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Public procurement case law update: The need to clarify the consequences of failing to meet an award criterion

  • United Kingdom
  • Competition, EU and Trade
  • Public procurement
  • Aerospace, defence and security

17-01-2018

MLS (Overseas) Limited v The Secretary of State for Defence [2017] EWHC 3389 (TCC)

Summary

In a recent judgment following a challenge to a competitive procurement process run by the Ministry of Defence (“MoD”) (MLS (Overseas) Limited v The Secretary of State for Defence [2017] EWHC 3389 (TCC)), the court decided that the MoD’s decision to reject a tender which received a “fail” score in respect of a pass/fail requirement was unlawful and in breach of its obligations of transparency on the basis that the consequences of receiving a “fail” score in respect of the relevant requirement was not expressly set out in the Invitation To Tender (“ITT”).

Although this claim was brought under the Defence and Security Public Contracts Regulations 2011 (the “Defence Regulations”), the principle of transparency referred to in the judgment apply equally to procurements governed by the Public Contracts Regulations 2015, the Utilities Contracts Regulations 2016 and the Concession Contracts Regulations 2016. The judgment highlights the importance of clearly setting out the consequences of a bidder failing to meet any criteria/thresholds in procurement documents.

Facts of the case

The MoD ran a competitive procurement process, governed by the Defence Regulations, in respect of a contract for global port, maritime and other logistical support services for the Royal Navy. The incumbent contractor, MLS, submitted a tender that achieved the highest score and was compliant with all of the commercial requirements set out in the ITT. However, MLS scored a “fail” in relation to a technical question requiring it to evidence the “safety culture” of its supply chain. As a result of the “fail” score, the MoD considered a range of relevant factors and decided that the “fail” justified the rejection of MLS’ tender. The contract was awarded to the next highest scoring tenderer.

The MoD had, as a result of an unfortunate administrative error, omitted to include within the ITT an express statement setting out the consequences of a bidder receiving a “fail” score in respect of the relevant technical question. MLS, during the mandatory standstill period, issued a claim against the MoD on the basis that the ITT did not specify, or was ambiguous as to, the consequences of a bidder receiving a “fail” score, and alleging that the MoD was not, therefore, entitled to reject the MLS tender on this basis. The MoD argued that it should have been apparent to a reasonably well-informed and normally diligent tenderer (referred to in the judgment as the “Reasonable Tenderer” but more commonly termed the “RWIND Tenderer”) that a fail score would result in either a mandatory or discretionary right to reject the tender.

The court’s decision

The MoD’s argument was rejected by the court, with Mrs Justice O’Farrell referring to the recent case of Energy Solutions EU Ltd v Nuclear Decommissioning Authority [2016] EWHC 1988 (TCC) to emphasise that a contracting authority must follow the decision-making procedures contained within its published tender documents.

The court emphasised the requirement upon the MoD to comply with the principles of equal treatment, non-discrimination, mutual recognition, proportionality and transparency. Referring to SIAC Construction Ltd v County Council of the County of Mayo (Case C-19/00 [2001] ECR- I-7725, the court clarified that the duty of transparency obliges contracting authorities to apply only criteria clearly set out in the ITT and capable of being interpreted in a consistent way by all RWIND Tenderers. Citing Healthcare at Home Ltd v The Common Services Agency (Scotland) [2014] UKSC 49, Mrs Justice O’Farrell went on to state that the application of this requirement necessitated an objective assessment, by reference to the documents available to the tenderer and all the circumstances of the case, of whether “the criteria were sufficiently clear to permit uniform interpretation by all [RWIND Tenderers]”.

Rejecting the MoD’s argument that a RWIND Tenderer would have appreciated that the pass/fail requirement would have some effect on the outcome of the competition (whether that be mandatory or discretionary exclusion), the court concluded that the criteria in the ITT were not sufficiently clear to permit uniform interpretation by all RWIND Tenderers. In the court’s view, a RWIND Tenderer would have had no way of knowing from the published ITT what, if any, effect the failure to achieve a “pass” score would have on the assessment of its tender, stating that “on a proper construction of the ITT, it did not make clear to the Reasonable Tenderer, expressly or implicitly, that a fail score … would or could result in disqualification of its tender…”. Consequently, the court considered the MoD had acted unlawfully and in breach of its obligations of transparency in applying criteria that were not sufficiently clear from the ITT and rejecting MLS’ tender.

MLS’ also argued that the MoD had made a manifest error in awarding it a “fail” score and, to the extent that the MoD had a discretion to reject the MLS tender, the MoD had failed to lawfully exercise this dicretion. The Court found in favour of the MoD on both of these points – the decision to award a “fail” score was not manifestly erroneous and, if the MoD did have a discretionary power to reject MLS’ tender, the manner in which the MoD had sought to exercise that discretion would have been lawful. However, as the court had already concluded that the MoD did not have the power to reject MLS’ tender as a result of the “fail” score, these findings were not relevant to the outcome of the claim.

Comment

Although this claim was brought under the Defence and Security Public Contracts Regulations 2011, the principle of transparency referred to in the judgment apply equally to procurements governed by the Public Contracts Regulations 2015, the Utilities Contracts Regulations 2016 and the Concession Contracts Regulations 2016. As such, this judgment clarifies further the extent of the transparency obligation in carrying out a public procurement. In particular, this decision highlights the need for contracting authorities to be mindful of the need to set out clearly in the procurement documents not only the tender requirements, rules and criteria for the competition but also the consequences of a tenderer failing to meet a criterion or evaluation threshold.

 

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