the allocated profit and risk. It is not however an answer at this stage to say it would not have been needed as it was thought to be required in late 1995. Harmon did not always give LML the correct figures but they are now available. Mr Nisbet did no more than point out the difference and could not support it against the allowance in the tender. No further adjustment is called for.

Overheads . H of C contested the figure of -3,321,375 advanced by Harmon and Mr Hay Davison. Its case was based on the percentage pleaded by Harmon in some particulars of 17.5% which, if applied to the net cost of the works in July 1995, produced a figure of -4,356,250. It argued that any reduction in the scope of work could not account for the difference and that the figure had to cover a number of substantial costs amounting to about -1,372,000: tendering (-435,000), insurance (-237,000), staff including Mr Boyle (-700,000), the London office, and financing. However overheads tend to overlap with margin and although H of C pertinently posed the question, the work done by Mr Hay Davison convincingly shows what the real figure is or is likely to be. I therefore accept it and make no adjustment under this head.

OMC . H of C naturally wished to see 4% for OMC deducted: -1,250,000. OMC was the shadowy enterprise which claimed an introduction fee of 4% for telling Harmon what was or was bound to be public knowledge. There is no evidence that it did anything useful. I doubt if OMC would indeed have got 4% and that it would have come out of the overheads for this contract, as opposed to some other group fund. The evidence of a binding contractual commitment is not at all clear and it seems remarkable to me that sums of this order would be payable as commission for apparently vestigial work, even though they would be not out of line if the building had been in some other countries. Harmon suggest a figure of -312,500, but the basis for this is speculative. However the evidence of Mr Clatworthy establishes that he thought there was an obligation to pay. He was the person who dealt with OMC. It is not necessary to establish a contract as such since the issue is whether a disbursement would have been made. I find that it would and that an adjustment of -1,250,000 needs to be made.

Novated Suppliers . Mr Nisbet suggested that an allowance of 7% would be reasonable on the work of novated suppliers, ie -460,000. Mr Hay Davison agreed that such a percentage would be reasonable. However in his supplementary report he pointed out that when Harmon was informed by LML (on 13 July 1995) of the provisional sums of -6,150,000 it was requested to provide lump sum mark-up (with breakdown) to cover management costs, inspection, quality control, wastage, transportation, expenses and profit. Harmon did not do so. Mr Hay Davison observed that, by using a conversion factor of FF 8.3/-1, -225,000 might be attributed to these heads of expenditure and risk. Mr Boyle also said in his third statement that part of the general management costs was referable to novated suppliers, and was cross-examined at some length about the amount of management that would be needed from which it became clear that the allowance that had been made was atypical for Harmon. Items may of course be treated as overheads when preparing the tender but here they would not have affected the result significantly. In my judgment there is no reason to assume that Harmon had not included sufficient for these costs in the main body of its tender make-up. It does not follow that by not providing the lump sum requested in LML's letter that such costs must come out of margin. They are all costs of a nature for which provision has to be made and it should be assumed that it was made elsewhere, in the absence of evidence of oversight.

Fabrication Costs . This is indirectly a challenge to the adequacy of Harmon's tender. The fabrication costs were based on a rate of FF 200 per hour given by Harmon Sitraco which was to carry out the work. The calculations made by M Voisin and others for fabrication costs came to FF 29,254,000. As the issue arose late it was not possible to hear from M Voisin and the point had not been put to M Michno. His witness statement gave evidence about his participation in the preparation of the tender and his consultations with personnel at Sitraco about the time required to fabricate the heavy panels, but he had no reason to deal with the rate or the meeting to which H of C referred. Harmon submitted that this was important because just prior to the submission of the July tender Mr Sahyoun met M Michno and after discussion decided to cut the figure to FF 17,500,000. It is not clear whether this was done because the figure was thought to be high or because it was a cut in the overall tender and it fell on that item. I regard the latter as improbable since cuts of that order are made across the board, as opposed to cuts in areas of genuine savings. Obviously the result is odd unless the cut was made in order to strip out of a composite rate elements duplicated elsewhere which might well be the case since the quotation was provided by a company within the group. However in that event one would have expected Mr Boyle to have explained it. However it is really for the defendant to establish that the cut must be treated as affecting margin which at that stage remained high - about 60%. Mr Nisbet could not of course assist as it was beyond his experience. Mr Hay Davison had not investigated the position although he evidently did not consider that the result was a patent under-estimate. I am not satisfied on the present evidence that I should conclude that the margin would have to be reduced by -1,469,250 as suggested by H of C.

Erection Costs . I reach the same conclusion, although for additional reasons in respect of H of C 's claim that a similar cut was made to these costs so as to reduce them from FF 6,800,000 to FF 2,500,000. The estimate had originally been based on figures provided by Cherif, a French sub-contractor. Here Mr Hay Davison made inquiries which justified that decision - see his second supplemental report, paragraph 15.05 ff. He thought that Cherif's hourly cost of FF 163 was excessive. His figure was based on London sub-contractors' current prices and equated to FF 100 per hour (which was the figure suggested by Mr Boyle), although he thought that a lower figure was more likely as it was a large project. Mr Nisbet did provide some check calculations but he was unable to give comparable evidence even about current prices for cladding and referred to the figure from Cherif thereby assuming the conclusion. I cannot accept his opinions which were in my view not only not based on relevant experience (unlike Mr Hay Davison) but were in places not independent but argumentative. The figure is justifiable if the hours are about 34,000. (I was surprised that Mr Nisbet was asked to give evidence as, despite his qualifications and lengthy experience, he was not qualified to deal with the key issues which resulted at times in a rather partisan and superficial investigation of the documents.)

Pinon . H of C maintained that Harmon failed to make any proper allowance in its estimates for tooling up and upgrading the factory at Pinon which was a "ghost factory" and not obviously capable of being restored to working order to meet the stringent requirements of the fenestration package. The work force had been dispersed and it was not clear how a satisfactory work force and equipment would be re-assembled. All this was of course apparent at the pre-qualification stage but, nevertheless, the project team allowed Harmon to proceed and invited it to submit a tender. In his report (F2/129), Mr. Blois-Brooke, H of C's expert, said this:

"5.61 As stated above, the information provided by Harmon during the pre-qualification and tender periods was comprehensive and in the main sought specifically to address each of the requests made by the project team. Seele/Alvis' submissions, while reasonably complete, were by no means as detailed. Nevertheless, I have no reason to doubt that both firms were capable of mobilising the staff, equipment and facilities necessary to complete this project.

5.63 Some difficulties may also have been encountered by Harmon, especially in creating a facility and establishing a workforce at Pinon with the special skills needed for this particular project. However, I would expect that, provided it was able to call on the world-wide resources of its associated companies and was prepared to invest the necessary time and money, Harmon would have been capable of addressing such problems without undue disruption to the programme for this work package.

5.74 I have no reason to doubt that Harmon and Seele/Alvis were capable of mobilising the staff, equipment and facilities necessary to complete this project."

The evidence from the Harmon witnesses naturally accepted that the factory was out of operation and would need work to bring it up to standard. Mr Larson, who knew very well how to manage difficult projects from long experience and was a reliable witness, saw no difficulty whatsoever in achieving this. (Mr Larson was rated highly by Mr Mumford in his risk assessment.) In cross-examination, he agreed that it would be necessary to set up a new production facility but he thought that H of C was being far too sophisticated since he had flown in from Kuala Lumpur where he had been responsible for the Petronas tower and where they had had to start from scratch "with the dirt floor and the flip-flops and the guys with no shirts". He accepted that at first sight the factory

"required a leap of faith for us [the Project Team] to believe that it could be turned into a factory which was going to produce bespoke cladding"

"Again, I would relate it to my KL experience where, basically at the end of the day, Cesar Pelli, was so excited about the work we did off a dirt floor, that it was extraordinary. We built a world-class wall in a third world country that I personally do not believe I could build in Minneapolis, Minnesota, USA, and of course my expectations and my understanding of the client's expectations on the new Parliament Building was that they also wanted a world-class wall and we were going to put the right team in place to give that to them."

M. Michno said that at the time when Harmon was submitting its tenders, the factory at Pinon was working on Harmon's project for SmithKline Beecham and the factory at Façalu was working on a building at Heathrow. There was a work force of about 50 people in each factory at that time. M. Michno said that it was intended to house the design staff at Pinon. The staff would be transferred from Orly. Mr Josey had visited Pinon and was satisfied that Harmon would have been able to store all the completed parts there ready for shipment to Westminster. Mr Blois-Brooke set out in some detail the steps that he thought would be required. Mr Nisbet estimated that some -136,000 would be required in order to provide tooling at Pinon. Mr Hay Davison comprehensively demonstrated in his report that adequate allowances had already been made in the tender for tooling up at Pinon and confirmed this in evidence. There should be no adjustment on this account.

Mr Hay Davison also took the view that whatever costs might be required for up-grading the factory at Pinon would form part of the capital costs of Sitraco and included in the price which Sitraco was to charge Harmon, i.e. FF 200 per hour. Some question arose as to which company might carry the cost but in my view that is irrelevant as this issue was whether such costs, if incurred within the group (as they would be), would be charged back to Harmon to be recouped from the revenue from the contract for the NPB. Normally however a contractor such as Harmon would not be concerned with the treatment of these costs as they would be incurred by another company acting as sub-contractor or supplier to Harmon and would form part of its overheads (as Mr Hay Davison said) so there would have to be some good reason why Harmon would have to include costs of this kind in its tender.

In my judgment in the absence of any evidence to indicate that such costs would be carried by a contractor such as Harmon, Mr Hay Davison's view is correct. Costs of this nature are the responsibility of the fabricator. They are not necessarily recovered from a particular contract if they are likely to be used again in the future for other projects. Even if they are not likely to be re-used again, they may have residual value. The major items of cost identified by Mr Blois-Brooke, eg the additional crane and the CNC milling machine, would not necessarily be treated as part of the expenditure exclusively required for the NPB. Although bought for the NPB contract they form part of the refurbishment of the factory and might reasonably be expected to be used again, and, if not, to be sold. Accordingly there would be amortised and included in Sitraco's overheads and be passed on to Harmon only through its charge eg FF 200 per hour. In my view, H of C's case falls short of what is required to show that Harmon ought to have included the costs of tooling-up in its own costs and that those costs are to be treated as coming out of the gross margin.

There was also a difference as to whether the cost of up-grading should be about -521,000, as suggested by Mr Hay Davison, or about -700,000, as calculated by Mr Nisbet. The difference was not so much one of assessment of cost, but as to whether Sitraco would have needed to have had additional overhead cranage beyond the two five-ton cranes which were there. Mr Mumford had taken the view that the cranage at Pinon was adequate, but Mr Blois-Brooke thought that to use the existing cranes "would have stretched [Harmon's] cranage a bit", although in most instances five-ton cranes would have been adequate. On this point, his opinions were always careful and considered. I do not consider that Sitraco would have risked the existing cranage and that some heavier cranage would have been installed. For this reason, Mr Nisbet's costings are probably closer to those required. By the same token, the installation of a heavier crane would clearly be a matter of value to the long term use of the factory and it is most unlikely, in my judgment, that its cost would have been charged by Sitraco to the work being done for the NPB.

Mock-up . The unrecovered costs of the mock-up would clearly have been charged to the NPB.

Surveyor and travelling . I regard these both as matters of judgment in estimating and I would not form a view that they were bound to have come out of the gross margin.

Storage in the UK . This was another surprising suggestion,namely that Harmon would have had to protect itself against the possibility of panels being delayed in transit to or at Westminster so that some buffer stock would be needed and a secure storage area provided in order that the policy of deliveries "just in time" was maintained. Obviously any contractor in the position of Harmon would allow for the possibility of delays en route but would normally assume that panels would be shipped from storage in France to England in a continuous flow, carefully planned as there were numerous types of panels. I regard this part of H of C's case as completely unrealistic.

