Is it lawful to exclude a non-compliant bid from a tender process?


25th April 2024

Can you exclude a non-compliant bid from a tender process? We look at a recent case that examined the lawfulness of rejecting a bid on the grounds of non-compliance with the requirement to not bid in excess of Framework prices. The case considered whether a contracting authority had breached the principles of transparency and equal treatment by disqualifying a tender and if alternative actions to disqualification should have been taken in the interests of proportionality.

Mr Justice Freedman, sitting in the Technology and Construction Court, heard the case of Working on Wellbeing Ltd trading as Optima Health v (1) Secretary of State for Work and Pensions (2) Department for Work and Pensions [2024] EWHC 766 (TCC) earlier this year, and handed down judgment on 5 April 2024.

The background to the dispute

Pursuant to a framework agreement, the Defendants (referred in this article as “DWP”), invited tender submissions for the procurement of a call-off contract for occupational health and employee assistance programmes (“OHEAP”). The Claimant (referred to in this article as “Optima Health”), was one of five invited bidders who submitted a bid for the OHEAP services.

It was a requirement for the tender submissions to include a Pricing Schedule which set out the maximum prices to be charged for each individual service item. It is of relevance to the findings in this case that Optima Health, and the other bidders, were afforded more than one opportunity to resubmit compliant Pricing Schedules, in line with additional instructions and guidance provided by DWP.

Upon final review of the submissions, DWP determined that Optima Health had exceeded the maximum prices under the Framework in relation to three service delivery lines, rendering the bid non-complaint by DWP. It ultimately transpired that, of the initial five bidders, there remained only one compliant bid – that bidder was subsequently awarded the contract for the OHEAP services.

Optima Health contested this decision. It had scored highly in the other areas of its bid, and had it not been for the non-compliance with the Pricing Schedule, it would have been awarded the contract – noting in particular that it considered the impact of its non-compliance on the evaluated price scenario to only amount to £600. DWP, however, submitted to the Court that their rejection of Optima Health’s bid was lawful on the basis of non-compliance, and to have allowed the bid would have been likely to infringe the principles of transparency and equal treatment.

Thus, a dispute arose concerning the validity of DWP’s decision to reject Optima Health’s bid on the grounds of non-compliance.

The arguments put forward by the respective parties

The questions put to the Court were twofold; did the tender documentation clearly and transparently set out the consequences of exceeding the Framework Pricing Schedule, and did DWP act unlawfully by excluding Optima Health rather than by taking other alternative action such as reducing the prices or seeking clarification?

Mr Justice Freedman’s judgment rather helpfully sets out the opposing arguments put forward by each party in response to each question.

(1) Did the tender documentation clearly and transparently set out the consequences of exceeding the Framework Pricing Schedule?

Optima Health did not contest that the requirement not to exceed the Framework Pricing Schedule was clear, but rather its position was that the consequences of failure to comply, namely that the bid would be deemed non-compliant and so disqualified, was not made clear in the invitation to tender (“ITT”) documentation. Optima Health asserted that this was a breach of the obligations of transparency and equal treatment on the part of DWP as the criterion lacked sufficient clarity to justify exclusion.

DWP disputed that the consequences were not clearly spelt out, and referred to various sections in the ITT documentation which demonstrated that non-compliant bids would be liable to disqualification.

(2) Whether the DWP acted unlawfully by excluding Optima Health rather than by taking other alternative action such as reducing the prices or seeking clarification?

Optima Health argued that DWP ought to have exercised their discretion in favour of Optima Health and waive the non-compliance, as failing to do so meant that DWP’s actions were disproportionate. To demonstrate so, Optima Health drew attention to, in its view, the insignificance of the non-compliance in contrast to the value of the contract, and additionally argued that it should have been offered the opportunity to clarify its prices.

DWP again disputed this and contended that it did in fact exercise a discretion, considering the plausibility of asking the bidders to resubmit the prices amongst other potential options, but ultimately concluded that if a compliant bid had been submitted, that bidder should rightfully be awarded the contract.

The judgment

Mr Justice Freedman considered the legal principles and existing case law at quite some length in relation to the following nine areas to come to his conclusion on each question – the Public Contract Regulations 2015 (“PCR”), the general principles under the PCR: the retained EU law, the reasonably well-informed and normally diligent tenderer, the duties of transparency and equal treatment, manifest error, ambiguous tender, exercising discretion and disqualifying a bidder from procurement, seeking clarification from a tenderer and proof of reasons and reasoning.

(1) Did the tender documentation clearly and transparently set out the consequences of exceeding the Framework Pricing Schedule?

Having considered each of the parties’ submissions on this point, Mr Justice Freedman was of the opinion that “the tender was clear, transparent and providing equal treatment to the tenderers”, and therefore ruled in favour of DWP. His reasoning was supported by the nature of the procurement process, in that Optima Health had several opportunities to resubmit a compliant Pricing Schedule in accordance with the additional guidance provided by DWP, wherein DWP had reiterated their right to exclude a non-compliant bid.

(2) Whether DWP acted unlawfully by excluding Optima Health rather than by taking other alternative action such as reducing the prices or seeking clarification?

Mr Justice Freedman also ruled in favour of DWP on the second question, agreeing that DWP had considered alternative options, thus exercising a discretion, before coming to the conclusion that the one compliant bid should be awarded the contract in the interests of transparency and equal treatment. The argument that Optima Health should have been provided with the opportunity to clarify its prices, was further dismissed by Mr Justice Freedman on the basis that to do so would have been to the detriment of the one compliant bidder and in breach of the principle of equal treatment if the same opportunity was not afforded to the other non-compliant bidders.

The Court therefore found against Optima Health on both fronts and concluded that DWP had not acted unlawfully nor disproportionately by excluding Optima Health from the tender process on the grounds of non-compliance.

Future implications

This decision speaks to both contracting authorities and prospective bidders going forward.

Contracting authorities will need to give considerable thought to the principles of equal treatment and transparency when taking action against non-compliance, and ultimately ensure that any such action is not to the detriment of one bidder over another.  On the other hand, prospective bidders will be minded to pay close attention to any criterion within the ITT documentation whereby non-compliance could result in disqualification, as this case has shown us that even where the monetary impact is comparatively minor, contracting authorities are generally within their legal right to exclude the bid for non-compliance.

Should you have any queries arising as a result of this case or on procurement law generally, please contact one of our team of experts.

Procurement specialists

If you need advice on the impact of the Procurement Act 2023 or to sign up for our series of webinars

Visit our Procurement Hub

Enjoy That? You Might Like These:


events

21 June
Are you ready for the change in procurement? To help, we are running a our series of webinars on the subject. In this webinar on Thursday 5 December, the focus... Read More

events

20 June
What are the social value opportunities under the Procurement Act 2023? We are running a series of webinars on the changes in procurement and in this webinar on Thursday 3... Read More

events

14 June
Make sure that you are ready for the procurement changes with our series of webinars. In this webinar on Thursday 12 September, we will look at exclusion and debarment in... Read More