Earlier this month the United Kingdom Technology and Construction Court1 considered a legal challenge to a tender evaluation process conducted by the Milton Keynes Council. In his judgment, Justice Coulson was highly critical of the way in which the Council conducted the tender evaluation.
The Court found:
- the Council failed to properly document its decision making and its evaluation of tender responses against the evaluation criteria
- the Council’s evaluation process was so flawed that a different outcome should probably have ensued.
This article considers key aspects of the flawed tender process and considers how the Commonwealth Procurement Rules might apply were these issues to arise in a Commonwealth procurement process.
The Milton Keynes Council (Council), the defendant in this case, conducted a tender process to select a contractor to undertake asbestos removal and site remediation services. The potential contract value was some £8 million over four years.
Five tenderers bid. The plaintiff in these proceedings, Woods Building Services (Woods) submitted the cheapest bid but was not successful. The successful tenderer was rival, European Asbestos Services (EAS), which was strongly evaluated on quality aspects.2 Woods was the incumbent.
Woods challenged the outcome of the Council’s tender process on a number of grounds, including alleging that:
- there was a lack of transparency in the process and in the outcomes
- the Council did not treat the tenderers equally
- the Council made manifest errors in conducting the process and in evaluating the tender responses.
While not agreeing with the arguments raised by Woods on all counts, Justice Coulson of the English Technology and Construction Court (Court) substantially found in favour of the plaintiff and strongly suggested the selection of EAS over Woods should be reversed.3
So what went wrong, and how should a number of those issues be dealt with under the Commonwealth Procurement Rules (CPRs) if they were to arise in a Commonwealth procurement process?4
First of all, transparency. The CPRs recognise that transparent decision-making is a key element needed to achieve a value for money outcome in Commonwealth procurement. See for example CPRs, rule 4.4(c).
Transparency requires, among other things, appropriate documentation of decisions made by the procuring agency regarding the procurement.
CPRs rule 7.2 sets out relevant requirements, including that documentation should provide ‘accurate and concise information on… relevant decisions and the basis of those decisions’ (see CPR 7.2e). Adequate documentation of decisions also supports debriefing activities under CPRs rule 7.15 and is important in assisting procuring agencies deal with any disputes or issues raised in respect of the tender process.
In the UK case, the Court was highly critical of the Council’s failure to properly document its decisions and the reasons for them. Justice Coulson noted that, despite there having been three tender evaluation stages – the initial evaluation, followed by two internal reviews – ‘the process produced next to no contemporaneous documentation or notes’. (More about the internal review process below).
What written records there were tended to amount to no more than a paraphrasing or repetition of the relevant selection criteria – there was no statement of reasons as would be required to satisfy the achievement of transparent decision-making as set out in the CPRs.
The Council’s failure to prepare adequate documentation meant it could not fully respond to a challenge made by Woods to the decision-making process, following which the Council found itself involved in these proceedings.
Take Home #1:
Adequate documentation of decisions made in connection with the procurement process, and the reasons for those decisions, is key.
It is unlikely to be sufficient for the purposes of the CPRs, to simply paraphrase or repeat the text of the relevant criterion. Rather, officials conducting procurements should ensure logical and robust reasons for the relevant decision are detailed.
Conflicts of interest
Identification and management of conflicts of interest is critical to the integrity of any procurement process. This is recognised in the CPRs (see for example, CPRs, rules 6.5 and 6.6).
In the UK case, Justice Coulson identified a number of areas of concern in this regard.
First of all, Justice Coulson was concerned about the involvement in the evaluation of a former employee of one of the tenderers (Woods, the plaintiff). Justice Coulson thought this person should not have been involved in the evaluation. The reasons for his concerns in this regard are not given in the judgment, but presumably Justice Coulson thought this person’s previous employment relationship at the very least gave rise to a reasonable apprehension that the evaluation process would be biased – whether for or against Woods.
Take Home #2:
Ensure the procurement process includes mechanisms for the identification, disclosure and management of any interests that may represent an actual or perceived conflict with a person’s role in the procurement process. This is particularly critical for members of the evaluation team.
The CPRs also address the fair, equitable and non-discriminatory treatment of tenderers in procurement processes (see for example, CPRs rules 4.4a and 10.8). This applies throughout the procurement process but particularly during evaluation.
