Pursuer: Lake QC; Maclay Murray & Spens LLP

Defender: Ms O'Neill, Solicitor advocate; Scottish Government Legal Directorate

Interested Party: R Dunlop QC; DLA Piper

29 May 2012

[1] In September 2011 the Scottish Ministers (the defenders), through the agency Transport Scotland, advertised for procurement of a contract for the provision of ferry services to the Northern Isles, and in particular the Pentland Firth route and the Aberdeen - Kirkwall - Lerwick route. The procurement was to be conducted under the competitive dialogue procedure in terms of regulation 18 of the Public Contract (Scotland) Regulations 2006. The contract would be awarded to the most economically advantageous tender.

[2] The defenders provide financial assistance for lifeline ferry services to the Northern Isles. Currently the supported services are operated by Northlink Ferries Limited in respect of the two routes mentioned above and by Shetland Line (1984) Ltd (the pursuers) in respect of a freight service between Aberdeen, Kirkwall and Lerwick. Financial support for the Northlink Service is provided in terms of a grant agreement dated 6 July 2006, which will terminate on 5 July 2012. The grant agreement in respect of the pursuers' contract ends in 2014. It is the Northlink contract which will be replaced by the new arrangement.

[3] The competition documentation specified that for the Aberdeen - Lerwick service there should be at least one passenger sailing in each direction per day throughout the year. It can be noted that the passenger vessels also carry freight. The documentation also required bidders to provide details of any additional freight services that would be required to meet "current and anticipated future demand". For freight only vessels on the Aberdeen - Lerwick route, the required carrying capacity was that necessary to meet anticipated demand. In the defences it is averred that there was no requirement for a minimum number of freight only vessels. Substantial and detailed information was provided on freight volumes and patterns over the last three years. This was to enable participants to analyse that information, conduct their own further analysis on future demand for freight services, and explain their understanding of future demand and their proposals for meeting that demand.

[4] The competition documentation also set out the criteria by which bids would be evaluated. Scores would be allocated for the quality of the bids and for the price proposed by bidders. The weighting of those scores would be 20% for quality and 80% for price. Bidders' proposals for meeting demand for freight services were evaluated as an aspect of quality, being one of several elements under the sub-heading of services. The marks available for bidders' proposals on services represented 15% of all available quality marks.

[5] The pursuers were one of ultimately four participants in the bidding process. They attended four dialogue period meetings with the defenders to enable to them to identify a solution that met the requirements set out in the competition documentation. The discussions included the requirements in respect of freight. The pursuers aver that they stated their view that the capacity required of the freight service was a fundamental issue. They set out the proposals they were developing whereby provision would be made to meet the whole of the anticipated demand for freight services. They aver that representatives of the defenders approved of this, stating that they wanted as much freight on the vessels as possible.

[6] By letter dated 13 February 2012 the defenders stated that the dialogue was concluded. The pursuers and others were invited to submit a tender for the proposed contract. Most of the previously specified requirements were unchanged. Participants were required to indicate proposals to ensure adequate deck space for the anticipated demand for car traffic and for time sensitive freight traffic. The pursuers submitted a tender for the proposed contract for the Aberdeen - Lerwick services. In addition to the passenger service, they offered to provide a further dedicated service for freight each day throughout the year.

[7] By letter of 4 May 2012 the defenders informed the pursuers that their tender had not been accepted and that they intended to execute a contract with a company called Serco Limited. Serco have been sisted as minuters in the current court process. The letter stated that the pursuers had scored more highly in respect of quality, but that when scores on price were taken into account, Serco scored more highly overall. The letter stated that during the off‑peak season, in addition to the passenger services, Serco would provide a single freighter providing a freight service on alternate days. The pursuers offer to prove that an off‑peak freight service on alternate days is insufficient to meet the current and anticipated demand for such services, thus the Serco bid did not meet the requirements specified by the defenders. On the other hand the tender proposed by the pursuers offered a better level of service which did meet the requirements. In these circumstances it is averred that the defenders were in breach of duties owed to the pursuers.

