With a fair RWIND

The Public Contracts (Scotland) Regulations 2006 (SSI 2006/1) govern the arrangements to be made for and in awarding public contracts in Scotland. As was noted in Health Care at Home v Common Services Agency [2014] UKSC 49, these regulations implemented EU Directives 89/665 and 2004/18/EC, and the court therefore reviewed the relative jurisprudence of the European Court of Justice.

Where challenges have been made under these regulations, the domestic courts have remained decidedly reluctant to intervene. Rationale for that approach was expressed by Lord Malcolm in Shetland Line (1984) Ltd v Scottish Ministers [2012] CSOH 99, where he said: “The court should be mindful of the risks of becoming embroiled in the merits of the evaluation and assessment of tenders in a public procurement exercise. Not only is the court poorly placed to do this, it would be quite wrong for it to trespass on the jurisdiction clearly given to the contracting authority to exercise a broad discretionary judgment as to the identification of the most economically advantageous bid. The court’s jurisdiction is to supervise the way in which the process has been carried out, and to review whether proper procedures and the basic principles underlying the Directive have been respected, for example, those concerning equality of treatment and transparency.”

This approach was followed by Lord Hodge in Amey LG Ltd v Scottish Ministers [2012] CSOH 181, and Lord Malcolm in the Glasgow rent deposit case, Rent Deposit and Support Scheme v Glasgow City Council [2012] CSOH 199.

In that latter case, although the pursuer’s bid contained the lowest price, the pursuer was informed that it had been unsuccessful. Reasons for that decision were given by the council. The pursuer raised an action seeking declarator that the decision was (i) in breach of reg 4(3) of the regulations, and (ii) the principles of equal treatment, transparency, non-discrimination and proportionality.

Lord Malcolm however decided that this was “a classic example of the kind of challenge which will not be entertained. The assessment of the quality of the bids is a matter for the judgment and discretion of the authority. The court will only interfere with such decisions if there is a manifest error. This is not an invitation to disappointed bidders to stop the contract process and tell the court why it thinks that the decision-maker was wrong, or to criticise the reasoning. The term ‘manifest error’ means an error which is clear and obvious beyond reasonable contradiction”.

Justification for this restrictive approach was expressed as “that otherwise the court would be trespassing upon the jurisdiction given to the contracting authority to exercise its own broad and discretionary judgment as to the identification of the most economically advantageous bid. The contracting authority enjoys no such margin of discretion where the basic principles of public procurement have been breached. But this is far from such a case. There is no question of discrimination, bad faith or misuse of power, only of alleged mistakes in the assessment process. A conviction that errors or misjudgments have occurred will often be held by unsuccessful bidders. It is important that it is understood that this will not justify an allegation of a breach of the 2006 Regulations, not least given the automatic halt in the process arising simply from the fact of such a challenge”.

In that case the council succeeded in obtaining an interim order in terms of reg 47A(2), ending the prohibition on awarding the contract to the successful bidder.

The status of RWIND man

In the Health Care at Home case the respondent had carried out a tendering process in 2010 in respect of the provision of medical services to health authorities in Scotland, as a result of which the appellant was unsuccessful in securing a further contract. The appellant contended that the criteria in the invitation to tender were insufficiently clear, and that the reasons given to it for the rejection of its tender were unclear and lacking in detail.

The Supreme Court gave particular consideration to the concept of the reasonably well informed and diligent tenderer (known as “the RWIND tenderer”), as developed by the European Court of Justice. As Lord Reed explained, “The RWIND tenderer, as he has been referred to in these proceedings, was born in Luxembourg. He owes his existence to the EU directives concerned with public procurement. For present purposes, the most significant directive is Directive 2004/18/EC of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ L 134, 30 April 2004, p 114).... In particular, as explained in the forty-sixth recital: ‘Contracts should be awarded on the basis of objective criteria which ensure compliance with the principles of transparency, non-discrimination and equal treatment and which guarantee that tenders are assessed in conditions of effective competition.…

“‘To ensure compliance with the principle of equal treatment in the award of contracts, it is appropriate to lay down an obligation – established by case-law – to ensure the necessary transparency to enable all tenderers to be reasonably informed of the criteria and arrangements which will be applied to identify the most economically advantageous tender.’”

Reflecting these general principles, Lord Reed continued, article 2 of the directive requires that “contracting authorities shall treat economic operators equally and non-discriminatorily and shall act in a transparent way”; article 41 entitles unsuccessful candidates to be informed of the reasons for the rejection of their applications; and article 53 sets out requirements governing the disclosure of the criteria for the award of public contracts.

Being such “general principles”, criteria for judicial decisions within them remain necessary.

After an eloquent introductory history of the concept of the reasonable man in domestic laws, and drawing on the European level from the approach of Advocate General Sharpston in Lämmerzahl GmbH v Freie Hansestadt Bremen (Case C-241/06) [2008] 1 CMLR 462, Lord Reed commented that “the yardstick of the RWIND tenderer is an objective standard applied by the court”. This was essential in order to ensure equality of treatment, and was consistent with legal certainty: “something which would be undermined by a standard which depended on evidence of the actual or subjective ability of particular tenderers to interpret award criteria in a uniform manner”. Furthermore, to require proof of the subjective understanding of tenderers would be inconsistent with the need for review to be carried out as rapidly as possible, as required by article 1 of Directive 89/665 (para 12).