Accordingly, I arrive at the conclusion that the following allowances should be taken out of the gross margin:-

Novated Suppliers nil

Fabrication costs nil

Erection costs nil

Supervision nil

Transport nil

Tooling up at Pinon nil

Upgrade of Pinon nil

OMC (Overseas Material Consultants) -1,250,000

Travelling nil

Storage in UK nil

This would reduce the available margin from -10,834,972 (using Mr Boyle's figure) to -4,556,750 or, using Mr Hay Davison's figure of -11,724,653 to -5,446,431. In either case there would be sufficient latitude for Harmon to compete vigorously to obtain the contract and would probably not have need to "buy" it. Even if Harmon had under-estimated the cost of welding it had sufficient room for manoeuvre for I cannot believe that this element would have cost it more than -500,000. I see no reason to alter my assessment of Harmon's chances of obtaining the contract if H of C had proceeded to award it on the basis of a revised option B2 or on the basis of a performance specification. In addition the true margin is rather more equivalent to that required for risk or realisable profit of the order of 15%, which seems to me to be within the bracket that one would expect for specialist work of this kind carried out by major contractors where relatively high net profits are to be sought to counter the significant risks encountered during carrying out such work and, of course, the nature of the industry, including the cyclical flow of work. It is comparable to the figures reported by LML to Mr Makepeace in early 1996 about the geographical distribution of elements within Seele/Alvis' pricing. They included LML's views of where in the Seele/Alvis tender there were clearly to be found elements for profit and risk. However such elements tend to be spread around within the pricing so the true picture is probably that Seele/Alvis's allowances for group profit and risk were higher. It is noteworthy that all the contractors made substantial reductions so that all must have included some "fat" in their tenders.

I certainly reject the contention advanced on behalf of H of C that by the time Harmon submitted its fourth tender in November 1995 there was no profit remaining in it. Similarly, I reject the argument that Harmon had no room for manoeuvre either to reduce its prices still further, or to accommodate any post tender changes of the kind that occurred between November 1995 and May 1996. It must follow that if Harmon had been awarded the contract it also might have run into the same or similar problems encountered by Seele Alvis Fenestration Ltd which led to the reversion to the base design and it too would had to have bought itself out of them. In my judgment it had enough in its tender to be able to do so without material detriment.

Accordingly I answer issue 5(10): If running costs, overheads and contingencies, such as payments to OMC, are excluded the amount included in the plaintiff's tender for November 1995 for margin for risk and profit was between -4.5 million and -5.4 million. Since November 1995 tender was arrived at by substantial reductions on previous tenders, it must follow that the previous tenders contained at least those amounts, and probably about twice the amount in the majority of cases (since reductions of at least -5 million had been made).

The answers to issue 8 (6A) are (i) Yes, Harmon would have been able to establish that it would have reduced its tender prices had it been given the opportunity of reflecting the changes to the contract terms pleaded in paragraph 14 (viii) of the re-re-amended statement of claim; (ii) Yes, as regards the novated suppliers and programme, Harmon would have made a reduction in its tender price if it had been given the opportunity to do so. The reduction would have been at least -500,000 and, if commercially necessary, more; (iii) Yes, there was certainly a real chance that such a reduction would have been made by Harmon.

In answering questions (A) and (B) in Issue 11 in the affirmative I give the following answers to the sub-issues (1) Yes; (2) and (3) Not necessarily, it is sufficient if it ought to have been awarded the contract; (4) Yes; (5) Yes, either of the fourth tenders of 2 November 1995.

There is a degree of convergence between the parties on the issues relating to damages, e.g. it was accepted that for most purposes the relevant tenders were that of November 1995. This accords with my earlier conclusions since November 1995 was effectively the time when Harmon was disappointed and had reduced its price substantially so that any assessment of the amounts to which it is in principle entitled ought to be based upon its latest position. The issues about damages are concerned with matters of principle since there are excluded issues relating to the precise quantification of the claim. The full list is as follows but I have appended summaries of the parties' answers so that it can be seen that only some require a decision.

Harmon say: Yes; H of C say: No, because Harmon is not to recover costs which it would have incurred had it been awarded the contract.

Both say the November 1995 tender, although Harmon adds the July tender in the alternative.

Harmon say: Yes; H of C say Yes in so far it proves it would have got the contract and made a profit.

Both say November 1995, although qualified as set out under issue 14.

(1) as damages for breach of the Treaty of Rome: or

(2) pursuant to Regulation 31(3) of the Regulations: or

(3) as damages for breach of the contract pleaded in paragraph 11 of the Re-Amended Statement of Claim; or

(4) as damages for misfeasance in public office.

Harmon say that its losses are recoverable under every head; H of C say that they are only recoverable pursuant to Regulation 31(3) of the PWR but if they were recoverable under (1) or (3) an identical approach should be adopted.

Harmon say Yes; H of C say No. The answer is Yes for reasons set out above. I add only that if the damages to which Harmon is be entitled (under any head) are to be assessed on a "tortious" basis rather than a "contractual", nevertheless I see no reason why damages for "loss of a chance" should not be awarded as a matter of general principle for otherwise Harmon would not obtain compensation for the loss and H of C would avoid paying for its default. The duties owed under the PWR and under other enforceable obligations are essentially directed towards the loss of opportunity to tender or to contract and accordingly the damage contemplated must be such a loss.

(1) is it necessary for the plaintiff to establish which one of its tenders should have been accepted by the defendant?

Harmon say Yes, but accept that if H of C should have invited re-tenders then it is such re-tender that ought to have been accepted. H of C similarly say that Harmon has to establish that a tender put forward by it would have been accepted and that logically this must a different tender to those actually submitted.

(2) If the answer to (1) is "Yes":

(a) is the plaintiff entitled in principle to quantify its claim as a proportion of the gross margin that it would have derived from one of the tenders pleaded in paragraph 19 of the Re-Amended Statement of Claim if so which tender? or

(b) is the plaintiff entitled in principle to quantify its claim as a proportion of the profit that it would have derived from one of the tenders pleaded in paragraph 19 of the Amended Statement of Claim and if so which tender?

(Para. 20 Re-Amended S of C; para 57(b);(c) Re-Amended Def.)

Harmon's answer is Yes, subject to its answer to (1); H of C say that the November 1995 tender would be the reference tender.

Harmon say 30-40%; H of C say no more than 15%.

(1) as damages for breach of the Treaty of Rome: or

(2) pursuant to Regulation 31(3) of the Regulations: or

(3) as damages for breach of the contract pleaded in paragraph 11 of the Re-Amended Statement of Claim; or

(4) as damages for misfeasance in public office?

(Para.20 Re-Amended S of C).

Both repeat the answers to issue 18.

(1) as damages for breach of the Treaty of Rome: or

(2) pursuant to Regulation 31(3) of the Regulations: or

(3) as damages for breach of the contract pleaded in paragraph 11 of the Re-Amended Statement of Claim; or

(4) as damages for misfeasance in public office?

(Para. 21A Re-Amended S of C; para 58 Re-Amended Def.).

Both effectively repeat the answers to issue 18.

Harmon say Yes; H of C say No.

Harmon say for all its tenders; H of C say only for the November tender.

In addition the following general issue is relevant.

(a) tender costs, or

(b) gross margin, or

(c) loss of profit

which would or might have been incurred or earned by another company within the Harmon Group:

(i) if the plaintiff is (in the case of tender costs) or would be (in the case of gross margin or loss of profit) contractually liable in law to that company for the same;

(ii) if the plaintiff is not, or would not have been contractually liable in law to that other company for the same?

I shall examine the issues in the following order: 18 (and 22, 23 and 26), 12, 20, 21, 24 and 25. The other issues have been or will be answered either directly or indirectly.

I have already decided that H of C is liable under all four heads: PWR and Directives; Article 6 of the Treaty of Rome; implied contract and misfeasance. Harmon submitted that it was not necessary for its purposes to consider what damages were recoverable under the second and third heads if it was in principle entitled under the first head to all that it claimed, since Regulation 31(1) imposed on H of C a duty to comply with "any enforceable Community obligation in respect of a public works contract" so breach of that duty was actionable by a contractor under Regulation 31. Mr White argued, first, that the word "enforceable" excluded H of C (on the basis that it was not an organ or emanation of the state) - a submission which I have rejected; secondly, that the words could refer only to the Works Directive and its predecessors 71/305 and 72/277 which had to be mentioned as they were directly enforceable.

In my judgment Harmon is basically right in its submission. Regulation 31(1) is a useful and wide-reaching provision which ensures that actionable breaches of obligations imposed upon an authority by the Treaty of Rome, by an applicable and directly effective Directive or any other enforceable principle or requirement of Community law will entitle an aggrieved contractor to recover damages under this Regulation, rather than by means of some other route, such as reliance upon the general law. Indeed it is not necessary that the obligation should be one which usually or specifically leads to an award of damages. It could be an obligation which is enforceable in another way, such as by injunction or declaration. There is no reason to restrict it to obligations which of their nature are not otherwise enforceable by individuals since the obligation will not be enforceable unless it is owed to an individual and falls within the aims and purposes of the PWR. The obligations relied on by Harmon are plainly either directed to the objectives which gave rise to the PWR or are connected with them. Thus I accept Harmon's argument that losses which could be proved to result from infringements of Articles 6, 30, 59 to 65 of the Treaty are recoverable under Regulation 31(3) (subject to my earlier reservation about dealing with articles 30 and 59 to 65), provided of course that they are enforceable, ie where the authority is an organ or emanation of the state and where the claimant has a right as an individual. Similarly I see no reason to confine the applicable directives to Works Directives if they are otherwise relevant. However the primary purpose of the PWR is to give effect to existing obligations and I do not consider that it should be construed as creating rights where none existed before. It is therefore unnecessary to consider any other basis for the recovery of damages for breach of Treaty obligations under the Treaty, or for recovery of damages for breach of a directly effective Directive obligation as a matter of general law, although in my view if necessary it is plain that H of C's breaches are sufficiently serious and that damages are the appropriate remedy for Harmon's claims to be maintainable. I therefore do not need to consider further on what basis damages might be assessed for these purposes. Regulation 31 does not require a distinction to be made between a claim for breach of the Regulations and one for breach of another enforceable obligation.

There is no specific guidance in either the PWR or the directives (in particular directive 89/665) as to how Regulation 31(3) is to be interpreted in English law. There are no decisions directly on the question of the assessment of damages from the European Court of Justice, or any English Court.

As a matter of approach to Regulation 31(3) Harmon relied on some key decisions of the ECJ. In von Colson und Kamann v. Land Nordrhein-Westfalen Case 14/83, [1984] ECR 1891 it was said:

"[23] Although, as has been stated in the reply to Question 1, full implementation of the directive does not require any specific form of sanction for unlawful discrimination, it does entail that that sanction be such as to guarantee real and effective judicial protection. Moreover it must also have a real deterrent effect on the employer. It follows that where a member-State chooses to penalise the breach of the prohibition of discrimination by the award of compensation, that compensation must in any event be adequate in relation to the damage sustained.

[24] In consequence it appears that national provisions limiting the right to compensation of persons who have been discriminated against as regards access to employment to a purely nominal amount, such as, for example, the reimbursement of expenses incurred by them in submitting their application, would not satisfy the requirements of an effective transposition of the directive.

[28] It should, however, be pointed out to the national court that although Directive 75/207/EEC, for the purpose of imposing a sanction for the breach of the prohibition of discrimination, leaves the member-States free to choose between the different solutions suitable for achieving its objective, it nevertheless requires that if a member-State chooses to penalise breaches of that prohibition by the award of compensation, then in order to ensure that it is effective and that it has a deterrent effect, that compensation must in any event be adequate in relation to the damage sustained and must therefore amount to more than purely nominal compensation such as, for example, the reimbursement only of the expenses incurred in connection with the application. It is for the national court to interpret and apply the legislation adopted for the implementation of the directive in conformity with the requirements of Community law, in so far as it is given discretion to do so under national law."

In Brasserie du Pêcheur v. Germany; R v. Secretary of State for Transport ex p. Factortame [1996] 1 CMLR 889 it was said :

(87) "Total exclusion of loss of profit as a head of damage for which reparation may be awarded in the case of a breach of community law cannot be accepted. Especially in the context of economic or commercial litigation, such a total exclusion of loss of profit would be such as to make reparation of damage practically impossible."