[8] In response the defenders contend that they conducted a thorough evaluation of all the bids. They are satisfied that Serco's proposals are sufficient to meet current and anticipated demand. The offer of a freight only vessel every other day related to the off‑season. Serco also proposed retention of a second vessel which could be used at short notice in the off‑peak season to recover from any disruption. The defenders submit that it was a natural consequence of the use of the competitive dialogue procedure that the tender submitted by the pursuers, Serco and the others proceeded on the basis of different and unique proposals as to the level of service. Participants were given discretion as to the proposed level of service, subject only to the requirements of the competition documentation, and were invited to price proposals accordingly.

[9] As an alternative to the first case of breach of duty, the pursuers aver that the defenders failed to state their needs and requirements with sufficient precision, thereby preventing effective competition. The result was that the bidders proposed different levels of service, thereby they were not in a position of equality when formulating their tenders. The participants were not treated equally. The defenders were guilty of discrimination and of a failure to act in a transparent manner. They prejudiced the ability of the pursuers to compete in an effective manner for the award of the contract. The pursuers were encouraged to provide a greater level of service than that in fact required by the defenders. The additional vessel required to provide a daily freight service throughout the year caused additional costs of some £23 million over the six year period of the contract when compared to the cost of the service offered by Serco. Thus the pursuers' bid was rendered uncompetitive. Had it not been clearly stated that it was necessary to meet current and anticipated demand the pursuers would have included a lesser service and tendered at a lower price. The defenders aver that the same information was provided to all economic operators. All were treated equally and without discrimination. The pursuers were treated in no different manner from the other bidders. The pursuers seek (a) declarator that the defenders have acted in breach of duties owed to them under the regulations, and (b) reduction of the decision to conclude a contract with Serco Limited.

[10] In terms of regulation 47 (10) the raising of these proceedings has prevented the defenders from entering into the contract until the proceedings are dealt with or until the court, by interim order, ends the prohibition. The matter came before the court in respect of a motion enrolled by the defenders for an interim order under and in terms of Regulation 47A (2), which provides that:

"In any interim proceedings under this part of the regulations the court may decide not to grant an interim order when the negative consequences of such an order are likely to outweigh the benefits, having regard to the following considerations,

a) The decisions taken by a contracting authority shall be reviewed effectively and in particular as rapidly as possible;

b) The probable consequences of an interim order for all interests likely to be harmed, and;

c) The public interest".

[11] All counsel submitted that I should deal with the motion on the basis set out by Lord Glennie in Elekta Limited v The Common Services Agency 2011 SLT 815 (subsequently adopted by Lord Hodge in Clinical Solutions International Limited v NHS 24 [2012] CSOH 10). In Elekta at paragraph 26 Lord Glennie said:

"It seems to me that what requires to be considered is the strength of the parties' cases, the balance of convenience having regard, but not overwhelming regard, to the question of whether damages might be an adequate remedy, and the public interest."

In Clinical Solutions Lord Hodge observed that the public interest overlaps with the other factors and takes account of, amongst other things, the requirement for effective review of a challenged procurement process, the need for certainty in the procurement exercise, and the avoidance of delay if the challenge has no reasonable prospect of success.

[12] South of the border the relevant regulations are to similar effect. In that jurisdiction much the same considerations have predominated when the court is considering interim orders and challenges to a public procurement exercise. For example in Excel Europe Ltd v University Hospitals Coventry and Warwickshire NHS Trust, [2011] BLR 167, Mr Justice Akenhead observed that the public interest in securing a valid and properly executed public procurement does not necessarily have an overriding impact. When considering whether to remove the automatic prohibition on the awarding of a contract he held that, in the circumstances of that case, if the challenge was ultimately successful, damages would be an adequate remedy. They would usually be calculable on a lost opportunity or lost chance basis. It was immaterial that they might not be in a substantial amount. In Mears Limited v Leeds City Council (No 2), [2011] EWHC 1031 (TCC), this time in a final judgment, Mr Justice Ramsay refused to quash an invalid decision on the basis that damages were an adequate remedy. The court always has a discretion as to the appropriate remedy. At paragraph 224 the learned judge said:

