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 October 2016 decision in DEM-Master Demolition Ltd v. Renfrewshire Council as Lead Authority for Scotland Excel, the Scottish Court of Session upheld the rejection of a bidder for failing to properly submit its pricing forms and ruled that the purchasing institution was under no duty to allow the bidder to cure that defect after the bid deadline. The dispute dealt with a tendering process for the provision of demolition services to Scottish public authorities under a framework agreement. The works were divided into three lots. The complainant submitted a bid for all three lots. However, it failed to provide the required percentage figures for overhead and profit for the first two lots and submitted a blank pricing form for the third lot. The purchasing authority notified the complainant of these omissions after the bid deadline and the complainant immediately provided the missing information. However, its bid was rejected as late. The complainant brought a legal action seeking to set aside its disqualification.
As the Court summarized, the bid irregularities were due to human error on the part of the bidder’s staff (referred to as the “pursuer” in the decision) and were not caused by any issues that could be tied to the purchasing authority or its tendering procedures:
The pursuer’s tender submission
In the pursuer’s tender submission, the boxes in sections 3.2.3 and 3.2.4 (for Lot 1) and sections 3.3.3 and 3.3.4 (for Lot 2) were left blank. As regards Lot 3, the Commercial Offer spreadsheet received by the defender along with the pursuer’s tender was a blank template. The tender was submitted by Ms Diane Irons, the pursuer’s Bid & Community Liaison Manager. In her affidavit Ms Irons noted that the pursuer had found the tender confusing as to what pricing information was required. She was also led to believe that if any necessary information was omitted when a tender was submitted, it would be rejected automatically by the defender’s system. That was not in fact the case; the defender’s automatic system could not be used for this tender because tenderers were not obliged to bid for all three lots. Most importantly, however, Ms Irons confirmed that despite these uncertainties, the omission of responses to questions 3.2.3, 3.2.4, 3.3.3 and 3.3.4 was not deliberate. She had intended to answer all questions. The omission of answers to these questions was an error. She had also intended to submit a completed spreadsheet in respect of Lot 3 and could not understand how it had come about that a blank template was attached to the pursuer’s tender. When the omissions were drawn to her attention it took little more than an hour to provide the required information, which did not differ from that provided for the abortive First Framework Agreement. The pursuer does not seek to contend that there was any electronic fault in the defender’s tender submission process.
However, notwithstanding this error, the complainant asserted that it should be allowed to repair its bid after close since, if its bid was rejected, it would lose most of its current work for a two- to four-year period and this would force it to lay off employees:
Effect on pursuer of exclusion from the framework agreement
According to the affidavit of Mr Richard McCulloch, the pursuer’s Managing Director, it is very unlikely that the pursuer will obtain work from the vast majority of councils in Scotland if it is excluded from the framework agreement for the next two, and possibly four, years. Work for councils represents about 60% of the pursuer’s turnover and employees will have to be made redundant. The pursuer is the preferred demolition contractor of a number of councils.
In support of this claim, the complainant argued that the rejection of its bid breached the principles of proportionality under Scottish and European procurement law:
Argument for the pursuer
On behalf of the pursuer it was submitted that the principle of proportionality was a general principle of EU law requiring a two-step enquiry, namely (i) whether the measure at issue was appropriate for attaining the objective pursued, and (ii) whether the measure at issue went beyond what was necessary to achieve the objective. By virtue of regulation 4(3), the award of contracts in the context of public procurement had to comply with this principle.
