Case Note: Schools
Procurement Challenege
This case concerns the successful challenge by contractors who were excluded from
the tender competition for a place on the framework panel under the Northern Ireland
Schools Modernisation Programme (“NISMP”). The challenge was brought against the
Department of Education for Northern Ireland. The claimants’ succeeded in demonstrating
that the defendant by appointing panel members on the basis of fee percentages alone
was uncompetitive. The Court made its judgment on 3 October 2008, and a further
hearing is expected on the remedy to be provided.
The Facts
A consortium of building contractors (“the Claimants”) submitted tenders within
the Northern Ireland Schools Modernisation Framework Agreement for the provision
of construction works for the NISMP.
In the primary competition for the work, tender
submissions were considered by the Department of Education for Northern Ireland
(“the Defendant”). The Defendant identified the eight highest ranking contractors
and excluded the four lowest ranking contractors ie the Claimants. Following the
Claimants’ debriefing meetings with the Defendant, the Claimants wrote to the Defendant
notifying their intention to bring proceedings.
At issue was the method of rejecting the Claimants from the tendering process. The
Claimants argued that the Defendant had only requested limited information in the
tender documents about the price of the contract. The only price information taken
into account was the fee percentages of the tenderers in relation to hypothetical
contract values. The Claimants argued that by relying on fee percentages alone the
Defendant had no accurate assessment of outturn cost and so there was a failure
to satisfy the Most Economically Advantageous Tenders (“MEAT”) criteria as outlined
under the Public Contract Regulations 2006 (“the Regulations”). The Claimants highlighted
that the MEAT criteria specifically referred to the term “economically” and by ignoring
the price an accurate comparison between bids could not be achieved. The Claimants
further asserted that it was unrealistic to assume a consistency of costs amongst
different contractors and that the omission to consider costs was contrary to the
Regulations. The Claimants also contended that the Defendant’s actions were not
in accordance with the general principles of procurement law regarding transparency
and equal treatment, the general principles of competition law and the principles
of state aid. Furthermore the Claimants argued that the process amounted to a manifest
error of assessment.
The Defendant reasoned that when considering the MEAT criteria under the Regulations
a contract price was not necessary as costs would be similar for each contractor.
The Defendant realised that a determination of costs would be needed at a later
stage but did not deem it essential or a requirement of the Regulations at the primary
competition stage. Furthermore the Defendant argued that by assuming a constancy
of costs it eliminated any manipulation of the prices by any bidders seeking to
use unrealistic and unsustainable prices. The Defendant submitted that under legislation
and case law they had a wide discretion to choose the criteria which would determine
MEAT and such criteria must still be linked to the subject matter of the contract
to satisfy procurement law principles of transparency and discrimination. The Defendant
argued that criteria related to MEAT under S.30(2) of the Regulations was not exclusive
to issues of price and cost and could include aspects which were unrelated to such
issues, although a mechanism relevant to the establishment of prices would also
have to be included.
The Defendant also submitted that the Claimants’ claim was not within the required
time limits for bringing proceedings. The Defendant maintained that any alleged
breach of the tender process would have taken place when the tender documents were
first submitted to the tenderers. The Defendant argued that the timing of the alleged
breach meant that the claim was not brought within 3 months of the grounds for the
claim first arising as required under Regulation 47(7)(b). Furthermore the Defendant
contended under Regulation 47(7)(a) that any claim the Claimants were to have should
be restricted to the grounds set out in the Claimants’ original letter, rather than
those set out in the Statement of Claim, skeleton argument and oral hearings.
The Decision
The High Court held that the MEAT criteria can take account
of factors that are not purely economic in value, however the omission of price/cost
entirely would not be permissible. The Defendant’s decision to rely on fee percentages
in relation to hypothetical contract bands was found to be based on an inaccurate
assumption and amounted to a manifest error that costs would be the same in the
construction industry. A fee percentage in isolation would not give a guide to the most economic outturn price/cost, however, the use of detailed costings would not
always be necessary at the primary competition stage and fee percentages could still
be a legitimate pricing mechanism. The Court noted that to ensure compliance with
the Regulations and general procurement law, fee percentages could only function
in conjunction with the competitive establishment of specific prices/costs at the
secondary competition stage alongside a countercheck against abnormally low bids.
If fee percentages were used without the additional pricing information the tendering
process would be uncompetitive. The Claimants’ submission that the principles of
state aid were not complied with was found to underline this main issue rather than
act as a separate claim.
The Court held that the timing of the Claimants’ claim was within the limits set
out in Regulation 47(7)(b). It was found that the breach of the Regulations did
not take place until the procedure was implemented ie at the time that the Claimants
were excluded from the tendering competition and so proceedings were brought in
time. The Court continued this point by stating that even if the Court was wrong
in its interpretation of Regulation 47(7)(b) then the Regulation still allowed the
Court to award an extension of the time limit if there was good reason. It was held
that the Claimants would have good reason to be awarded an extension as firstly
the high levels of public expenditure for NIMSP required the legality of procedures
to be dealt with quickly, secondly as the procedures are those that will be used
by Government Departments they should be remedied quickly and thirdly that the extent
of the cases put forward by the Claimants and Defendant over the proceedings would
make it regrettable to determine the outcome on a limitation issue. Similarly it
was found that the real public interest in procurement meant that the Claimant’s
case could not be deprived by the jurisdiction issues argued by the Defendant under
S.47(7)(a). The Claimants’ case although more detailed and extensive than in their
original letter was not developed to such an extent as to limit the scope of the
claim as the Defendant contended.
|
For More Information Contact:
Graham Burns
TPP Law Limited
53 Great Suffolk Street
London SE1 ODB
t 020 7620 0888
f 020 7620 0778
e info@tpplaw.co.uk
Email:
Graham
For a full printable version
of this article please
click here
|