To reject or not to reject a non-compliant tender

Catherine Bogoje looks at the lessons arising from a procurement case that arose after NHS National Services Scotland disqualified a final bid for a high-value contract.

The Scottish courts handed down their judgment in the case of Capita Business Services Limited v the Common Services Agency for the Scottish Health Service on 10^th February 2023.

Background

NHS National Services Scotland (“NSS”) conducted a procurement exercise, following the competitive procedure with negotiation (CPN) in accordance with Public Contracts (Scotland) Regulations 2015. The procurement was for a single supplier framework for the provision of a Scottish Wide Area Network Replacement Programme (“SWAN 2”) and associated services. The claimant, Capita Business Services, was the incumbent supplier to NSS.

The claimant and another bidder submitted their Final Bids for the framework. NSS determined that the claimant’s Final Bid was non-compliant with the “Instructions to Bidders” document that had been issued and should be disqualified as their Final Bid was incomplete, it had included an assumption that resulted in an incomplete pricing submission.

The claimant challenged on the basis that its final tender was fully compliant with NSS’s “Instructions to Bidders” document and that NSS’s decision to disqualify the claimant was in breach of their obligations under Regulations 19, 30(23)(c) and 76(4) of the Public Contracts (Scotland) Regulations 2015. Regulation 19 requires that a contracting authority (“CA”) must, in carrying out any procurement…(a) treat economic operators equally and without discrimination; and (b) act in a transparent and proportionate manner. Regulations 30(23)(c) and 76(4), require that a CA, in conducting a CPN, must evaluate tenders on the basis of award criteria specified in the procurement documents.

The equivalent regulations in PCR 2015 are Regulation 18(1), 29(21)(c) and 76(3).

What is equal treatment and transparency?

The judge summarised the following:

• The principle of equal treatment implies an obligation of transparency to enable compliance with it to be verified.
• The CA must apply its rules consistently throughout the procurement process – (a) the CA must apply its rules consistently between different Bidders and (b) the CA must interpret the award criteria in the same way throughout the entire procedure.
• The principle of transparency also requires clarity. This is judged against what would be understood the reasonably well informed and normally diligent (“RWIND”) tenderer.
• In an ITT for a public contract, the formulation of the award criteria must be such as to allow all RWIND tenderers to interpret them in the same way. The question is not whether all tenderers have in fact interpreted them in the same way, but whether the court considers that the criteria were sufficiently clear to permit a uniform interpretation by all RWIND tenderers and therefore ensuring equality of treatment.
• Where disqualification of a Bid is an option open to a CA, the principles of fairness and equality of treatment demand particular transparency and clarity. If failure to meet a particular criterion or to comply with a particular requirement of the process is to result in disqualification of the tenderer, the tender documentation must clearly and transparently set this out. Whether such transparency and clarity exists, is to be determined by having regard to what the RWIND tenderer would have understood the documentation to mean.

What were the issues to be determined?

1. Were NSS’ Instructions to Bidders sufficiently clear to permit of uniform interpretation by all RWIND tenderers? If not, the NSS will be held to have breached its duty of transparency (and further inquiry into whether the Bid complied with the Instructions would not be required).
2. If the Instructions to Bidders were sufficiently clear, was the claimant’s Final Bid compliant with those instructions? If so, NSS was not entitled to disqualify it.
3. If the claimants Bid was non-compliant, did NSS act proportionately (and rationally) in deciding to disqualify it?

What happened in the case?

The framework was procured on behalf of NSS and over 90 other contracting authorities (“SWAN Members”).

The issues that arose stemmed from the tender documentation requiring Bidders to offer a price for the provision of the connectivity services specified by the SWAN members on specified dates, a number of which fell before the necessary planned infrastructure build. There were a number of negotiation meetings and clarifications raised in respect of price certainty and infrastructure build costs.

At “Initial”, and subsequent “Interim Bid” stages, assumptions were permissible. At “Interim Bid” stage it was reinforced to Bidders that although assumptions were permissible at this stage, these were required to be removed by the time of the Final Bid.

The Instructions to Bidders document contained the following:

• NSS reserves the right to reject or disqualify a Bidder where:
  • a) a Bid is submitted late, is completed incorrectly, is materially incomplete or fails to meet NSS’ submission requirements which have been notified to Bidders
  • d) the Bidder contravenes any of the terms and conditions of this ITN or any other Contract Document.