In that case the court had actually been invited to go further and to decide what might be recovered but, in the manner of courts, it declined to provide inferior courts with the guidance that they need. However, applying principles established or affirmed by von Colson , Harz , Marshall II [1994] QB 126 and Factortame , one may safely conclude that the amount recoverable under Regulation 31(3), whilst ultimately a matter for the English courts applying English law, must not result in an award which would be less favourable than would be available under national law. Harmon's alternative claim for breach of a preliminary contract may thus be relevant (as accepted by H of C). Even if the damages recoverable under Regulation 31(3) would be characterised in English law as damages for breach of statutory duty and or in the nature of those recoverable for a tort such as negligence, I do not consider that it either necessary or desirable to look at them in that way. Harmon maintained that the principle of "effectiveness" should also be applied. H of C, whilst accepting the principle of effectiveness, maintained that it had in fact been met by the provision of apparently sufficient remedy in Regulation 31(3). H of C argued that "effectiveness" meant that domestic law should only provide a remedy for breach of community law if otherwise there would have been no such remedy and that it was not necessary to consider the adequacy of the remedy. Certainly a remedy would be ineffective if it was not available because the domestic law conflicted with community law: see for example Marshall II . However in that case the court said (albeit in a different context but the principle is relevant):

"It is therefore necessary to identify the objectives of the Directive and in particular to see whether, in the event of a breach of the prohibition of discrimination, its provisions leave member states a degree of discretion as regards the form and content of the sanctions to be applied.

The purpose of the Directive is to put into effect in the member states the principle of equal treatment for men and women as regards the various aspects of employment, in particular working conditions, including the conditions governing dismissal.

To that end, article 2 establishes the principle of equal treatment and its limits, whilst article 5(1) defines the scope of that principle with regard specifically to working conditions, including conditions governing dismissal, to the effect that men and women are to be guaranteed the same conditions without discrimination on grounds of sex.

As the court held in Marshall [I] Case 152/84, [1986] QB 401 , since article 5(1) prohibits generally and unequivocally all discrimination on grounds of sex, in particular with regard to dismissal, it may be relied upon as against a state authority acting in its capacity as an employer, in order to avoid the application of any national provision which does not conform to that article.

Article 6 of the Directive puts member states under a duty to take the necessary measures to enable all persons who consider themselves wronged by discrimination to pursue their claims by judicial process. Such obligation implies that the measures in question should be sufficiently effective to achieve the objective of the Directive and should be capable of being effectively relied upon by the persons concerned before national courts.

As the court held in von Colson v. Land Nordrhein-Westfalen Case 14/83, [1984] ECR 1891 , 1907, para. 18, article 6 does not prescribe a specific measure to be taken in the event of a breach of the prohibition of discrimination, but leaves member states free to choose between the different solutions suitable for achieving the objective of the Directive, depending on the different situations which may arise.

1. However, the objective is to arrive at real equality of opportunity and cannot therefore be attained in the absence of measures appropriate to restore such equality when it has not been observed. As the court stated in the von Colson case, at p. 1908, para. 23, those measures must be such as to guarantee real and effective judicial protection and have a real deterrent effect on the employer.

2. Such requirements necessarily entail that the particular circumstances of each breach of the principle of equal treatment should be taken into account. In the event of discriminatory dismissal contrary to article 5(1) of the Directive, a situation of equality could not be restored without either reinstating the victim of discrimination or, in the alternative, granting financial compensation for the loss and damage sustained.

3. Where financial compensation is the measure adopted in order to achieve the objective indicated above, it must be adequate, in that it must enable the loss and damage actually sustained as a result of the discriminatory dismissal to be made good in full in accordance with the applicable national rules."

In my judgment it is not enough that some remedy should be provided for, in my view, it is clear that from the cases culminating in Brasserie du Pêcheur that the remedy should be both adequate and a real deterrent. Accordingly, it is necessary always to take care to ensure that the result of applying a national law which purports to implement a directive will sufficiently meet the requirements of Directive 89/665. It follows that the interpretation of a national law purportedly giving effect to a directive such as 89/665 should be one which assumes that it is intended to achieve the objectives of the relevant directive, unless the language is completely inconsistent with that intention, in which case effect will have to be given to the parent Directive or other law or principle of law for the national law will have failed to implement it. Accordingly Regulation 31(3) must be read or applied in such a way that a contractor will recover all its losses incurred in consequence of the relevant breach even if such losses might not be recoverable under a comparable or analogous provision of national law for in that way the remedy will be both adequate and a real deterrent. The latter objective will not be met if a contracting authority were able to escape paying the full consequences of its breach.

Similarly I can see no reason why the special or general damages recoverable should vary depending on whether the breach or default is characterised as one for failure to comply with Treaty or like obligations (assuming that they fall outside Regulation 31(3)) of breach of contract or for misfeasance in public office provide of course that the underlying facts and results are the same, namely that the contractor has wrongfully been deprived of a contract or of a real and substantial chance of being awarded a contract (applying Allied Maples ) and in consequence has wasted its costs of tendering or lost the chance of recovering them through the contract or has lost the net profit and contribution to overheads that it would have obtained or the chance of so doing. Indeed the objects of the Treaty and like obligations, of the implied contract and of the proper exercise of powers are precisely to avoid such situations.

H of C commented that Harmon's pleaded case on damage did not say how much of the gross margin is likely to be profit and that that omission was never made good during the evidence. I do not consider this to be relevant for the purposes of the present issues and, furthermore, it is by no means uncommon for an entity in the position of Harmon to be unable to be specific, not least because the margin is to cover provision against risks for which no other provision has been made or for which other provision might prove to be inadequate and profit. If the risks eventuate the expenditure diminishes and vice versa. Once a contract is completed, it is usually possible to be specific as to the amount of profit which would have been realised since by that time the risks will have eventuated and the effect can be costed. Similarly Harmon's claim, if it proceeds to be quantified, will have to be tested against the events that occurred during the performance of the contract by Seele/Alvis Fenestration Limited, for otherwise it may not be possible to decide whether Harmon would in reality have made the profit that they contemplated, had they been awarded the contract on the basis of the fourth tender. At this stage, also, account will have to be taken of the effect of post-tender negotiations, both those contemplated by Harmon in the reservations that they made under the heading "Clarifications" in its tender, and those which resulted from negotiations with Seele/Alvis, some of which might have the effect of decreasing risk and increasing profit all otherwise affecting the net estimated cost with consequential effect on the gross margin available for risk and profit.

H of C also maintained that Harmon could not recover those margins for profit and overheads that would have been earned by or recovered by other companies within the Harmon Group. This included the intra group margin of 25% which would have been included in the intra group accounting to other companies for the work materials and services provided by them to Harmon, since the basis upon which they were provided was costs, plus 25%. I am not yet concerned with the precise amount of the margin, or the companies which might have benefited from it, nor am I concerned, from these issues, to consider again or to decide whether the intra group margin would have had to have come from the gross margin, or whether it was already included in the net estimated costs. But I shall assume that it was the former. Otherwise a factual basis for the arguments presented by H of C will not be present.

Harmon however submitted that if it was contractually liable to another company within the Harmon group either in respect of tender costs or in respect of payment of gross margin or profit, under ordinary principles of law, Harmon was entitled to recover in respect of those matters, and the fact that Harmon was itself liable to account to other companies within the Harmon Group is irrelevant to Harmon's entitlement against the Defendant. The same result would follow even if Harmon had sub-contracted the work to other companies which were not within the Harmon Group. Where however Harmon had remitted margin or profit to another Harmon Group company but did so without there being any direct contractual liability to do so Mr Fernyhough submitted that modern judicial thinking shows that Harmon can recover the remitted margin or profit. He referred to In St Martins' Property v Sir Robert McAlpine [1994] 1 AC 85 Lord Griffiths said at page 97G as follows:

"But here again in my view who actually pays for the repairs is no concern of the Defendant who broke the contract. The Court will of course wish to be satisfied that the repairs have been or are likely to be carried out but if they are carried out the costs of doing them must fall upon the Defendant who broke his contract. Authority for this is to be found in Jones v Stroud District Council [1986] 1WLR 1141. The case in fact was won in tort and not contract but the principle of whether or not it is the defence if someone else has paid for work for which the Defendant would otherwise be liable must apply to both tort and contract. The claim was for damages to a building which had suffered damage as a result of the Defendant's negligence...

There are many cases where a tortfeasor's liability has been temporarily discharged by payment by a third party on behalf of the Plaintiff. A very common example occurs in personal injury cases where the cost of medical treatment is borne by a relative; but that has never been seen as a reason why that sum should not ultimately be paid by the Defendant if he is found liable for the injuries. The law regards who actually paid for the work necessary as a result of the Defendant's breach of contract as a matter which is res inter alios acta so far as the Defendant is concerned".

H of C's case was also that Harmon could not recover gross margin in circumstances in which the margin includes costs which Harmon would have had to incur had it been awarded the contract. Mr Boyle conceded that included in the overheads, at least, were costs that would only have been incurred if Harmon had been awarded the contract, e.g. the cost of the bond, or the cost of tooling but, again, I do not have to deal with these element for the purposes of the present issues.

As a matter of principle, I see no reason why Harmon cannot recover the intra group margin as part of its gross margin, since in my view it is again necessary to be realistic and commercial about activities incurred within a group and those incurred as a result of sub-contracts placed outside a group. There will be some projects where the contractor selects and employs another company within the group overtly as a sub-contractor but when, as here, it was intended that the combined resources of the Harmon Group, particularly in the European area, would be mobilised for the purposes of the project it is to be assumed that profits that would have been earned by any member company would have been treated as profits referable to the project, even though for internal purposes they might have been attributed to one or more subsidiaries. As I state elsewhere, H of C expected the Harmon Group to provide a tenderer and that it was not to be expected that the selected tenderer would not have called upon other companies within the Group to provide services and, indeed, capital for which and upon which those other companies would be entitled to show a return or profit. Clearly, if the contract had been awarded to Harmon, the intra group margin would have formed part of the cost to Harmon, as such, but it does not follow that it has now to be deducted from the gross margin and re-allocated under the head of net estimated cost if that cost does not otherwise include that group profit margin.

H of C also submitted that St Martin's only entitled a person to recover costs incurred by others, in the limited circumstances there contemplated. But the case was about the recovery of damages and whether costs or losses incurred by others could be included in such damages. If remedial works are executed the costs of doing so will be a loss unless and until they are recovered. There is no distinction therefore between losses actually incurred and prospective losses that equally result from the breach in question, nor is there a distinction between "Harmon's costs or losses" and losses of an economic character, such as loss of profit or loss of contribution towards overheads. However, as regards the latter, H of C is right in that Harmon cannot recover loss of contribution towards overheads that would only have been incurred had the project gone forward: subject to issue 27 and for the reasons already given in relation to tender costs, Harmon is entitled to recover that which it has lost as a result of not having the contract which may include the costs of maintaining managerial and other staff and other overheads which would have been funded by the fenestration package. Harmon relied on passages in Hudson's Building and Engineering Contracts 11th Edition, paragraphs 8-177 -8-179, and paragraph 154 in McGregor on Damages , as well as an American case, Vitex Manufacturing Corporation Ltd v. Caribtex Corporation 337 F.2d 795 (1967). Vitex is a well known decision of the US Court of Appeals, Third Circuit. It was a case of termination or repudiation. A factory in the Virgin Islands, which operated only from time to time, received an order and commenced manufacture. The order was then cancelled. It was argued that the claim by the manufacturer for its gross operating profit should be reduced by the rent of the factory during the period when manufacturing might have been carried out, but for the termination or repudiation. Staley C.J. said (at page 798 -[5]:-

"Since this overhead remained constant, in no way attributable to or affected by the Caribtex contract, it would be improper to consider it as a cost of Vitex's performance to be deducted from the gross proceeds of the Caribtex contract."

[6] Because it may be useful for planning purposes to allocate a portion of overheads to each transaction, it does not follow that the allocated share of fixed overhead should be considered a cost factor in the computation of lost profits on individual transactions."

Since Harmon took on other work in 1996-1997 then some of its overheads would have been met out of the other contracts and thus the loss claimed may have been avoided either wholly or in part. Similarly, if Harmon could reasonably have undertaken more work but declined to do so as a result of which it failed to take the opportunity to minimise or reduce its losses, its costs would to that extent be avoidable and irrecoverable. These are matters which will have to be investigated if and when the excluded issues are dealt with.

