The NDA case is a sobering scour through the nuts and bolts of a public procurement process and has some valuable lessons on what a contracting authority should do, or indeed not do, when undertaking a tender evaluation process.

Introduction

Energysolutions challenged the NDA's award of a nuclear decommissioning contract to another bidder. The key grounds of challenge were that the accepted tender was non-compliant, and Energysolutions' tender had been under-marked, amounting to a manifest error in evaluation. Without those errors, Energysolutions would have been awarded the contract. Mr Justice Fraser accepted Energysolutions' position, in a judgment that is very critical of the NDA's evaluation process. He concluded that Energysolutions should indeed have been awarded the contract – in a separate hearing this month he has been considering the amount of damages to which Energysolutions is entitled.

The facts of this case are notable for a few reasons. Firstly the contract value was staggeringly high; a contract to decommission 12 nuclear power stations that on some reports was worth in the region of £7 billion. It seems Energysolutions could be looking for up to £200 million in damages. Secondly, and perhaps because of the value, the case did not settle in the early stages, but has instead gone as far as a final decision – something that has been very rare in the UK. Thirdly, EnergySolutions only issued proceedings after the contract was entered into, and so was asking for a damages payment rather than to be awarded the contract itself.

Procurement lawyers should probably be grateful cases like this don't come along more often – the decision runs to nearly 1000 paragraphs. However, amongst those 1000 paragraphs there are some very important messages about how to undertake an evaluation process.

Documenting decision making

The judge heavily criticised the lack of evidence showing why certain key decisions were taken. There were a few different, but similar, points which he picked up, for example:

  • evaluators were prevented from making notes at all when undertaking their evaluation;
  • certain key decisions, such as decisions to reduce scores originally awarded to EnergySolutions, were taken orally and without any record being made; and
  • other decisions were taken following a review by solicitors; the documents which set out the reasons for those decisions were protected by legal privilege.

The authority chose not to waive legal privilege over the documents, which it was perfectly entitled to do, but which meant that the judge did not have the benefit of those documents when deciding if a decision was well taken.

The key message from the NDA case is that contemporaneous records are vital for supporting decisions taken by a contracting authority. Important decisions should be properly recorded, together with the reasons for those decisions. In particular, the process and reasons for any changes made to scores initially awarded must be carefully documented.

The judge's view of the decision not to permit evaluators to take notes, largely it seems through fear of challenge, is interesting. There is a lot to be said for preventing evaluators sending lots of informal emails with partially-formulated views on the tenders. But equally there is no need for authorities only to record one consistent set of final comments. The NDA seemed to be particularly concerned with ensuring it had a single, consistent and brief, set of feedback notes, and the judge was critical of that approach. It is inevitable that evaluators will have different views on some evaluation criteria, and that does not undermine a final decision that differs from some or all of those scores. The authority's obligation is to reconcile those different views sensibly and in accordance with the disclosed process.

Handling non-compliant tenders

The successful tender did not meet the NDA's minimum requirements. It had become clear to the NDA that those minimum requirements were not necessarily essential and therefore they felt that it was not necessary to exclude the winning bidder, CFP, for its non-compliance. The judgment makes three key points

  1. the NDA had not reserved a discretion; the wording of the tender documents said that it would disqualify tenders that did not meet the mandatory requirements. The NDA was bound by those words in the tender documents. It was therefore obliged to disqualify CFP, and could not seek to argue, retrospectively, that the mandatory requirements CFP were not very important. The judge was also clear that the obligation of proportionality did not extend to retaining CFP in the competition because the mandatory requirement it had failed wasn't actually very important;
  2. even if the NDA had retained a discretion, it had not properly exercised that discretion. The evaluators were told to err on the side of not disqualifying CFP when giving marks. That meant that CFP was awarded marks higher than it should have been, and that were therefore manifestly incorrect. The judge was clear - if the NDA was exercising a discretion it should have concluded that CFP had failed, and then documented the reasons why it had decided CFP should nonetheless be retained in the process; and
  3. where an authority retains a discretion to waive non-compliance with a requirement, the circumstances in which it might be appropriate to exercise that discretion are likely to be very limited. The judge goes close to limiting the circumstances to only procedural points. He gave a couple of examples; the first being non-compliance due to circumstances entirely or substantially outside the control of the tenderer and the second being where the non-compliance had "no impact upon either the content of the tender submission, or the degree of confidence on the part of the evaluators that the tender submission was compliant with the rules". In particular, he notes that where requirements have been identified as important, through a 'high priority' label for example, disqualifying a bid for failure to meet those requirements cannot be considered disproportionate.

There is always a risk that too many requirements are designated as mandatory, without a full appreciation of the potential impact on the competition when bidders cannot meet those requirements. Once a bidder has failed to meet a mandatory requirement, an authority's hands are largely tied. Even if it has a discretion as to whether to exclude for non-compliance, as Mr Justice Fraser pointed out, there are often very limited circumstances in which it might be appropriate not to exclude a bidder, in light of the obligations of equal treatment and non-discrimination.

Conclusion

It is unusual that a UK court will accept that a contracting authority has committed a manifest error, tending instead to give them a wide margin of appreciation. It is even more unusual that a procurement case will result in the award of damages, with the real prize being seen as the contract itself in most cases. This case is certainly a cautionary tale; the defensive attitude of the authority, both during the process and in the court, together with the lack of record-keeping undoubtedly worked against the NDA. In trying to ensure its process was 'challenge-proof' it instead appeared lacking in transparency, and unable to evidence the justifications for key decisions in court.