As he explained at para 14, the rationale of the standard of the RWIND tenderer is thus to determine whether the invitation to tender is sufficiently clear to enable tenderers to interpret it in the same way, so ensuring equality of treatment. This involves a factual assessment by the national court, taking account of all the circumstances of the particular case. It has also been applied by the Court of Justice and the General Court in a number of cases in which those courts have themselves had to determine whether tender documents complied with the standard.

Relevant evidence?

In the present case in the Outer House ([2012] CSOH 75), Lord Hodge, who heard evidence over eight days, rejected the argument that the appellants had not understood the criteria in the same way as the successful tenderer. In so deciding he thought (i) that it was unrealistic to require a contracting authority to frame its invitation to tender in such detail that two reasonable people could not reach different views on its interpretation; (ii) that there were practical limits to the extent to which a contracting authority could spell out every aspect of what its criteria might entail; and (iii) that it was implicit in the RWIND tenderer test that the court should ask what would have been reasonably foreseeable by an RWIND tenderer as being encompassed by the stated criteria. Applying that objective approach to the invitation to tender, in the light of evidence as to the relevant context, he concluded that the criteria met the required standard of clarity.

Dealing with a further challenge based on the sufficiency of the reasons given for the respondent’s decision, he held them to have been adequate on the basis that the appellant could have been left in no real doubt as to why it had been unsuccessful, and as to the relative characteristics and advantages of the successful tenderer.

The appellant’s appeal to the Inner House ([2013] CSIH 22; 2013 SC 411) was refused. As the Lord Justice Clerk there said: “The criteria must be formulated in such a manner as to allow all reasonably well informed and diligent tenderers to interpret them uniformly. If such a tenderer could, ‘understandably and plausibly’… have construed the criteria in different ways then the criteria must be deemed insufficiently transparent. However, that is a long way from a proposition that the mere fact that a tenderer, who might normally be regarded as reasonably well informed and diligent, construed the criteria in his own particular way is destructive of the process. For such an outcome, the court has to be satisfied that the interpretation was open to the hypothetical tenderer and not simply that the unsuccessful tenderer had been reasonably well informed and diligent and in fact reached that interpretation.”

In rejecting the appeal in the Supreme Court, Lord Reed approved the Lord Justice Clerk's further observations that: “The court's decision will involve it placing itself in the position of the reasonably informed tenderer, looking at the matter objectively, rather than, as occurred here to a degree, hearing evidence of what such a hypothetical person might think… Although different from an orthodox exercise in contractual interpretation, the question of what a reasonably well-informed and normally diligent tenderer might anticipate or understand requires an objective answer, albeit on a properly informed basis. Just like those other juridical creations, such as the man on the Clapham omnibus (delict) or the officious bystander (contract), the court decides what that person would think by making its own evaluation against the background circumstances. It does not hear evidence from a person offered up as a candidate for the role of reasonable tenderer. In a disputed case, the court will, no doubt, need to have explained to it certain technical terms and will have to be informed of some of the particular circumstances of the terms or industry in question, which should have been known to informed tenderers. However, evidence as to what the tenderers themselves thought the criteria required is, essentially, irrelevant.”

Lord Reed did recognise that “evidence may be relevant to the question of how a document would be understood by the RWIND tenderer. The court has to be able to put itself into the position of the RWIND tenderer, and evidence may be necessary for that purpose: for example, so as to understand any technical terms, and the context in which the document has to be construed. But the question cannot be determined by evidence, as it depends on the application of a legal test, rather than being a purely empirical enquiry. Although, as counsel for the appellants emphasised, the question is not one of contractual interpretation – the issue is not what the invitation to tender meant, but whether its meaning would be clear to any RWIND tenderer – it is equally suitable for objective determination”.

He agreed that it was “unnecessary, and potentially confusing, to introduce the concept of reasonable foreseeability in the present context”, but Lord Hodge and the Inner House had “applied the same objective test by considering what a RWIND tenderer would have understood as being encompassed or entailed by the terms of the invitation to tender”.

Dealing with specific criticisms of the invitation to tender, Lord Reed took the view that “Once it is accepted, however, that the courts below applied the correct legal test, this court will not readily interfere with the conclusion which they reached in the light of their evaluation”.

Similarly as regards the reasons given for the respondent’s decision, it was held that “the courts below applied the approach laid down by the Court of Justice”, and it was “not the function of this court to review their findings, in the absence of any error of law in their approach to the evidence or some other recognised ground for interfering with their assessment”.

For those tasked with drafting invitations to tender, dealing with tenders received and giving reasons for decisions thereon, this decision of the Supreme Court – which focuses more on the European perspective than the domestic regulation viewpoint of earlier cases – should be, relatively at least, comforting for that work. Sustainable grounds for prospective challenges to decisions taken by the awarding authorities will need to be fully convincing to be justified in the courts.