Don't "discount" the details in public procurement: lessons learned from Optima Health v DWP

The recent case of Working on Wellbeing Ltd trading as Optima Health v Secretary of State for Work and Pensions, Department for Work and Pensions [2024] EWHC 766 (TCC) provides (yet another!) salutary reminder for bidders in public procurement of the importance of precise compliance with the requirements of a tender and encouragement for authorities to avoid ambiguous language in their procurement documents.   

As with many procurement cases, the Court's decision in this case turns heavily on its own facts.  But there are wider lessons to be drawn.

• In the first place, the case illustrates once again the extremely tough line that the Court takes towards non-compliance with tender rules and the strict enforcement of the principle of equal treatment.  Tenderers who submit non-compliant bids, even to a small degree and even inadvertently, can expect to be disqualified with little or no discretion available to contracting authorities.
• Secondly, for bidders, if an authority's requirements are unclear, it pays to seek clarification.  In this case, as discussed in more detail below, the position seems to have been complicated by the tortuous and shifting process run by DWP with multiple re-submissions of, and changes to, the pricing submissions, but it seems that underlying (apparent) ambiguities were never questioned during the tender process.
• Thirdly, for authorities, it helps to call a spade, a spade!  Had DWP used more precise language, in particular making it absolutely clear that non-compliance would be liable to lead to disqualification or exclusion, the challenge might never have got off the ground.
• Finally, from the perspective of procurement challenges generally, there is a strong sense from the Court's judgment that the central issue in the case – namely the interpretation of the word "discounted" in the procurement documents – was one that had been developed ex post by Optima's (very strong) legal team, rather than being in the minds of Optima's bid team when submitting their tender.  In fact, the witness evidence suggested that Optima understood at the time of the tender that submission of prices in excess of framework prices was liable to lead to disqualification.  For challengers, ensuring that legal arguments line up with the understanding of witnesses is clearly key. 

The procurement process

Optima Health (Optima) is an occupational health provider. Its dispute with DWP revolved around the tender process for a call-off contract under a framework agreement for occupational health and employee assistance programmes (OHEAP) (CCS Occupational Health Services RM6182 - National Managed Service Agreement (Framework Agreement)).

DWP's previous contract for OHEAP services expired at the end of February 2022 and an Invitation to Tender (ITT) was issued at the start of that month. The explanatory documentation of the ITT stated that the maximum contract value was governed by each bidder's respective framework agreement pricing schedule and that any bids for any service line being procured under the call-off contract could not be in excess of the maximum unit sums as set out in the framework pricing schedule. Any bid in excess of that maximum price would be "discounted." The ITT also gave DWP the alternative right to disqualify as non-compliant any bid that exceeded the maximum prices set out in the Framework Agreement.

The ITT included a pricing template schedule in Excel format, with each different service to be priced having its own line. Tenders were submitted in early March 2022 by five bidders including Optima.

From the off things did not go smoothly. DWP quickly established that none of the bidders had returned a fully completed pricing schedule and so asked all bidders to resubmit by the end of that month.   An evaluation then took place based on the re-submitted pricing schedules, in which Optima's bid was placed first.  However, at this point an internal review within DWP identified that there were problems with the evaluation of the bids. After several months of delay, bidders were asked in September 2022 to re-submit their pricing schedules for a second time. Optima re-submitted its pricing schedule, lowering its prices for some services. However, the internal DWP review rumbled on and, after a wider assessment of the procurement process, DWP concluded in January 2023 that all bidders' pricing schedules remained non-compliant. Bidders were therefore asked to re-submit their pricing schedules for a third time by 1 February 2023.  

Matters were still not settled by March 2023.  DWP at that point took the more significant step of replacing the pricing schedule with a substantially revised one (Revised Pricing Schedule) having decided the previous template, which had been provided with the ITT, was not fit for purpose. As previously, it was made clear to bidders that they needed to ensure the prices submitted for the various individual items in the Revised Pricing Schedule did not exceed the maximum prices set for those items under the bidders' respective framework agreements.   Key changes in the Revised Pricing Schedule were that it:

• covered only the services lines and delivery methods that DWP actually required; and
• requested different prices for different delivery methods separately.

These changes subsequently became a central element in Optima's objections to the procurement.  In particular, Optima argued that DWP had failed to clearly identify amendments in relation to three cells in the template, including the line item for "Occupational Health Advisory - telephone/virtual".

Optima resubmitted its bid under the Revised Pricing Schedule, with the total value of its tender being below the maximum contract value applying the Framework Agreement prices. Yet, critically, its tender included a unit price of £165 for telephone/virtual consultations, whereas its maximum price for this service line in the Framework Agreement was £105.  Despite what Optima later claimed was effectively a clerical error and notwithstanding that (a) the quantum of the over-pricing was minor relative to the overall value of the tender and (b) Optima was still placed first, its bid as a whole was rejected on the grounds of non-compliance. The contract instead went to the only bidder who had submitted a compliant bid.  

Optima's challenge to the procurement

Optima did not dispute that the requirement under the ITT was not to exceed the pricing set out in the Framework Agreement. However, it argued that there was a lack of clarity in the wording of the explanatory documentation as regards the consequences of failing to meet that requirement.

In essence, Optima's case was that the ITT explanatory documentation did not sufficiently clearly state that failure to meet the requirement for pricing not to exceed framework prices would render a bidder's tender non-compliant.  Rather, it argued that, when the ITT documentation stated that any bid that was priced in excess of the maximum allowed for any service line under the Framework Agreement would be "discounted", that meant that any excess over the maximum would be disregarded, rather than the entire bid being rendered non-compliant.

Optima further pleaded, in the alternative, that "excluding the entirety of the bid for an inadvertent failure to meet the requirement in relation to a single line is draconian and does not have a rational connection to the purpose of the rule."

The Court's ruling

The Court rejected Optima's arguments in their entirety.  It held that, in the context of the case, there was no ambiguity that the word "discounted" meant that bids in excess of the maximum prices under the Framework Agreement would be "disqualified" or "excluded" and that a "reasonably well-informed and normally diligent" tenderer would have understood it as such.  Going back to first principles, the Court considered that it made "no sense that there would be a discount (meaning a reduction) when it would not have been possible to have divined what the reduction ought to have been between nought and the amount of the maximum sum for the service line submitted."

The Court accepted DWP's submission that the tender documentation had to be considered in its commercial context, i.e. that all tenderers should have understood that a bid which included prices for service lines in excess of framework maximum prices "could not be contractualised, hence would need to be excluded from the competition." DWP had in addition exercised its discretion properly and had not acted unlawfully in choosing to exclude Optima rather than by taking other alternative actions such as unilaterally reducing the prices or seeking clarification.

The Court also rejected Optima's submission that, instead of disqualifying its bid, DWP should have allowed Optima the chance to clarify and/or resubmit its tender and that, in failing to do this, DWP had acted irrationally. Granting Optima some sort of a waiver in this regard would have taken DWP into the realms of a potential breach of the principle of equal treatment, since it had already received a compliant bid from a competing tenderer. Giving Optima the chance to clarify and/or re-submit would only have been to the detriment of that competing tenderer. It would also have resulted in a potential breach of equal treatment unless all of the other non-compliant tenderers were also given the opportunity to revise their bids.

Likewise, Optima's attempt to persuade the Court that the alteration made by DWP to the Revised Price Schedule without clear identification of the amendments made was dismissed. Optima alone was responsible for the defects in, and non-compliant nature of, its bid.

If you would like to discuss any of the issues covered in this blog, please contact our Procurement specialist Nick Pimlott.