Reasons to be cheerful

The judgment of the Outer House of the Scottish Court of Session in Healthcare At Home Ltd v The Common Services Agency [2012] ScotCS CSOH_75 (Lord Hodge presiding) [1] should provide some guidance and reassurance to contracting authority procurement teams that find themselves at that exciting but delicate point in a procurement exercise when the die is cast, an award decision has been made and the unsuccessful bidders have to be told the reasons why they have not won.  

Background

The Common Services Agency (“CSA”) provides national strategic support services to the rest of the NHS in Scotland. The CSA ran a procurement exercise to set up a single-supplier framework agreement for the supply of the drug Herceptin and associated patient services. The new framework replaced an existing arrangement under which Healthcare at Home (“HAH”) had provided CSA with supplies and services for some eight years. HAH submitted a tender to become the new framework supplier but was unsuccessful, losing out to BUPA Home Healthcare (“BUPA”).

The procurement was governed by the Public Contracts (Scotland) Regulations 2006 (as amended). Under reg. 32, CSA was obliged to give HAH written notification of the reasons why its tender was unsuccessful and the characteristics and relative advantages of the successful tender [2].

This requirement is obviously very important to unsuccessful bidders since (a) it triggers the start of the 10-day time limit for the standstill period (it is only after the expiry of that period that the contracting authority can enter into a contract with the successful bidder without threat of an ineffectiveness challenge); and (b) the giving of such reasons – provided they are adequate – will normally mark the point at which time starts running under the tight statutory timescales for making a claim to the courts that there has been a breach of the Regulations (i.e. because it is the point at which the unsuccessful bidder has or should have knowledge of any potential grounds for complaint).

By letter dated 13 May 2010, CSA advised HAH of the result and attached two summary tables setting out the scores which HAH and BUPA were awarded against the various quality award criteria and sub-criteria previously disclosed in the Invitation to Tender (“ITT”). These tables showed that BUPA had been awarded a total score of 90.48 and HAH was close behind with a total score of 89.06. Also included with CSA’s letter was a statement of reasons for the award decision in BUPA’s favour which had been prepared by CSA officers from an analysis of comments made by individual scorers comprising the evaluation team.  

On 20 May HAH’s solicitors wrote to CSA with observations on the statement of reasons and criticised CSA’s evaluation of the relative merits of the two bidders’ proposals in three particular areas - Dispensing Process, Contract Implementation/Change in Business Volumes and Contingency Proposal (areas which produced the most difference between the two sets of scores). They followed this up with a further letter the following day indicating HAH’s intention to initiate legal proceedings for CSA’s breaches of the 2006 Regulations.

Having taken detailed instructions from CSA evaluation officials, CSA’s legal adviser responded to HAH’s solicitors with a more detailed explanation of the reasons for the differences between the two sets of scores in the three contentious areas. The parties and their legal advisers met on 8 June 2010 to discuss HAH’s concerns but were not able to resolve their differences and HAH issued proceedings shortly thereafter seeking an order setting aside the award decision.  

The court’s decision

HAH’s complaint was based on CSA’s alleged lack of transparency, its failure to disclose all relevant evaluation criteria in the ITT and a failure to give sufficiently clear reasons for its decision to enter into the Framework Agreement with BUPA. The court found against HAH on all three grounds [3].

In relation to the challenge on the adequacy of the reasons for the decision, the court reviewed the fairly limited case law in this area - starting with the first instance decision of the European Court of Justice in Strabag Benelux NV v Council of the European Union [2003] ECR II-135. There the ECJ stated that:

• the contracting authority must disclose its reasoning in a clear and unequivocal manner in order to (i) make the unsuccessful tenderer aware of the reasons for the decision and thereby enable it to defend its rights and (ii) enable the court to exercise its supervisory jurisdiction;  
• the authority can correspond with the unsuccessful tenderer, and in so doing expand on its initial statement of reasons, and its performance of the duty to state reasons will therefore be assessed in the light of the information which is available to the applicant at the time when the legal proceedings are brought;
• the authority is not, however, permitted to substitute an entirely new statement of reasons for its original statement of reasons.

The court went on to note that it is not a ground of objection that the reasons are short (Alstom Transport v Eurostar International Ltd [2011] EWHC 1828 (Ch) - Mann J at para 72). Nor is the contracting authority under an obligation to undertake a detailed comparative analysis of the successful tender and the unsuccessful tender or to produce a copy of the evaluation report (Evropaiki Dynamiki v Proigmena Systimata Tilepikoinonion (Case C-561/10 P) 20 September 2011).

During the hearing, counsel for HAH had gone to considerable lengths to seek to demonstrate that the manner in which CSA had given its reasons was contradictory and lacked transparency, particularly in terms of the differences between the original decision letter of 13 May 2010 and the subsequent clarification of 20 May 2010.

However, the court took a robust view. Two comments from Lord Hodge are noteworthy in this context: “I am not persuaded that the recipients of the communications were left in any real doubt as to the thrust of the points which were being made as to why HAH had been unsuccessful and the characteristics and relative advantages of BUPA’s tender.”

He also said: “Standing back from the detail of the challenges, I am satisfied that CSA gave HAH sufficient information to allow it to articulate its challenges to the decision and bring the legal proceedings in which it has aired its grievances. Whilst it is almost always possible for a person drafting a statement of reasons to improve the document if he is able to reflect on it at leisure, I am persuaded that the statement of reasons met the required standards of clarity.”

Conclusion

It remains essential for contracting authorities to exercise care in articulating and communicating the reasons why a particular bidder has been unsuccessful since that communication is likely to have an important bearing on whether or not the bidder decides whether or not to take the matter further.

However, contracting authority procurement teams can take some reassurance from the common sense approach adopted by the court to the way in which the duty to give reasons is discharged and its rejection of a “counsel of perfection”. This is in line with what appears to be a general trend in this area of the law over the last couple of years for the courts to recognise the practical realities involved in running large scale procurement exercises of this nature.

Paul O’Sullivan is a procurement specialist and partner at Sharpe Pritchard. He can be contacted on 0207 405 4600 or by This email address is being protected from spambots. You need JavaScript enabled to view it..

1. The decision is not, strictly speaking, binding on the courts in England & Wales but has persuasive authority.
2. Essentially the same requirements are set out in reg. 32 of the equivalent regulations for England & Wales.
3. This article focuses on the last of these grounds but it is worth noting that the judgement also contains a useful summary of the main features of the case law relating to the application of the fundamental EU principles of equal treatment, non-discrimination and transparency to such procurement exercises.