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Lessons from Bechtel v HS2

A recent Technology and Construction Court ruling relating to HS2 procurement addressed a wide range of important issues, write Emily Heard and Victoria Croshaw.

On 4 March 2021, in Bechtel Limited v High Speed Two Limited [2021] EWHC 458 (TCC) the Technology and Construction court handed down a decision concerning a claim arising out of the procurement run by High Speed Two Limited (HS2) for a Construction Partner contract for Old Oak Common Station.

The winning bidder was a consortium made up of four companies (BBVS). The procurement challenge was brought by an unsuccessful bidder, Bechtel Limited (Bechtel), against HS2 for breaches of duties imposed under the Utilities Contracts Regulations 2016 (UCR). 

Issues raised by Bechtel  

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Bechtel challenged the outcome of the procurement for a number of reasons including:

  1. Manifest errors in scoring – Bechtel alleged that HS2 carried out its evaluation for a number of questions in manifest error, such that BBVS should have scored lower and Bechtel should have scored higher
  2. Unequal treatment in the evaluation of certain questions – Bechtel asserted that BBVS’ bid was abnormally low (due to a lack of resources and in respect of BBVS’ price) and ought to have been disqualified
  3. Breaches of transparency and/or good administration due to inadequate records of the assessment and moderation process
  4. Whether post tender changes to the contract were permissible material changes, and
  5. Breach of an alleged duty of good administration.

The decision

Mr Justice Fraser (Fraser J) found in favour of HS2 and held that Bechtel’s claims all failed.

1. Manifest error & unequal treatment

Fraser J re-affirmed that manifest error has a broad equivalence to irrationality and held that establishing a manifest error is a “high hurdle” to overcome; it requires something more than a disagreement with a score that was awarded. Further, the “different legal expressions” concerning manifest error presented “insurmountable obstacles” to Bechtel’s challenges to the scores which had been awarded.

On this issue, Fraser J held that Bechtel failed to demonstrate manifest error and/or lack of transparency and/or unequal treatment on the part of HS2 in respect of any of the separate challenges to the evaluation, either in respect of its own score (to have that increased) or BBVS’ score (to have that reduced). As such, Fraser J found that there were no manifest errors by HS2 on the different areas of the evaluation, nor were there any other breaches of obligation. Fraser J stated that Bechtel failed to establish that any of the evaluations were in error, let alone manifestly in error.

This judgement therefore reiterates the high threshold that must be satisfied in order to show than an error in evaluation is in fact manifest.

2. Abnormally Low Tenders (ALTs)

Fraser J stated that the principles concerning ALTs set out in SRCL [1] (in that case under the Public Contracts Regulations 2015) also applied to the UCR. As such, he held that under the UCR, HS2 had the power to reject an ALT, but was not obliged to do so.

Fraser J therefore found that Bechtel’s assertion that BBVS ought to have been disqualified and that the competition ought to have been abandoned or re-run was “entirely without foundation” and also failed.

3. Record keeping

The importance of note-keeping also came to the fore again, with Fraser J distinguishing between the conduct of the Trust in the Lancashire [2] case, which amounted to wholesale deficient records of reasons (and in consequence grounds for quashing the decision), and the technical failure of HS2 to keep adequate minutes of one meeting. Fraser J noted that even though scores had been decided before this meeting (such that it did not strictly form part of the evaluation process), HS2 should still have taken a minute of the meeting because “it was part of the life of the procurement”.  Nevertheless, Fraser J found that this “isolated failure in respect of record keeping” did not assist Bechtel in its claim and was not causative of any loss. 

4. Varying the terms of a contract during final stages of negotiation

Bechtel alleged that there were sufficient material changes to the contract entered into between HS2 and BBVS which amounted to a substantial modification and/or material change as contemplated by Regulation 88(7)(b)(i) UCR.

Fraser J noted that the UCR is far wider than the Public Contracts Regulations 2015 and gives utilities a greater flexibility in terms of negotiation. Given the nature of utilities projects it would be far from sensible if, having selected the winning bidder, the utility was not permitted to negotiate, agree, discuss or make changes with that economic operator. Fraser J was of the view that the changes in this case were “sufficiently minor”. There was therefore no distortion to the competitive process by permitting such negotiation, and this was permitted by the UCR. Interestingly, Fraser J noted that had HS2 accepted the qualifications proposed by Bechtel (discussed in further detail at point 3. below), this would have been the sort of change which would not have been permitted without a new competition.

