This article is an excerpt from the 2021 edition of The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its March 2016 decision in Shetland Line (1984) Ltd v. The Scottish Ministers, the Scottish Court of Session dismissed a legal challenge to a government evaluation process. The dispute dealt with a dialogue RFP issued for freight shipping services that sought creative solutions from proponents. A losing proponent challenged the outcome, arguing that the government relied on vague evaluation criteria. It also claimed damages as a result of the allegedly unfair bidding process.
A tendering process was initiated under a competitive dialogue procedure for the provision of ferry services to the Northern Isles for a six-and-a-half-year period. That tender call contemplated different types of freight services, which included vessels that roll freight on and off ships using trailers (referred to as roll-on-roll-off or “RoRo” vessels), some of which also take passengers (referred to as “RoPax” vessels), along with vessels that load containers on and off ships by crane (referred to as load-on-load-off or “LoLo” vessels.) As the Court summarized, bids were required for two routes, a “Lot A” Pentland Firth route between Scrabster and Stromness, and a “Lot B” Aberdeen–Kirkwall–Lerwick route. The tender call rules allowed bidders to bid on one or both routes.
The complainant challenged the government’s evaluation process, arguing that the evaluation lacked objective criteria and that the evaluation was subjective and arbitrary since the government failed to disclose the amount of future anticipated freight and failed to use anticipated volumes as benchmarks to assess the bids:
This ground focussed on the evaluation of bidders’ proposals to meet current and future anticipated demand for freight, including time sensitive freight. Once again, the claim was that there was a lack of transparency in terms of reg 4(3). That was, it was contended, because the evaluation was subjective and arbitrary. The defenders ought to have determined levels of current and anticipated future demand for freight, including time sensitive freight, and used those as benchmarks against which the bidders’ proposals fell to be assessed. A freight expert could, and should, have been instructed to identify those benchmarks.
However, the court disagreed with this argument, finding that the government was not required to conduct the benchmarking exercise since the dialogue RFP process recognized that bidders were in a better position than the government to predict the volume levels required in the marketplace and to propose shipping solutions to meet those demands:
In my opinion the defenders were not obliged to carry out the benchmarking exercises which the pursuers posit. A fortiori it was not incumbent upon them to assess bids against a benchmark which assumed that all bidders must include capacity to carry the pursuers’ LoLo freight. One of the reasons the defenders used the competitive dialogue procedure was that they recognised that those operating in the ferry market were better placed than they were (i) to assess the levels of freight, including time sensitive freight, which a successful bidder would be likely to require to accommodate; and (ii) to identify appropriate solutions for the carrying of that freight. That was so both in relation to demand for freight in general, and to demand for time sensitive freight. The likelihood was that, rather than there being definitive and prescriptive answers, there would be (a) a range of possible conclusions from bidders’ assessment exercises and (b) a variety of acceptable solutions proposed to cater for the demand identified by those exercises. Some component factors were liable to vary from bidder to bidder. Thus, for example, the extent to which, if at all, a bidder anticipated obtaining/retaining the pursuers’ LoLo freight was a factor which would affect its assessment of the demand for the freight it would have to accommodate if awarded the contract. Bidders’ assessments of what was needed to accommodate time sensitive freight might well differ depending upon their determination of the types and volumes of freight which would truly need to sail on the day of presentation at port. Bidders’ understandings might well be more or less informed depending upon the extent and thoroughness of their investigations with the market prior to submission of their bids. It was inherent in the procurement process that more than one bid might comply with the tender requirements, but that each compliant bid might contain strengths and weaknesses relative to the other compliant bids.
The Court therefore concluded that the evaluation process was not arbitrary or subjective just because it failed to use volume benchmarking of anticipated needs to assess competing bids. As this case illustrates, while purchasing institutions are typically required to provide anticipated work volumes for most tendered contracts, when the required services are to be provided directly to the market, bidders may be in a better position than the tendering institution to anticipate potential work volumes and factor those assumptions into their bids. In such circumstances, the use of a dialogue RFP that allows for innovation by suppliers to solve market challenges may be the appropriate tendering format. In these circumstances, the typical means of evaluating bids against pre-set volume assumptions may not be an appropriate evaluation mechanism.