In the present case, on a proper application of the principle, the defender ought to have allowed the pursuer to correct its tender submission by providing the required percentages and a completed commercial spreadsheet after its errors had been brought to its attention. Reference was made to the judgment of the Court of First Instance in Tideland Signal Ltd v European Commission [2002] ECR II-3785, paragraphs 39-43. The omissions were obvious and easily corrected errors causing minimal disruption and delay to the procurement process. Nor was correction of errors precluded by the EU principle of equal treatment. In Ministeriet for Forskning, Innovation og Videregående Uddannelser v Manova A/S [2014] PTSR 254 (Case C-336/12), the Court of Justice had held that the principle of equal treatment did not preclude a contracting authority from requesting the correction or amplification of details of such an application, on a limited and specific basis, provided that (i) the request related to particulars or information, such as a published balance sheet, which could be objectively shown to predate the deadline for applying to take part in the tendering procedure, (ii) the contract documents did not expressly state that the application would be rejected unless such documents were provided, and (iii) the request did not unduly favour or disadvantage the candidate or candidates to which it was addressed. Those requirements were met in the present case. Paragraph F of the Information and Instructions to Tenderers had reserved a wide discretion to the defender to clarify information supplied by tenderers.
As regards domestic authorities, the law was summarised in principles discerned by HH Judge Waksman QC in R (Harrow Solicitors and Advocates) v Legal Services Commission [2011] EWHC 1087 (Admin). Applied to the circumstances of the present case, those principles required the defender to exercise the power reserved in paragraph F to seek clarification by the pursuer of the obvious errors in the tender submission. Reference was also made to the judgment of Carr J in R (All About Rights Law Practice) v The Lord Chancellor [2013] EWHC 3461 (Admin). The circumstances of the present case were very different, and if Carr J’s approach was adopted here the defender’s decision was demonstrably disproportionate. There was no risk of abuse by a tenderer seeking to improve its original bid. The public interest favoured not excluding a potentially advantageous tender.
However, the Court rejected these arguments, finding that the case law authorities relied on by the complainant could be distinguished from the facts of the disputed case and that the cited authorities did not stand for the proposition that rejecting the non-compliant bidder offended the principles of proportionality:
Was the defender’s decision disproportionate?
The authorities: review
The Tideland Signal case concerned a project put out to tender by the European Commission after a previous tender procedure had been cancelled. Tenderers were obliged to remain bound by their tenders for 90 days from the submission deadline. In its tender submission for the new procedure, Tideland Signal inadvertently retained the date for remaining bound that had been contained in its previous tender. As this was less than 90 days after the submission deadline in the new procedure, the tender was rejected by the Commission. The Court of First Instance held that the decision to reject without seeking clarification of the intended period of validity of the tender was clearly disproportionate. At paragraph 39, the Court observed:
The principle of proportionality requires that measures adopted by Community institutions do not exceed the limits of what is appropriate and necessary in order to attain the objectives pursued and that where there is a choice between several appropriate measures recourse must be had to the least onerous…
The Court noted that Tideland’s tender documentation had stated in two other places that the tender remained valid for 90 days. This was therefore a case of ambiguity which the principle of good administration required the recipient of the tender to resolve. As regards the principle of proportionality, the recipient had a choice between two courses of action, either of which would have resolved the obvious ambiguity, and was bound to select the less onerous one.
In the Manova case, the invitation to tender required tenderers to include a copy of their most recent balance sheet with their application. Two tenderers failed to comply with this requirement until requested by the contracting authority to do so, after the submission deadline. They were both subsequently awarded contracts. The awards were challenged by Manova, an unsuccessful tenderer, on the ground that the contracting authority had acted in breach of the principle of equal treatment. The Court of Justice referred to certain requirements laid down in SAG ELV Slovensko and Others [2012] 2 CMLR 36 (Case C-599/10) to mark the bounds of a contracting authority’s right to request clarification of a tender, including the general rule that the contracting authority must treat tenderers equally and fairly, in such a way that the request does not unduly favour or disadvantage the tenderer or tenderers to whom it is addressed. The Court then stated (at paragraphs 39-40):
…A contracting authority may request the correction or amplification of details of such an application, on a limited and specific basis, so long as that request relates to particulars or information, such as a published balance sheet, which can be objectively shown to pre-date the deadline for applying to take part in the tendering procedure concerned.
