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

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.

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.