Aborting a flawed tender process
In the series of recent public procurement cases on which we have reported in the updater (see our reports of December 2008, April 2009 and July 2009) an emerging trend has been the courts’ determination to give effect to the “EC Treaty” principles which underpin the rules of award of contracts by public bodies - in particular, the principles of transparency and equal treatment. In the following case, the court was required to examine the rationale behind a contracting authority’s decision to abort its contract award procedure before the award of the contract because the tender procedure was thought to be flawed. The court decided this case in line with the growing stream of jurisprudence on what the principles of transparency and equal treatment require of contracting authorities in the award of public contracts.
Rules of contract award for service contracts
The Public Contracts Regulations 2006 (Regulations) which implement Directive 2004/18/EC distinguish between contracts for priority services (Part A) and contracts for non-priority services (Part B). Schedule 3 of the Regulations prescribes which types of service contracts fall into either Part A or Part B. In this case, the contract was for the provision of security services which fell under Part B of Schedule 3 and was therefore a Part B services contract.
Part A service contracts are subject to full compliance with the public procurement rules. However, Regulation 5 (2) specifically provides that only certain and less onerous regulations apply to Part B service contracts - for example, the rules relating to technical specifications and notices of contract award. Prior advertising of contracts for Part B services or compliance with one of the competitive tender procedures i.e. open, restricted or negotiated is not required.
Federal Security Services Limited v The Northern Ireland Court Service and Resource (NI) Limited  NIQB 15
The contracting authority, the Northern Ireland Court Service, commenced a competition which would have led to the award of a contract for the provision of security services in 23 courts throughout Northern Ireland.
During the competition all bidders were required to provide with their tender submission, a valid “Secretary of State Certificate/Licence” to provide security services or an explanation as to why it was not included. The provision of a security licence was expressed to be a mandatory requirement but the bidders were also informed that all mandatory requirements would be subject to a variable scoring and weighting exercise.
The evaluation exercise
The contractor (Maybin) enclosed an expired licence. Despite this, Maybin was assessed as the first placed tenderer once the scoring and weighting methodology had been applied. (Maybin achieved 99 per cent compliance with the mandatory requirement to hold a valid licence). Maybin’s tender offer was assessed as the most economically advantageous.
Maybin was advised that its tender was successful and that it would be awarded the contract. Federal Security Services was the second placed tenderer.
Following this notification, the contracting authority aborted the competition and informed all the bidders of its decision.
The contracting authority’s rationale behind its decision
Just prior to the evaluation exercise, the contracting authority became aware that Maybin did not hold a current certificate/licence; Maybin obtained a fresh licence and submitted it to the court service director.
The fact that Maybin did not possess a valid security certificate/licence at the time of tender raised high level internal deliberations within the contracting authority. The contracting authority reviewed its evaluation criteria and found that failure to comply with a single mandatory requirement, such as the provision of a valid security certificate/licence did not exclude a bidder from the tender process. Rather, this was regarded as an incidence of non-compliance and the bidder’s overall score adjusted to take account of this. As a result of this, Maybin’s bid had been assessed as compliant. The contracting authority concluded that the instructions to bidders could have been the cause of uncertainty or possible confusion because they did not make it clear that it was a mandatory requirement for tenderers to hold a valid certificate/licence. The contracting authority decided to abort the competition and initiate a new contract award process.
Was the tender procedure flawed?
The second placed tenderer brought proceedings against the contracting authority challenging the decision to abort the tender procedure. It argued that the tender procedure was not flawed, and more particularly that the requirement to submit a valid, current security certificate/licence was:
- given to all bidders in unambiguous terms, and
- a mandatory requirement, in the sense that it admitted no possible relaxation or exception;
and that the provision of a licence operated as a precondition to further evaluation of all tenders submitted.
The contracting authority was therefore mistaken to conclude that the instructions given to bidders could have been the cause of uncertainty or possible confusion.
The second placed tenderer sought orders from the court to:
- annul the decision;
- complete the aborted competition;
- rule out award of the contract to Maybin because it did not possess a valid security certificate/licence at the time of submitting its tender for the contract; or
- award damages in the alternative.
The contracting authority conversely argued that the principle of transparency demanded that all bidders should know and clearly understand, when preparing their tenders, the criteria to be applied and the relative weightings to be allocated to each of the criteria so that they could compete on equal terms.
The courts approach to the application of the Regulations to Part B service contracts
In order to understand how the court decided whether the tender process was indeed flawed and whether the contracting authority was entitled to abandon the tender process, it is necessary to look at how the court applied the public procurement rules to Part B service contracts.
