In Woods Building Services v Milton Keynes Council [2015] EWHC 2011 (TCC), the High Court upheld a challenge by an unsuccessful bidder (“Woods”) of a tender process undertaken by Milton Keynes Council (the “Council”) on the grounds of manifest error and breach of transparency and equal treatment in the bid evaluation.

The claim was brought under the Public Contracts Regulations 2006 (the "2006 Regulations") but it is equally relevant to contract awards under the Public Contracts Regulations 2015 (the "2015 Regulations"). In determining the claim, the High Court (re)assessed the tenders of the successful bidder, European Asbestos Services ("EAS"), and Woods. Applying the Council's own scoring methodology, the Court concluded that EAS's score required substantial reduction, whilst Woods' score required a small increase.

The case is important as a rare example of a UK court challenge leading to the setting aside of a contract award decision for breach of procurement regulation. It is also important in that it demonstrates that, at least in certain circumstances, the courts will be prepared to carry out an exhaustive (re)assessment of the evaluation decisions of contracting authorities.

Background

The procurement exercise undertaken by the Council was for the award of a four-year single supplier framework agreement for asbestos removal services, valued at £8m. At the time of the procurement exercise, Woods was the incumbent service provider.

The Council's tender documentation specified that the most economically advantageous tender would be determined by reference to cost (at 60 per cent) and quality (at 40 per cent). In respect of quality, the bidders had to answer 12 questions, which were scored 0, 2, 4, 6, 8 or 10, depending on how well the response met the Council's requirements.

Out of the five tenders that were submitted, Woods' offer was the cheapest. Despite the fact that price carried a 60 per cent weighting, EAS scored significantly higher in terms of quality and on that basis achieved the highest overall score and was declared the winner.

Woods challenged the decision alleging, amongst other things, that the Council's evaluation was fundamentally flawed.

Judgment was handed down, in two parts, by Mr Justice Coulson in the High Court on 14 July 2015. The first judgment deals with the substantive claim whilst the second with the question of the appropriate remedy.

The scoring process

As part of the tender evaluation process, the Council had set up an evaluation panel which was responsible for scoring the 12 quality questions. The evaluation panel consisted of an employee of the Council with experience in procurement, and an asbestos specialist. Interestingly, albeit not a subject of dispute in the claim, the asbestos specialist was an ex-employee of Woods although no one at the Council seems to have been concerned about the potential conflict of interest in asking this individual to score the bids.

The panel's initial quality evaluation was subsequently revised after a Council officer expressed concerns about the difference in the quality scores between EAS and Woods. Whilst this revision led to a reduction in the difference between the scores, EAS' score remained the highest.

Questions for the Court

In determining the substantive claim, the Court focused on the key complaint, which was the Council's evaluation of the answers to the 12 questions on quality. The Court had to decide whether there were manifest errors in the Council's evaluation, or whether it breached the obligations of transparency and equality of treatment.

The Court's approach and findings - the substantive claim

The Court determined that the concept of manifest error broadly equated to the concept ofWednesbury unreasonableness in UK law and that the question of whether something is a manifest error depends on the nature and centrality (or materiality) of the error in question. The Court noted that the mere fact that an error might not be immediately apparent to the layman is not necessarily a reason to conclude that it is not manifest.

In respect of the transparency obligation, the Court repeated previously accepted principles, namely that award criteria need to be clear, precise and unequivocal and formulated in a way that allows all reasonably well-informed and diligent tenderers to interpret them in the same way. In respect of equality of treatment, the Court reiterated the established principle that contracting authorities need to treat bidders in the same way and must adopt the same approach to similar bids unless there is an objective justification for a difference in approach.

The Court also confirmed that, in determining whether a manifest error had been made, it would have to allow for a "margin of appreciation" in the Council's evaluation. However, the breach of the transparency and equality of treatment obligations did not allow for any margin of appreciation.

The Court evaluated the responses provided by the two bidders to all 12 questions and determined that eight of the answers required adjustment to be consistent with the Council's published scoring criteria. Four adjustments were deemed necessary as a result of manifest errors and the remaining four as a result of a breach of the transparency and equality of treatment obligations, albeit that the Court noted that three of these four adjustments could also have been determined as manifest errors. Overall, the Court determined that a reduction of 40 marks was required to EAS's overall score and an increase of six marks was required for Woods. Interestingly, in four of the EAS adjustments, the Court gave EAS a score of zero (as opposed to the original scores of 6, 8, 10 and 10) by applying the Council's scoring methodology.

