Public Sector Procurement- The probity principle of Transparency and the Clapham Omnibus

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The Crown spends billions every year purchasing goods and services and now more than ever, vendors and suppliers depend on public sector tenders to sustain their businesses.  For many, an unsuccessful tender may lead to enterprise failure.

 

The procurement processes which are now required to be followed and the level of transparency created by them, together with general adherence to the probity principle of transparency give rise to significant risk of challenge by unsuccessful tenderers.  There have been a number of successful challenges to procurement decisions, one of the most ones recent being the interim injunction granted and the Telco Technology Services case.

 

Under the new Government Rules of Sourcing, not only must the relative importance of the evaluation criteria be openly disclosed, but combined with the debriefing requirements for unsuccessful tenderers, there is now much greater access to evidence which may provide a basis for challenging decisions made.  This article highlights the risk of adherence to transparency probity principles against the background of a recent UK Supreme Court decision.

 “The Clapham omnibus has many passengers. The most venerable is the reasonable man, who was born during the reign of Victoria but remains in vigorous health. Amongst the other passengers are the right-thinking member of society, familiar from the law of defamation, the officious bystander, the reasonable parent, the reasonable landlord, and the fair-minded and informed observer, all of whom have had season tickets for many years.

The horse-drawn bus between Knightsbridge and Clapham, which Lord Bowen is thought to have had in mind, was real enough. But its most famous passenger, and the others I have mentioned, are legal fictions. They belong to an intellectual tradition of defining a legal standard by reference to a hypothetical person, which stretches back to the creation by Roman jurists of the figure of the bonus paterfamilias. As Lord Radcliffe observed in Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696, 728:

“The spokesman of the fair and reasonable man, who represents after all no more than the anthropomorphic conception of justice, is and must be the court itself.”

It follows from the nature of the reasonable man, as a means of describing a standard applied by the court, that it would misconceived for a party to seek to lead evidence from actual passengers on the Clapham omnibus as to how they would have acted in a given situation or what they would have foreseen, in order to establish how the reasonable man would have acted or what he would have foreseen. Even if the party offered to prove that his witnesses were reasonable men, the evidence would be beside the point. The behaviour of the reasonable man is not established by the evidence of witnesses, but by the application of a legal standard by the court. The court may require to be informed by evidence of circumstances which bear on its application of the standard of the reasonable man in any particular case; but it is then for the court to determine the outcome, in those circumstances, of applying that impersonal standard.

In recent times, some additional passengers from the European Union have boarded the Clapham omnibus. This appeal is concerned with one of them: the reasonably well-informed and normally diligent tenderer.”

The Crown purchases over $30 billion worth of goods and services per year and now, more than ever, vendors or suppliers depend on public sector tenders to sustain their businesses. For many, an unsuccessful tender may lead to enterprise failure.

There has been an increasing number of challenges to procurement processes which now go much beyond litigation relating to process contracts. The actual substance of the request for proposal or tender process and the evaluation of proposals and tenders is now clearly the subject of judicial comment, and in light of the value of the contracts for which procurement processes are adopted, it is likely that the number of challenges to contract awards will increase further.

In a recent High Court judgment on an interim injunction application[1], the Court determined that a further potential ground for judicial review existed in the procurement context.  Whilst leaving open whether compliance with the Government Rules of Sourcing 2013 (GRS), was of itself a ground for judicial review, the Court said “judicial review is available on a commercial tendering context where the Crown may have breached procedural expectations in a material way”.

While acknowledging that the Telco Technology Services case is an interim injunction application judgment only, the principles enunciated in it seem likely to provide a basis for further challenge to tender processes.

While public sector procurement is ultimately a reflection of the law of contract, there are additional elements to it which represent risk. Probity principles of fairness and transparency are applicable to all large scale or complicated procurements.  These principles are given practical effect by the adoption of GRS.

Under rule 35 of GRS, the notice of procurement must include all evaluation criteria the agency will use to assess responses, and unless the price is the only criterion, an indication of the relative importance of each evaluation criterion.

