Southampton City Council (19 005 106)

Category : Other Categories > Commercial and contracts

Decision : Upheld

Decision date : 12 Dec 2019

The Ombudsman's final decision:

Summary: The Council failed to act in accordance with the terms of its framework agreement for contracts with Mr C, by refusing mediation. This has caused time and trouble for Mr C. The Council will apologise and refer the matter to mediation.

The complaint

  1. The complainant, who I will call Mr C, says the Council did not fairly judge his company’s tender submission. Mr C accuses the Council of bias towards the cheapest provider and rigging the assessment process to ensure the cheapest provider won. Mr C has asked the Council for an independent review under its framework agreement and complains the Council has refused. Mr C has lost faith in the tender process and feels it’s pointless putting in tenders for future contracts if the Council may not judge them fairly. He wants the independent review to restore his faith.

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The Ombudsman’s role and powers

  1. The law says we cannot normally investigate a complaint when someone could take the matter to court. However, we may decide to investigate if we consider it would be unreasonable to expect the person to go to court. (Local Government Act 1974, section 26(6)(c), as amended)
  2. We investigate complaints about ‘maladministration’ and ‘service failure’. In this statement, I have used the word fault to refer to these. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. If there has been fault which has caused an injustice, we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
  3. If we are satisfied with a council’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)

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How I considered this complaint

  1. I considered information provided by Mr C and the Council, including the framework agreement. I shared a draft statement with both parties and considered their comments.

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What I found

  1. Mr C’s company responded to the Council’s invitation to tender for a contract. Mr C’s company did not win the contract. Mr C was concerned by the Council’s feedback, and feels the Council rigged the process to ensure the cheapest applicant won the contract.
  2. A framework agreement is a contract where there is no guarantee of any commitment to spend any money with one or more suppliers. The Council has a framework agreement with Mr C’s company for services it might purchase from time to time. The framework agreement includes a section called ‘dispute resolution procedure.’
  3. The first step is for the parties to try and resolve the dispute with the Council’s representative and the Services Manager of Mr C’s company. The parties did this, but Mr C remained unhappy.
  4. The next step, under clause 21.1.2, is to refer the dispute to mediation. The contract says “If the dispute cannot be resolved by them within 5 Working Days after the dispute has been referred to them, either Party may give notice to the other Party in writing referring the matter to mediation to be conducted in accordance with clause 21.2”
  5. Mr C gave notice referring the matter to mediation. The Council refused. There is nothing in clause 21.1 which allows it to make that decision; Mr C has given notice and the matter must go to mediation.
  6. Clause 21.2 says “In the event that a dispute cannot be resolved by agreement under 21.1.1 the parties may either:

21.2.1 agree to refer the dispute to an independent person to be appointed by agreement between the parties;

or

21.2.2 agree to refer the matter to an adjudicator.”

  1. The Council says the parties may agree to refer the dispute to an independent person or an adjudicator. The Council says the framework agreement does not provide for a unilateral right for one party to refer the dispute to an independent person or an adjudicator without the agreement of the other. The Council does not agree to refer the dispute because it says it acted correctly in the tender process.
  2. Clause 21.1.2 plainly gives the unilateral right to go to mediation, and there is no option for the other party to refuse it. Clause 21.2 says the parties may agree either option for the process but does not provide a third option of no mediation. By refusing to arrange the mediation the Council is therefore acting against the terms of the framework agreement and is at fault. It has caused Mr C time and trouble in complaining to the Ombudsman to have this put right.
  3. The Council argues the matter is not one the Ombudsman should investigate because it would be reasonable for Mr C to exercise his rights to take the Council to Court. I do not agree. Mr C simply wants the Council to refer the case to mediation in accordance with the framework agreement and the notice he has served. There is no need for a court to intervene and interpret the agreement because it is clear what the Council must do on plain reading of the document. So, we have exercised our discretion to investigate on the basis it is not reasonable to expect Mr C to go to Court in this case.

Agreed action

  1. The Council does not agree with the Ombudsman’s findings, and believes it has a strong position to challenge the interpretation of clause 21. Notwithstanding that, it has agreed to take the below actions as does not feel it cost effective or in the public interest to challenge it at this time.
  2. To recognise the impact on Mr C caused by the fault identified in paragraph 13, the Council will:
      1. Apologise to Mr C for refusing to comply with his notice to refer to mediation or arbitration under the framework agreement.
      2. Agree with Mr C to refer the dispute to either an independent person or an adjudicator to be agreed by the parties in accordance with clause 21. The mediation should be started as soon as possible thereafter.
  3. The Council should complete the above actions within two months of the Ombudsman’s final decision and evidence its compliance to the Ombudsman.

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Final decision

  1. I have completed my investigation on the basis the agreed action is enough to remedy the injustice to Mr C from the Council’s fault.

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Investigator's decision on behalf of the Ombudsman

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