The court confirmed that the contract for the provision of security services was a Part B services contract and that Regulation 5 (2) specified which provisions of the Regulations applied to the award of Part B services contract.
Despite the limited application of the public procurement rules to Part B services contracts, the court held that Regulation 5 (2) did not preclude the voluntary adoption by the contracting authority of other provisions in the Regulations. In this instance, the court noted, the Defendant had voluntarily applied Regulation 16 which was concerned with the use of the restricted procedure.
Although the court does not clarify this point in its judgment, what seems implicit in its approach is the idea that by voluntarily applying the restricted procedure in the award of a contract the contracting authority had rendered itself subject to all the obligations that arise under the Regulations in the award of contracts under that procedure.
The principles of transparency and equal treatment in relation to undisclosed contract award criteria
One of the rules set out in Regulation 30 requires contracting authorities to inform bidders about the evaluation criteria which they will use to evaluate tenders, including the relative importance of each of these criteria.
The court noted the growing stream of jurisprudence in relation to undisclosed contract award criteria, and observed that compliance with the principles of transparency and equal treatment required that:
- The subject matter of each contract and the criteria governing its award must be clearly defined.
The legal test (as devised by Lord Phillips MR in the English Court of Appeal in Regina (Law Society) v Legal Services Commission  2 WLR) was as follows:
“If the tenderers had known in advance of the relevant information, bearing on the award criteria or the proposed contract, might this have influenced the terms in which they formulated their tenders?”
The Court’s approach to the contract award criteria: applying the principles
In this case, the most significant features of which the court took account were the facts that:
- the pre-qualification questionnaire and associated materials did not mention the necessity to provide a security certificate/licence;
- the instructions to bidders at the second stage clearly provided that a security certificate/licence was a mandatory requirement but the word “mandatory” had no defined meaning;
- bidders were explicitly instructed to outline “how and to what extent the mandatory requirements” would be met. This suggested a less than absolute standard which could also mean that a bidder could comply with such requirements at a later date;
- the scoring and weighting mechanism applied to the mandatory requirements was not reconcilable with the notion of an absolute requirement to provide a security certificate/licence.
Taking into account these features in the contract award documents, the legal principles and the relevant test(s) to be applied to contract award criteria, the court concluded that the contract award criteria were not sufficiently formulated and expressed in such a manner as to allow all reasonably well informed and normally diligent bidders to interpret them uniformly.
Further, the court concluded that it was a significant shortcoming in the tender instruction process not to have expressed the requirement of a valid licence as a pre-condition to further evaluation, without which a bidder could be disqualified or declared ineligible. In the court’s view, this could have affected the terms in which tenders were formulated.
The court concurred with the view which the contracting authority had formed, namely that the instructions given to tenderers and the associated documents did not comply with the principles of transparency and equal treatment.
The court held that the contracting authority was entitled to abort the flawed tender process and institute a fresh competition to curb the shortcomings of the previous competition. The court went on to say that had the contracting authority continued with the award of the contract to Maybin it would have been in breach of EU principles.
That the court dismissed the Plaintiff’s case is perhaps not surprising given the strength of evidence that the rules of the competition were ambiguous. This, the court concluded, gave rise to the real possibility that the bidders could have interpreted these rules differently. This then raised issues of discrimination and lack of transparency as the interpretation of the competition’s requirements could have affected the way in which the bidders formulated their offers. Accordingly, it was proportionate for the Defendant to cease the process and initiate a fresh procedure. Failure to do so would have led to a breach of legal requirements.
However, what is perhaps surprising is the principle implicit in the court’s decision that the Part B services contract in question was subject to the requirements of the Regulations, or at least those requirements relating to the application of the restricted procedure, by virtue of the voluntary use of that procedure.
The court’s decision is unsatisfactory in not clarifying this point further, especially since European jurisprudence suggests that a procurement directive may not be deemed to apply in circumstances where a contracting authority chooses to apply its provisions voluntarily.
In any event, it is also unclear why the court did not follow the more obvious approach in its judgment which would have been to consider whether the contract in question was of “a certain cross-border interest”. European jurisprudence has already established that Part B services contracts are subject to obligations which arise under the EC Treaty principles if they are of “a certain cross-border interest”. If the court were to have followed this approach, it seems likely that its conclusion on this point would have been positive. Certainly, that was the court’s conclusion a few days later following this judgment with regard to the award of another security services contract in a case which the same Plaintiff had brought against the Police Service of Northern Ireland.
On the basis that EC Treaty principles were applicable, it would have been easy for the court to have concluded by reference essentially to the same jurisprudence that the Defendant’s decision to cease the process was in line with those principles.