In so far as Harmon has a claim based upon a preliminary implied contract, then the same principles apply. In George Wimpey Canada v. Hamilton-Wentworth (Regional Municipality (1997) 34 CLR (2d) 123 (to which I have referred) the contractor was entitled to damages measured by the difference between the revenue that it would have received had it been awarded the contract and the cost that it would have incurred in performing the contract. In my view, that is no more than an obvious illustration of well established principles. In addition in Pratt Contractors Limited -v- Palmerston North City Council [1995] 1 NZLR 469 Gallen J awarded loss of profit.

All parts of Issue 18 (and Issues 22 and 23) will be answered in the affirmative. Issue 26 will be answered similarly but of course on the basis of a refinement of Harmon's definition of "gross margin" to which I now refer.

H of C's case has been considered under the heading of Causation where I have decided that it should be assumed that Harmon's fourth tender had an estimated gross margin of about -4.5 million to about -5.5 million. I have excluded costs which Harmon might have had to incur so as to reduce the margin available. To that extent I do not accept Harmon's definition in its substituted annotated Further and Better Particulars (A2/307);

"Total gross margin is calculated by subtracting the net costs from the tender sum. It is also the sum of contribution to overheads, additions to dayworks, contingency, additions to novated suppliers, additions to the cost of the Bond, currency hedge and unallocated profit and risk".

As a matter of principle H of C is right in its submission that Harmon cannot recover as damages quantified by reference to a gross margin costs which it would have incurred even if it had not been awarded the contract, such as the costs of tendering. They may be recovered in some other way. For the purposes of assessing damages gross margin differs from loss of profit only in so far as it includes a contribution to items of recurrent or fixed expenditure the cost of which must defrayed from earnings. Such costs may of course be recoverable as damages in some other way. The assessment of gross margin must take account of events which would have affected the performance of the contract for good or ill. The answer to this issue is: Yes.

I have already decided that damages for "loss of a chance" are really only to be awarded only if H of C was not obliged to award the contract to Harmon and ought to have sought new tenders. In such event the selection of one of Harmon's tenders does not arise. H of C is therefore correct in its submission that this issue should be not be answered "yes" although any assessment will require the construction of a hypothetical tender for Option A1 or B which would undoubtedly be based on the November tender. The answer to part (1) is therefore No, does not arise as a hypothetical tender would be used and the answer to part (2) is that based on option (a): the plaintiff is entitled in principle to quantify its claim by reference to a tender based on a November tender with such adjustments as may be necessary for the purposes of a hypothetical tender required by re-tendering in competition with others.

Under the heading of Causation I have concluded that if Harmon had been treated fairly and in accordance with the law Community Law, then H of C ought to have awarded it the contract on the basis of Option A1. If H of C had decided to award the Contract on the basis of Option B2, and if it had given other tenderers the opportunity to tender on the basis of that option, then Harmon stood as good a chance as any of being awarded the contract, and better than most - probably 70;30. In arriving at these conclusions I have endeavoured to apply the principles set out in Allied Maples v Simmons & Simmons [1995] 1 WLR 1602 , in particular the observations of Stuart-Smith LJ at page 1614D which are relevant both to issues of causation and issues relating to the principles upon which damages are to be assessed:

"But, in my judgment, the plaintiff must prove as a matter of causation that he has a real or substantial chance as opposed to a speculative one. If he succeeds in doing so, the evaluation of the chance is part of the assessment of the quantum of damage, the range lying somewhere between something that just qualifies as real or substantial on the one hand and near certainty on the other. I do not think that it is helpful to seek to lay down in percentage terms what the lower and upper ends of the bracket should be."

H of C submitted that generous discounts were made in assessing damages for loss of a chance. Mr White referred to Fisher v. Knibbe (1989) 6 WWR 130 (where the court awarded the plaintiff 15% of the damages he would have received as the value of a lost cause of action) and Yardley v. Coombes (1963) 107 SJ 575 (where there was a 66% reduction in the damages the plaintiff would have received had his negligence action been successful.) Both provide little help as each are concerned with the consequences of lost causes of action where the outcome is necessarily speculative and where the courts understandably take a conservative attitude so as to avoid holding the defendant liable for anything more than the minimum. Mr White was on surer ground in referring to Gregory v. Tarlo (1964) 108 SJ 209 (where the Court held that the plaintiff had a "formidable case", but still reduced the damages by 25%) and Dolmon v. Penrose (1983) 34 SASR 481 (a case described as "almost certain of success" where there was a 20% discount).

On the other hand it remains important to distinguish between the evaluation of the loss of chance of "success" ie being awarded the contact" and the probability that the whole of the likely profit might be recovered. In my judgment Mr Fernyhough's approach both recognised this distinction and was sensible and practical. He submitted that all that was here required was to make an assessment of the probability of the profit being earned. He suggested that it might be reduced by 50% to illustrate the risks and hazards inherent in construction work. In my view this is realistic and conservative and I agree with it since it is in my view a reasonable assessment, entirely consistent with experience of the incidence of risk on work of this kind. I therefore answer this issue: 35%.

Issue 24 poses the questions whether Harmon is entitled to recover tender costs prior to 23 May 1995. Harmon claim that it is entitled to recover all the costs incurred by it or by other companies within the Harmon Group in and towards preparing the tenders and that it is immaterial which company incurred the costs prior to 23 May 1995. All the costs were necessary to enable Harmon to submit its tenders commencing with the first tender on 31 July 1995. It should be immaterial to H of C how the costs were incurred and by which company, if they were otherwise reasonably and necessarily incurred and resulted in the tender or tenders that were presented. The fact that H of C did not know until 23 May 1995 that the Group had decided that Harmon should be the tenderer is equally irrelevant since H of C wanted the Harmon Group to submit a tender and had invited the company then put forward - Harmon CFEM Façades SA - to tender. H of C must have known have known therefore that that company, at least, would be incurring costs. Furthermore in respect of the work done after 31 July 1995 H of C expressly requested Harmon to re-tender on three further occasions and must have known that it would incur additional costs in preparing and submitting these tenders. If damages are recoverable on the basis that Harmon would not have tendered if it had known that it would not be treated fairly and lawfully, then the costs are all wasted costs recoverable as such.

H of C maintained that its objection was not to the claim for the cost of preparing tenders which would not otherwise have been incurred or on the grounds that the costs were incurred by other companies in the Group but it took issue as to whether Harmon was under an enforceable liability to pay such other companies. Its case was that the costs prior to 23 May 1995 and subsequently were not in fact incurred by Harmon and were incurred by others in circumstances where Harmon had failed to demonstrate any sort of liability or accountability. Mr Boyle had indeed confirmed that a management fee of FF 150,000 per month was paid for the services provided by Harmon to other companies but no claim was made in respect of that fee. Harmon had relied upon Ballast Nedam v Belgium [1994] ECR 1289 but that did not assist on the question of the recoverability of costs (or damages). Equally, in English law neither St Martin's nor Darlington v Wiltshier assisted the Harmon since the right to recover on behalf of others arose only "because the parties to the contract intended or contemplated that it should, their intentions being ascertained from its terms ... when this situation arises the plaintiff recovers damages in respect of financial loss which in fact has been borne by another person, and he is liable to account to that party accordingly". H of C maintained that the claim under Regulation 31(3) was not analogous to a case in contract nor, in so far as Harmon's case depended upon an implied preliminary contract, could Harmon recover substantial damages borne by another party, and there was no evidence that Harmon was liable to account to other companies in the Group. Harmon's insolvency meant that it would not now be able to make any payment. To allow recovery of tender costs would give Harmon a windfall because it would recover in relation to a loss that it did not itself sustain and for which it had no liability whatsoever to account to other companies many of which have either been wound up or sold (although I doubt if this is correct were the court to direct that the relevant amounts should be paid to a particular company). In addition, regulation 4 of the PWR defines a contractor as a person "(a) who sought, or seeks, or who would have wished to be a person to whom a public works contract is awarded and (b) who is a national of and established in a Member state". H of C argued that if Harmon's claim were accepted it would allow a contractor to recover for companies who would not be nationals of or established in a relevant state.

The question posed is one which commonly arises where a tenderer is a member of a group. Tenders are frequently prepared either wholly or in part centrally for a group of companies by the principal company and at times by a services company since it would not be economic to maintain an estimating staff for each operating subsidiary. These costs may or may not ultimately be charged out to the subsidiary. They are rarely the subject of a readily identifiable contract with the subsidiary, although in accounting and management terms there is generally a recognised liability to account internally, especially if the tender is successful. In commercial terms there can be no doubt that such costs are incurred for the benefit of the operating subsidiary and ultimately in order to keep its business and the business of the group going.

In this case, the claim is primarily made under the PWR so the issue as to whether tender costs incurred before 23 May 1995 (or after that date if incurred by others) is one which depends upon the interpretation and application of the Regulations. National law is relevant only to the extent that the result where community law is applicable, is not less favourable. In interpreting the PWR it is necessary not only to take account of Regulation 4, but also Regulation 19 in which a consortium defined as "two or more persons, at least one of whom is a contractor, acting jointly for the purpose of being awarded a public works contract". It says in paragraph (2): "The contracting authority shall not treat the tenderer of a consortium as ineligible.... on the grounds that the consortium has not formed a legal entity ...". Paragraph (3) reads

"In these regulations references to a contractor or to a concessionaire where the contractor or concessionaire as a consortium includes a reference to each person who is a member of that consortium".

"Tenders may be submitted by groups of contractors. These groups may not be required to submit a specific legal form in order to submit a tender; however, the group selected may be required to do so when it has been awarded the contract."

Therefore, if a claim were made for infringement of the PWR by a contractor, it would not in my judgment be open to the contracting authority to say that costs had been incurred not by the contractor but by some other member of the consortium, and that member might not be a contractor as defined by Regulation 4, ie the person might not be a national or resident in a Member State. It is also pertinent that the notice placed in the OJ indicated that tenders were, for example, permissible from companies in the United States so a claim made on behalf of such a company was within the contemplation of H of C. Similarly, if the costs had been incurred by a joint venture, but it formed a legal entity which became the contractor, surely the costs of the joint venture would be recoverable by the joint venture or consortium which conceived the contractor.

However, Mr White maintained that the "contractor" should be given a narrow meaning. Directive 89/665 envisages that a remedy should be granted to a person harmed by the infringement, but Mr White maintained that Parliament had decided to confine the remedy to whoever qualified as a "contractor" and not to others. If this argument is correct, then it seems to me that there are problems: first, Parliament has not given effect to that directive, and secondly, as a result, if that person is not a "contractor" there is not an effective remedy to a person harmed by the infringement. Directive 93/97 defines contractor as including a "candidate", and this concept is reflected in the PWR whose definitions include those seeking to be contractors. I have already said that the effect of the remedy should be judged by its results, the proof of the pudding being in the eating. If PWR were to be interpreted as Mr White suggests, then, in my view, they would not provide an effective remedy. Part of its effectiveness is to be found in the principle that a contracting authority is to make proper reparation for the damages caused in consequence of the infringement. As a matter of policy therefore, and in order to avoid the PWR being ineffective, I would read them as entitling the contractor to recover all the costs reasonably and necessarily incurred in the preparation of a tender, whether by the contractor/tenderer itself, or by some other entity or entities at the request of that contractor/tenderer or for its benefit. From the point of view of the contracting authority they are all part of or contributing to an organisation which is seeking to be a contractor. In my view, the position of the consortium is instructive. If Seele/Alvis Fenestration Limited had been the claimant, there could in my view have been no doubt that it could recover the costs incurred by Glasbau Seele GmbH and Alvis Vehicles Limited, respectively (and by any of the many companies within each of the groups of which those companies were a part). Any other result would not be sensible commercially. Since the raison d'être of the Works Directive is to secure equality of treatment on public works contracts within the EU an interpretation of any law which put legalistic niceties before such commercial reality would not be acceptable.

It may therefore not be necessary to consider whether in the matter of English law such costs would be recoverable as damages, although if there is liability to Harmon for breach of the preliminary contract then its recoverability must be considered. Furthermore, if the assessment of damages under the PWR is to follow a "contractual" approach, as I have held, then the application of the PWR should at least not be inconsistent with such contractual damages.

