An aggrieved bidder in a procurement exercise conducted by Strathclyde Fire Board has been awarded over £120,000 in damages in an action brought in the Court of Session in Scotland. The court held that Aquatron plc had successfully proven a number of significant errors in the procurement exercise which resulted in it not being awarded the contract. Strathclyde Fire Board has been ordered to pay the damages in compensation for the loss of profit suffered by Aquatron plc.
In March 2004, Strathclyde Fire Board issued a notice in the Official Journal advertising its intention to award a contract for the provision of maintenance and repair services for breathing apparatus and oxygen tanks. The contracting authority chose to adopt the open procedure meaning that all interested parties were entitled to submit a bid. This procedure is to be contrasted with the more frequently used restricted procedure which will generally involve some form of short-listing procedure after bidders have had their technical, financial and economic standing assessed in order to ensure compliance with minimum standards.
OJEU notice and evaluation criteria
The OJEU notice stated that the contract would be awarded to the "most economically advantageous tender ("MEAT") complying with technical specification i.e price, delivery data, running costs, cost effectiveness, after sales service and compatibility".
Exclusion from tender process – failure to meet technical standards
Aquatron plc was one of three parties that submitted a bid for the services contract. The price it submitted for the contract was £222,300. The price submitted by the winning bidder was £253,740. Along with one other bidder, Aquatron was excluded from the tender process on two grounds:
i) its workforce failed to meet quality standards; and
ii) its ISO 9001 quality accreditation was unacceptable on the basis of doubts over the body that had awarded the accreditation to Aquatron.
The court took a fairly stringent (albeit logical) interpretation of the procurement rules and found that the Fire Board had erred on both of these grounds.
In relation to the first ground, the court stated that as no minimum standards had been specified (or were obvious) in relation to the experience of the workforce, it was not permissible to exclude Aquatron plc for failing to meet minimum standards. In relation to the second ground, again the court stated that as the tender documents had failed to specify the body from whom the ISO 9001 accreditation required to be obtained, it was not permissible to exclude Aquatron plc on the basis that its accreditation was received from a different awarding body. These findings lead the court to conclude that Aquatron should not have been excluded form the tender process and so, its bid should have been evaluated and compared with the other compliant bid. Failure to consider Aquatron's bid was held to constitute unequal treatment in breach of the procurement principles.
Comparative evaluation – award of damages
Perhaps the most surprising aspect of the court's decision was its conclusion in relation to the comparative evaluation. The court noted the evaluation criteria stated in the OJEU notice (e.g price, delivery data, after sales service, etc) and found that the only relevant criteria for this contract was price. The other criteria were relevant to goods contracts and had ill advisedly been lifted from previous procurement exercises. For that reason, the court held that the only criteria that should have been used by the Fire Board when evaluating bids was price. As Aquatron's bid was lower than the winning bidder, it followed that it would have been awarded the contract had its bid been evaluated accordingly. In order to compensate for the loss of profits that Aquatron had suffered as a result of the flawed procurement process, the Fire Board was ordered to pay £109,555 damages (representing the profit that would have been earned had it been awarded the contract) plus interest over the relevant period, totalling some £122,149.
Interestingly, the court highlighted that there had been deficiencies in Aquatron's bid and that had the evaluation criteria been drafted and communicated to bidders appropriately (e.g to include a qualitative assessment), then Aquatron would not necessarily have been awarded the contract. Instead, the court assessed that its chances would have been 50/50 and on that basis, the amount of damages that it would have been awarded would have been reduced by 50% to reflect the reduced probability of it being successful in the process.
This case highlights very clearly the importance of using experienced procurement staff when conducting tender exercises in order to ensure that appropriate evaluation criteria and procedures are put in place, from the outset. The judgement perhaps undermines a common myth in procurement circles that damages will only be awarded against contracting authorities where they have, in some respect, acted in bad faith. In this case, the court is clear that damages were awarded as a result of the lack of expertise not any bad faith.
It is also worth noting that this case was brought under the old procurement rules. Aggrieved bidders (under the new rules) have further rights to obtain important evaluation information from contracting authorities which may facilitate more actions, like this one, challenging the decisions of contracting authorities.