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How suppliers interpret criteria for awarding public contracts is irrelevant to how the criteria are to be understood, rules Supreme Court

Out-Law News | 31 Jul 2014 | 2:48 pm | 3 min. read

The way in which suppliers interpret criteria set out in tender documents is irrelevant to what that wording is to be understood as meaning, the Supreme Court has said.

Only courts can determine how the 'reasonably well-informed and normally diligent (RWIND) tenderer' would interpret the criteria that need to be achieved by suppliers hoping to win public contracts that are being put out to tender, it ruled.

Public procurement expert Kathrine Eddon of Pinsent Masons, the law firm behind Out-Law.com, said that the judgment makes clear that witness evidence relied on by suppliers cannot be said to demonstrate the views of a RWIND tenderer. She said the ruling should prompt suppliers to carefully review tender documents and raise concerns about wording used at an early stage in the procurement process.

"Suppliers will be very surprised to hear that how they understood a tender document counts for nothing, and that it’s also irrelevant whether other tenderers read the documents in the same way they did," Eddon said. "The courts will apply a purely objective legal test, acting essentially as spokesman for what a hypothetical ‘reasonably well-informed and diligent tenderer’ would have made of the documents. Evidence will only be needed to help the court get to grips with any technical terms or to understand the context of a document."

"The case makes clear that suppliers need to make sure they are investing enough time up front to read public tender documents with a fine tooth comb, and to raise questions on any ambiguities or grey areas with the customer at the earliest opportunity.      

In their ruling, Lords Mance, Kerr, Sumption, Reed and Hughes dismissed an appeal by health provider, Healthcare at Home Limited (HaH), against a previous Court of Session ruling in Edinburgh.

The Court of Session had dismissed a legal challenge brought by HaH against the decision by a public contracting body, the Common Services Agency (CSA), to award a contract for the provision of medical services to health bodies in Scotland to another supplier.

The basis of the legal challenge brought by HaH was that the criteria explaining what suppliers had to achieve to be considered for the contract, as set out in the CSA's invitation to tender, were "insufficiently clear", according to the judgment. The company also claimed that "the reasons given to it for the rejection of its tender were unclear and lacking in detail".

The EU's 2004 Public Procurement Directive, which has been superseded by a package of new EU rules on public procurements agreed earlier this year but which have yet to be implemented into national law, requires public bodies when seeking to contract with prospective suppliers to "treat economic operators equally and non-discriminatorily and … act in a transparent way".

Under the Directive, contracting authorities must disclose the criteria by which they will award such contracts and must also notify unsuccessful bidders for public contracts of the reasons why their bids were rejected.

HaH relied on evidence from witnesses, provided during hearings before the Court of Session, as showing that the RWIND tenderer would not have interpreted the award criteria set out by the CSA in the same way as the successful bidder for the CSA's contract had done.

The legal test for determining how the award criteria for public contracts are to be interpreted is what the RWIND tenderer can be said to have understood the criteria as meaning. The test was set out by the EU's highest court, the Court of Justice of the EU.

However, the Supreme Court judges said that witness evidence cannot, on its own, be said to demonstrate the views of the RWIND tenderer. Instead, courts have to assume the role of a RWIND tenderer so as to provide an "objective determination" on the issue.

"Evidence may be relevant to the question of how a document would be understood by the RWIND tenderer," Lord Reed said in the judgment. "The court has to be able to put itself into the position of the RWIND tenderer, and evidence may be necessary for that purpose: for example, so as to understand any technical terms, and the context in which the document has to be construed. But the question cannot be determined by evidence, as it depends on the application of a legal test, rather than being a purely empirical enquiry."

"Although … the question is not one of contractual interpretation – the issue is not what the invitation to tender meant, but whether its meaning would be clear to any RWIND tenderer – it is equally suitable for objective determination," he said.

The judges said that the Court of Session had applied the correct legal tests when assessing, and rejecting, HaH's complaints about the adequacy of the reasons given to it by the CSA for why its bid for the contract was unsuccessful.

Lord Reed said therefore that it is "not the function" of the Supreme Court to review the findings of lower courts "in the absence of any error of law in their approach to the evidence or some other recognised ground for interfering with their assessment".