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 January 2016 preliminary decision in Johnson & Johnson Medical Ltd (t/a Depuy Synthes UK) v. Greater Glasgow Health Board, the Scottish Court of Session determined that the failure to clearly define a second-stage evaluation process under a framework agreement justified proceeding to a full trial. The dispute dealt with a second-stage tendering process for the acquisition of orthopaedic hip and knee products conducted by the Greater Glasgow Health Board under a framework agreement established by the National Health Services of Scotland. As the Court summarized, the solicitation contained significant ambiguities regarding the scoping of the opportunity and the evaluation of bids. The solicitation purported to allow the Board to keep its options open: (i) for a single award to the best combined bid for both the hip and knee products; (ii) for a dual award, with one award going to the best bid for the hip products, and a second going to the best bid for the knee products; or (iii) multiple awards to the best hip product bids and to the best knee product bids on a location-specific basis based on a ceiling price model. Furthermore, the Board purported to reserve the right to make the award decision(s) at its “sole discretion” and did not define how it would decide between the three award options:
Sections B2, B5 and G1 of the specification provided that the tender would have three options for award. These were stated to be: (i) one supplier for the majority of hip and knee products; or (ii) one supplier for the majority of hip products and one supplier for the majority of knee products; or (iii) one supplier for the majority of hip products per site and one supplier for the majority of knee products per site, based on a ceiling price model. Section G1 of the defenders’ specification provided that the defenders had sole discretion to choose which of the three award options was selected; the framework agreement and specification provided no additional guidance or criterion on how that discretion should be exercised, in order to choose among the three options.
To further complicate the matter, the Board then allowed one of the bidders to provide post-bid follow-up pricing even though the process rules did not allow for the repricing of initial price submissions. Unsurprisingly, the resulting contract awards faced multiple legal challenges. As the Court summarized, the complainant (who was referred to as the “pursuer” in the decision) scored highest for its combined hip and knee products bid. However, the complainant was only selected for partial award for the knee products category, while the competing bidder who was permitted to reprice its bid after the original submissions was awarded the hip products contract. After those results were announced, another unsuccessful bidder brought a legal challenge, which prompted the Board to rescind the knee products contract that was initially awarded to the complainant. The complainant brought a legal action challenging the entire process, maintaining that the Board failed to explain how it had evaluated the various options to arrive at its award decisions and asserting that the complainant should have won the entire contract as the best overall bid. The Court summarized the complainant’s argument as follows:
First, the tender documents did not specify how the defenders would decide on which of the three options it would choose. Despite being requested to do so, the defenders have not provided any further information on how they decided which option to choose. Each of the three options was scored separately. The scores spreadsheet prepared by the defenders shows that the pursuers gained the highest score for the combined hip and knee award in addition to the highest score for the individual knee award. When comparing like-for-like, the pursuers’ combined offering was not only the highest scoring of the combined bids, but was the most economically advantageous tender submitted, out of all of the possible options. On that basis alone, the pursuers should have been awarded the combined contract for hip and knee products. No standstill letter has been issued by the defenders in respect of their decision not to award the combined contract for hip and knee products to the pursuers, despite the pursuers’ combined tender being the most economically advantageous. The defenders did not issue scoring in relation to the combined tender, until 6 August 2014. The pursuers did not know that the defenders had scored bids jointly, until they reviewed the defenders’ tender evaluation files on or around 12 August 2014. Despite being requested to provide the pursuers with their reasons as to why their combined bid was not accepted, the defenders have failed to do so. In the absence of any such information, reason or criterion for choosing among the three options, the defenders have not complied with their duties of transparency and equal treatment and the duty to give reasons.
In support of its claim, the complainant asserted that the tendering process was treated as a single process, which should have resulted in a single award to the best overall bid:
Second, although there are separate framework agreements for hip and knee products, the mini‑competition was run as a single process, with a combined assessment involving consultants with specialisms in hips and/or knees. There was also a single presentation for hip and knee products. The single unified nature of the procurement process was emphasised by the option of awarding a single combined contract in respect of both hip and knee products. If the procurement process was not a single unified process, no such combined award could have been made. In such circumstances, if there were legitimate concerns regarding the knee products contract, the only lawful option open to the defenders was to abandon the whole of the unified procurement process. Accordingly, as the mini-competition was a single unified process, if Zimmer’s legal challenges were “not wholly unmeritorious” as is now averred by the defenders, the defenders required to abandon the whole of the unified procurement process as the process relating to hip and knee products would both be equally tainted by any unlawfulness identified by Zimmer. However, the defenders made a decision to abandon part only of the procurement process, which has resulted in their making an award which was not one of the three options contemplated in the tender documents for the mini-competition. The decision of the defenders to abandon part of a unified procurement process on the basis of a challenge from a losing bidder casts doubt on the integrity and validity of the whole process, and is a breach of the Community law principles of equal treatment, non-discrimination and transparency.
The Board’s lawyers countered by arguing that the Board had the right to “cherry-pick” bids when comparing the different options as between a single award, a dual award based on the knee and hip categories, or multiple awards based on separate categories across multiple locations:
Counsel submitted that, against that background, the pursuers’ complaint, that the tender documents did not specify how the defenders would decide on which of the three options it would choose, is “wholly incorrect” because it is evident from number 6/2 of process, the award criteria, that the defenders had decided to use the criterion of most economically advantageous tender. That, submitted counsel, is exactly what they did, by choosing the most economically advantageous hip tender and the most economically advantageous knee tender. The suggestion that what they intended to do and what they did was not specified or adequately explained or transparent, is “self-evidently entirely incorrect”, contended Mr Currie. The defenders made two things very clear. First, the criterion to be applied to bids was most economically advantageous and second, the defenders did not bind themselves to give the hips implant award and knees implant award to a single bidder. They retained the right to “cherry pick”.
The Court ultimately determined that the dispute needed to proceed to trial to resolve the evidentiary issues regarding the evaluation and ranking of the different bids, which raised “a disputed question of fact that can only be resolved after proof.” As this case illustrates, the failure to clearly define evaluation criteria and evaluation rules exposes purchasing institutions to protracted legal challenges to their evaluation and award decisions. Project teams should strive to clearly define the rules that will govern their evaluation decisions since leaving those rules undefined contravenes applicable transparency standards. The desire to leave options open in multiple award scenarios to “cherry-pick” bids based on undisclosed after-the-fact considerations can undermine the defensibility of any resulting award decisions.