"The remedy must be proportionate. There will obviously be cases at one end of the scale where the impact of the breach of the regulations is so serious or obvious that it can only be met by setting aside a decision or action. At the other end of the scale, there will be cases where the impact is less serious or obvious, where damages will deal adequately with the breach. In between there will be many cases where the court must perform a balancing exercise of the various interests in deciding on the appropriate remedy"

Later he observed that:

"The question of remedy depends on the exercise of discretion based on a balance between the public interest in Leeds City Council proceeding with the award of the contract, and the private harm to Mears by not having the chance to be included in the next stage of the tender, taking account of the underlying principle that the public tender should be carried out in compliance with the regulations."

His Lordship concluded that: "Overall the balance lies in favour of limiting the remedy to damages and not setting aside the procedure." He based this on the prejudice in terms of the housing arrangements for a significant number of tenants and the delay in the provision of those arrangements if the relevant decision was quashed.

[13] In agreeing with the approach adopted by Mr Justice Akenhead in Excel Ltd, I question the approach adopted by Mr Lake QC on behalf of the pursuers when he submitted that, in general, the court should favour reduction as the most effective method of reviewing procedures of this kind. It is true that, in accordance with the Remedies Directive, regulation 47A (2) states that regard has to be had to decisions being reviewed effectively and, in particular, as rapidly as possible. However this is achieved by, amongst other things, the various time limits in the regulations; the standstill period; the automatic prohibition on awarding a contract when proceedings are served; the requirement on the authority to persuade a court to lift that prohibition; and, more generally, the powers and duties of the court under regulation 47A, which provides a menu of interim and final remedial options.

[14] In the course of the hearing I was addressed on the issue of the strength or otherwise of the case led by the pursuers in support of the challenge to the defenders' decision. Mr Lake confirmed that the challenge falls into two parts, all as summarised in the earlier account of the pleadings. The primary ground of challenge is that the Serco bid did not meet the defenders' requirements as specified, namely, that in respect of off‑peak freight traffic the level of service offered by Serco will not meet current demand, let alone anticipated future demand. Mr Lake described this as "a hard‑edged objective issue". Later it will become apparent that I would not use that description. Mr Lake asserted that, if the Serco contract goes ahead, freight will be left on the quayside. Regulation 18 requires the contracting authority to specify its needs and requirements. The means for meeting those needs is for the tenderer to address but, according to Mr Lake, the means proposed by Serco will not satisfy current and future demand from freight users of the ferry services. It was not open to the defenders to accept a bid which did not meet its specified requirements, otherwise tenderers were not being treated in like manner, and there could be no objective comparison of the various tenders. Reference was made to European case law, which emphasised the principles of transparency and equal treatment. In one case it was stressed that if a contracting entity takes into account an amendment to the initial tender of only one bidder, that bidder then enjoys an unfair advantage over his competitors.

[15] As he developed his submissions it became clear that Mr Lake's primary argument overlaps with the second or alternative case, which is to the effect that, from the outset, the requirements were too vague. The lack of sufficient clarity and specification as to the expected level of service necessary to meet demand led the pursuers to tender for a greater level of service, and this rendered their bid uncompetitive when compared with the successful bid. The pursuers put forward means necessary to service requirements which were more exacting than the requirements accepted by the defenders. Mr Lake accepted that the tenderers were allowed to present different proposals or solutions, but only in respect of a common requirement. In these circumstances it was submitted that there had been a breach of the fundamental principles of transparency, equality of treatment and non discrimination.

