Optima Health v DWP – A shake up in the world of evaluations?

Often, contracting authorities take the “safe” option when dealing with possible non-compliance of tenders: reject for fear of breaching transparency and equal treatment.

The Court of Appeal’s decision allowing Optima Health’s appeal challenges the idea that rejecting bids is the best option.

This article reviews the Court of Appeal’s decision and explores the implications.

Background

The Department for Work and Pensions (DWP) decided to call-off its requirements for occupational health services from a Framework Agreement. The framework set out “Framework Maximum Prices” which were the maximum prices bidders could charge for each individual service item. As part of the Invitation to Tender, (“ITT”) bidders needed to provide a Pricing Schedule, which had 133 service line items to complete.

The ITT stated that no service line-item prices in the Pricing Schedule were to exceed the Framework Maximum Price and: “any bids for any service line submitted to the Framework by invited bidders in excess of this [the Framework Maximum Price] will be discounted”.

Optima exceeded the Framework Maximum Price on 3 service delivery lines. DWP stated in the evaluation process it believed this was due to “cut and paste” errors.

The errors made a difference of 0.02% to the overall price submitted by Optima. Optima’s quality scores were significantly higher than the other bidders.

However, DWP excluded Optima’s bid on the basis that the ITT said bids would be ‘discounted’ if the pricing was higher than the Framework Maximum Prices, and it interpreted ‘discounted’ as ‘excluded’.

Key Issues

1. Mandatory Exclusion Provision: Whether the ITT contained a mandatory exclusion provision for bids exceeding the Framework Maximum Prices;
2. Clarification of Errors: Whether DWP was entitled or obliged to seek clarification of errors in Optima’s bid;
3. Requests for Clarification: When does a change become substantial or a new bid; and
4. Rationality and Proportionality: What is the proposed approach contracting authorities should take when faced with errors (or ambiguities) in tender submissions.

Mandatory Exclusion – Was there a clause?

The Court considered whether the term ‘discounted’ was a ‘clear, precise and unequivocal’ description for exclusion. DWP had expressly set out other exclusion grounds in their tender documents, so what did ‘discounted’ mean, and was that clear to a bidder?

The Court considered there not to be a mandatory exclusion for pricing. The words ‘exclusion’ and ‘disqualified’ were used elsewhere in the ITT to signify exclusion from the procurement. The word ‘discounted’ was used elsewhere to indicate reduction of price. Therefore, the Court considered it reasonable for a bidder to interpret ‘discounted’ in this circumstance as ‘reduce’, and would expect the above Framework Maximum Price service lines to be reduced, as opposed to the whole bid being excluded.

Clarification of Errors – A Failure to Exercise Discretion

The Court stated that where the error must be obvious to the contracting authority, it needs to consider whether the error is material to the final outcome of the competition. If it is, clarity should be sought from the bidder. Where the error is not material, no further action is necessary.

But for the error, Optima would have been the clear winner of the competition. Had DWP sought clarity about the erroneous values, Optima would have won the competition. The error was therefore material to the outcome and clarity should have been sought.

The Court clarified that contracting authorities do not have a duty, let alone an obligation, to consider seeking clarification unless there is an obvious and material error or ambiguity in the tender. The contracting authority is entitled to assume, at first instance, the bidders have submitted accurate bids. However, if an error becomes obvious, and it may be material to the outcome of the competition, it is likely that the contracting authority will be obliged to seek clarification so that it can properly evaluate tenders.

Request for Clarification – Changing the bid

A bidder cannot use the clarification as a mechanism to submit a new bid or make substantial changes to the existing bid.

As the Court accepted, what had to be avoided were changes to the bid which improved the errant tenderer’s prospects of success in the competition, and it is important to prevent a tenderer having “a second bite at the cherry”.

The Court considered that by reason of the obvious error, “the figure originally intended was not in the bid”. It also pointed out that on the particular facts of this case, the contracting authority had in its possession the Framework Maximum Prices, so it already knew the maximum amount which Optima was entitled to charge for these services.

Rationality and Proportionality

The Court determined that if there are different courses of action a contracting authority can take when contemplating exclusion, they should choose the least onerous one for the bidder. Where there is the option to exclude or clarify with the bidder, the contracting authority must clarify.

What does this mean?

Contracting authorities and the Courts have often been unforgiving of even minor errors in tenders. This case is a notable warning that a blanket approach is not reasonable or acceptable.

It is particularly striking, given that the error concerned price, and given some of the comments by the Court, it is unsafe to assume that very significant errors (such as a price of £23m instead of £2.3m) cannot be corrected.

Nevertheless, bids cannot be simply re-written, and the Court was clearly very attracted to the fact that the contracting authority knew the maximum price that Optima was permitted to bid. This may even have been pivotal to the judgment.

Some points for consideration by contracting authorities:

1. Say what you mean and use terms consistently, especially when addressing the consequences of non-compliance with submission requirements. Had the contracting authority used the term ‘exclusion’ instead of ‘discounted’, in accordance with the rest of the tender documents, this case may have had a different outcome. This is the second case in recent years where the contracting authority has not been clear enough about the intended consequences of non-compliance;
2. Carefully consider alternatives to exclusion and keep accurate records of any decisions made; and
3. If, at evaluation stage, the contracting authority thinks there is an error in the tender submission that could be quickly and easily corrected, and it may be material to the outcome of the competition, seek clarification.

In conclusion, it seems the ruling is pragmatic in its approach as it is trying to uphold the principles of fair competition. It demonstrates it is vital that tender documents are drafted conscientiously, and all options are considered when contemplating whether to exclude a bidder.

Nicola Cullen

Associate

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