Make your intentions clear: "Pass"/"Fail" scoring and rejection of tenders

The importance attached to ensuring tenderers are fully informed of how their tenders will be evaluated has been emphasised again in MLS v Secretary of State for Defence  ("MOD"). The High Court analysed the tender documents issued by the MOD and concluded that where it is intended that a "fail" score could result in a disqualification, this needs to be explicit within the tender documents. The case also highlights the danger in making assumptions in relation to consequences of scoring a "fail" on a pass/fail question.

In this case, the MOD sought the provision of global port, maritime and other logistical support services for the Royal Navy. A competitive procurement was conducted using the restricted procedure which was governed by the Defence and Security Public Contracts Regulations 2011 (as amended). However, the reasoning in this case is likely to apply to the Public Contracts Regulations 2015, Utilities Contracts Regulations 2016 and the Concession Contracts Regulations 2016.

MLS, an unsuccessful tenderer, brought proceedings against the MOD challenging the lawfulness of the procurement process. MLS' tender submission was commercially compliant, offered the lowest price and, was awarded the highest score in the technical evaluation. However, it was awarded a "fail" for its response to a question which requested evidence that "…a safe working culture is promoted and practised throughout [the] supply chain in the delivery of the contract" ("Question 6.3"). As this was a pass/fail question, the MOD assumed that MLS understood that a "fail" score would have some effect on the outcome of the competition and, that MLS would appreciate that a "fail" score would lead to automatic or discretionary rejection of the their tender. The MOD, on this basis, deemed MLS' bid to be non-compliant and, rejected it in favour of the next highest tender.

MLS argued that the Invitation to Tender ("ITT") did not state, or was unclear as to what the consequence(s) of scoring of "fail" in response to Question 6.3 were. MLS claimed that the MOD acted unlawfully in breach of its obligations of transparency and equal treatment in disqualifying its bid.  In addition, MLS argued that the rejection of its tender by the MOD was a manifest error of assessment given the content of the bid and published scoring criteria.

In response, the MOD argued that, despite the ITT not containing an express statement that the consequence of a "fail" score would result in the rejection of a tender, this would have been apparent to a reasonably well-informed and normally diligent tenderer. The MOD exercised its discretion to reject MLS' tender on this basis, which it considered was not irrational or disproportionate.

The court decided that the MOD had in fact acted unlawfully; in breach of the obligations on transparency and equality of treatment. This was simply because it failed to make it clear in the ITT, either expressly or implicitly, that a "fail" score against Question 6.3 would or, could result in disqualification of a tender. Whilst it acknowledged that the ITT did state a number of reasons why a tender would be rejected, the scoring guidance made no reference to disqualification being a consequence of a "fail" score for any part of a response to Question 6.

In reaching its decision, the court was of the view that if the intention was for a "fail" score to Question 6 to result in automatic disqualification, the minimum standard would have needed to be clearly set out. Likewise, if the right to reject was to operate on a discretionary basis, the circumstances in which the "fail" score would and would not have effect on the assessment of the tender should have been explicitly provided for in the tender documents.

This case illustrates the importance of clear and explicit explanations in the procurement documents of the way in which evaluation criterion will be scored and the consequences of particular evaluation scores. Contracting authorities may think that that it is obvious to tenderers that a "fail" will result in rejection of the tender but, as this decision shows that is a dangerous assumption to make.