Public authorities have to treat all bidders with perfect impartiality. As perfection is quite a high standard to meet, many are judged wanting. Like this client here …

For the first time in eight years a UK court has awarded damages to a firm making an unsuccessful tender as a result of an authority’s failure to comply with public procurement regulations. In Aquatron Marine vs Strathclyde Fire Board, damages were awarded to Aquatron in the Court of Session in Scotland for profit it would have obtained had it been awarded the fire board’s contract.

The fire board advertised for tenders for the supply and regular maintenance of breathing apparatus equipment. It had chosen the “open procedure” for tendering and its specification called for accreditation to “ISO 9001:2000” and “evidence of quality standards achieved by the workforce”. It was what these fairly loose requirements were supposed to mean that caused the dispute.

For those who have not been involved in the evaluation of such a bid, it is a two-stage process. First, the entries are checked to establish whether they are “tender compliant”, that is, whether they meet the specification or technical requirements. All tenders that do this will then be evaluated against criteria in the notice inviting tenders. The overriding principle behind public procurement regulations is to ensure equal treatment.

Aquatron was in competition with two other companies. It submitted an ISO certificate issued not by UKAS, which is apparently what the fire board wanted, but by QMS, another recognised centre of accreditation. Aquatron stated in the covering letter that its staff were experienced in the range of equipment covered and had attended the manufacturer’s work courses.

The fire board asked Aquatron to attend a tender clarification meeting at which the qualifications of Aquatron’s employees were discussed. There was some subsequent confusion about what was said at the meeting over these qualifications.

Following this meeting the fire board knocked Aquatron out at the first stage. That is, it found that Aquatron’s bid was not compliant with the tender notice. The board did this on the basis that Aquatron had not supplied evidence of the quality standards of the workforce and it did not recognise the body that had granted the ISO certificate.

The regulations allow for damages to be awarded to a party that has suffered loss or damage as a consequence of a breach. But the breach has to have caused the tenderer loss

The court found that Aquatron had been excluded from the process unfairly. The letter that accompanyied Aquatron’s tender, which referred to the qualifications of its employees, had not been seen by those who evaluated the tenders. And the court found that the board had taken into account factors that had not been stated as relevant in its tender notice. For example, since the board had not specified minimum standard qualifications for employees it could not use Aquatron’s apparent lack of evidence on the subject of qualifications as a reason to exclude it. Similarly, the court found that the board ought to have accepted the ISO certificate as it was issued by an recognised accreditation centre.

But Aquatron was not home and dry. The regulations allow for damages to be awarded to a party that has suffered loss or damage as a consequence of a breach. But the breach has to have caused the tenderer loss.

The loss claimed in this case was that if the regulations had been followed properly Aquatron would have been awarded the contract. The court, applying the award criteria set out in the tender notice, evaluated all the tenders and found that Aquatron would have been awarded the contract as it had offered the cheapest price. It was then able to assess the damages due to Aquatron on the basis of its loss of profit.

This is a useful reminder of the two-stage process under the Public Contracts Regulations 2006. Failure to apply the criteria in the tender process, or applying other non-specified criteria, may give a right to challenge a decision.

Hot on the heels of this decision is the publication, just before Christmas, of a remedies directive. This proposes that as well as damages being awarded after the event, a contract awarded in breach of the regulations may be struck down.

A breathing period may also be required after evaluation and prior to the contract award to allow challenges and to avoid a case of shutting the door after the horse has bolted. The UK has to implement this directive by December 2009. Its implementation may well change the timetable for awarding public contracts.