The Court concluded that certain aspects of the procurement exercise were unsatisfactory, that there were a number of manifest errors and that in certain instances the Council was in breach of its duties of equality and transparency.

One example of manifest error related to the Council's assessment of the bidders' mobilisation plans (requirement A) and proposals to ensure that all task orders were completed within the given timescale (requirement B). In its response, EAS set out its plan for mobilisation but did not deal with requirement B. The Court therefore determined that there was a material and substantive failure to meet the Council's requirements and, on the basis of the Council's own scoring criteria, this had to result in a score of zero. The score of six originally attributed to EAS was therefore deemed a manifest error. In respect of another question where EAS's score was reduced to zero, this was as a result of the answer provided by EAS not complying with contractual requirements/the Council's KPIs. The Council's score of eight was therefore again a manifest error.

In respect of scores demonstrating a breach of transparency and equality, this was evident in the evaluation of question three in particular, which asked bidders to "specify the members of delivery/project team, including their roles and responsibilities (including CVs)". In respect of this question, EAS scored eight as jt had identified a contract manager who, the Council assumed, would work on this contract alone whereas Woods referred to a project director who, the Council also assumed, would have other commitments. Woods therefore scored six. Whilst it became clear during the proceedings that the Council wanted a dedicated member of staff, the Court found that the Council had not specified such requirement. Accordingly, as this requirement had not been disclosed, the Court held that the Council's scoring of this question was in breach of the rule on transparency where there was no margin for error. The Court also found that, as there was nothing specifically stated in the answers of Woods and EAS to lead to the Council forming the view that EAS were offering a dedicated contract manager, whereas Woods were not, there was plainly different treatment of the two tenderers and therefore a breach of the duty of equal treatment. The Court, therefore, increased Woods score to eight, to equal that given to EAS.

In all cases where the Court found that transparency and equality obligations had been breached in scoring the responses, the Court amended the scores given to Woods and EAS to make them equal.

The Court acknowledged that its alterations to the scores would have a material effect on the outcome of the procurement process, as it was confident that its adjustments would result in Woods outscoring EAS. The Court therefore welcomed Counsel's submissions as to what relief should be granted.

As part of its general observations on the procurement exercise conducted by the Council, the Court voiced concern about the way in which this was undertaken. The Court confirmed that it was not appropriate for an ex-employee of Woods to be involved in the evaluation. Separately, it considered that the Council had not documented adequately the reasons for the scores attributed to Woods and EAS during the evaluation. Evaluators had only recorded brief and unhelpful conclusions which often paraphrased the scoring criteria "so as to be all but meaningless".

Remedy

Following the substantive hearing and the conclusion that the Council's tender evaluation process was fundamentally flawed, the Court went on to consider the question of what would be the appropriate remedy in the circumstances. Both parties agreed that the Council's original decision should be set aside and that the Council's records should be amended to refer to the adjusted scores. In addition, the Court considered that it would also be appropriate for it to declare the claimant's tender the most economically advantageous tender. However, that still left two issues to be considered, namely whether the Court should order the Council to award the contract to Woods or, in the alternative, whether Woods were entitled to damages.

As regards the first, the Court refused to order the Council to award the contract to Woods, on the basis that:

  • such an order did not form part of Woods' pleaded case;
  • the 2006 Regulations did not expressly provide for such a remedy;
  • whilst it was true that (despite (b) above) the legislation did not prejudice any other powers of the Court an order requiring A to contract with B "in respect of a contact which might last for years" would only be granted in exceptional circumstances which did not apply here;
  • balance of convenience considerations meant that it would be inappropriate to award Woods a contract arising out of a tender process which the Court had found to be flawed;
  • damages were an adequate remedy in that Woods could, if necessary, identify both their wasted costs and the loss of profit arising from the flawed procurement.

In respect of the alternative claim for damages, the Council sought to argue that this should (also) be rejected on the basis that contracting authorities enjoyed a broad discretion to abandon or terminate procurements. The Court disagreed. Having found that the Council was in breach of the 2006 Regulations it considered that it would be absurd if the Council could then avoid "the natural consequences of those beaches" which was an award of damages in favour of Woods.

