Letting International Ltd v London Borough of Newham [2008] EWHC 1583

In Issue 93 we reported on the European decision of Lianakis v Alexandroupolis where the court confirmed that tenderers must be placed on an equal footing throughout the tender process, which itself must be transparent. This decision was applied here by Mr Justice Silber. As the Judge said, the requirement of transparency means that parties proposing to tender have the right to be informed both of the criteria to be used in selecting the successful tenderer and their respective significance.

LIL tendered for a position under a framework agreement. The tender evaluation criteria stated that the contract would be awarded on the basis of the most economically advantageous tender. The evaluation of the tenders was to be based on the detailed written response, pricing and site visits. The evaluation criteria was weighted as follows, specification (50%), price (40%) and suitability of premises, staffing and working conditions (10%). After LIL failed in its effort to become one of these successful tenderers, it sought details from Newham as to how the tenders had been marked.

It emerged that the proportions attributed to the subject matter of the method statements establishing compliance with specification were not equal but varied between 5%-17% for the various items. These weightings were established after the tender document had been published but before any tenders had been received. Secondly, LIL learnt that the overall criteria of compliance with the specification had been broken down into 28 sub criteria. The weightings had not been previously disclosed to the tenderers. Finally, when evaluating the sub criteria, full compliance with the specification received three marks out of five, whilst the next highest mark was reserved for tenders which not merely met but actually exceeded the specification. Consequently, in November of 2007, LIL obtained an interim injunction, upheld by the CA, restraining Newham from entering into any contract or framework agreement pursuant to the above tender arrangements.

Mr Justice Silber therefore had to decide whether Newham had acted without the requisite degree of transparency, whether Newham had made a number of manifest errors in its tender process and whether it was necessary for LIL to establish loss or risk of loss as part of its cause of action.

Following the Lianakis case, and in accordance with the Public Contracts Regulations 2006, the Judge noted that if parties wish to use sub criteria, they must state them in the tender notice. The requirement of transparency means that all criteria used to enable a contracting party to determine which tender will be accepted have to be disclosed. The weighting here should, in the view of the Judge, have been disclosed. The critical factor was not whether the disclosure of the weightings would have affected the preparation of the tenders but whether they could have affected the tenders.

If a tender meets and focuses on the sub criteria considered most important by the contracting authority, it is much more likely to obtain higher marks than one which deals not only with those issues, but also matters which fall outside the key sub criteria which have been selected. A claim for breach of the EC regulations is not dependent on a party showing that if there had been full disclosure of the relevant criteria and approach, the party’s tender would have been different. All the party has to show that as a result of the breach of the regulations, it risked suffering loss and damage. Thus, the contention that Newham had failed to mark its tenders fairly, reasonably and objectively became academic as it would not alter the relief to which LIL was entitled. (As it happened, LIL failed in this part of their case.)

The Judge concluded that if LIL had been informed as it should have been, first of the weight attached to each item in the method statements and second that to obtain full marks it had to exceed the specification, then it would have had a "significant chance" of being both a successful tenderer and then successfully obtaining some work under the framework agreement. That was enough to justify bringing its claim for breach of the transparency provisions.

During the case, the parties had agreed that if the Judge reached the conclusion which he did, he should then invite the parties to agree on the remedy which should be adopted. This he did although noting that:

"rather than having a new tender procedure, Newham might consider it prudent merely to add the name of the Claimant as one of the successful tendering parties. This is merely a suggestion and I will happily hear submissions if this were not to be mutually acceptable."