[16] According to Mr Lake the defenders should have obtained expert opinion as to future demand and designed their requirements around that advice. That would have allowed specification as to, for example , whether a daily freight only vessel departure was or was not required in the off‑peak season. Otherwise there could be no fair competition. Mr Lake explained how it is proposed to prove that the Serco bid does not even meet current freight demand. An immense amount of information was provided to all bidders as to freight volumes and patterns carried by Northlink and the pursuers over the three year period prior to the bidding process. An affidavit was provided by Gareth Crichton, the managing director of Streamline Shipping Group, the parent company of the pursuers. He explains the nature of and demand for freight services, with the aquaculture trade providing the largest single category of product shipped. The bulk of freight traffic is carried by a relatively small number of haulage and distribution firms. Streamline Shipping Group is the fourth largest by volume after Shetland Transport, Northwards and JBT. In a detailed affidavit Mr Crichton stresses that the decision letter stated that Serco plans to use two freighters between mid‑June and 1 December only. He explains why, in his view, for the rest of the year one freighter will be insufficient. For example, the service would be vulnerable to delay and disruption due to weather or technical fault. There will be less capacity; less cover; an increased risk of outage; and reduced catch‑up performance. Mr Crichton sets out his views on the information as to demand in the tendering process. He says that it was difficult to determine what the government was looking for in respect of the freight service. Since 2003 Northlink operated with two freight only vessels all year round. Since 2006 Northlink has been making a case for increased subsidy in order to support larger freight vessels on the route, all in response to the demands of the market. Mr Crichton summarises some of the discussions at dialogue meetings with the defenders' representatives. For example, a consultant hired by Transport Scotland is said to have commented, "If anybody knows this business it's you guys". In the course of the discussions a Minister for Transport offered assurances to interested parties that the tender competition would bring forward appropriate solutions on freight. Concerns were expressed as to the number of unknowns in the specification. There was a lack of clarity in respect of the cargo to be carried and as to the charging structure, and uncertainty as to what would happen to the freight currently being transported by the pursuers load on/load off operation when their grant agreement ends in 2014.

[17] Mr Lake referred to various graphs compiled under reference to the vast amount of freight information relating to the past three years which was provided in the course of the invitation to tender process. The pursuers offer to prove that these graphs demonstrate the lack of freight capacity inherent in the Serco off‑peak proposal, and that as a result freight will not be moved when it should be moved. Mr Lake submitted that there is a clear prima facie case that demand will not be met.

[18] As to the alternative argument, the proposition is that the defenders did not provide a set threshold against which parties could frame their bids. Reference was made to production 6/34, a letter form the Scottish Government Legal Directorate to the pursuer's agents dated 24 May 2012. In that letter, amongst other things, it is said:

"Under the terms of the participants' required responses, there is no single correct answer to the estimation of demands and capacity provided to satisfy that. The Scottish Ministers were able to provide information on historic usage of services and this comprised the information available in the information room. However, they sought an economical solution to the assessment of demand, including demand management measures and the provision of timetabling and vessels to carry current and anticipated demands, which balance the discounted cost of grant required over a six year service period (weighted at 80%) with the quality of various service parameters - the participants answers to the questions - (weighted at 20%). The Scottish Ministers were aware of the current levels of volume carried and the means by which they are carried and this experience informed but did not constrain consideration of alternative solutions presented by bidders combining their responses to the several determining factors proposed in response to the questions. To the extent that Scottish Ministers cannot constrain the size of the market for the provision of services at any time and that the various factors could influence the introduction or disappearance of competing non grant aid services it was anticipated that participants could have different answers even to the volumes of traffic they anticipated that they would carry. Scottish Ministers provided the information on current demands in the information room and this was available to all bidders. Scottish Ministers did not enter the competition with a predetermined view of the future demand. The evaluation of the final tenders was informed by the response of the individual tenderers to the questions within their bids. Your clients (i.e. the pursuers) carried out their own analysis based on this information, as did the other bidders."

[19] The complaint is that the Scottish Ministers left it to bidders to determine the level of service required. As a result there was a failure to meet the terms of regulation 18 (5) in that the authority did not specify and define its "needs and requirements". Mr Lake submitted that procedures must be available to set aside the decisions. Reference was made to articles 1 and 2 of the Remedies Directive, and to European jurisprudence which affirms the obligation on member states to establish rapid and effective review procedures in respect of public procurement, including, where infringements may still be rectified, the possibility of reduction, even in cases where damages can be awarded.