• When preparing and submitting their Final Bids, Bidders must comply with the Instructions to Bidders….Failure to comply ….. may result in a Bidder being disqualified from this procurement process.
• At the point of final bids, no assumptions should exist.
• In pricing for this ITSFB Phase, Bidders must not include any assumptions.

The claimant submitted its Final Bid which contained:

• Where new fibre infrastructure is required, it is assumed that this will be made available in a timely fashion either by Scottish Government fibre infrastructure build programs e.g., ‘R100’, and/or by other similar private sector-led initiatives.
• Where the required fibre is not, or is unlikely to be available by these methods, in time to meet the SWAN Customer’s stated requirements, Capita can, at the Customer’s request, provide a number of potential fibre infrastructure build options. Once the customer has selected its preferred fibre infrastructure build options, it will be contracted between the Customer and Capita via the change control process.

The claimant’s rationale was (a) it was unclear whether build was within the scope of the project or not but took the view that it was not and it was therefore entitled not to offer infrastructure build and (b) there were no pricing assumptions, the assumptions made were technical ones.

NSS considered the assumptions made appeared to qualify the pricing, leaving it open to the bidder to charge additional costs for sites where the necessary infrastructure was not in place by the dates set out. The bidder was asking SWAN Members to change their requirements either by waiting until such time as infrastructure build was provided by another programme, or by choosing another service, the cost of which was not included in the relevant pricing table (and so, was absent from the total price of the Bid).

NSS raised clarifications with the claimant but ultimately decided to disqualify their Final Bid on the basis of it: (i) being completed incorrectly, (ii) being materially incomplete, (iii) failing to meet the submission requirements and (iv) contravening the terms and conditions of the ITN.

Judgement

The judge considered the principal reason for the disqualification of the claimant’s Final Bid was that it was materially incomplete rather than that it contained an assumption.

Taking the 3 issues in order, the judgment was as follows:

1. The tender documentation had the requisite degree of clarity and transparency to permit uniform interpretation by all RWIND tenderers, there was no ambiguity, it couldn’t have been clearer. There was no breach by NSS of Regulation 19.

   A RWIND tenderer:

   • could have been in no doubt that the Final Bid must not contain assumptions as to the price and the requirement to submit a fully priced Final Bid.
   • would have understood that if infrastructure build was proposed, the cost of that build was required to be included in the pricing spreadsheet.

2. The judge concluded that the claimants Bid did include a pricing assumption and therefore was not a fully compliant Bid. The Bid was not fully priced, and in that material respect, it was not compliant with the Instructions to Bidders as it was incomplete.On the issue of whether the assumption made in the Final Bid was one of a technical or pricing assumption, the judge determined the question to be asked was whether the claimant’s assumption was one which had an impact on the price. The judge considered that the very reason the claimant made the assumption was to lower the cost of its Bid.

3. The judge found NSS was entitled to disqualify a materially incomplete Bid. The claimant’s bid was not only incomplete, it omitted costs. NSS’s decision to disqualify the claimant’s Final Bid was neither irrational nor disproportionate.

Key takeaways:

• Ensure the ITT documents clearly set out how tenders should be priced.
• If a bidder may be disqualified for any assumptions in their pricing or incomplete tender submissions, ensure the consequence of this is very clearly set out in the ITT documents. Particularly if the procurement is multi-stage and assumptions may be permitted in earlier stages but not for the final tender submission.
• In this case, it wasn’t that there was a pricing assumption that caused the tender to be disqualified as non-compliant but rather there was an assumption in the technical submission which impacted on price and meant the pricing was incomplete. It may be useful to include in future ITT’s that any assumption which has an impact on price or results in an incomplete pricing submission may result in the tender being disqualified (as relevant to the CA’s procurement).

This isn’t the first time NSS has been challenged when procuring these services. When NSS awarded the previous SWAN framework, a procurement challenge was raised by the then incumbent supplier, BT, who had lost out on the new framework to Capita. These types of contracts tend to be technically complex, high value and may be considered desirable to suppliers, potentially increasing the likelihood of a challenge. We advise contracting authorities on all manner of IT contracts and issues relating to public procurement.

Catherine Bogoje is a Senior Associate at Sharpe Pritchard LLP.

For further insight and resources on local government legal issues from Sharpe Pritchard, please visit the SharpeEdge page by clicking on the banner below.

This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email This email address is being protected from spambots. You need JavaScript enabled to view it.