On what grounds can you lawfully
reject a bid for not being credible?
Cyrus Mehta, Partner
Nabarro LLP
30 April 2014
Doubts over credibility
Even if a bid is fully compliant, doubts may arise over:
• low pricing – abnormally low tenders
• bidder’s financial covenant – e.g. recent PR, market rumours,
etc.
• prior performance
• quality of bid documents/bidder team
• robustness of bidder’s claims
• quality of supporting evidence
• complaints from rival bidders
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Topics for discussion
• Credibility of price – abnormally low tenders
• Credibility of quality/experience – clarification/verification of
bidder’s claims
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I.
Abnormally low tenders (“ALTs”)
Regulation 30(6) states:
“If an offer for a public contract is abnormally low, the
contracting authority may reject that offer but only if it has –
(a) requested in writing an explanation of the offer or of those
parts which it considers contribute to the offer being abnormally
low;
(b) taken account of the evidence provided in response to a
request in writing; and
(c) subsequently verified the offer or parts of the offer being
abnormally low with the economic operator”
Article 69 of new Directive:
“Contracting authorities shall require economic operators to
explain the price or costs proposed in the tender where tenders
appear to be abnormally low in relation to the works supplies or
services.”
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What is an abnormally low tender?
• No definition – a matter for individual authorities (Impresa
Lombardini)
• Risks over the “genuineness” or “viability” of the bid (Impresa
Lombardini; SECAP, Renco)
• A price at “a level below which an offer cannot be considered as
being serious having regard to the services provided”
(Commission’s Guide to the Community Rules on Public
Procurement of Services)
• Two perspectives:
– the bid is significantly below the range of prices tendered by
other bidders (e.g. use of “anomaly thresholds” based on %
deviation from average prices)
– the bid is significantly below the authority’s own budgeted
estimates
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What is an abnormally low tender?
• Morrison Facilities Services v Norwich CC – winning bid priced
at £17.5 million, compared to competing tenders in the range of
£23 million - £26 million
• Price/other price components e.g. hours worked or supply chain
costs
• Article 69(2) of the new Directive allows for rejection where the
evidence “does not satisfactorily account for the low level of
prices or costs proposed …”
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What is an abnormally low tender?
• But can the authority reject an ALT even if satisfied that it is
economically rational and does not pose risks of nonperformance (e.g. loss leading; cross-subsidisation of losses)?
• Consequence of an ALT is that the whole bid can be rejected –
no requirement for scoring of price or non-price aspects
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Is there a discretion or duty to
investigate an ALT?
• SAG indicated that there is an obligation “to require a tenderer
to clarify an abnormally low price” (followed by Arnold J. in
Morrison Facilities Services v Norwich CC)
• But Flaux J. in Varney v Hertfordshire CC concluded that there
was no such duty unless the authority wished to reject the
tender
• Article 69 of the new Directive states:
“Contracting authorities shall require economic operators to
explain …”
• Duty to seek the explanations referred to in Article 69(2)
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What triggers the duty to
investigate?
• Article 69: “Where tenders appear to be abnormally low … “
• There needs to be clear evidence in front of the authority (see
e.g. PC Ware)
• Constructive knowledge does not suffice (Varney v
Hertfordshire)
• The authority has a broad margin of assessment, subject to
cases of manifest error
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What must the authority do with the
information?
• Duty to “consider the information provided by consulting the
tenderer” (Article 69(3); Impresa Lombardini – inter partes
consultations)
• Authority has a discretion not a duty to reject:
– Recital 103 – “a contracting authority should be entitled to
reject the tender”
– Contrast with mandatory rejection in cases of noncompliance with social or environmental legislation
• But where the information raises clear risks of non-performance,
the authority has an obligation to take this into account and is
challengeable if there is “manifest error”
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II.
Quality/experience
Key principles
• There is no general right to reject save for:
– exclusion grounds
– right to reject “unacceptable” tenders e.g. where evidence of
collusion or corruption (Article 26(b) of new Directive)
• Right to exclude where “serious misrepresentation” in the bid
• The authority’s duty to consider the tender on its face and
evaluate the information provided (All About Rights Law Practice
v LSC)
• Duty of care and principle of “sound administration” (Tideland)
• Duty to apply the selection and evaluation criteria and score
objectively and fairly
• Lack of credibility in one aspect does not necessarily “infect”
credibility of other aspects
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• The authority enjoys a margin of appreciation in its evaluation
but “manifest error” may be challenged
• Questions of credibility may extend to bidder’s supply chain
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Due diligence
The right to clarify tenders:
• At the selection stage, the authority’s evaluation of economic
financial standing and technical and professional ability is limited
– see Article 58-60 and Annex XII of new Directive
• At the evaluation stage, the authority can ask a tenderer to
“supplement, clarify or complete” (Article 56(3)) its tender
• Clarification subject to principle of equality (SAG; R (Hossacks)
v LSC)
• If doubts arise, there may be a duty to clarify before rejecting
(Tideland)
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Due diligence
The duty to verify tenders:
• Award criteria must be capable of verification (EVN)
• Article 67(4), new Directive: “In cases of doubt, contracting
authorities shall verify effectively the accuracy of the information
and proof provided by the tenderers.”
• Failure to verify compliance with quality standards may be in
breach of the principle of equality (PI Lawyers v LSC). Implications
for self-certification?
• Contracting authorities must have a “critical, probing and
challenging mindset” and not simply adopt “a supine acceptance
of virtually everything claimed” (Easycoach v Department for
Regional Development)
• Third party “noise” – duty to verify third party allegations of
misconduct, provided these are more than “general assertions”
(European Dynamics, T-457/1)
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Conclusions
• ALTs must be approached with care
• Flexibility to reject low price bids
• Growing emphasis generally on authority’s duty to carry out
further investigation
• Suspicions have to be well-founded
• Duty to clarify/verify before rejecting
• Background of growing litigation from aggrieved tenderers
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On what grounds can you lawfully
reject a bid for not being credible?
Cyrus Mehta, Partner
Nabarro LLP
30 April 2014