However, it should be explained that this would not be the case if the contract documents required provision of the missing particulars or information, on pain of exclusion. It falls to the contracting authority to comply strictly with the criteria which it has itself laid down (see, to that effect, Commission v CAS Succhi di Frutta [2004] ECR I-3801 (Case C-496/99 P), paragraph 115).
The Manova case has nothing to say about the principle of proportionality, being concerned rather with the principle of equality of treatment and the obligation of transparency.
As the Court noted, a common thread running through the English case law recognized that the courts should only interfere with tender rejection decisions in exceptional circumstances, and that the principle of proportionality needs to be balanced against the duty of fair and equal treatment to all bidders:
If there is a common thread running through the English domestic authorities, it seems to me to be that the court should only interfere in exceptional circumstances with a contracting authority’s decision to reject a non-conforming tender. In JB Leadbitter v Devon County Council (above), tenders required to be accompanied by four completed case studies. Leadbitter submitted its tender electronically a few hours before the deadline but then realised that it had not included the case studies. Although these had been prepared and were ready to send, it was not possible to add them before the deadline to the already-submitted electronic tender. They were sent by email to the contracting authority 26 minutes after the deadline. The contracting authority rejected the tender. David Richards J held that the contracting authority had not acted disproportionately, for the following reasons:
…a deadline for the submission of tenders and that a deadline is a deadline. The [invitation to tender] could not have been clearer on the requirement for a single upload and submission before the deadline, and the claimant’s witnesses readily accepted that they knew this was the requirement. In addition, there are clear statements of policy and practice in Devon CC’s code of business conduct that late tenders are not considered… As well as the deadline, the other key elements of submitting tenders, such as the requirement for a single submission and the lack of provision for changes to submitted tenders, were clear and well understood by the claimants, as their witnesses’ evidence made clear. Fairness to all tenderers, as well as equal treatment and transparency, required that these key features should be observed.
There may be circumstances where proportionality will, exceptionally, require the acceptance of the late submission of the whole or significant portions of a tender, most obviously where, as noted by Professor Arrowsmith [The Law of Public and Utilities Procurement (2005), para 7.96], it results from fault on the part of the procuring authority. But in general, even if there is discretion to accept late submissions, there is no requirement to do so, particularly where, as here, it results from a fault on the part of the tenderer. In addition to the considerations already mentioned, the particular facts on which the claimant relies to characterise its case as exceptional would require investigation and determination by Devon CC and I do not see that it was required to undertake those tasks. In my judgment, the decision of Devon CC to reject the claimant’s tender was well within the margin of discretion given to contracting authorities.”
The case affords a useful illustration of the potential for conflict between the principle of proportionality on the one hand and the principle of equal treatment on the other. It also emphasises the respect that should be accorded by the court to a decision made in exercise of the contracting authority’s discretion.
The Court also considered another case where a bidder had mistakenly submitted a blank form. In that case the purchasing institution’s decision to reject the bid as non-compliant was upheld in a resulting legal challenge since the court ruled that the general fairness duties owed to specific bidders must yield to the general duty of equal treatment owed to all bidders:
The case of R (Hoole & Co) v Legal Services Commission (above) is of interest for present purposes because it concerned the inadvertent submission of a blank form in the commercial envelope section of the applicant’s tender. Upholding the contracting authority’s decision to refuse to allow the tender to be amended after the deadline, Blake J held that Tideland Signal was of no assistance to the applicant because there was no ambiguity in the bid, merely an uncompleted section of the form. Other factors mentioned were that the contracting authority was not to blame for the applicant’s failure, and that an overbroad exercise of the power to seek clarification would be contrary to the principle of equal treatment. It would have been unfair to rival tenderers to allow the applicant to amend its application by completing the commercial envelope. Blake J observed (paragraph 30):
Viewed entirely from the point of view of a public law duty to act fairly, it may well be that the exercise of a discretion to grant a benefit should be based on all matters that could or should be known to the authority, and that fairness might well include a reasonable opportunity to correct obvious errors without changing the fundamental nature of the bid submitted. It is after all in the public interest that a well-qualified and experienced provider of legal services in the field of immigration should be permitted to continue in business. However, any such duty is severely circumscribed where there is a competitive tender and an over-riding duty to treat all tenderers equally. Here for reasons that were not the responsibility of the defendant, the claimant had failed to supply the information that would have led them to being ranked in priority where there was competition for the award of [new matter starts]. Any general duty to give an applicant an opportunity to correct errors in the absence of fault by the defendant, yields to the duty to apply the rules of the competition consistently and fairly between all applicants, and not afford an individual applicant an opportunity to amend the bid and improve its prospects of success in the competition after the submission date had passed.