[20] As to the balance of convenience, Mr Lake submitted that the pursuers had a strong, even compelling prima facie case of invalidity, thus a contrast can be drawn with Lord Glennie's discussion in Elekta, which took place in the context of a weak prima facie case on the merits. Again reliance was placed on the need for an effective challenge. Mr Lake asserted that the issues in the case could be resolved after a proof in under three months. That would be a speedy and effective review procedure as mentioned in regulation 47A (2). Damages would be difficult to assess in the absence of specific criteria. It would be difficult to calculate the chance lost and its value.

[21] As to the potential impact of further delay in the process, and in particular of delay beyond determination of the current agreement in early July, Mr Lake described the concerns raised on behalf of the defenders and Serco as "scaremongering". The current operators are willing to carry on the service beyond 5 July. With reference to the caveats in the relevant letter from Northlink concerning the provision of adequate notice to and the position of supply chain partners, Mr Lake stated that the pursuers' preparations in case they were awarded the contract indicated that there was unlikely to be a problem with three to six month extensions of the relevant agreements. Reference was made to a report carried in the Shetland Times on 18 May 2012 which recorded assurances given by a Scottish Government Transport Minister that, "There will be no disruption to the Northlink ferry service this summer while legal wrangling over the new contract is resolved". The Minister spoke of contingency plans for Northlink to operate beyond 5 July until Serco can take over. According to Mr Lake there would be no regulatory difficulties over a temporary extension beyond the current six year contract. Reference was made to regulations 14(1) and 17(2). In any event, if there is a difficulty the fault is that of Scottish Ministers in entering into a contract of the maximum allowable duration. As to the alleged concerns of staff, Mr Lake doubted that these proceedings really entered into their consciousness. They would be subject to transfer under the TUPE regulations. Their real concern will be the risk of redundancy.

[22] As to increased cost to the public purse if a short‑term contract is negotiated, Mr Lake submitted that this will flow back into the same purse because the government is the proprietor of Northlink's parent company. In any event, if unmet demand is taken up by the private sector, that will allow Serco to renegotiate their base case thereby increasing the cost to the public purse.

[23] The vessels currently in use are chartered by their owners, the Royal Bank of Scotland. Mr Lake suggested that there is no reason to suppose that the bank will cause difficulties if the process is not concluded by 5 July. There is a thriving market in freight vessels. On any view the Scottish Ministers will do what is required to maintain the lifeline service to the Northern Isles.

[24] I will not summarise the submissions made on behalf of the defenders by Ms O'Neill, nor those from Mr Dunlop QC on behalf of Serco Limited. I will pick up at least some of their main themes in my discussion of the submissions presented by Mr Lake.

[25] I now turn to my discussion of the issues, and ultimately to my decision in respect of the defenders' motion. I will begin with the question of the strength or otherwise of the case put forward by the pursuers. The action is still at an early stage. The pleadings are not fully developed and no doubt, if and when a full inquiry takes place, the court will be better placed to judge the merits of the pursuers' challenge. However it is clear that my deliberations must include an assessment as to whether a prima facie case has been presented, and if so, whether there are good or poor chances of it being successful. At least to a degree this will be impressionistic, although I have had the benefit of relatively full submissions and an affidavit from a representative of each interested party. Furthermore, although this opinion has been required as a matter of urgency, before delivering it I allowed myself some time in which to reflect on the productions, the case law, and the submissions made on behalf of the parties.

[26] At the outset it is worth mentioning the restricted nature of the proper role of the court in proceedings of this nature. A full discussion of this is to be found in the judgment of Mr Justice Morgan in Lion Apparel Systems Limited v Firebuy Limited, [2007] EWHC 2179. From paragraph 26 the learned judge sets out the relevant legal principles to be applied when the court is considering whether a procurement process does or does not meet the requirements of community and domestic law. (These principles were adopted by Lord Carloway in the case of Aquatron Marine v Strathclyde Fire Board [2007] CSOH 185, and by Lord Hodge in Healthcare at Home Limited v The Common Services Agency, [2012] CSOH 75.) I note in particular Mr Justice Morgan's observations at paragraphs 35 - 38 of his judgment :

"35. The court must carry out its review with the appropriate degree of scrutiny to ensure that the above principles for public procurement have been complied with, the facts relied upon by the authority are correct, and that there is no manifest error of assessment or misuse of power.