An opportunity for respondents to assess whether the criteria have been applied in the evaluation of tenders or proposals in accordance with that information is provided for in rule 46 of GRS. Rule 46 requires unsuccessful tenderers be given the opportunity to be informed of the reasons the proposal was not successful and for an explanation of how the suppliers proposal performed against the evaluation criteria.

As a result of these two rules, procuring agencies are therefore obliged to formulate the evaluation criteria carefully, and ensure that the evaluation occurs consistently across all criteria for all proposals. If this is not the case, the debrief held with unsuccessful tenderers is likely to disclose this fact.

In the European Union, the principle of transparency is enshrined in directives. In this context, the relevant directive requires “contracting authorities shall treat economic operators equally and non-discriminatorily and shall act in a transparent way.”

So what then has the Clapham Omnibus got to do with transparency in public sector procurement context? Well, in truth, very little. A recent UK Supreme Court decision[2] has considered the transparency directive in the context of tenders for the provision of medical services.

The incumbent service provider tendered unsuccessfully for a new contract and challenged the decision on the basis that the evaluation criteria in the invitation were insufficiently clear and that the reasons given for the rejection of tenders were unclear and lacking in detail.

Decisions of the Court of Justice of the European Union had previously explained that the principle of transparency required that the evaluation criteria “must be formulated in such a way as to allow all reasonably well-informed and normally diligent (RWIND) tenderers to interpret them in the same manner.”

In Healthcare at Home, the appellant argued that the lower court should not have treated the RWIND as a hypothetical construct instead should have agreed to hear evidence relating to the meaning of the evaluation criteria.

The appeal failed. The Court reaffirmed the RWIND as a hypothetical construct, just like a reasonable man on the Clapham Omnibus.

The benefit of the judgment from a procurement perspective is to remind procurement teams that it is vital that evaluation criteria are formulated carefully. They must be clear, clearly able to be understood, and clearly able to be applied.  In Healthcare at Home the Court adopted a previous judgment of the European Union Court in identifying the requirements for an invitation to tender or submit a proposal as follows:

“The principle of transparency implies that all the conditions on detailed rules of the award procedure must be drawn up in a clear, precise and unequivocal manner in the notice or contracts documents so that, first, all reasonably informed tenderers exercising ordinary care can understand their exact significance and interpret them in the same way and, secondly, the contracting authority is able to ascertain whether the tenders submitted satisfy the criteria applying to the relevant contract…”

It is no longer acceptable for the basis of evaluation to be a somewhat “closed book”. Not only must the criteria to be identified in the notice of procurement, but in the context of an unsuccessful tenderer’s debrief, there are now mechanisms within the GRS to ensure that the evaluation criteria has been applied consistently across all proposals.

As the content of the debriefing which occurs following a procurement becomes more detailed as provided for in the GRS, unsuccessful tenderers will undoubtedly look for signs that the evaluation criteria were interpreted differently or were not applied consistently. The Healthcare at Home case helpfully identified that there was no obligation to provide a copy of the evaluation report to unsuccessful tenderers nor was the requirement to provide a detailed comparative analysis.  However, rule 46 is clear as to the content of such debriefing sessions, the purpose of which is clearly to enable tenderers to improve their processes for the submission of tenders and proposals, but also as a check and balance on the procuring agencies evaluation of proposals submitted.

In the context text of GRS then beware of the new passengers on the Clapham Omnibus, the days of increasing risk of challenge are very much here.

There is another more holistic benefit to be derived from the judgment in the Healthcare at Home case-the superb use of language. For those of us who spend their days crafting documents and interpreting statutes, what a pleasure it is to encounter the introductory words of the judgment as quoted in the opening paragraph to this article.

[1] Telco Technology Services Limited v Ministry of Education [2014]NZHC 213

[2] Health Care at Home Limited v the Common Services Agency( Scotland)[2014] UKSC 49

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