Procurement case law update: Woods Building Services v Milton Keynes Council

This case is one of the first to look in detail at allegations of errors in the evaluation of tenders undertaken by a contracting authority and the remedies available to economic operators where they are able to establish a breach of the Regulations which would have resulted in a different tenderer being successful.

On 14 July 2015, the High Court handed down a significant Judgment which has wide ranging ramifications for contracting authorities who fail to evaluate tenderers’ bids in accordance with the obligations imposed upon them by the Public Contracts Regulations 2006/2015 and in accordance with their published award and scoring criteria.

By way of background, the contracting authority, Milton Keynes Council, was procuring a single supplier framework for asbestos removal and re-instatement works. The tender documents confirmed that the award criteria was based on the most economically advantageous bid and that scores would be awarded on the basis of 60% for price and 40% for quality.

The Claimant, Woods Building Services (“Woods”), was the incumbent supplier and was the cheapest bidder of the five who tendered. It received confirmation that its bid had been unsuccessful and that a company called European Asbestos Services (“EAS”) would be awarded the contract. Accordingly, on the basis of the published scoring, EAS seemed to have clearly outperformed Woods on quality. The difference in scores between the two tenders was 3.43% which was reduced to 2.93% following discovery of an error in the scores.

Woods argued that the Council had committed manifest errors and had breached the principles of transparency and equal treatment in the evaluation of the bids. It argued that it should have received higher marks than it had been awarded and that EAS should have been scored lower. It also alleged that one of the evaluation panel was a former Woods employee so should not have been involved in the scoring of bids given the conflict of interest. Finally, Woods complained that one of its former employees, who was now working for EAS, had lifted passages directly from the Woods’ library of tender responses and put them into the EAS tender and so the Council should have disqualified EAS’s tender.

In his Judgment, Coulson J set out a number of general principles applicable to the evaluation of tenders before turning to consider the specific facts of the case:

1. Where there is a breach of the principles of transparency or equal treatment, the contracting authority has no “margin of appreciation”.
2. Where there has been an error in the evaluation of bids, which involves a degree of judgment or assessment, a contracting authority does enjoy a margin of appreciation. A Court will only interfere with a scoring decision in circumstances where there has been a manifest error.
3. Manifest error is broadly equivalent to Wednesbury unreasonableness. This means that a Court will only intervene in a scoring decision made by an evaluator if that decision is so unreasonable that no reasonable person acting reasonably could have made it.

The Court was also heavily critical of the lack of contemporaneous documentation disclosed by the Council to justify the scoring decisions made. This factor influenced the Judge’s decisions where scoring was unclear. It is also noteworthy that the Judgment records on many occasions concessions that appear to have been made by the Council’s witnesses at trial.

Coulson J considered the scores given in relation to the 12 questions which, on Woods’ case, had been scored incorrectly and upheld 8 of them in Woods’ favour. For three of the questions, the score for EAS was reduced to zero on the basis that had the Council properly applied the scoring criteria to the question, it was clear that EAS’s response was unacceptable and/or did not meet the requirement.

Where manifest error alone was pleaded and specifically where, for example, Woods pleaded it should have received a score of 10 rather than 8, Coulson J almost invariably made no adjustment to the scores on the basis that even if he would have awarded a different score, it could not be established that the score that was given was manifestly incorrect (ie. so unreasonable that no reasonable person would have scored the question this way). The “margin of appreciation” therefore afforded the Council with a defence.

However, for several questions where a lack of transparency and/or unequal treatment was found to exist by the Court, this resulted in an automatic adjustment to the score to ensure that both the scores of Woods and EAS were equalised. This was because there was no “margin of appreciation” which could afford the Council with a defence to these breaches.

The Court found that there was a clear conflict of interest in the former Woods employee evaluating the tenders.  It also found that the former Woods employee who was working for EAS had unlawfully taken material from Woods and used it in the EAS tender. However, Coulson J did not consider that the Council was necessarily obliged to disqualify EAS’s tender as a result.

Given the changes made to the scores, the effect of the decision was that Woods should have been awarded the contract.

In its later judgment dated 24 July 2015 on what remedy should be granted to Woods, the Court ordered the Council to set aside its contract award decision , amend its records to reflect the lawful tender evaluation scores, as found in the Court’s judgment, and declare that Woods had submitted the most economically advantageous tender. However, the Court refused to order the Council to contract with Woods and instead confirmed that damages was the appropriate remedy. The Court confirmed that it would only be in “exceptional circumstances” that a contracting authority would be compelled to enter into a such a contract. Whether or not Woods can establish loss of profits will be determined after the Council has run a new procurement process, so there may be further decisions arising out of these proceedings.

Contracting authorities should ensure that the implications of this Judgment is conveyed to all members of staff who carry out tender evaluations and to ensure evaluation panel members are given adequate training and guidance to ensure that they understand their obligations and duties. An adequate record must be kept for the basis for the scores being awarded to avoid the criticisms faced by the Council in this case.

Economic operators should ensure that on the outcome of a tender process, they scrutinise the scoring and tender documents and bring any discrepancies to the immediate attention of the contracting authority and if they remain unresolved to seek immediate legal advice on their positions.