In my judgment, the situation is akin to that in St Martin's or, rather, Darlington v. Wiltshier . H of C wanted Harmon Group, with its worldwide reputation, to take an interest in this project. It did so, being represented by a French operating subsidiary which, in turn, was specifically invited to tender by H of C. H of C shortly afterwards accepted the substitution of Harmon for that company when it was clear that preparations were already well in hand for the tender. Certainly by the time of the second, third and fourth tenders, H of C knew that preparatory work was being done, namely at Orly, and that Harmon's own offices in the United Kingdom were vestigial. By inviting the second, third and fourth tenders, is it to be supposed that H of C was requiring Harmon to re-do work that had already been done by others, so that it could be said to have been done by Harmon itself? In my judgment H of C knew that the Harmon's tender was being prepared for it by others in the Harmon group, and that Harmon could not itself have tendered without that assistance. H of C was derived considerable benefit from the work that Harmon and its associated companies had done because it enabled H of C to maintain competitive tendering.

Where one company within a group carries out work for the preparation of a tender by another company within that group which is or may be for the benefit of it or the group as a whole it is to be inferred that it has been requested and that if necessary the costs will be chargeable to the tendering company on the basis that it requested the work. It is not usual within a group for formal arrangements to be made for the preparation of tenders (as opposed to the execution of work which is and should generally be covered by tangible basis for recompense). There are no facts here to displace that inference. The arrangements that were made, such as the management fee, are not inconsistent with and do not preclude such an inference. In addition it was known to H of C that Harmon was looking to other companies for the work so that the fact that other companies were involved was within its contemplation. In my judgment to deny Harmon the opportunity of recovering such tender costs would be to recognise the proverbial "legal black hole" which it was the intention of the House of Lords in St Martin's to avoid, by the application of the principle in Dunlop v. Lambert which itself calls for an effective remedy. As Lord Diplock said in The Albazero [1977] AC 774 at page 846: "the rule [provides] a remedy where no other would be available to a person sustaining loss which under a rational legal system ought to be compensated by the person who has caused it." Thus, in my view, Harmon is entitled to recover tender costs incurred by other companies both before and after 23 May 1995. On whatever basis tender costs may be recoverable Issue 24 will be answered: Yes.

It would in my judgment be artificial and wrong to refuse Harmon its tender costs for its earlier tender and to limit its recovery to the minimal costs incurred after the third tender in presenting the fourth tender, particularly in the circumstances of this case where the request for the fourth tender was not genuine one and was colourable. Where a contractor is entitled to recover its tender costs the costs must be all the costs incurred in presenting the tender that was not accepted including costs incurred in the preparation of preceding tenders unless of course some of those costs were not reasonably incurred or were incurred only on at the tenderer's own initiative and were of no interest or value to the contracting authority. None of these reservations apply here so on whatever basis tender costs are recoverable Issue 25 will also be answered: Yes.

. Issue 27 is :-

"To what extent (if at all) is the fact that on 10 March 1998 the plaintiff ceased trading and had a provisional liquidator appointed to be taken into account, as a matter of principle:

(a) In assessing any damages to which the plaintiff may be entitled or,

(b) In assessing any damages to which the plaintiff may be entitled for being unlawfully deprived of the chance of being awarded the fenestration Contract?"

The relevant background to this issue is that on 26 February 1998 Apogee Enterprises issued a press release in which it announced that it was to "take an after-tax charge ranging from $3 million to $39 million... for its fourth quarter ending 28 February 1998." It continued:

The charge primarily relates to the New Construction Unit of Apogee's Building Products & Services segment, and provides amounts for exiting all European Curtainwall and related operations, including the completion of remaining projects. The exit from Apogee's European Curtainwall Operations follows the company's previously announced third quarter after-tax charge of $16 million..., to close the segments Asian offices and rationalise its project management, engineering and European manufacturing capacity.

After a very comprehensive review of our European Curtainwall business, we have concluded that it is not in the best interests of our shareholders to continue to fund this operation", said Russell Huffer, Apogee's President and Chief Executive Officer.

"By calendar year-end 1998, we currently expect to have exited both our Asian and European Curtainwall operations. After this exit, Apogee's only continuing Curtainwall operations will be in the United States...." Harper added.

"This decision underscores our commitment to investing our resources where they can earn the best return for our shareholders. Following our exit from these operations, all of Apogee's continuing businesses are expected to be profitable and we can focus on our strongest opportunities..."

As a result of the decision to withdraw its support, the directors of Harmon took independent advice from Deloitte & Touche as a result of which on 10 March 1998 the shareholders appointed a liquidator of the company. Subsequently the liquidator reported that in the period 1995-1996 in which the company traded,

"The company made losses on almost every contract due to a combination of poor bidding practices, project management, financial control and the fact that the management of the company was based in France with no dedicated UK management teams. In addition, the company began to suffer from poor relationships with its clients. Nevertheless the company obtained contracts some of which were of substantial value. The company's turnover was as follows :-

Year to 28 February 1995: -599,881

Year to 29 February 1996 -20,925,830

Year to 28 February 1997 -13,109,972

Year to 28 February 1998 -5,978,555

Harmon contended that the appointment of a liquidator was irrelevant in the assessment of Harmon's damages. The appointment of the liquidator could not affect damage which Harmon had already suffered at the date of liquidation since that damage would have been incurred in the event. In the case of future loss of profits the question was "How much less of the plaintiff's wealth is in consequence of the defendant's act than it might have been had he exploited to the maximum advantage the opportunities which he was entitled to be given", (relying on Hart & Honoré: Causation in the Law , 2nd edition, at page 312). Furthermore there was value in having an executory contract even if Harmon might have been unable to perform it. Harmon's causes of action vested in the liquidator so that, for example, the liquidator could recover wasted tender costs and any other damages which Harmon had already suffered. Provided that a causal link existed to show that Harmon was entitled to the foreseeable consequences of the wrong, i.e. its loss of profit, H of C should not be entitled to take advantage of further misfortunes which might have befallen Harmon. Mr Fernyhough argued that an analogy existed with the case of a contractor who, by reason of a breach of contract on the part of the employer, was unable to generate sufficient revenue to finance his overheads. In such circumstances the claim would only succeed if the contractor could show that he was actually prevented from obtaining equivalent revenue from other contracts, i.e. that he had to turn work away or that he was unable to tender successfully for other contracts. Reliance was placed on City Axis Limited v. Daniel P Jackson (1998) CILL 1382. Pratt Contractors Limited v. Palmerston North City Council [1994] 1 NZLR 469 was merely "the exception which proves the rule". In addition Harmon ought to be able to establish that its poor financial condition was consequent on H of C's wrongs. If Harmon had been awarded the contract then its financial position would have been better and insolvency would or might have been averted. Indeed, Mr Fernyhough contended that since Mr Makepeace accepted that the non award of the contract would injure Harmon, it followed that Harmon's insolvency was foreseeable so that damages caused by that event were recoverable or, put another way, the H of C could not use it in order to avoid the consequences of its wrongful acts. Reliance was placed on McGregor on Damages 16th edition, paragraph 189:

"Where the event is dependent upon the defendant's act in the sense that it would not have occurred had the defendant not acted as he did, then the defendant will be liable for all the damage. This is the situation where a physical force is set in motion by the defendant's act which engenders certain reactions which are mechanical freaks."

However the editors note that there are no cases of mechanical freaks in English law. Paragraph 246 was also relied on where intervening events are also discussed and in particular, Monarch SS v. Karlshamns Oljefabriker [1949] AC 196 .

Moreover Mr Fernyhough argued that if Harmon were required to show that it would have been in a position to take advantage of the hypothetical opportunity denied to it by H of C, then if Harmon had secured the contract, there would at least have been a substantial chance that its parent company would not have presented the petition or that, if it had, Harmon would have permitted to continue trading to complete the works. Clause 1.4.1 of the trade contract required a guarantee from the parent company which might have provided an incentive to allow Harmon to continue. (This submission assumed that H of C could not have lawfully terminated Harmon's employment under trade contract.)

H of C contended that Harmon's liquidation was in principle relevant to the assessment of damages contemplated by Issue 27(a) and (b). In quantifying the profit that Harmon would have made or in assessing the loss of chance of being awarded the fenestration package (and thus recovering its profit) it would be necessary to look at what would actually have happened had Harmon been awarded the fenestration contract. In Pratt Contractors v. Palmerston North City Council [1995] 1 NZLR 469 Gallen J. took into account what had actually happened during the course of the performance of the works by the successful contractor in arriving at the loss of profit which he awarded (see pages 488-489). Issue 27 did not require a decision as to whether liquidation might have been averted had Harmon been awarded the contract.

Issue 27 does not specifically refer to Harmon's claim for wasted tender costs. Those are, in my judgment, completely unaffected by the appointment of a liquidator. The principles are in my view clear. Harmon's causes of action against H of C accrued in the middle of 1996. Those causes of action have now vested in the liquidator. Harmon were and are entitled, if H of C is liable, to recover (a) any damage that it has actually incurred and (b) any damage that is actually incurred in terms of costs thrown away or actual expenditure and (c) any damage that it has incurred in terms of loss of profits, or contribution to overheads which it would otherwise have recovered had it been awarded the contract. In assessing damages, all factors that have occurred since the breach and are in evidence at the time of the trial, are in principle relevant and may be relied upon by either the claimant and may be relied on by the plaintiff or the defendant. Acts which would have occurred and which would affect either a determination of liability or causation, or quantum, cannot be ignored. In the case of future loss and future profits or contribution towards overheads, the question is clearly what future profits or contribution towards overheads would Harmon have actually achieved had it been awarded the contract and had it performed the contract. The approach of Gallen J. in Pratt Contractors v. Palmerston North City Council was in accordance with principle. He took into account what had occurred during the performance of the contract by the contractor who was awarded the contract in order to see whether or not the claimant contractor would or would not have made a profit of the order claimed. If a risk were to supervene which would erode Harmon's margin, then the effect of that risk would have to be taken into account. For example, if there were strikes affecting ferries which would probably have delayed delivery of the windows to the NPB and if in turn those delays would have led Harmon to incur costs to make up lost time, or otherwise to accelerate or even to pay damages for late completion, then those factors would have to be taken into account in assessing Harmon's losses of profit. In other words, when it comes to the assessment of any damages to which Harmon may be entitled, it will be necessary to re-construct the likely sequence of execution of the contract and to form a view as to how much of the possible profit would have remained. By the same token, if by reason of variations or other events during the currency of the contract executed by Seele Alvis Fenestration Ltd there would have been an increase in profit or contribution towards overheads had Harmon been the contractor, then those factors will also have to be evaluated. Equally, Harmon may be able to show that its estimators over estimated certain costs and that in reality the outturn of the contract would have gone far better than contemplated so that its actual loss of profits would be greater than those which are presently calculated.

It therefore follows that the effect of an outside event such as the holding company deciding to pull out of its activities in Europe and to withdraw support from the plaintiff is a factor which may have to be taken into account. It seems that Harmon was, as a result of that decision, obliged to withdraw from certain contracts which it had in hand. It may be that it will be established that it would not have been necessary to withdraw from those contracts had the fenestration package for the NPB been sufficiently profitable for the liquidator to decide that it would be in the interests of the creditors and shareholders to continue the fenestration and other contracts. These are matters which will need to be investigated. If, on the other hand, it is established that the financial position of Harmon, or even if it had been executed, the fenestration package would have been such that it is probable that the liquidator would have been unable to continue the contract or to resist its forfeiture, then clearly the amount of profit which would actually have been recovered by Harmon had it been awarded the contract and carried it out would necessarily be affected by it, (although it is not unknown for profit to be in the early stages and the losses in the later stages of the contract so that a termination actually gives the contractor rather more than it might otherwise have received, even taking into account the costs of completion).

I consider that the analogy with a claim for the loss of contribution towards overheads is an apt one in that such claims require the establishment of certain underlying assumptions which, if not established, would materially affect the assessment that would otherwise be made. Those assumptions are ones which have to be tested and made good against the offence which has actually happened since the date of the breach.