36. If the authority is not compliant with its obligation as to equality, transparency, and objectivity, then there is no scope for the authority to have a margin of appreciation as to the extent to which it will or will not comply with its obligations.

37. In relation to matters of judgment or assessment, the authority does have a margin of appreciation, so that the court should only disturb the authority's decision where it has committed a manifest error.

38. When referring to manifest error, the word manifest does not require any exaggerated description of obviousness. A case of manifest error is a case where an error has clearly been made."

At paragraph 102 the learned judge said that the court will interfere only if the decision is "manifestly wrong". I respectfully agree with all of this. The court should be mindful of the risks of becoming embroiled in the merits of the evaluation and assessment of tenders in a public procurement exercise. Not only is the court poorly placed to do this, it would be quite wrong for it to trespass on the jurisdiction clearly given to the contracting authority to exercise a broad discretionary judgment as to the identification of the most economically advantageous bid. The court's jurisdiction is to supervise the way in the which the process has been carried out, and to review whether proper procedures and the basic principles underlying the Directive have been respected, for example, those concerning equality of treatment and transparency.

[27] After a competitive process, and perhaps especially one carried out under the competitive dialogue procedure, there will be disappointed and dissatisfied unsuccessful bidders. Often there will be ample scope for argument and dispute as to whether the correct tender was chosen. My impression is that, in substance, the current challenge is a thinly veiled attempt to invite the court to adjudicate upon exactly that issue, and to disregard the defenders' legitimate margin of appreciation on this question. So far as the primary ground of challenge is concerned, I am not persuaded that the pursuers are likely to demonstrate that, in allowing the Serco bid, the defenders made a manifest error of assessment or misused their powers. In the first place, I am assured by Ms O'Neill for the defenders, and by Mr Dunlop for Serco, that the Serco bid does allow for a standby freight only vessel in the off‑peak season, should such be needed to avoid undue disruption. Thus immediately the main premise of the pursuers' case in this regard is undermined.

[28] On one view that is all that needs to be said on the whole matter, in that the likelihood is that there is no material difference between the two bids in respect of the off‑peak freight service. However, lest that proves to be wrong, Ms O'Neill pointed out that the defenders are looking to save money in times of economic stringency. There is no set level at which the public purse must subsidise the freight traffic. The government is committed to ensuring the provision of a lifeline service to the Northern Isles to maintain the sustainability of those communities. It is not offering a concession or monopoly to the new operator. It requested individual solutions from the bidders which it could then assess in terms of the quality of the proposal (weighted at 20% of the overall evaluation) and its cost (weighted at 80%). There was a minimum threshold for quality below which an offered price would be disregarded. In this regard reference was made to 6/3 of process at paragraph 3.4.2. I was told that one bidder was rejected on this basis. In my view it would have been obvious to all those involved that there was no absolute requirement as to the details of the service to be provided, and that it was up to each bidder to analyse the data, and then to assess the demand for their services and frame the appropriate bid using their expertise and experience, all in the context that the emphasis would be on efficiency rather than maximisation of freight capacity on the route.

[29] The submission for the defenders and Serco was that the process of allowing the bidders to assess the relevant demand for themselves recognised that demand is not static. On the face of it that makes sense. Operators can create and influence demand, for example by different management of their vessels and services, and by new pricing strategies. Such can also have an impact upon service schedules. Furthermore the new operator, assuming that it is not the pursuers, will be competing against the pursuers in respect of freight services. Other commercial providers can enter the market. I share the reservations expressed on behalf of both the defenders and Serco as to how, without having had the opportunity to see and assess the Serco bid, for example in respect of the management of demand, timetabling, fares incentive, standby capacity etc., the pursuers can assert that the bid will fail to meet the demand for its services in the future. If the services provided are deficient, the pursuers or others will have the opportunity to profit and fill the gap.

