The recent case of Montpellier Estates Ltd (MEL) and Leeds City Council serves as a reminder that a contracting authority should act in a transparent manner when conducting an OJEU procurement process and be aware that its conduct can create an implied contract between it and its tenderers.
MEL brought a claim against the Council alleging premature termination of a procurement process for the development of an arena for music events. They also alleged breach of an implied contract and that the Council had applied evaluation criteria that were not indicated in the tender documents.
The procurement process began in July 2007, when the Council published a Contract Notice in the Official Journal to invite tenders. MEL submitted a bid with proposals to develop one of its own sites. MEL went through a pre-qualification questionnaire stage and in October 2007 was invited by the Council to ‘participate in dialogue’.
MEL had reservations throughout that it was being used as a ‘stalking horse’ to test the market. In response to its concerns MEL received repeated assurances from the Council that it would conduct the procurement process in a fair and transparent manner.
In May 2008, the Council asked MEL to revisit its proposals because it stated it had exceeded the assumed level of public funding. The following month the Council again moved the goalposts when it issued a clarification note introducing for the first time a “public sector comparator”. This was an evaluation tool used to establish whether the limited level of funding would achieve value for money.
Finally in November, the Council notified MEL that it had decided to terminate the process but did not give MEL an opportunity to bring its bid within the Council’s new criteria. At the same time it announced it was to develop the arena at a separate site. This alternative process had been undisclosed and running parallel to the procurement process.
As a result, MEL alleged that the Council applied an evaluation criteria and weighting that was not disclosed in the tendering document, failed to follow the tendering procedure and prematurely terminated the procedure. It argued this was in breach of the Public Contracts Regulations 2006 and that the Council had acted in breach of an implied contract. The Council applied to strike out the claim and contended that it gave the tenderers full reasons for the termination. It said the commercial proposals were simply not affordable.
The High Court handed down a judgment on 24 June 2010 that the application made by MEL should be given a full hearing at trial. It highlights the importance of disclosing criteria at the outset and the importance of acting transparently throughout a procurement process. A date has not yet been set for the trial but we will send a further e-briefing in due course when the outcome of the case is decided.
If you would like advice on how to reduce the risk of your procurements being challenged, or if you have lost out due to a poor procurement procedure, please contact any member of the Construction and Procurement Department team, on 0121 212 7474 or Osman Hamir on osman.hamir@anthonycollins.com.