20/02/2019
This series of articles draws on our disputes experience and identifies 7 common Procurement Pitfalls. When we advise on procurement challenges we tend to find the same types of problems, irrespective of the sector in which they arise. Often these are problems which emerge from the content of the tender documents, and which lead to problems for evaluators. The objective of these articles is to forewarn so that early thought can be given to avoiding these issues.
We will be focussing on:
- Price/evaluation methodology
- Waiving requirements
- Imposing unreasonably high requirements
- Debriefing
Our third Procurement Pitfall is on overly restrictive threshold requirements.
Procurement Pitfalls 3 – Overly restrictive threshold requirements
This is an issue that commonly crops up in procurement challenges. Contracting authorities set qualitative thresholds for bidders in order to ensure the right standard of delivery, but upon receipt of bids discover the overly restrictive nature of those thresholds. Contracting authorities then often recognise the benefits of keeping competition as wide as possible rather than disqualifying bids on the basis of what appear in hindsight to be less than vital failures to achieve minimum scores. Mr Justice Fraser in the EnergySolutions case[1] was very scathing of the authority’s argument in that case that they should be permitted to “lean against disqualification” in order to increase competition by keeping bidders in who might have been disqualified on a strict interpretation of threshold requirements.
We have set out below some examples of the use of overly restrictive threshold requirements, and how these can be adapted.
Example 1
Extract from the instructions to tenderers in a procurement run using the Competitive Procedure with Negotiation (CPN):
“If a Tenderer scores less than 40% for any of the questions then that Tender shall not be considered further and the Tenderer shall be eliminated from the procurement.”
What happens next?
Five bidders submit Initial Tenders in response to the invitation to submit initial tenders. The contracting authority has not reserved the right to award the contract on the basis of the initial tenders, and has stated an intention to negotiate with the top three bidders prior to requesting final tenders.
Four of the five bidders obtain scores of less than 40% of the available marks for at least one question, and in two cases a score of less than 40% is awarded for only one question. However, the contracting authority is very keen to ensure that competition in the negotiation phase is maintained, and feels that because two of the bidders only missed out on one question each, neither of which is felt to be particularly material, the scores for these two questions should be increased to 40% to allow three bidders through to negotiation.
What should the authority do?
Acting transparently and in accordance with its duty of equal treatment, it must exclude all four bidders who failed to achieve a score of 40% for every single question. It can maintain a pretence of competition in the negotiation phase with the remaining bidder, but in reality may find that its ability to exert appropriate pressure may be lessened.
What would resolve this problem in the future?
Particularly in a procedure such as CPN or competitive dialogue that permits bidders to improve their bids during the process as a result of negotiations/dialogue, contracting authorities should exercise caution about setting absolute requirements after the selection stage, and should instead rely on the ability to de-select (in accordance with a published methodology) based on overall scores.
Example 2
Extract from an ITT:
"Question 4 - Your response must describe:
- details of governance and contracting arrangements you will have in place with any sub-contractors;
- how you will ensure smooth mobilisation of the contract, with particular reference to how you will manage the equipment handover; and
- the arrangements for staff training.
To achieve a score of 3 or above your response must as a minimum cover all of the above aspects.
Bidders must achieve a score of 3 or above for Questions 1, 4 and 8 to continue in the evaluation. Those bids not achieving this score for these questions will be excluded from further evaluation.”
What happens next?
Four bidders submit tenders, including the incumbent provider, whose response to question 4 omits any reference to the management of equipment handover on the basis that if it were successful this would not be relevant.
What should the authority do?
On the basis of the clear instructions in the tender documents, the authority arguably ought to exclude the incumbent provider, because it has not covered all of the aspects of question 4, which expressly stated that bidders were particularly required to explain the process for equipment handover. However, the authority must also consider whether any wider requirements (including the duty to act proportionately) affect its obligations here. Is it possible to waive this requirement in relation to the incumbent bidder given their unique position of not having to worry about equipment transfer? There is at least a risk that the Courts would not look favourably on the authority waiving this clear requirement for one bidder, as the incumbent bidder could easily have “addressed” the point by stating that as incumbent there would be minimal requirement for equipment handover. After all, the bids will of course be marked anonymously and the evaluator may not otherwise be aware that it is marking the bid of the incumbent.
What would resolve this problem in the future?
This is a good example of a failure to think through the likely responses to a particular question to ensure that the wording of the question will not tie the authority to take an overly restrictive approach to its scoring and evaluation. It would be best to include some wording to enable the authority to retain some discretion:
To achieve a score of 3 or above your response must cover all of the above aspects that are relevant to your bid. If a particular aspect is not relevant to your bid you must identify and explain this.
Bidders must achieve a score of 3 or above for Questions 1, 4 and 8 to continue in the evaluation. Those bids not achieving this score for these questions will be excluded from further evaluation.”
Our specialist procurement litigation team frequently bring and defend court challenges, both for suppliers and contracting authorities. In the past year alone, we have advised on a range of disputes covering health and social care, infrastructure and development, waste collection and disposal, pathology, defence and telecommunications.
[1] EnergySolutions EU Ltd v Nuclear Decommissioning Authority [2016] EWHC 1988 (TCC)