At present, although it may not be necessary to reach a decision on it, I find considerable difficulty in accepting the proposition that Harmon's liquidation was foreseeable, if only because it appears to have been brought about by a decision on the part of the shareholders which took into account the trading position of a number of the companies within the Group.

Issue 27 will therefore be answered: It is to be taken into account under (a) or (b) in assessing any loss of profit to which the plaintiff may be entitled.

Issue 28 is as follows :

"(1) Do the matters pleaded in paragraph 14C of the Re-re-amended Statement of Claim entitle the Plaintiff to exemplary or aggravated damages for breach of the Public Works Contracts Regulations 1991, or its obligations under the Treaty of Rome?

(2) Do the matters pleaded in paragraphs 14B and/or 14C of the Re-re-amended Statement of Claim entitle the Plaintiff to exemplary or aggravated damages for misfeasance in public office?

(3) Do the matters pleaded in paragraphs 21C and 21D of the Re-re-amended Statement of Claim, whether or not in conjunction with the matters pleaded in paragraph 14C thereof, entitle the Plaintiff to aggravated damages for misfeasance, breach of the Public Works Contracts Regulations 1991, or its obligations under the Treaty of Rome?

(4) How is any award of aggravated or exemplary damages to be assessed in relation to the other damages to be awarded?

(5) Is the Plaintiff entitled as a matter of principle to general damages pursuant to the matters pleaded in paragraphs 21C and 21D of the Re-re-amended Statement of Claim?

In the paragraphs referred to in these issues Harmon allege that H of C exercised its powers unlawfully and in doing so it knew or believed or suspected that it would or might cause damage to Harmon. I have found virtually all its principal allegations to be correct, although I have not accepted that Harmon has established that H of C was advised during the visit to Brussels in November 1995. However I do consider that H of C was intent on stopping Harmon from obtaining an injunction to prevent the award of the contract and to enforce its rights, and thus both did not inform it of the true position (but it did not thereby mislead Harmon as Harmon knew of the position, eg through Mr Kerr) and that it later misinformed Harmon of the true reasons for the award and put pressure on it to dissuade it from bringing proceedings to recover damages. Unless the decision of 23 November to negotiate with Seele/Alvis is to be treated as the decision to award the contract (which it was not) I do not consider that in that respect H of C was wrong not to put Harmon in the picture in the early months of 1996. It was entitled to protect its interests by its stalling letters. The PWR are not clear as to what constitutes the award of the contract - the decision itself, whether or not accompanied by a letter of intent, or the final conclusion in law of the contract (although I doubt if it the latter as the PWR and the Directives are concerned with the commercial steps) so it is not surprising if an authority will not admit to the award until it is "safe" to do so. I do not consider that principles of openness and transparency yet require a contracting authority to reveal that it had received advice to "obtain a legal opinion ... in view of the risk of delay arising from a judicial review of the order being placed with an offer higher than the lowest tender", or that it decided not to heed it, although of course by March 1996 it recognised that its conduct laid it open to a claim from Harmon for not accepting its tender. Its other later conduct in endeavouring to cover up its mistakes, eg by fabricating the reasons is of course not acceptable, but it did not materially worsen Harmon's position who by then was taking legal advice. Harmon maintain that it suffered distress, outrage and indignation.

Harmon contended that aggravated damages should be awarded effectively to provide full and proper compensation to Harmon, even though it might punish the defendant for its behaviour. It referred also to the European law requirement that an award of damages should also deter: see for example von Colson und Kamann v. Land Nordrhein-Westfalen Case 14/83, [1984] ECR 1891 to which I have referred. Mr Fernyhough submitted that the pre-conditions for an award of aggravated damages were :

"(1) Exceptional or contumelious conduct or motive on the part of the defendant in committing the wrong, or, in certain circumstances, subsequent wrong; and

(2) Mental distress sustained by the plaintiff as a result."

He relied upon Appleton v. Garrett [1986] PIQR T1 at page T4; Ministry of Defence v. Meredith [1995] IRLR 539 and the Law Commission Report on Aggravated, Exemplary and Restitutionary Damages (1997). The reference in those pre-conditions to "subsequent wrong" includes the manner in which a defendant conducts himself at trial (see Sutcliffe v. Pressdram Limited [1991] 1 QB 153, and, in the cases of discrimination, further victimisation of a plaintiff ( Duffy v. Eastern Health & Social Services Board [1992] IRLR 251 at page 257) and an inadequate investigation of a complaint ( Prison Service v. Johnson [1997] ICR 275 at page 287. All these cases of course involve individuals but Mr Fernyhough submitted that a Corporation could suffer "mental distress", and other injury of the types pleaded. For this purpose, he relied upon a decision of Caulfield J.in Messenger Newspapers Limited v. National Graphical Association [1984] IRLR 397, at page 407 who said :

"Now to a rather more difficult aspect of damages, in view of the fact that the plaintiff is a limited company. The plaintiff further claims both aggravated and exemplary damages. These two classes of damages are well recognised in certain torts, particularly defamation, false imprisonment and kindred torts, where the plaintiffs are human beings though the defendants are frequently but legal entities. Can the same principles be applied where the plaintiff is not human but inanimate? Can a limited company be awarded aggravated or exemplary damages in respect of the torts which I have found committed by the defendant? Secondly, can they be applied in the case of a limited company against a union?

Certainly exemplary and aggravated damages can be awarded against inanimate legal entities like limited companies, and I cannot see any reason why the same legal entities cannot be awarded aggravated and exemplary damages. The tort of intimidation, while exercised against persons - that is employees - to be effective is exercised at the same time against an employer which is a limited company. I think the task of this Court is to decide whether on the facts of this case aggravated damages could be awarded if the plaintiff were not a limited company but a human being or a group of human beings. I conclude aggravated damages could and should be awarded if the plaintiff was an individual on the facts of this case.

Assuming the plaintiff was a human being, I am satisfied on the authorities that I could include in the compensatory award a sum for aggravated damages. I do conclude with ease that the defendant's intention was to close down the plaintiff's business, as I said earlier, and/or enforce a closed shop. The defendant was, on the evidence, reckless in pursuit of its intentions and acted, too, in jubilant defiance of the Court with an open arrogance. Their objects were to their knowledge unlawful and tortious. The defendant was a deliberate tortfeasor. Injured feelings of the plaintiff is only one aspect in considering aggravated damages. The more important element is where the injury to the plaintiff has been aggravated by malice or by the manner of doing the injury; that is the insolence or arrogance by which it is accompanied. For a human being whose feelings exist, my award would have been higher, but I eliminate human feelings from my award. I see no reason why a limited company should not be awarded aggravated damages just like a human being. There is no reason why the present plaintiff should not recover. Of course, that aggravated damages can be awarded on the facts of this case is my main finding on this item, but I am not including any damages for injured feelings. I have approached the question on the manner of the doing of the injury and on the basis which I think is right, that the compensatory award which I have earlier made is not adequate.

Mr White argued that although Messenger Newspaper Group v. NGA was authority for the proposition that a corporate body might be awarded aggregated damages, Caulfield J. had not awarded on the basis of any damages for injured feelings, but the manner in which injury was caused. Mr White maintained that mental distress sustained by a plaintiff was required, in addition to exceptional or contumelious conduct or motive on the part of the defendant in committing a wrong. To that extent, Mr White accepted the basic formulation of the test for an award of aggravated damages suggested by Mr Fernyhough. However, he maintained that the facts did not bring Harmon within the necessary pre-conditions and that in any event no award for aggravated damages had been made for wrongs of the kind alleged against H of C. He placed particular reliance on Kralj v. McGrath [1986] 1 All ER 554. The plaintiff had been subjected to horrific and unacceptable treatment by the defendant obstetrician in the course of giving birth to a child which was born with severe disabilities resulting from the obstetrician's attempts and it died eight weeks later. Liability was admitted and the only issue was the quantum of damages. The claims included one for aggravated damages for the obstetrician's conduct towards her. Woolf J. considered the distinction between aggravated and exemplary damages, i.e. as set out in Clerk and Lindsell on the Law of Torts 15th edition at pages 242-243, that aggravated damages are distinct from exemplary or punitive damages and that, " except where exemplary damages are permissible, every award of damages, including aggravated damages, where appropriate, must be justifiable on the basis of compensation". He said :

"It is my view that it would be wholly inappropriate to introduce into claims of this sort, for breach of contract and negligence, the concept of aggravated damages. If it were to apply in this situation of a doctor not treating a patient in accordance with his duty, whether under contract or in tort, then I would consider that it must apply in other situations where a person is under a duty to exercise care. It would be difficult to see why it could not even extend to cases where damages are brought for personal injuries in respect of driving. ..."

Furthermore Mr White submitted that the matters on which Harmon relied to establish mental distress were not sufficient to entitle it to an award of aggravated damages. The Court of Appeal in A B v. Southwest Water Services [1993] QB 507 had approved what Woolf J. had said in Kralj v. McGrath and had struck out a claim for aggravated damages made "on the basis that [the plaintiffs'] feelings of indignation were justifiably aroused by the high-handed manner in which the defendant dealt with the incident... and because they continued to drink the water for longer than would have been the case had the defendant reacted promptly, frankly and efficiently." Stuart-Smith L.J. said:

"In my judgment, if the plaintiffs experienced greater or more prolonged pain and suffering because the nuisance continued for longer than it should have done, or they drank more contaminated water with ill effect, that is matter for which they are entitled to become compensated by way of general damages.

Likewise, if uncertainty as to the true position caused by the defendant's lack of frankness following the initial incident led to real anxiety and distress, that is an element for which they are entitled to compensation under general damages for suffering. But anger and indignation is not a proper subject for compensation; it is neither pain nor suffering."

Sir Thomas Bingham M.R. said (at page 532):

"I know of no precedent for awarding damages for indignation aroused by a defendant's conduct. Defamation cases in which a plaintiff's damages are increased by the defendant's conduct of the litigation (as by aggressive cross-examination of the plaintiff or persistence in a groundless plea of justification) are not in my view a true exception, since injury to the plaintiff's feelings and self-esteem is an important part of the damage for which compensation is awarded. In very many other tort actions (and, for that matter, actions in contract, boundary disputes, partnership actions and other disputes) the plaintiff is indignant of the conduct of the defendant (or his insurers). An award of damages does not follow; nor, in my judgment should it, since this is not damage directly caused by the defendant's tortious conduct and this is not damage which the law has ever recognised."

First, although H of C's conduct was reprehensible it is not such as to merit an award of aggravated damages even if all the other conditions were satisfied. In a nutshell, the case is a bad one but not exceptional. The conduct of H of C is certainly not contumelious (with the possible exception of its failure to disclose the documents relating to the project handbook), nor do I consider that its efforts to cover up amount to anything approaching a further victimisation of Harmon. Secondly, there is no real "mental distress" caused to Harmon as a result. Thirdly, I consider that Harmon was aware of the position (through its contacts with Mr Kerr) but it did not act. This may be because its letters did not produce sufficient evidence (although if it had acted it ought to have been available), or because it preferred to wait in case the negotiations with Seele/Alvis broke down in which case it would have been well placed to step into their shoes. Starting legal proceedings would not have helped. Furthermore, as a matter of law, I do not consider that an award of aggravated damages is available in a claim of this sort. As a matter of policy the approval by the Court of Appeal of the decision of Woolf J. in Kralj v. McGrath clearly establishes the limits to the award of aggravated damages. It therefore does not apply to ordinary disputes and certainly not to disputes which are essentially of a commercial nature however irate or sore the claimant may be about the defendant's conduct. If as a matter of application of the national law such claims are not allowed for breach of contract, breach of professional services, or for the other matters instanced by Sir Thomas Bingham MR in A B v. South West Water Services then those claims are similar in nature to Harmon's claims in this action which are therefore not eligible for an award on aggravated damages (subject to further consideration of the decision of the Divisional Court in Factortame V to which I shall return). Therefore, for the purposes of Regulation 31(3) and for the purposes of the obligations referred to in it (whether or not they are enforceable under it), damages do not include aggravated damages.

