This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its January 2008 decision in McConnell Archive Storage Limited v. Belfast City Council, the Northern Ireland High Court of Justice, Chancery Division, dealt with a complaint launched by a bidder that had its contract award rescinded after the purchaser discovered that it had improperly ranked the bids. The dispute involved a tender call issued by the City of Belfast for the outsourcing of records management services for a five-year period. The plaintiff, McConnell Archive Storage Limited, was originally notified in a letter written by the City’s procurement manager that it had submitted the winning bid:
I am pleased to tell you that your tender for the above has been successful, subject to the ten working day standstill period as outlined in the specifications and to a Form of Contract being drawn up by Legal Services.
As the Court noted, the “standstill period” referred to in the City’s letter came from the regulation 32(3) of the UK’s Public Contracts Regulations 2006, which requires a ten-day waiting period after the announcement of a winning bidder and prior to the execution of a contract.
During that standstill period, the second-best bidder, Morgan Record Management, complained that the City had improperly evaluated its pricing information by calculating fifteen trips per week between the government office and its warehouse, whereas its bid proposed only five consolidated trips per week. In its letter to the City, Morgan maintained that the error materially impacted its score, since it increased the cost of its bid by £80,000:
We have looked at the spreadsheet and your scenario is incorrect as there are a number of very obvious and very significant errors in relation to journey charges, specifically in 3.2.1, 3.2.2, 3.4.1 and 3.4.2. For example 3.2.1 asks for 15 boxes per week within office hours next working day. As you have asked for next working day delivery and there are only 5 working days in a working week the maximum number of journey charges should be 5 not 15 as worked out in your figures.
The journey charges are applied on a per trip basis and not per department so for example all requests made on a Tuesday for next day delivery would be made on one trip on the Wednesday incurring only one journey charge. At no point did we say each department would be charged a separate journey charge.
3.4.1 and 3.4.2 asks for collections of boxes/files by the successful contractor and if you look at our tender response and my email to you of 31 May [referred to above] a journey charge would not be applied as boxes/files would be returned to us on the same delivery trip thus incurring no additional journey charge.
We estimate the total error to be in the region of £80,000 plus which would drastically reduce our overall cost.
The City acknowledged and corrected this error, resulting in a new ranking that knocked McConnell’s bid out of the top spot and put Morgan’s bid on top.
McConnell sued, advancing the following three arguments: (i) that it had already been awarded the contract and that it was too late to rescind that award; (ii) that Morgan’s alternative approach to weekly trips was outside of the format contemplated in the tender call; and (iii) that the City had breached the procurement rules by letting Morgan clarify the number of weekly trips after the original submission of tenders.
The Court was quick to dismiss the first argument, finding that the City was within its rights when it corrected the initial evaluation error, re-ranked the bids, and rescinded McConnell’s award in favour of Morgan’s bid:
I find that a contracting authority is at liberty during the standstill period, or an extension of the same, to re-open the contract assessment and award the contract afresh when it is satisfied that it is right to do so because the initial decision to award the contract to one economic operator was in fact grounded on illegality, bad faith or material unfairness or misinterpretation.
As the Court noted, the standstill period contemplated by the statutory scheme allowed for these types of corrections, to help ensure the proper administration of the procurement process.
The second issue turned on the interpretation of the structure of the pricing form. McConnell maintained that Morgan’s proposed consolidation of trips was outside of the pricing scheme originally contemplated in the tender call. The Court disagreed, noting that the relevant pricing schedule left some flexibility and allowed bidders to make adjustments in the way that they structured their proposed pricing. While this may have resulted in apples-to-oranges pricing comparisons, since bidders were bidding based on different assumptions, the Court determined that the tender call rules permitted this asymmetry in proposed pricing.
With respect to the third issue, the Court rejected McConnell’s assertion that the City had acted unfairly when it allowed Morgan to clarify that its pricing was based on fewer weekly trips. The Court found that these clarifications were a legitimate part of the standstill complaint process because they served to highlight the errors in the original scoring and ranking of the bids:
The plaintiff then makes a series of criticisms of what happened after Morgans learnt that the Council were proposing to award the contract to the plaintiff. The first of these complaints (5.11 of the skeleton argument) is that Morgans were allowed to provide new and additional information about their costs in relation to the frequency of journeys and the capacity of a single journey to subsume collections into deliveries. It will be recalled that an economic operator in the position of Morgans has a statutory right under Regulation 32 to make a request during a ten day standstill period for the reasons why that economic operator was unsuccessful and the contracting authorities are under a duty to provide such information. It must be an inherent part of the operation of this system, given the finding I have made on the plaintiff’s principal point, that a disappointed economic operator such as Morgans is entitled to comment on the reasons for their rejection and draw attention to a material error, if such exists, on the part of the contracting authority. Therefore generally the court would be slow to criticise a contracting authority in the exercise of its discretion (see Regulation 32(13)) as to the disclosure of information to the disappointed operator or the receipt of information from it.
The Court also found that the City was under a statutory duty to seek the most economically advantageous outcome and that this duty called for the clarification of ambiguities in pricing proposals:
I note that the Council also relies on paragraph 22 of the Instructions and Information For Tenderers regarding arithmetical errors in support of its case. It also relies on the decision of this court in the Arc 21 case as authority for the proposition that clarification of a bid by a tenderer is permissible. It must be borne in mind that the overall purpose of these regulations is to ensure that public bodies discharge their procurement duties in as efficient a way as possible, unclouded by any bias or error. It is therefore right that they can seek and that a tenderer can provide clarification. I acknowledge Mr Maguire’s argument that Morgans may not have made it crystal clear originally what they had in mind. However given the unchallenged evidence that their approach is customary industry practice and the duty on the contracting authority to achieve the most economically advantageous outcome I do not see that as a ground for quashing this decision by the Council.
Having failed on all three arguments, McConnell’s claim was dismissed and the rescission of its contract was upheld.
While the City successfully defended itself from legal challenge, this case serves as a useful study of the risks inherent in open-ended pricing structures. By allowing bidders to make variations to their proposed performance and pricing, the City opened its evaluation process to interpretive dispute. To ensure that all bidders are submitting pricing based on the same assumptions, you would be well served to draft clear pricing forms that align pricing structures to fixed baseline performance requirements. The failure to do so can undermine the transparency of your tendering process and the defensibility of your pricing evaluations.
