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High Court orders ‘unsatisfactory’ public contract award to be set aside

Out-Law News | 21 Jul 2015 | 10:08 am | 3 min. read

The procurement process through which an English council awarded a contract for asbestos removal contained “a number of manifest errors” and breaches of equality and transparency requirements, and should therefore be set aside, the High Court has ruled.

In finding against Milton Keynes Council, Mr Justice Coulson was the first judge in an English court to set aside a public body’s contract award decision under the 2006 Public Contract Regulations. He found that the council’s evaluation of eight out of the 12 award criteria in favour of European Asbestos Services (EAS), which scored higher than incumbent service provider Woods Building Services by just 3%, had been unlawful.

The judge noted that procurement laws allow the courts to overturn a public body’s contract award in circumstances where it had “committed a manifest error”. However, he commented that these were often harder to prove than transparency or equality breaches as the contracting authority has a “margin of appreciation” when making its assessment. Despite this fact, when he went through each of the award criteria one by one he found that the scores awarded to EAS should be reduced by a total of 40 marks, while those awarded to Woods should be increased by six marks.

He said that he would rule on a remedy for Woods at a future hearing, after giving the parties the opportunity to work out what the adjusted scores should be.

"This is a significant decision because it is the first time that an English court has set aside a procuring authority's contract award decision under the Public Contracts Regulations," said procurement law expert Ben Lasserson of Pinsent Masons, the law firm behind Out-Law.com.

"Essentially, this case boiled down to whether the council's evaluation exercise had been conducted lawfully. In the past, such a challenge would have been very difficult for a claimant to sustain because the courts were always reluctant to 'second guess' a procuring authority in matters of evaluation. This decision suggests that the courts will be willing to take a more pro-claimant position in the future," he said.

The contract at the centre of the dispute was a four-year single-supplier contract for asbestos removal, worth around £8 million. Five companies including Woods, the council’s existing provider of asbestos removal services, submitted tenders. Although Woods submitted the cheapest bid, it lost out to EAS as a result of the council’s evaluation of the quality criteria in the tenders.

Public bodies that put goods or services out to tender must comply with a number of legal requirements as set out in the Public Contracts Regulations, which were recently replaced by an updated version for 2015. In particular, the tendering process and award criteria must be transparent, and all parties bidding for the contract must be treated equally.

On two particular points, the judge found that the council had awarded EAS a 10/10 score when it should legally have awarded the company zero. He said that the scoring criteria were “a matter of law” and that, if a response did not meet the council’s requirements or was unacceptable in accordance with the council's own scoring methodology, then it required to be given a zero score. That the council had not done so in one particular case was “incapable of rational explanation”, the judge said.

He added that even on “a simple read-through of the answers”, it was “surprising” that the scores awarded to Woods and EAS were so different.

“In my view, an informed reader would think that the EAS answers were almost studiedly vague, strong on aspiration and management-speak, light on detail,” he said. “The Woods’ answers, on the other hand, could fairly be said to bristle with detail and commitment.”

On the “unsatisfactory” scoring notes provided by the council, he said that the absence of clear reasons to explain certain scores created a “lack of certainty in the nature of the council’s case”.

Procurement expert Christopher Murray of Pinsent Masons said that the decision should also be taken by contracting authorities as a warning about the need to keep adequate notes and records during a tender evaluation process.

"Mr Justice Coulson commented that the council's notes here were 'unsatisfactory' and included only 'brief and unhelpful conclusions, not reasons to explain the scores'," he said.

"Although the judge noted that in itself this would perhaps not amount to a breach of the regulations, it did leave him 'more sceptical' about the appropriateness of individual scores awarded. Contracting authorities would therefore be advised to maintain fairly detailed records of their tender evaluation processes, in order to be able to more robustly defend procurement challenges," he said.

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