Not for turning?

August 21, 2012

Julie Prior looks at the lessons to be learned for contracting authorities from a recent High Court case on bringing a claim during a tender process.

It is a brave tenderer who is prepared to risk its chances of tendering success by issuing (or even threatening to issue) proceedings, before they know that they haven’t won. Many tenderers would worry that taking such a step would damage their potential relationship with the contracting authority and that it might affect their chances of success in the evaluation process.

The case of Turning Point v Norfolk County Council [2012] EWHC 2121 (TCC) serves as a reminder that tenderers cannot put off taking action for perceived breaches of the procurement regulations until they are sure that taking such action will not affect their chances of winning. In this case, failing to take action sooner, lost TP all hope of being able to secure an £8m contract.

The facts

One has to have some sympathy with TP in this case. Their tender would have won had it not been rejected on the basis that it contained caveats or qualifications which were expressly prohibited by the Invitation to Tender (ITT). And why you may ask did their tender include such caveats, knowing that the ITT specifically prohibited? The answer to this is because they were required to price for any TUPE, redundancy and/or pension costs that may occur as a result of the contract being let, but were given (in their reasonable opinion) insufficient information, even following clarification, about the staff involved to enable them to price these costs effectively.

TP, were between a rock and a hard place, knowing that no more information on staffing would be forthcoming (the clarification window having closed and the tender closing date looming) and being required to price for all related staffing risks. They were therefore forced to try to protect their position by submitting a tender which included a caveat or qualification around redundancy costs stating that redundancies had not been priced and if they did occur, they “would wish to enter into further discussions” in respect of them. Many tenderers in the same position may well have taken the same course of action.

How much knowledge starts the clock ticking?

The court’s view is that another course of action – making a claim against the Council for breaches of the procurement regulations would have been a better way of protecting their position than proceeding to tender (with qualification). The court considered that TP's claim was time-barred as they had failed to raise the alleged breaches soon enough.

In examining when the 30 day time period for making a claim as set out in Regulation 47D(2) began to run, or put another way, when TP knew or ought to have known that grounds for starting the proceedings had arisen, the court’s view was that this could be no later than the date on which TP submitted their tender (9 February 2012).

TP received a very limited and poor response to the numerous clarification questions it raised on staffing related matters on 19 January 2012. By this time, the clarification window had already closed and TP knew that no further information would be forthcoming. TP had sufficient information at this stage, and certainly in advance of the tender closing date on 9 February, to know that the information provided was inadequate or incomplete and that this would make it difficult to tender. As the claim against the Council was largely on the basis of breaches of its duty of transparency relating to the inadequacy of the information provided, the court’s view was that TP must have had knowledge of the basic facts which indicated an infringement before submitting a tender.

If, therefore, the 30 days started at 9 February 2012, it expired on 10 March. TP were not notified that their tender had been rejected until 12 March, so it would have been impossible to wait to hear the outcome of the decision before deciding to take action. Proceedings were not started until 28 March 2012 and in the court’s view this was 18 days too late.

Exercising discretion to extend the 30 day time limit

The court has discretion under Regulation 47D(4) to extend the deadline beyond 30 days where it considers that there is good reason to do so. No doubt suspecting that their claim may be considered out of time, TP argued that it should be entitled to a short extension (which they put at 14 days). The court, however, found that it would only be reasonable to extend the deadline in circumstances which were beyond TP’s control, such as illness or detention of tendering staff, and no extension was granted.

Was the Council right to reject the qualified tender?

TP argued that the Council had committed a manifest error in determining that the tender price was qualified and as a result, the tender had to be rejected in its entirety. Was the Council heavy handed in its approach or did it do the right thing?

The ITT had specifically stated that “The Council will accept no caveats to proposals or variant bids and no liability for any increased costs as a result of changes to Tenderers’ arrangements or assumptions they may make in the course of, or as a result of this procurement exercise” and also that “The Council may exclude from consideration any tender which is not submitted in full compliance with the instructions contained in this ITT”.

There was no doubt in the court’s view that the words that TP had included with regard to their responsibility (or lack thereof) for meeting any redundancy costs were a qualification or at the very least a caveat. These words would have ultimately formed part of the contract between the parties, it would have been impossible to insist in the light of those words that TP pick up costs in relation to redundancy. Providing for all potential redundancy costs was a specific requirement of the tender process. The ITT was clear that no qualifications or caveats would be accepted. Therefore, the court found the Council had acted correctly and without manifest error in rejecting the tender.

Duty to seek clarification?

Should the Council have given TP the opportunity to explain or remove the caveat? The court’s view was no, the Council were right not to give TP this opportunity as it would amount to an opportunity to amend their bid which was not offered to the other tenderers. There was no express entitlement in the ITT which would have enabled the Council to do so, nor could one be implied. Had they done so, TP would probably have surmised that they would win if they agreed to remove the qualification, or they may have sought to raise their tender price in return for agreeing to remove it, both of which would be at risk of breaching the transparency principle.

Implied contract between Council and TP

TP also argued that by reason of the Council inviting TP to tender (by way of issuing the ITT) and of TP submitting its tender, there arose an implied contract between the parties, the terms of which required the Council to act fairly towards TP in running the process and assessing its tender. The court agreed that there was an arguable case (without deciding the point) that an implied contract had arisen. However, in the court’s view the terms of any such implied contract were clearly set out in the ITT which stated that the Council does not make any binding commitment to tenderers “other than to abide by its statutory obligations” and the express terms of the legal notice in the ITT. There are no statutory obligations which require the Council to “act fairly” nor was this covered in the terms of the legal notice in the ITT and therefore these terms did not exist and could not be implied.

Advice for contracting authorities

As discussed above, the Turning Point case reminds tenderers that it may be in their best interests to make a claim to protect their interests before they know the outcome of the process, in circumstances where the 30 day time limit is likely to be considered to have expired before the outcome of the process is known.

There is also valuable advice for contracting authorities here, most notably:

Be aware that a court may consider that an implied contract exists between you and the tenderers. You should therefore ensure that your ITT includes specific wording which sets out what the terms of any such implied contract would be. This will prevent terms in the tenderer’s favour being implied into that contract by the court;
Ensure that you give tenderers adequate information to enable them to meet the requirements of the tender process. The Court did not come to a view in this case about whether the Council had breached its duty of transparency by failing to give tenderer’s sufficient information, or whether it had breached its duties of non-discrimination and equal treatment in failing to provide such information (as this discriminated in favour of the incumbent providers who already had some or all of this information). However, there must be a real risk that these breaches could have been established here if the case was not time-barred; and
Consider lengthening your evaluation process to 30 days or more. It may be to the Council’s benefit in this case that they notified TP of their decision to reject its tender 32 days after the tender closing date. Had the Council been more prompt in its evaluation, it is possible that TP could have made a claim about breaches in the tender process following notification of the rejection of its tender, which was not time-barred. If a Council has any concerns about how it had conducted the tender process (excluding the evaluation process), it would therefore seem to be prudent for that Council to allow more than 30 days before announcing the result of the evaluation process. Tenderers are less likely to take action before they know for certain that they haven’t won. If they wait for the result, like TP did here, they may well find themselves out of time.

Julie Prior is an Associate at Dickinson Dees. She can be contacted on 0191 279 9035 or by This email address is being protected from spambots. You need JavaScript enabled to view it..