In the UK case, Justice Coulson reviewed the tender responses themselves and was clearly troubled by the inequitable approach to evaluation taken by the Council, which resulted in the Council’s apparent preference for or bias toward EAS over Woods.
First of all, the tender response prepared by EAS appeared to be inferior. Justice Coulson felt that, on the whole, the EAS response was ‘almost studiedly vague’, aspirational in tone and ‘light on detail’.5 Justice Coulson went so far as to express the view that in its response, EAS ‘commits to and promises nothing’.6 By contrast, Justice Coulson felt the Woods response ‘could fairly be said to bristle with detail and comment’.7
Secondly, the Council appeared to prefer EAS to Woods. Justice Coulson felt the Council’s response to Woods’ complaints about the evaluation process was ‘motivated by a simple desire to stick with EAS, whatever the circumstances’8 and remarks that ‘after the first flawed stage of the process, the EAS tender was regarded by Council as being in pole position, a position which it never properly reviewed’.9
Justice Coulson suggests that when the results of the tender evaluation were made known to Council management, Council management itself was concerned the incumbent had not won, despite tendering the lowest price.10 An internal review process then commenced, but then it appears error began to pile up upon error. Rather than undertaking a review from scratch, the initial evaluation was reviewed and revised. While the gap between Woods and EAS narrowed as a consequence of this review, EAS remained the preferred bidder.
Justice Coulson felt that by taking the initial evaluation as a benchmark, the review ‘was inevitably going to start with the subconscious assumption that the EAS tender was better than the Woods tender’.11 In fact the Court expressed a concern that this ‘subconscious assumption’ had not only resulted in a flawed review process but had ‘informed the Council’s approach throughout’.12
Take Home #3:
A tender process must be genuine and fair in the sense that all respondents are treated equitably. Those involved in evaluation should ensure they do not assess tenders on the basis of pre-conceptions about the outcome, or with the intent of excluding a particular respondent (eg, an incumbent with which the procuring agency may have become dissatisfied). This also applies to the ultimate decision-maker.
A second aspect of fairness and equitable treatment considered by the Court relates to the drafting, and disclosure to tenderers, of evaluation criteria. CPRs rule 7.10 states that evaluation criteria should ‘enable the proper identification, assessment and comparison of submissions on a fair, common and appropriately transparent basis’. In the UK case, in contrast, the Council applied evaluation sub-criteria that had not been disclosed as part of the evaluation criteria published in the RFT documentation. Section 6.3 of the judgment13 provides a good illustration of this error. The relevant request for tender question asked each tenderer to ‘specify the members of [its] delivery/project team, including their roles and responsibilities’. EAS was ranked higher against this requirement than Woods. The reason for EAS receiving a higher score was the Council’s perception (a perception that the Court found was not supported by the relevant tender responses) that EAS was offering a dedicated project manager. The Council apparently placed significant weight on the contractor providing a person to be responsible for the work on a day to day basis, but this was not specified as an evaluation criterion (or sub-criterion) in the RFT documentation.
Justice Coulson stated as follows:
‘In my view, if this was an important matter to the Council, such as to justify giving different scores… solely on this basis, then it ought to have been disclosed in the scoring criteria. I find that the failure to do so was a breach of the rule as to transparency… It was an undisclosed sub-criterion.’14
Take Home #4:
All criteria used to evaluate a response should be disclosed to tenderers in the RFT documentation. The evaluation team must not introduce additional considerations into its evaluation where respondents have not been asked to address those considerations in their tender responses.
In the UK case, the Council applied scores based on a table15 ranging from:
- zero points for a response that did not meet tendered requirements and/or was unacceptable or contained insufficient information to demonstrate the tenderer’s ability to deliver the services, to
- ten points for a response ‘meet[ing] requirements to a very high standard with clear and credible added values and/or innovation’.
It is a common practice to score evaluations on the basis of applying numbers to the evaluation of individual criteria and to overall outcomes. Such scoring provides a readily accessible snapshot of the outcomes of an evaluation process and facilitates the ranking of respondents in order. However numbered scoring is not without its potential pitfalls if misused, as this case demonstrates.
