Businesses supplying the public sector will be used to tendering for contract opportunities. It is critical that those businesses ensure that their tenders comply with all of the contracting authority’s requirements. Failure to ensure compliance with all of those requirements could result in the bid being rejected. This has been highlighted in the recent case of Optima Health v DWP (Working on Wellbeing Ltd (t/a Optima Health) v Secretary of State for Work and Pensions).
The background to the case
The procurement was for a contract for the provision of occupational health services and an employee assistance programme and which was being called off under a framework. When Optima had originally bid to be appointed to the framework, it had been required to provide a pricing schedule setting out the maximum prices that Optima would charge for each individual service item in any contract awarded under the framework. The framework agreement included a provision prohibiting those maximum prices being exceeded.
When it came to bidding for the call-off contract, DWP asked all of the bidders to complete a pricing template, where prices were required to be submitted against a number of different service items. The instructions for completion of the pricing schedule stated that those prices must not be higher than the maximum prices set under the framework. The instructions went on to say that any bids with prices “in excess of this will be discounted”. The procurement documents also stated that bidders were “strongly advised to read and understand the specific guidance provided before responding” and that DWP had the right to exclude non-compliant bids.
After final bids were submitted, DWP discovered that the prices provided by Optima against 3 service items were in excess of the maximum prices set under the framework by a small amount in each instance. DWP considered potential routes to overcome the non-compliance, but ultimately rejected all of these. The table below sets out the options considered and the reasons for their rejection.
Option – Allow all bidders to resubmit their pricing schedules.
Reason for rejection – This would be unfair given that another bidder had submitted a compliant bid
Option – Disregard the prices submitted for the service lines in question.
Reason for rejection – This would skew the financial evaluation.
Option – Reduce the prices for the relevant service lines to the maximum prices set under the framework.
Reason for rejection – No mechanism to allow this in the procurement documents.
DWP resolved that the only available alternative was to reject Optima’s bid, this being consistent with the instructions provided in the procurement documents. This meant that Optima would not be awarded the contract, despite Optima’s bid having achieved the highest score from the bids submitted. DWP wrote to Optima notifying its decision to reject Optima’s bid, explaining the reason for that decision. Optima issued a claim in the High Court that DWP had, in rejecting Optima’s bid, acted in breach of procurement laws.
The court case
The court proceedings focused on two matters:
- Whether DWP’s procurement documents clearly and transparently set out the consequences of exceeding the maximum prices set under the framework.
- Whether DWP had acted unlawfully in rejecting Optima’s bid rather than in taking any alternative course of action.
Optima’s claim failed on both bases.
Its case was that DWP had said in the pricing instructions that bids with prices in excess of the framework prices would be “discounted”, and that the term “discounted” could be interpreted as meaning that any excess prices would be reduced to the maximum price set under the framework. DWP rejected this argument.
The court considered the “reasonably well-informed and normally diligent (RWIND) tenderer” test, which is where the court determines whether the procurement documents are sufficiently clear to enable bidders to interpret the requirements in the same way. The court found that “in context the natural meaning of the word “discounted” was that the bid as a whole would be “disqualified” or “excluded”” and was satisfied that the procurement documents, taken as a whole, contained clear explanations which would leave a RWIND bidder in no doubt that the outcome of exceeding the maximum prices set under the framework could result in the bid being disqualified.
The court took into consideration that DWP had evaluated a number of options other than disqualification, and that DWP had taken into account all relevant factors in concluding that each of those options could not be applied. DWP was therefore entitled to reject Optima’s bid. The court noted that, had DWP decided to implement one of those other options, there was a real risk that procurement proceedings could have been issued by any of the other bidders for breach of the principle of equal treatment.
What do our lawyers say?
Jenny Wade, an associate solicitor in our commercial team, has been advising on public procurement matters for 14 years.
“Current public procurement legislation provides that contracts can only be awarded to bidders whose bids comply with the requirements set out in the procurement documents”, says Jenny. “This position will be enforced by the new Procurement Act which comes into force on 24 February next year; this contains a right for contracting authorities to “disregard any tender which breaches a procedural requirement set out in the tender notice or associated tender documents.
“We recommend that, whenever a business first receives the procurement documents for a contract opportunity, the business carefully reads all of the requirements, conditions and criteria to ensure that they are clear. Where this is not the case, we strongly advise that a clarification is raised at the earliest opportunity, in order to avoid the risk of rejection on a technicality.”
For advice on public procurement matters, contact partner and head of commercial, Antony Hall on ahall@mincoffs.co.uk.