At paragraph 32, Blake J referred to a “judgment call” that must be made by the contracting authority as to how and when general fairness must yield to equal treatment.
The Court also cited other decisions that dealt with the rejection of bids with blank forms where the courts recognized that the rejection was not a disproportionate decision by the purchasing institution:
The two All About Rights Law Practice decisions (above) also concerned the inadvertent submission of a blank form (“the TIF”) whose completion was mandatory in terms of the information given to tenderers. In the second of the two decisions, Carr J listed her reasons for holding that the decision to reject the bid was not disproportionate as follows:
-
this was a non-responsive tender by the applicant;
-
the information for applicants made it clear that completion of the TIF was mandatory;
-
the TIF was of fundamental importance to the bid;
-
the TIF was singled out as the only mandatory form;
-
to allow submission of a completed form would have been effectively to allow submission of a new bid. This was not clarification of ambiguity or an obvious error;
-
a new bid would have disadvantaged others by reducing the pool of work available to other bidders;
-
the necessary information could not have been obtained from other material submitted by the applicant;
-
it was not clear that the remedy would be quick and easy;
-
the mistake could not be attributed to any fault on the part of the contracting authority;
-
to have allowed further submission would have jeopardised implementation, increased the administrative burden and created a risk of abuse;
-
the potentially harsh economic consequences for the tenderer should not induce the court to accommodate a failure to comply with a mandatory requirement of the bid.
In Harrow Solicitors (above), the applicant’s error consisted of erroneously answering a question in the tender form “no” rather than “yes”. Had it answered “yes” (as it claimed to have intended to do, and to have been entitled to do) it would have scored enough points to be awarded a contract. The principles discerned from previous case law by HH Judge Waksman QC were as follows:
-
All tenderers must be treated equally;
-
It would violate that principle and the principle of good administration in the tendering process if any tenderer were permitted to change its bid after bidding had closed;
-
If the awarding authority had a discretion to seek clarification about a bid from the tenderer, the Court would not normally interfere with the exercise of that discretion unless (a) it was exercised unequally or unfairly across the relevant bidders or (b) it was not exercised, yet it appeared to the awarding authority that there was an ambiguity or obvious error which probably had a simple explanation and could be easily resolved; seeking clarification in the latter case was required in order that consideration of what might be an advantageous bid should not be excluded; it would be for the awarding authority to determine whether the clarification exercise would be simple or not;
-
But any purported clarification must not amount to a change in the bid.
Judge Waksman added:
If the inability to proceed with a bid, which may be an advantageous addition to the competitive process, can be resolved easily and quickly it should be done, assuming there is no change to the bid or risk of that happening. If there is an obvious error or ambiguity or gap, clarifying it does not change the bid because, objectively the bid never positively said otherwise.
In having considered the applicable case law dealing with the submission of blank forms, the Court ultimately determined that there was no principle that entitled those bidders to rectify their errors after the bid deadline:
There was no principle that entitled a tenderer who had made an error which did not render it ambiguous or deficient on its face, but which was objectively verifiable, to have the tender rectified. Here there was no ambiguity or obvious error. Although the consequences of the mistake were very serious for the tenderer, the result was not disproportionate. Nor was proof of actual prejudice to other tenderers necessary in order to render proportionate a decision not to permit correction of the mistake.
