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Ministry of Defence Broke Rules in £385 Million Contract Tendering Exercise

Judges are astute to the enforcement of the strict rules of fairness that apply to public contract tendering exercises. In one case that proved the point, the High Court found that the Ministry of Defence (MoD) had applied arbitrary criteria in awarding a very large contract in respect of logistical support for the Royal Navy.ship

The contract was worth up to £385 million over six years. A company had submitted a tender that was commercially compliant, offered the lowest price and received the highest score in a technical evaluation. However, it received a ‘fail’ score in respect of a request for evidence that a safety culture existed throughout the company’s supply chain. As a result, the tender was rejected on the basis that it was non-compliant and the contract was awarded to another bidder.

The company launched proceedings, alleging breaches of the Defence and Security Public Contracts Regulations 2011. It argued that the invitation to tender either did not state, or was ambiguous as to, the consequences of a ‘fail’ score and that the MoD was thus not entitled to automatically reject the tender.

The MoD accepted that, due to an administrative error, the invitation to tender failed to state in terms that the consequence of a ‘fail’ score would be rejection. However, it was submitted that that consequence would have been apparent to any reasonably well-informed and normally diligent tenderer.

The Court rejected the company’s arguments that the MoD had made a manifest error in assessing the tender, having regard to its contents and the published scoring criteria. It had also not been established that the MoD had irrationally exercised its discretion to reject the tender by reason of the ‘fail’ score.

However, the Court found that, on a proper reading of the invitation to tender, a reasonable tenderer would not have understood that a ‘fail’ score would, or could, result in automatic rejection. The MoD had acted in breach of its obligations of transparency and equal treatment in applying criteria that were arbitrary or not sufficiently clear from the wording of the invitation to tender and in rejecting the company’s tender on that ground. The Court granted a declaration that the MoD had acted unlawfully.

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