A great deal of care needs to be taken to ensure scores applied have a justifiable and transparent basis to be found in the procuring agency’s written reasons. Numbered scoring is not a mechanism for giving effect to substantive views or emergent preferences for one bidder’s response over another’s. An example from this case is illustrative. One of the evaluation criteria asked respondents to provide details of their ‘proposed communication procedures in relation to the requirements of the contract’.16 Despite some significant omissions from the EAS response against this criterion, the Council gave EAS the highest possible score of 10. By contrast, the Council gave Woods a score of six. No reason for this differential was given in the Council’s written evaluation (and tellingly, no rational explanation was given by the Council for the different scores in the ensuing proceedings). In comparing the two responses, the Court felt the Woods response was ‘more detailed’17 and in fact ‘better’18. The Court reduced the EAS score so both respondents were awarded six points against this criterion.
Another issue to be careful of when using numbered scoring is to ensure that scoring is properly applied in accordance with scoring criteria. A failure to do so will result in manifest error in the evaluation process.
Justice Coulson notes such scoring criteria can ‘suggest a degree of rigidity which may not [be] the intention’,19 indicating careful consideration needs to be given to how such criteria are drafted to ensure they do not result in unwanted inflexibility. In this case it appears significant inflexibility arose from the requirement to award zero points where a response had any of the characteristics referred to above.
The Court was unhappy with the way the Council applied its own scoring system. In a number of cases, it reduced quite high scores given by the Council to certain EAS responses to zero.20 Other EAS scores were reduced by the Court. The result of the Court’s adjustments to the scores was to decrease EAS’s overall score from 104 to 64 and to increase Woods’ score from 88 to 94. Thus EAS went from clear winner to clear runner up, in the Court’s view.
Take Home #5A:
Numbered scores must be supported by written reasons and objective explanations.
In particular, where scores for respondents against one criterion vary, the scores given must be specified and supported by a logical explanation of the reasons for the differing scores.
Take Home #5B:
The basis for numbered scoring must be correctly and consistently applied. Overly restrictive or inflexible definitions for scoring criteria should be avoided.
There is a strong inference in this UK case that the Council was, from the beginning, predisposed to selecting EAS over Woods. Thus from the outset, the process could probably not have been conducted with a high degree of integrity. The failure by the Council to properly document decisions does not of itself prove this was the case but such failures:
- probably led to Woods being dissatisfied with the Council’s account of itself, leading to this litigation
- prompted the Court to be “sceptical”21 about the Council’s evaluation.
The Commonwealth Procurement Rules include requirements intended to ensure issues such as those identified in this case do not occur in Commonwealth procurements. If only one lesson is drawn from the unhappy experience of the Milton Keynes Council in this process, it should be that numerous issues arising in a procurement process can completely undermine the integrity of the process, and the confidence the public and tenderers have in the procuring agency’s decision-making.
1. High Court of Justice, Queens Bench Division, Technology and Construction Court – see Woods Building Services and Milton Keynes Council  EWHC 2011 (TCC); date of publication of judgment: 14 July 2015.
2. Note that there was a weighting of 60 percent for cost and 40 percent for quality – see paragraph 23 of the judgment.
3. Justice Coulson left it to the parties to agree what the adjusted evaluation scores should be and to make submissions to the Court as to what relief would be sought by the claimant – see paragraphs 156 and 158. But Justice Coulson noted that he confidently expected the revised scoring ‘to demonstrate that a different result should have eventuated’ (paragraph 156) and that ‘Woods outscored EAS so that there should have been a different result’ (paragraph 158).
4. Department of Finance, Commonwealth Procurement Rules, July 2014. This article does not consider broader implications of these issues for Commonwealth officials that might arise under other applicable legislation, for example, the Public Governance, Performance and Accountability Act 2013.
5. See paragraphs 40 and 85a, for example.
6. See paragraph 120.
7. See paragraph 40.
8. See paragraph 112.
9. See paragraph 86.
10. See paragraph 26.
11. See paragraph 41.
12. See generally section 5 ‘General observations’ of the judgment and in particular paragraph 41 where the quoted comment occurs.
13. Paragraphs 69 to 75.
14. Emphasis added.
15. The relevant scoring criteria are reproduced in full at paragraph 23 of the judgment.
16. See section 6.9 (Communication procedures) of the judgment.
17. See paragraph 121.
18. See paragraph 122.
19. See paragraph 24.
20. See the table appearing at paragraph 147 for a summary of the Court’s variations to the scores awarded by the Council.
21. See the final sentence at paragraph 44.
|Sean Field | Special Counsel
Tel +61 3 9258 3397