I do not consider that the remedy conferred by that Regulation is any the less effective, for the purposes of European law, as a result, both in the light of my findings as to fact, and for the policy reasons given by the Court of Appeal and, perhaps above all, because the plaintiff is a limited company. Although Messenger was cited in AB v. South West Water Services , I do not consider that it can be regarded as good law in the light of the decision in that case. In any event, I would not have followed it since it seems to me to be driven by its own very special facts and I do not accept the general proposition that a limited company can suffer mental distress or other injury of the kinds relied by Harmon (even if they had been established) so as to justify an award of damages, whether general or aggravated, save, perhaps, in those circumstances where the veil of incorporation may perhaps be pierced or the inanimate persona of a corporation activated so that the conclusion could be reached that the defendant's wrongful conduct was directed towards the owners or operators of the corporation as individuals as much as to the legal entity itself and that it would be proper to compensate the claimant corporation for that which was done to those running it or for whose benefit it had been created. It is however noteworthy that Caulfield J. did not make an award of aggravated damages on that basis but apparently did so rather more to mark the court's disapproval of the way in which the defendant had committed the wrong and its activities subsequent to the commission of the wrong. However, as I have already said, in the light of the decision in AB v. South West Water Services and I consider the decision is not one to be followed. Indeed, no instance was given to me of it ever having been followed.

In addition in von Colson und Kamann v. Land Nordrhein-Westfalen Case 14/83, [1984] ECR 1891 the Court was concerned to establish that damages were fully compensatory and, as such, that they would provide "a real deterrent effect on the employer". It said :

"It follows that where a member-State chooses to penalise the breach of the prohibition of discrimination by the award of compensation, that compensation must in any event be adequate in relation to the damage sustained."

In my judgment this case and its successor are not authority for the award of punitive damages in excess of true commercial compensation. They are directed to ensuring, for example, that an award for loss of profit should not be limited to a fixed or conventional percentage of the tender if to do so would not be an effective sanction and would fail to provide full compensation. In English law an award of general damages might conceivably be made, but not one of aggravated damages.

It was common ground that in English law exemplary damages can only be awarded where the defendant's conduct falls within one of the categories set out by Lord Devlin in Rookes v. Barnard [1964] AC 1129 at page 1226: (a) oppressive, arbitrary or unconstitutional acts by servants of the government; or (b) wrongful conduct which has been calculated by the defendant to make a profit for himself which may well exceed the compensation payable to the plaintiff; or (c) where exemplary damages are expressly authorised by statute; and (d) where the cause or causes of action upon which the claim for exemplary damages are founded is one for which an award of exemplary damages had been made prior to 1964. I shall return to the last point in due course. Harmon placed great reliance on the description of the first category by Lord Devlin:

"The first category is oppressive, arbitrary or unconstitutional action by the servants of the government. I should not extend this category - I say this with particular relevance to the facts of this case - to oppressive action by private corporations or individuals. Where one man is more powerful than another, it is inevitable that he will try to use his power to gain his end; and if his power is much greater than the other's, he might, perhaps, be said to be using it oppressively. If he uses his power illegally, he must of course pay for his illegality in the ordinary way; but he is not to be punished simply because he is the more powerful. In the case of the government it is different, for the servants of the government are also the servants of the people and the use of their power must always be subordinate to their duty of service. ..."

In addition Harmon relied upon the speech of Lord Wilberforce in Broome v. Cassell [1972] AC 107 at page 1120 in which he said:

"There is not perhaps much difficulty about category 1: it is well based on the cases on a principle stated in 1703 - if public officers will infringe men's rights, they ought to pay greater damages than other men to deter and hinder others from the like offences": Ashby v. White (1703) 2 Ld. Raym. 938, 936 per Holt C.J. Excessive and insolent use of power is certainly something against which citizens require as much protection today: a wide interpretation of "government" which I understand your lordships to endorse would correspond with Holt C.J.'s "public officers" and would partly correspond with modern needs."

Mr White contended that for a public officer or servant of government to be liable to pay exemplary damages, he must be discharging functions of government or acting as an instrument or agent of the government. Mr White referred again to AB v. South West Water Services in which Sir Thomas Bingham MR had said at page 531g:-

"The defendants were at first prepared to accept, as they did before the Judge, that they were a body falling within the category [1] although, at the prompting of the court, they qualified that concession. I do not for my part find it helpful, in considering whether they fall within the rule or not, to enquire whether they are a body whose decisions are judicially reviewable in public law, or whether they are a body through which the United Kingdom performs its obligations in Community law. We are here concerned with a judge made principle of domestic private law, devised to address a particular problem, and other rules arising in different contexts seem to me to have little bearing. If the defendants' conduct was as pleaded, as we must for present purposes assume, it was highly reprehensible, that the conduct complained of was quite unlike the abuses of power which Lord Devlin had in mind and I cannot regard the defendants, for any purposes relevant to these ends, as wielding executive or governmental power. They were a publicly owned utility acting as a monopoly as a monopoly supplier of a necessary commodity, enjoying certain statutory powers and subject to certain obligations, but they were not acting as an instrument or agent of government. I regard this case as falling well outside the first category."

In addition in Factortame V the Divisional Court said at [1997] Eu LR at page 530:

"The word "government" is to be given a wide interpretation as potentially extending to agencies of government even at a local level, typically the police. (See, further, Broome v. Cassell ). Thus, it has been established since 1964 that there are restrictions upon the award of exemplary damages in English law which relate not only to the character and motivation of the conduct complained of but also to the identity of the defendant. As Lord Devlin makes clear, private individuals or corporations, however powerful, are not liable to be punished in this way under the civil law, however oppressive and arbitrary their conduct may have been. The relevant defendant has to be a servant of government who has abused his position as a servant of the people."

H of C therefore submitted that it was not a servant of the government since it did not discharge executive or governmental functions and that in procuring the fenestration contract and in entering into a contract with Seele/Alvis, the defendant was entering "into contracts for the purposes of [the House of Commons] pursuant to section 2(3)(b) of the Parliamentary Corporate Bodies Act 1992. Therefore carrying out a function comparable to the commercial activities of South West Water and did not fall within Lord Devlin's category 1.

In my judgment the submissions on behalf of H of C on this point are correct. Lord Devlin drew a clear distinction between the actions of government and the actions of private individuals. The distinction is between the action of a government or executive acting upon an individual and in my view is quite distinct from the commercial transactions which are the subject of this case. Furthermore, I am not at all certain that Parliament can, for the purposes of Lord Devlin's first category, be considered to be the "government". Is it to be assumed that exemplary damages could be awarded against the legislature? The wide interpretation of public officer suggested by Wilberforce in Broome v Cassell coupled with AB v South West Water shows again that it is necessary to look not so much at the office as such but at its nature and the functions to be performed (see also Jones v. Swansea City Council [1990] 1 WLR 1453 per Slade L.J. at page 1471 to which I referred under the heading of Misfeasance). It does not follow that because the defendant is an organ or emanation of the state or is the holder of a public office that in discharging its functions it will be wielding executive or governmental powers of a kind that might attract exemplary damages, if they were exercised in an oppressive manner.

Mr White submitted that there were no oppressive, arbitrary or unconstitutional acts. On my findings the defendant's acts were unlawful but not everything that is unlawful is unconstitutional. However, since this part of the defendant's case was effectively a case that there was no ground upon which it could be held that tort of misfeasance had been committed it is not necessary for me to reach any further findings in relation to it.

Mr White also submitted that exemplary damages could not be awarded, even if the tort of misfeasance had been established, since it failed what is known as the "cause of action test", namely, that exemplary damages can only be awarded for a cause of action for which there has been an award made prior to 1964. This qualification has two limbs. First, is the cause of action one for which an award of exemplary damages had been made prior to 1964 (and this will include causes of action analogous to those for which award of damages had been made); and even if it was an analogous one had exemplary damages actually been awarded?

Mr Fernyhough submitted that the tort of misfeasance in public office was one for which exemplary damages had been awarded both prior to and since 1964. He relied upon Ashby v. White (cited by Lord Wilberforce in Broome v. Cassell) and a Canadian case: Roncarelli v. Duplessis (1959) 16 DLR (2d) 689. However it was submitted that, as a matter of both precedent and policy, it was not necessary to establish that there had been an award of exemplary damages in the case of an action for misfeasance since it should as a matter of policy be available in such cases. Mr Fernyhough recognised that whatever might have been left open by Lord Devlin in Rookes v. Barnard had almost certainly been closed by the majority in Broome v. Cassell , although he referred to what Lord Wilberforce had said at page 114 in the latter case. He naturally referred to the Law Commission's Report which states at page 55:

"Certainly the fact that exemplary damages were not awarded for a particular wrong prior to 1964 is not considered a good reason as such for refusing to award them for that wrong today."

Mr Fernyhough submitted that the latter approach could particularly be justified in the context of the breach of European Community Law where it is clear that exemplary or punitive damages must be awarded where these would be available for a similar breach of national law since a national remedy for breach of a community right must be no less favourable than those available for similar claims or courses of action founded on domestic law. An award for exemplary damages for breach of Community law should not be ruled out, if such damages could be awarded pursuant to a similar claim or action founded on domestic law: Brasserie du Pêcheur SA v. Germany [1996] QB 404 . In Factortame V [1997] Eu LR 475 at pages 531-2 the Divisional Court had considered whether exemplary damages should be awarded for breach of Community law, and in the course of doing so it decided that exemplary damages were available for the tort of misfeasance. It said :-

As regards breaches of statutory duty, the English law is that, unless the statute expressly provides that penal damages may be awarded, only compensatory damages (i.e. reparation) should be awarded for such breaches. There is no express statutory provision for the award of penal or exemplary damages in the present case. Indeed, to construe the United Kingdom legislation as inferentially giving such a power could be said, as we have previously explained, to be in itself in conflict with Community principles and to involve elements of discrimination. The English law rule does not discriminate against Community law; it simply observes and applies a uniform approach to the construction of statutes, regardless whether the statute relates to a Community matter or to a purely national matter. Therefore, unless there is some other argument which clearly demonstrates discrimination by English law against breaches of Community law, the applicants' argument under this head must fail.

If it were the case that English law declines to award penal damages simply because the statutory obligation was one which first came into existence after 1964, a case of discrimination against Community law might have been made out. But that is not the case here. It is simply that the 1972 Act does not provide for penal damages. No criticism is made of the terms in which the 1972 Act is drafted.

The argument of the applicants is more subtle. It is that English law may not discriminate against Community law by failing to award penal damages when, it is submitted, for similar claims made under national law, the remedy of penal damages would be allowed. It is submitted that the tort of misfeasance is directly similar to the breach of statutory duty which constitutes their cause of action, that penal damages are available under Lord Devlin's first category for misfeasance and that to fail to make such damages available here would be discriminatory and contrary to the ruling of the ECJ.

Here again nothing turns upon the date 1964. The tort of misfeasance can be traced back to previous centuries: see the judgments of Mann J in Bourgoin and of Clarke J in Three Rivers District Council and others v. Bank of England (No.3) . If the claim made by the applicants in the present case is similar to a claim in the tort of misfeasance, they have made out this step in their argument.

Thus the relevant question is whether there is a similarity between a claim in respect of the tortious misfeasance by a government servant and the claims which are made by the applicants for the breach by the United Kingdom of its Treaty obligations, bearing in mind that the purpose of asking this question is to ascertain whether the refusal of exemplary damages to the applicants would offend the principle of non-discrimination.

The characteristics of the tort of misfeasance has been examined in the judgments of Mann J. and Clarke J to which we have referred. The tort is dependent upon knowledge by the defendant that he is breaking the law or at least his being reckless whether he is doing so or not. That is not the present case. The actionable breach by the United Kingdom of Community law does not depend on subjective factors. As explained in the section of this judgment which deals with the question whether the breaches were sufficiently serious, the criteria do not require a consciousness that the Community law was being broken, nor is absence of recklessness an answer to liability. The criteria have a different character. A comparison of, on the one hand, a liability based upon the guilty mind of an individual and, on the other hand, a liability based upon an objective assessment of the clarity and character of the law broken and the gravity of the breach discloses an important dissimilarity not a similarity."