For its part, the claimant asked the Court to stipulate that damages would be in respect of Woods' loss of profit. The Court did not consider that it was possible to do that (at that point) not least because Woods had not formulated its damages claim. The Court considered that the assessment of damages must wait the re-run of the tender process as it was likely that this could affect the quantum of any claim made by Woods for loss of profit.

On that basis the court ordered that Woods were entitled to damages with the quantum of those damages to be assessed "at an appropriate time".

Comment

Whilst every case ultimately turns on its own specific facts, this case illustrates that in appropriate cases, the court will not shy away from carrying out an extensive review of tender evaluation decisions and to scrutinise the scores awarded to bidders to determine whether there had been any manifest errors or whether a contracting authority's evaluation was consistent with the principles of transparency and equal treatment.

In this regard, it is worth noting that the way Woods pleaded its case to the Court might had made it easier for the Court to conduct an extensive review of the Council's evaluation. This is because Woods had already worked through the Council's evaluation of the responses to the 12 questions and had set out detailed reasons as to why its responses should have been awarded higher scores, and those of EAS lower. Although the Court did not specifically comment on whether this had any bearing on its approach, it would be reasonable to assume that this would have been helpful to the claimant’s case and illustrates the importance of strategic case planning.

It is also worth noting that the Court's task of establishing that the Council had made manifest errors in the scores it had awarded was perhaps made easier by the fact that, according to the Court, "EAS answers were almost studiedly vague, strong on aspiration and management-speak, light on detail. The Woods' answers, on the other hand, could fairly be said to bristle with detail and commitment".

Indeed, despite the vagueness in EAS's answers, the Council had considered that it offered a better quality than Woods' more detailed and specific proposals. This is an important point in that unless contracting authorities consider in their assessment the extent to which bidders substantiate their claims and proposals, and demonstrate through their plans that they can deliver on their promises, the procurement process is reduced to a competition in who can write the most aspirational tender. It should be recalled that contracting authorities have in fact an obligation to verify the information provided by bidders in order to assess the extent to which their tenders meet the award criteria. This verification obligation existed under the 2006 Regulations and has been clarified further under the 2015 Regulations.

Related to this issue, is the Court's criticism of the Council's lack of sufficiently detailed contemporaneous notes that would have set out the reasons for the award of a particular score. Indeed, the Court took a dim view of the fact that the Council's notes were "extremely brief" and amounted either to a brief conclusion (rather than a statement of reasons) or a paraphrase of the scoring criteria. An example of the latter was the Council's reasoning for awarding, to one of Woods answers, the score of six. The evaluators noted that Woods’ response was generally of a good standard with no significant weaknesses, issues or omissions. As the Court noted, this "reasoning" was simply a repetition of the scoring criteria.

Again, the issue of properly prepared contemporaneous notes documenting the reasons for evaluation decisions is an important one given that such a detailed record can then provide the evidence that the contracting authority has carried out a fair and objective evaluation process. It should be recalled that under the 2015 Regulations, keeping "sufficient documentation" to justify decisions taken at all stages of the procurement procedure (including as regards evaluation) is now an explicit obligation.

Finally, whilst not the main subject matter of this dispute, the Court was critical of the involvement of an individual in the tender process who was connected to one of the bidders. Again, the obligations in relation to conflicts of interest have become much more explicit in the 2015 Regulations. It is therefore important that contracting authorities think about who they appoint to evaluate tenders and ensure that their employees are aware of the need to report any potential conflicts of interest.

Failure to comply fully with such requirements clearly raises the risks of a court establishing that manifest errors were made in the evaluation or that evaluation decisions breached the duty of transparency or equality of treatment.

As to the question of remedies, it is interesting to note the Court's conclusion that an order requiring a contracting authority to contract with a particular bidder, even in circumstances where the Court concludes that that bidder had submitted the most economically advantageous tender, would only be appropriate in exceptional circumstances.

As regards the type of damages that would be appropriate in this case, this will depend on the outcome of the new tender process which the Council will carry out. If the winner of the new competition is the successful claimant that is likely to lead to a damages award being limited to wasted costs.

The two judgments can be found using the following links:

High Court substantive judgment

High Court remedy judgment