Turning to the facts of the specific case, the Court determined that the principle of equal treatment weighed towards the rejection of the bid:
Application to the circumstances of this case
The only case to which I was referred in which the principle of proportionality was successfully invoked by a rejected tenderer was Tideland Signal. That case is of no direct assistance to the pursuer in the present case because it concerned what the Court of First Instance clearly regarded as a patent ambiguity in the terms of the tender. That is not, in my view, the same thing as a patent failure to comply with the instructions to tenderers. Although it may be likely that such a failure has occurred as a consequence of an error on the part of the tenderer, there could be other explanations. It might be an attempt to gain a competitive advantage, although there is no suggestion that that was so in the present case. But obvious error is not the only factor to which regard must be had in assessing whether the course adopted by the contracting authority was disproportionate. In particular, as I have already noted, there may be a conflict with the principle of equal treatment, and the thrust of the English case law, at least in cases where the problem has arisen through error on the part of the tenderer, is to accord priority to equal treatment.
…
It follows, in my opinion, that if the defender had acceded to the pursuer’s request to accept the figures and spreadsheet submitted late, there would have been a powerful case to be made by the successful tenderers that the defender had breached the principle of equal treatment. A contracting authority which acts in a manner necessary to avoid breaching that principle cannot, in my view, be said to be acting disproportionately.
Even if I were wrong in my view that the requirements of Manova were not met, I would in any event hold that the defender’s refusal did not constitute a breach of the principle of proportionality. Most of the reasons listed by Carr J in All About Rights Law Practice (paragraph 20 above) apply to the circumstances of the present case. The warnings attached to sections 3.2, 3.3 and 3.4 of the Commercial Envelope were clear and unequivocal. Completion of the Commercial Envelope was clearly regarded by the defender as a matter of fundamental importance, yet the combined effect of the pursuer’s errors was that no information at all was provided in that part of the tender. There was no ambiguity to clarify. Insertion of the information would in effect have amounted to a new tender; it was not self-evident that the pursuer would, if asked, supply figures and other data identical to that contained in the First Framework Agreement tender. There was no reason why the defender, in making its decision whether or not to reject the incomplete tender, should have assumed that the remedy would be quick and easy. It was not contended that the pursuer’s error ought to be attributed to fault on the part of the defender. To have allowed further submission might have jeopardised the tender, at least to the extent that one of the successful tenderers could reasonably have challenged such a decision as a breach of the principle of equal treatment. For these reasons, even if it was obvious that errors had been made by the pursuer, there was no duty incumbent upon the defender to afford the pursuer an opportunity to correct them after the deadline for submission of the tender had passed.
Nor, in my opinion, are these considerations outweighed by the adverse consequences for the pursuer in being excluded from the framework agreement. There are strong policy reasons for enforcing deadlines for submissions of tenders, including fairness to other tenderers and avoidance of risk of abuse. I note that in at least one of the English cases (All About Rights Law Practice), it was acknowledged that failure to obtain a legal aid contract would probably render the tenderers’ business unviable. The consequences for the pursuer in the present case are unfortunate but not such as to render the defender’s decision disproportionate.
In summary, having given extensive consideration to the arguments forwarded by the rejected bidder, the Court ultimately determined that there was no duty to allow bidders to correct bid omissions after the bid deadline and that only in exceptional circumstances would it be permissible to allow such post-bid corrections. Given that the bidding rules were clear and that omissions were attributable to the bidder’s errors, the principles of transparency and equal treatment owed to all bidders required the purchasing institution to reject the non-compliant bid and not permit the post-bid repair of that bid. As this case illustrates, the decision to reject a bid for non-compliance can give rise to complex legal challenges. Purchasing institutions should therefore ensure that their bid submission procedures are transparent and consistently enforced to help support the defensibility of bid rejection decisions.