Mr White accordingly submitted that any claim for exemplary damages for breach of the Regulations had to fail. However, he submitted that the decision of the Divisional Court in Factortame V should not be followed in so far as it held that the tort of misfeasance might allow an award of exemplary damages. That the tort of misfeasance dates back for centuries was conceded, but Mr White argued that it was not the tort but the award of damages for the tort that was crucial. He relied upon the conclusion reached by the Law Commission in its report where it said at paragraph 4.25

"and not withstanding recent dicta, it would seem that the tort of misfeasance in a public office also fails the cause of action test".

The Commission said (see footnote 119)

"Moreover, the Divisional Court appeared to decide that the cause of action tests were satisfied, in the case of the tort of misfeasance in a public office, because the tort was known to the law pre 1964. That is obviously a necessary condition, but it should not be sufficient to satisfy the cause of action test, as conventionally viewed: see paras. 4.4 and 4.25 above. The Court should have gone on to ask whether there were authorities which had awarded exemplary damages for that tort pre 1964."

Mr Fernyhough's answer to this argument was to refer to a number of cases in which although the claim was for trespass to personal property and false imprisonment one could equally have been brought for the tort of misfeasance had such a tort then been widely recognised: Huckle v. Money (1763) 2 Wils. KB 205; Wilkes v. Woodes (1763) Lofft. 1; Benson v. Frederick (1766) 3 Burr. 1845 and, more recently, cases in which exemplary damages may be available for unlawful discrimination: Bradford City Council v. Arora [1991] 2 AC 507.

On this aspect Harmon's case can only succeed if it can establish that exemplary damages were awarded for the tort of misfeasance prior to 1964. In my judgment the Law Commission's view is to be preferred to that of the Divisional Court, especially since it does not appear that the latter was asked to decide the point now taken by H of C. Ashby v. White is a slender basis. Ultimately Ashby was awarded -200. It was an action upon the case but really for breach of the statutory right to vote. In Wilkes v Woodes Mr Wilkes got a verdict for -1000 for trespass, albeit that the evidence would have constituted the tort of misfeasance. There appear to be no other comparable cases which were cited to Mann J in Bourgoin SA v. Ministry of Agriculture (see pages 734 onwards) as instances of misfeasance in public office. Given that they are notable, it is surprising that they were overlooked if they were examples of misfeasance. Ashby was referred to by Clarke J. in Three Rivers but not for that purpose. In the absence of any compelling authority, I have to conclude that the cause of action test is not satisfied. In Factortame V the point was left open before the Court of Appeal for decision by the House of Lords. In the light of Broome v Cassell it is not for me to declare that such damages should be available as a matter of public policy.

Ought exemplary damages to be awarded? First, it is of course to be assumed that an award of damages under the PWR or for its other causes of action will fully compensate Harmon for its actual losses. H of C naturally submitted that no damages should be awarded. I agree. I have already said that it is a bad case but not exceptional. The defendant's conduct is not unconstitutional nor do I consider that it is oppressive which is no more than the effect of directed governmental power on an individual. Harmon was not oppressed in that ordinary sense of the word. To describe what has happened as oppressive, or as the excessive or insolent use of power (see Broome v Cassell) would mean that virtually every case of misfeasance would attract exemplary damages. The adjective "oppressive" here describes the abuse of governmental power. Similarly it was not arbitrary; it was calculated but not so much as to exclude Harmon but to secure Seele/Alvis. Harmon was the target as it was the only other contender. Had Gartner been in the running I have little doubt that, if at all possible, its tender would have been evaluated in such a way to exclude it also. There is therefore fault but no conduct falling within either categories 1 or 2 (see Rookes v Barnard ) which would justify making an award to punish or deter H of C or to signal disapproval (see AB v South West Water at pages 528-529 per Sir Thomas Bingham MR). Issue 28 will therefore be answered: No, to (1) (2) (3) and (5); (4) does not arise.

I now set out in full the issues as presented by the parties (together with their explanatory text) and my answers to them interposed (where answers are required).

[Note: the defendant contends that (1) the plaintiff did not become involved in the tender process until 23.5.95. It therefore can have no claim in relation to alleged failures before that date; (2) After 23.5.95 the plaintiff acted as agent for Harmon CFEM Facades SA ("Harmon SA") and would have contracted as agent for that company in the event that the Harmon UK tender had been accepted; (3) Therefore any duty owed by the defendant was owed to Harmon SA and not to the plaintiff.]

(Re-Am. S of C para 9, Re-Am.Def. paras 8 and 36).

There are numerous issues between the parties as to the various events that occurred during the advertisement of the tender procedure, the seeking of tenders by the defendant and the review of tenders by the defendant and its Project Team and the documents produced in the course of that procedure. The rival factual contentions are set out in paragraph 10 of the Re-Amended Statement of Claim; paragraphs 10 to 30C of the Re-Amended Defence; paragraphs 3, 4, 5 and 6 of the Reply; paragraph 12 of the Re-Amended Statement of Claim, paragraph 33 of the Re-Amended Defence.

The main issues are as follows:

(1) Whether the matters contained within the Schedule of Deliverables (section 2 part 3) and contract documents constituted compliance with Regulation 20 and were either:

(i) selection criteria, or;

(ii) minimum requirements

for the purposes of Regulations 20(3) or 20(4) respectively (paragraph 13 Re-Amended Def.).

(2) The circumstances in which Alvis Vehicles Ltd and Seele Alvis became involved. (para. 10cc Re-Amended S of C; para 17A Re-Am.Def.)

(3) Whether it was the defendant's policy that the greatest possible proportion of the work to the Building was carried out by UK Companies and to prefer UK companies in the tender procedure. (Para 10(ccc) Re-Amended S of C; para.17B Re-Amended Def.).

(4) Whether the plaintiff completed the Pre-qualification Enquiry Document. (Para 10(b) Re Amended S of C; para 16 Re-Amended Def.)

(5) Whether the tender dated 29 July 1995:

(a) was submitted by or on behalf of the plaintiff;

(b) was complete;

(c) complied with the terms of the ITT;

Insofar as the tender was not complete and/or did not comply with the terms of the ITT, whether such omissions or non compliance was waived by the defendant.

(Para 10(f) Re-Amended S of C; para. 21 Re-Amended Def.)

Although Harmon's tender was not complete and did not comply with the invitation to tender in that, for example, the pricing schedule had not been completed and it was subject to numerous qualifications and reservations, none of the respects in which the tender was incomplete or non-compliant was considered sufficient to disqualify the tender from further consideration or to require it to be treated as non-compliant. Harmon was not told that its tender would not be considered and by considering it and by inviting Harmon to submit further tenders based on the July tender without requiring them to be fully completed and complaint in all respects the defendant led Harmon to believe that there was nothing in its tenders that H of C thought to be incapable of negotiation and agreement and thereby waived the omissions and non-compliance.

(6) Whether in meetings between Laing and the defendant's other consultants and the plaintiff, following the first tender Laing and others expressed the view that the plaintiff's tender was in all respects to be preferred to that of Alvis. (Para.10(h) Re-Amended S of C; para.24 Re-Amended Def.).

(7) Were any of the tenderers entitled to submit alternative tenders based upon alternative designs

and if so, whether such an alternative tender had to be additional to and accompanied by a compliant tender. (Para 10(o) Re-Amended S of C; para 30 Re-Amended Def.).

(8) (a) Whether, at the time when the plaintiff submitted its second tender in September 1995 it knew or ought to have known that it was entitled to submit an alternative tender. (Para.24 Re-Amended Def.).

(b) Whether the documents and prices submitted by tenderers on or about 25 September 1995 were tenders that could properly and appropriately be made?

(9) Whether the defendant's negotiations with Seele Alvis after 2.11.95 resulted in the awarding of a contract to Seele Alvis on materially different terms to that upon which the plaintiff had tendered. (Paras 10(p), 10(q) and 10(r) Re-Amended S of C; paras 30A, 30B and 30C Re-Amended Def.).

(10) How much was included in each of the plaintiff's tenders for margin and profit?

(11) Did the changes to the contract terms pleaded in paragraph 14(viii) of the Re-amended Statement of Claim actually distort competition, and in particular price competition?

(a) that the alternative submitted by a tenderer would be considered alongside a compliant revised tender from that tenderer;

(b) that any alternative would be one of detail and not of design;

(c) that tenderers who responded to that invitation would be treated equally and fairly.

[Note (by the parties): The particulars of breach and hence the defence do not appear in an entirely logical sequence.]

The key issues, ranked in logical sequence are as follows:

(1) Whether the defendant was in breach of Regulation 20 in:

(a) seeking tenders on the basis of "best overall value for money";

(b) awarding the contract for the Fenestration package on the basis of "best overall value for money"

(c) awarding the contract for the fenestration package on the basis of the most economically advantageous tender.

In the circumstances, should the defendant have only awarded the contract on the basis of the lowest price? (Para. 14(ii) and (iv) Re-Amended S of C; Reply 2, FBPs of C; para 36A(1)(2), 38, 38A, 38B, 38C, 40, 43-46; Re-Amended Def.; para 5 Reply).

(1A) Did the defendant or its Project Team ever agree among themselves any common selection criterion other than price? Did the defendant or its Project Team ever apply any common selection criterion other than price that had been stated in advance of the selection criterion?

Did the defendant or its Project Team make clear to the plaintiff that the sole or dominant selection criterion was price either (i) before the submission of the first tender on 31 July 1995

or (ii) thereafter?

Was the defendant or its Project Team entitled to rely upon matters that ought to have been dealt with as part of the pre-qualification exercise when selecting the contractor either (i) as a matter of law

or (ii) as a matter of fact given that the Task Force Leader recorded that the further inspections did not give rise to anything that ruled either tenderer out?

In the circumstances, should the defendant have only awarded the contract on the basis of the lowest price?

(2) On the basis that the defendant was in principle entitled to consider tenders and to award a contract for the fenestration package on the basis of the tender that was the most economically advantageous, was the defendant in breach of Regulation 20 in failing to identify the criteria or to rank the criteria that would be applied in identifying the most economically advantageous tender:

(a) in seeking tenders: and/or

(b) in the award of the contract for the fenestration package.

(Para 14(ii) and (iv) Re-Amended S of C; Reply 2 FBPS of C; paras 36A, 38, 38A, 38B, 38C Re-Amended Def.)

(3) If the answer to (2) is "No"; was the defendant entitled to consider alternative or variant tenders pursuant to Regulation 20(4) ((i.e. did the defendant comply with the requirements of Regulation 20(4)). Further was the defendant entitled to compare alternative tenders with compliant tenders, and if so, upon what basis should such a comparison have been made? (Para. 14(vii)(b), 14 (ix); Re-Amended S of C; para (c) Reply 2 FBP S of C; para 36A(6) 52 Re-Amended Def.)

(4) If the answer to (2) is "No", did the defendants in fact apply the identified criteria when assessing tenders? (i.e those criteria identified in the contract documents and/or made known to tenderers in the manner particularised in paragraphs 38, 38A, 38B and 38C of the Re-Amended Def.) (Paras 14(vii)(e)(f)(g) Re-Amended S of C; paras 50(5), (6) and (7) Re-Amended Def.)

(5) If the answer to (3) is "Yes" (i.e. the defendant was entitled to consider variant tenders) were the plaintiff's tenders the most economically advantageous or represent best overall value for money when compared with the tenders of Seele Alvis for option B2? (The plaintiff contends that its tenders were to be preferred on basis of price, management and technical skill, experience, accuracy of tender, completeness of tender (Paras 14(i)(iii) Re-Amended S of C; Reply 3 FBPS of C; the defendant contends that B2 tenders were to be preferred on basis of price, quality, technical superiority, manufacturing and technical capabilities programme and organisation and maintenance (Paras 37, 39, 42 Re-Amended Def.; replies 19-34 FBP Def.).

Accordingly was the defendant in breach of Regulation 20 in:

(a) considering the tenders of Seele Alvis for option B2: and

(b) in awarding the contract for the fenestration package to Seele Alvis?

(6) Was the defendant in breach of the Regulations/other enforceable Community obligations in failing to treat the plaintiff equally or fairly?

In particular, did the defendant:

(a) initiate, encourage or permit to continue a policy that the fenestration package should be awarded to a UK owned contractor, and if so did that policy affect the tendering procedure?

(b) apply arbitrary methods in an attempt to favour Seele Alvis' tender at the expense of the plaintiff?