28/02/2025
Working on Wellbeing Ltd trading as Optima Health v Secretary of State for Work and Pensions (1) and the Department for Work and Pensions (2) [2025] EWCA Civ 127
One aspect of public procurement that has always been fraught with difficulty for contracting authorities is the question of how an apparent error or ambiguity in a bid should be managed. A recent judgment from the Court of Appeal provides helpful guidance and clarity.
The TCC decision
DWP ran a procurement utilising the RM6182 Framework Agreement to which Optima was a party. Under the terms of the Framework Agreement, service providers were limited to a maximum price that they could charge for each individual service item in any call-off contract awarded under the Framework Agreement. Paragraph 2.2 of the Invitation to Tender (“ITT”) set out that:
“any bid for any service line submitted to the Framework by invited bidders in excess of this will be discounted” (emphasis added).
Optima exceeded the maximum price in relation to three out of a total of 133 service delivery lines. Out of the three errors, only one resulted in an increase in price (of only 0.02%) because the other two were zero-rated. DWP excluded Optima’s bid, without seeking any clarification, on the basis that it was non-compliant with the terms of the Framework Agreement despite Optima scoring significantly more than the only other remaining compliant bidder. Optima challenged this decision.
The TCC concluded that the “reasonably well-informed and normally diligent tenderer” (“the RWIND tenderer”) would have been left in no doubt that exceeding the maximum price would have led to the possibility of being disqualified from the procurement process given the language of the ITT. In its view, the word “discounted” could only have had the meaning “excluded” rather than, as Optima sought to argue, “reduced”. The TCC also concluded that DWP were not under an obligation to clarify the position with Optima as there was no obvious mistake or ambiguity.
The Court of Appeal Judgment
Optima took the view that excluding its bid for minor errors in respect of three out of more than 100 items, rather than seeking clarification on these prices, was unlawful. The Court of Appeal agreed and in doing so established some helpful guidelines for that will be able to be applied in future scenarios.
Did the ITT contain a mandatory exclusion provision?
Referring to the requirement the rules of public procurement to be drawn up in a “clear, precise and unequivocal manner” [1] the Court of Appeal found that paragraph 2.2 of the ITT did not contain a mandatory exclusion provision for a number of reasons.
Firstly, in the absence of any specific reference to exclusion or disqualification, the RWIND tenderer would not have naturally concluded that this would be the outcome if a bid for a particular service line was in excess of the Framework Maximum. Secondly, there was ambiguity in the use of the word “discounted”. This could have meant “reduced” or it could have meant “excluded” or “disqualified”. It was noted that the words “excluded” and “disqualified” were referred to elsewhere in the ITT and that “discounts” was expressly provided for elsewhere in the ITT as indicating a reduction. Finally, despite DWP arguing that the discount referred to any bids, the Court of Appeal highlighted that the ITT actually stated “any bid for any service line….will be discounted”, meaning that the discounting was expressly limited to the service line and not the bid in its entirety.
It is clear that for a right to exclude to arise, it must be set out in the tender documents in very clear and specific terms, with no room for ambiguity.
Were DWP entitled or obliged to seek clarification of Optima’s errors?
Lord Justice Coulson considered a number of European authorities, referencing the decision in Tideland [2] in which the rejection of a tender without seeking clarification was deemed disproportionate, and the decision in Antwerpse [3], where the court noted that the principle of proportionality required institutions to ensure that any action taken in respect of a bid did not cause a disproportionate disadvantage to another party or parties. He then went on to apply a three stage test to ascertain whether DWP had a discretion to seek clarification and whether that discretion had become a duty.
The first stage was to consider whether an error or ambiguity was obvious to DWP and whether the error was material to the outcome. The prices in excess of the Framework Maximum were deemed obvious by the Court of Appeal because DWP not only spotted these mistakes but categorised them themselves as “cut and paste errors”. The errors were material to the outcome of the procurement because had they not been made, Optima would have been identified as the winning bidder.
Where it had been established that an obvious error that was material to the outcome had occurred, the second stage was for DWP to consider whether or not to seek clarification. DWP’s position, one that was upheld by the lower court, was that it could not seek clarification because doing so would have amounted to a breach of equal treatment. Lord Justice Coulson disagreed. His view was that whilst Optima and one other bidder had both made similar mistakes, the mistake by the other bidder was immaterial because regardless of any clarification it would not have won the call-off contract. For this reason the principle of equal treatment did not prevent DWP from querying the mistake with Optima. The fact that the tender contained obvious ambiguities which were highly material to the outcome meant that DWP should have sought clarification of the prices – it was incumbent on it to take the least onerous option (i.e. to clarify rather than exclude).
The third stage was to consider whether the clarification changed the bid, with the Court of Appeal upholding the general principle that a clarification that does so cannot be permitted. DWP’s position was that the outcome of the request for clarification would have amounted to the submission of a new bid, breaching the principles of equal treatment and transparency. The Court of Appeal disagreed, referencing the need for common sense to be applied when applying the rules relating to public procurement – “experienced evaluators working for contracting authorities should know when a response to a request for clarification is a simple adjustment of the kind they generally expected, and when it is an attempt to have another go”. It also pointed to Regulation 56(4) of the Public Contracts Regulations 2015 which allows an economic operator to “submit, clarify or complete the relevant information”. Had DWP sought clarification, the most likely outcome would have been that the three erroneous prices would have been reduced to the Framework Maximum prices, resulting in DWP awarding Optima the contract.
Comment
Whilst this decision concerns a procurement run under the PCR 2015 our view is that it still provides useful guidance going forward as to when a contracting authority is required, or entitled, to seek post tender clarifications. The three-stage test is likely to prove useful under the Procurement Act 2023 given the continuing duty of equal treatment and the discretion to exclude suppliers under section 19 who breach procedural requirements. It also serves as a timely reminder to contracting authorities, who may be in the process of updating their template documents in line with the Procurement Act 2023, to ensure that all their procurement documents are explicitly clear, particularly when it comes to any reservation of rights to exclude bidders.
- Healthcare at Home Ltd v The Common Services Agency [2014] UKSC 49
- Tideland Signal Limited v EC Commission [2002] 3 CMLR 33
- Antwerpse Bouwwerken NV v European Commission [2009] ECR II-4439