5. No principle of good administration

One significant feature of the judgment is that it was held that there is no duty of good administration which applies in the public procurement context on the basis that there is (a) no obligation of good administration contained in the UCR and (b) no authority for imposing such an obligation upon a contracting authority. Consequently, Fraser J found that Bechtel’s allegation that there had been a breach of good administration also failed.

In light of this, a claimant considering grounds of challenge on its claim form need no longer apply its mind to this duty. 

Further key points discussed in the judgement

In determining the issues set out above, Fraser J also provided comment and guidance on a number of other important issues which arise in procurement claims. We deal with these in more detail below:

1. Confidentiality rings and redactions

Fraser J accepted that confidentiality rings were commonplace in procurement claims and held that the level of profit in percentage terms that a tenderer includes in its bid is likely to be considered to be commercially confidential for any tenderer, including the Claimant. However, he noted that it is important to bear in mind the important principle of open justice. As such, when it comes trial, the court should only be required to go into confidential session in very exceptional circumstances.

Fraser J also focussed on how the parties apply redactions to documents which end up in the trial bundle. He highlighted the importance of ensuring that the scope of redactions is not too wide and suggested that an index should be made of the redactions and the justification for those redactions so that an explanation of why redactions are in place is readily available. 

2. Limitation & amendments to statements of case

Bechtel included by amendment an Annex 3 to their Particulars of Claim which contained a comparison of Bechtel’s and BBVS’ scores.  HS2 consented to this amendment but without prejudice to its position on limitation (which Fraser J noted was a sensible position to adopt). HS2 maintained that the contents of Annex 3 was time barred on the basis that Bechtel had been provided with the requisite knowledge for these amendments in the standstill letter (which included the full moderation rationale for both Bechtel and BBVS’ tender).

Fraser J re-affirmed his position in SRCL [3], namely that where there are a number of grounds of complaint, the date upon which limitation starts to run would not necessarily be the same for all of them as the date upon which the economic operator would have known that it had grounds for bringing a challenge could be different in respect of different breaches. In light of this, Fraser J held that BBVS’ tender response (which was only provided to Bechtel in standard disclosure) was required in order for Bechtel to carry out the comparison detailed in Annex 3. As such, he found that these complaints were not time-barred.

3. Putting qualifications in your tender submission

Bechtel was not prepared to tender on the basis of the proposed contract terms included in the Invitation to Tender (ITT) and therefore qualified their tender which, Fraser J noted, sought to change the fundamental allocation of contractual risk (and, as such, HS2’s commercial strategy). HS2 were not prepared to accept Bechtel’s proposed qualifications and asked Bechtel to withdraw them but the qualifications remained in place. The ITT expressly reserved the right for HS2 to reject a tender which contained unacceptable qualifications.

Fraser J held that not only did HS2 have a right to reject Bechtel on this basis during the procurement but that HS2 retained that right after the conclusion of the procurement and were entitled to rely on it in the proceedings. Fraser J therefore found that HS2’s overall defence that Bechtel’s bid could have been disqualified by reason of this qualification, and had Bechtel been the overall winner they would have been disqualified, succeeded.

Impact on procurement litigation going forward

The 533-paragraph long judgement touches on many different issues which frequently arise in public procurement challenges and will therefore be a case to have in mind going forward. Of particular interest is the finding that there is no principle of good administration such that claimants may no longer need to consider this breach when considering grounds of challenge.

Interestingly, Fraser J asserted that “…it might be thought that procurement law imposes a counsel of perfection upon contracting authorities, and that any failure to achieve perfection will result in the court’s interference. That would not be an accurate depiction of what procurement law requires, and it is not the approach that the court has adopted in this case”. This decision was a clear win for the contracting authority and whilst every case will be decided on its own facts, it was perhaps compelling that overall, HS2’s audit trail was obviously good enough for the court to be able to form an impression of a process which had been sufficiently well-run.

Emily Heard is a partner and Victoria Croshaw is a solicitor at Bevan Brittan.

[1] SRCL Ltd v The National Health Service Commissioning Board (NHS) [2018] EWHC 1985 (TCC)

[2] Lancashire Care NHS Foundation Trust and another v Lancashire County Council [2018] EWHC 1589 (TCC)

[3] SRCL Ltd v The National Health Service Commissioning Board (NHS) [2018] EWHC 1985 (TCC)

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