Public Procurement Matters June 2009

Ten commandments for respect of procurement rules emerging from recent court cases

A recent wave of public procurement litigation in the UK has highlighted that careful respect for the rules (the Public Contracts Regulations 2006 plus EC and UK case law) is vital if public authorities in particular are to avoid expensive, embarrassing and plan-wrecking Court challenges. 

 
There have always been European Court cases coming through but save for some exceptions like the heavily reported and cited Roanne case, these have sometimes seemed remote and therefore of less immediate impact.  However, UK Court defeats for public authorities bring matters into sharper focus. 

Many procurements surely proceed every day with less than perfect processes having been run, but this should not lead to complacency.  The few that do end up in Court show that you cannot be sure when an aggrieved bidder will use the full remedies available to it.  Therefore it pays to be careful.  From a bidder’s point of view, recent cases prove that bidders do have rights they can exercise and the Courts are prepared to enforce them.  Either way, this puts an emphasis on careful scrutiny of each process for compliance.  Set out below are ten quick lessons emerging from the most recent case law.

Rule 1: Make plain all the factors on which you will base your decision
Letting International v London Borough of Newham

If there are sub-criteria for use in scoring the declared award criteria, these must be made plain.  Here, Newham had advertised its intention to enter into framework agreements for contracts relating to procurement, maintenance and management of housing.  The Invitation to Tender (ITT) stipulated that the contract would be awarded to the “most economically advantageous tender” (MEAT) to be determined in accordance with three weighted award criteria.  Letting tendered on this basis.
Following an unsuccessful bid, Letting argued that the contracting authority had failed to administer and conduct a clear and transparent process, noting particularly that Newham had failed to disclose further sub criteria and weighting systems that were used to evaluate the tenders.

The Court held Newham in breach.  It held that a contracting authority must publish clearly in the tender notice and/or description documents all the factors which it intends to apply when evaluating a MEAT-based bid, in line with the general principle of transparency,  thus enabling bidders to assess their suitability when preparing bids and concentrate on areas of significance. 

It is not sufficient just to give a high-level summary.  A contracting authority is therefore precluded, at the evaluation stage, from adopting award criteria or weightings that were not disclosed in the initial contract documents.  The sub-criteria should have been disclosed at the outset, and it was further irrelevant that Newham claimed that this would not have affected the outcome of the decision not to award to Letting in any event. 

Rule 2: Make plain what will result in top marks - no prizes for extras!
Letting v Newham

A further point of contention in Newham was the marking system used.  An applicant who had fully complied with all of the set criteria could not achieve full marks because the maximum number of marks to be awarded was 3 out of 5.  A mark of 4 out of 5 was reserved for those applicants who exceeded the specifications.  Newham had failed to make this clear in the tender documents and this failure similarly amounted to a breach of transparency.  In other words, if it is possible to obtain higher marks by exceeding the specifications, this must be clear. 

Rule 3: Distinguish selection and award criteria
Lianakis and recent OGC policy note

A point emerging from the recent European Court judgement of Lianakis was that “experience” is not a valid award criterion, because this is a “selection” criterion that determines whether a bidder is qualified to bid, not whether the bid is necessarily the best (the basis for “award”).  All procurement processes involve a selection phase before considering awards, even the open procedure where selection is relatively simultaneous to award.  The rules specify what may be requested by way of selection criteria – for example capability, experience and financial standing.  This establishes whether in principle the supplier concerned is suitable for award, with those that are suitable being eligible to proceed to consideration for award if they make the best offer. 

However, selection criteria must not be used for award purposes.  Those (award) criteria aimed at evaluating MEAT bids must be based on factors which are independent from tenderers’ ability to perform the contract, which are taken as a given once a tenderer has passed selection.  Examples of award criteria given in the Regulations include price, delivery dates, and aesthetic and functional characteristics.