When tendering for specialist goods and services, what happens if there are very few suppliers that can meet your requirements? Is this still considered an open and fair tender process, or do you need to widen your requirements to allow for more competition?
This was the situation recently looked at by the Court of Session where they were asked to consider whether the EU Treaty Principle of Equal Treatment had been breached.
In Elekta Ltd v The Common Services Agency, the Court ruled that the Common Services Agency ("CSA") had not breached The Treaty Principle of Equal Treatment by specifying a requirement that could only be met by one potential bidder, provided that that requirement was objectively justifiable.
Background to this judgement
The CSA tendered for a range of radiotherapy equipment on behalf of five Scottish Health Boards. Four of the Health Boards were already users of a complimentary software system (“the ARIA System”), manufactured and provided by Varian. When the radiotherapy equipment being tendered was used alongside the ARIA system it streamlines the delivery of patient services. The fifth Health Board, Tayside, did not operate a complimentary software system.
The contract was estimated to be worth £21m and was tendered through the Open Procedure. It was ultimately awarded to Varian; a decision that was challenged by Elekta Limited. The basis of their challenge was twofold:
1. that the contracting authority had not treated all potential bidders equally by specifying as a mandatory (or heavily weighted) requirement that the tendered equipment had to be compatible with the ARIA System, a requirement which could only be achieved by Varian; and
2. that the CSA should have tendered the requirements of Tayside Health Board separately (or allowed multiple suppliers) as they were not bound by the same compatibility issues as the other Health Boards who were already using the ARIA System.
So what did we learn?
Specifying the Requirement - When deciding this case, the Court examined similar cases from around Europe. It relied heavily on a decision of the European Court in an earlier Finnish case (Concordia Bus Finland v Helsingen Kaupunk ) where it was decided that the specification of requirements, even where it resulted in excluding potential bidders from the process, could only be considered discriminatory if it could not be justified objectively, taking into account the characteristics of the contract and the needs of the contracting authority.
The Court’s decision therefore leaves it up to the contracting authority to decide what their functional requirements are. It is of particular significance that the CSA did not say that they required a Varian system, but just one that was compatible with the existing ARIA system that the Health Boards already operated.
The Court stated that it would not be appropriate to compel the Health Boards to buy another system that they neither needed nor wanted. To do so, even if the potential bidders could have provided the whole package cheaper, would give the Health Boards operational difficulties such as installation teething difficulties and the associated time commitment in training their staff appropriately. The CSA's specified requirements were, therefore, objectively justifiable.
A Single Provider - Elekta also argued that they had been discriminated against by the CSA’s requirement for a single provider for all five Health Boards. The argument being that Elekta (or any other potential bidder) could have provided the equipment to Tayside, with their own software, as there would be no compatibility issues there. The Court again dismissed this argument on the basis that it was up to the contracting authority if it wanted to specify that they only wanted to deal with one provider.
Top tips for requirement specification
The above case shows that carefully written requirements are essential to good procurement practice. Had the CSA gone out to tender specifying Varian equipment only, then there is little doubt that the Court would have given a different answer.
To try and avoid a successful challenge, contracting authorities should consider the following tips when specifying their contract requirements:-
- Output based specification – The focus should be on what needs to be achieved, not how it is achieved. Allow the market to come up with innovative ways of fulfilling the requirement.
- Use clear, concise and unambiguous language – Avoid abbreviations or terminology that could be misinterpreted.
- Only specify essential requirements – What is needed, not what is wanted. You might not know what you want until it is presented to you.
- Only use generic technical or performance terms – Do not use brand names or refer to a specific process or means of production. If there is no other way to specify the requirement, add the words “or equivalent”. Be extra careful when specifying IT equipment e.g. “Intel Processor”, would not be acceptable.
- Give the right level of detail – Potential bidders need to be given a sufficient level of detail to develop their bids. This will also cut down on the number of tender clarifications that you have to field.
- Include measures of performance – this means that there is less scope for a mismatch of expectations on the level of service/performance that is to be provided.