[30] In her affidavit Ms Judith Ainsley of Transport Scotland explains that they were aware of a general view that there is an over provision of freight capacity on the routes to the Northern Isles. The government has been subsidising this over capacity. The desire was to encourage potential operators to come forward with their own solutions for the movement of passengers and freight, Transport Scotland having provided them with as much information as they could. In paragraphs 8 - 10 of her affidavit Ms Ainsley says this:

"8. No minimum number of additional freight only vessels was required. No minimum number of freight only vessels were specified and no specific timetable was required. Bidders were asked to demonstrate how they would carry the current and future anticipated demand for freight. We were open‑minded as to how this could be achieved, and all bidders did come forward with different proposals. All recognised the current over provision of freight capacity in the market and addressed it.

9. Transport Scotland did consider whether freight needed to be subsided at all. A full analysis concluded that, in the way that it is currently provided, it did, and we could not be sure that it could be provided without subsidy. In any event it was not currently being provided by the market on a commercial (i.e. subsidy free) basis, and Transport Scotland consider it to be a vital element of the lifeline services to Orkney and Shetland. Leaving the freight aspect as open as possible however gave the best chance of the most efficient service at the best price being achieved through the competition.

10. Bidders were asked to determine what additional freight capacity they would need (in addition to the ROPAX vessels) and were required to demonstrate that they could carry all current and anticipated future demand. In evaluating this the evaluation panel looked at the analysis of the current and future carryings provided by bidders (different bidders provided different levels of detail in their analysis) and assessed whether their proposals were reasonable. We also had an external consultant evaluate and compare the different bids along with the information room data to provide us with his assessment and comments."

It is this general approach which is the subject of the pursuers' second ground of challenge. At present I am not persuaded that it is likely that the pursuers will succeed in this attack. Regulation 9 affords considerable discretion to the authority when drafting the technical specifications in the contract documents. This is emphasised in regulation 9.7, which is one of the regulations said to have been breached. It allows the authority to define the specifications required for the contract in terms of performance or functional requirements, so long as they as they are sufficiently precise to allow the bidder to determine the subject matter of the contract and the authority to award it. I can identify little prospect of the pursuers persuading a court that the reference to "current and anticipated demand" for freight in the contract documentation amounted to a breach of this provision. I detect nothing in the regulations which prevents the exercise embarked upon by Transport Scotland, namely asking bidders to identify the appropriate number of vessels, schedules, capacity, etc. and allowing the authority to assess them and select the most economically advantageous tender. Indeed the whole purpose of the competitive dialogue procedure appears to be designed to meet the situation where it is not appropriate for the authority to be specific as to the technical means necessary to satisfy its needs or objectives.

[31] Mr Lake submitted that the pursuers' needs or objectives are to be construed as a freight service which will meet, at a minimum, current demand. Therefore the documentation should have been specific, and in particular specific as to whether a daily dedicated freight service on the off‑peak season is or is not required. I strongly suspect that after any full inquiry the better analysis will be that the authority's overriding objective is an efficient ferry service which delivers best value for money, and which, in all the foreseeable circumstance of the market over the next few years, maintains an appropriate level of lifeline service to the Northern Isles. In that context I see nothing wrong in the defenders opening a dialogue with the selected participants with a view to identifying the means best suited to satisfying their needs (all as envisaged in regulation 18(20)), and thereafter at the appropriate stage inviting a final tender from each participant containing all the elements necessary for the performance of the project on the basis of any solution presented during the competitive dialogue, as per regulation 18 (25). Regulation 18 (24) contemplates that by this time the authority will have learned of one or more solutions which are said to be capable of meeting is needs.

[32] In the context of a contract such as this, in my view it would be surprising if compliance with the competitive dialogue procedure required the kind of detailed specification desiderated by the pursuers. This is particularly so where there can be no certainty as to the demand for freight capacity and freight sailings which any new operator will experience. For example, the pursuers may react to defeat in this exercise by more aggressive competition in the market place, both now and in the future, in the hope that by the end of the grant agreement in 2014 they can thrive without public subsidy.

[33] The second ground of challenge relies on the undoubtedly fundamental principles of transparency and equality of treatment. In that context all the participants were provided with the same specification and information, and were given the same opportunity to engage in dialogue and the asking of questions. There is no suggestion of bad faith, nor of deliberate favouritism towards one particular bidder. There is no question of a private amendment of a tender, nor of the revisal of the specifications to assist one bidder. The real complaint is as to the lack of certainty as to the level of freight service which a successful bidder would require to price.

