Price is a critical part of tender evaluation.  It is evaluated in different ways using different formula and assumptions.  It is important that these are carefully considered and don't give rise to grounds for challenge.  This came to the fore in a recent Northern Irish case. 

The Department of Education for Northern Ireland ("DOE") invited tenders for participation in a framework agreement as part of a schools modernisation programme. Henry Brothers, an unsuccessful tenderer, challenged the process.  This was on the grounds that price was evaluated based upon tendered fee percentages which were applied to assumed "Defined Costs".  The underlying assumption was that the "Defined Costs" would be the same for each contractor.                

The use of fee percentages was intended to address the historic problems with lowest price tenders, which introduced a low bid/high claim culture. Other mechanisms of assessing competitive cost had been considered by the DOE including the pricing of sample schemes and actual historic projects. The DOE's expert explained that these were of limited use since contractors often found reasons for arguing that the samples were not representative of the projects to be completed or arguments for amending previous prices. 

The Court confirmed that DOE was entitled to rely on the advice of its professional advisers, applying SIAC Construction Ltd v County Council of the County of Mayo (Case C-19-00).  It noted, though, that such advice is subject to analysis to establish whether it was erroneous.  The Court held the approach to evaluating price was unlawful.  This was because the underlying assumption that Defined Costs would be the same for each contractor was incorrect.  This may potentially be applicable in other contexts also, such as with respect to price evaluations based upon margins on open-book contracts where there is no underlying evaluation of the input costs.

Interestingly, the trial judge in the original decision indicated that he had difficulty with the proposition that a public body could determine the most economically advantageous bid without a reliable indication of price or cost to balance against the qualitative aspects.  This may suggest that the practice sometimes adopted with frameworks where price is only evaluated during mini-competitions, and not in the primary competition for appointment to the framework, may be vulnerable to legal challenge. 

The Court also considered when the (general) 30 day timeline, within which a challenge must be brought, started.  This is important as often a public body will seek to use this timeline to its advantage, by disclosing areas of potential challenge early in the process when there is no incentive to challenge, so that unsuccessful bidders will be out of time in raising them subsequently.  

The Court held that: 

  • the cause of action only arises where a breach of procurement law is alleged - anticipation of a breach is not sufficient; and
  • time runs from the date on which the claimant has the requisite knowledge that a breach of sufficient magnitude to justify proceedings has occurred.

Although it was clear from the tender documents that price would be evaluated based upon fee percentages, the Court held that time only started to run at the earliest when the assessment of tenders took place (and not when the tender documents were issued).  The Court also indicated that a delay in taking a challenge within the 30 day period which is contributed to by ongoing correspondence and an extension of the standstill period would inevitably have led to the 30 day period being extended.  This interpretation of the 30 day rule is helpful to bidders seeking to challenge procurement processes. 

Henry Brothers (Magherafelt) Limited v Department of Education for Northern Ireland [2011] NICA 59

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