[34] In my opinion there was no obligation upon the defenders to be any more specific than they were as to what was expected of those submitting final tenders. This is because of the uncertainties and complexity of the contract; the scope for imaginative and individual proposals; and the indefinite nature of the content of the most economically advantageous tender. In my view the regulations did not deprive the contracting authority of the option of leaving the bidder to assess exactly what should be offered, price it, and then await the evaluation of Transport Scotland. Were it otherwise the public authority would lose the potential of the full benefit of competition between expert bidders, all operating on an equal footing in terms of information and dialogue. I am not persuaded that there is a significant prospect that it will be proved that the defenders acted in breach of any of the basic obligations of fairness relied upon by the pursuers. In summary, and in respect of both grounds of challenge, my view is that, at best, the pursuers have put forward a weak prima facie case.

[35] Turning to the balance of convenience, despite the eloquence of Mr Lake's plea on behalf of the pursuers I am satisfied that it strongly favours the grant of the defenders motion. This is a lifeline service. Any uncertainty over what is to happen after the expiry of the current arrangements is likely to be highly damaging to important interests, not least to the welfare of the communities in the Northern Isles. The potential adverse consequences of continuing delay and uncertainty are outlined in Ms Ainsley's affidavit, and in an affidavit from Mr Jamie Ross, a business development director who has been involved in the contractual process on behalf of Serco Limited. I have already rehearsed views expressed by other judges to the effect that an effective remedy for an invalid procurement exercise does not necessarily require reduction of that process. I agree with those views. The public interest will often justify subordination of the private interests of a disappointed bidder. Perhaps that is why Mr Lake was unable to point to any reported case of a refusal of a motion of this nature (although I was told that there is an unreported decision of a Northern Irish judge to that effect). No doubt in the case of a clear or deliberate breach of the regulations, the position might be different. When the challenge is weak, and the prohibition is causing major disruption, and where, in the event of ultimately a successful challenge, damages will provide an adequate remedy, in my view it is hard to justify refusal of a motion for the lifting of a prohibition on the completion of the process. In the present case I see no good reason to conclude that damages will not be an appropriate and sufficient remedy in respect of any breach of duty on the part of the defenders.

[36] It is optimistic for Mr Lake to predict that the current process will be entirely completed in three months. If a final interlocutor is pronounced within that time period, something which I hope is not impossible, the difficulty is that it could be appealed with leave to the Inner House, and even after that, if so advised, to the Supreme Court. Long before the ultimate disposal it would have become necessary to start the bidding process again. In the meantime all the benefits of a smooth transition would have been lost. There would be all the problems of uncertainty and disruption, not least for staff, the subcontractors, and all those in the Northern Isles and elsewhere, including traders and the tourist industry, who are relying on a clear and certain future for the ferry services. In all likelihood there would be increased costs to the public purse arising from maintaining a service during all the delay and uncertainty.

[37] The interests of Serco Limited should not be ignored. They want to be able to plan for the future, including the recruitment of staff for the new contract if it is to go ahead. In addition, in the event that the motion is refused, but ultimately the action fails, it is unlikely that Serco Limited will have a claim in damages against the pursuers. This is on the basis that the previous rule that an interim interdict is obtained periculo petentis has been superseded by the statutory automatic prohibition gained by the mere raising of the proceedings. On the other hand, the right of the pursuers to seek compensation, should the motion be granted and this action ultimately succeeds, is unquestioned. (None of this was disputed by Mr Lake.) [38] For completeness I should indicate that arguments were presented in support of the motion which I have not recorded, for example that the pre‑litigation notice of the proceedings did not comply with the relevant regulations. In the result it has not been necessary to deal with these submissions.

[39] In the whole circumstances, having considered the various factors specified in regulation 47A (2), and having applied my mind to the factors mentioned by Lord Glennie in Elekta, I have decided that I should grant the motion and lift the prohibition on completion of the contract.