New procurement case confirms that evaluation is a serious business!

Published 15 septiembre 2016

Contracting Authorities and their evaluators are reminded once again of how important it is to ensure that the evaluation stage in a procurement process is carried out in accordance with the published criteria and the principles of transparency, equal treatment and non-discrimination as a result of the recent case of Energy Solutions EU Limited v Nuclear Decommissioning Authority [2016] EWHC 1988 (TCC).

Key facts

This case concerned a procurement on the part of the Nuclear Decommissioning Authority ("NDA") for the decommissioning of 12 different Magnox nuclear facilities in the United Kingdom. The value of the contract was just over £4 billion for the first 7 years of its 14 year term and it was a significant, high profile Government contract. The procurement was run using the competitive dialogue procedure under the Public Contracts Regulations 2006 (the "Regulations") (the relevant procurement regulations in force at the time). In terms of final scores, there was just 1.06% between the winning bidder and the challenger, Energy Solutions EU Limited ("Energy Solutions") who were part of a consortium. Energy Solutions challenged the process under the Regulations claiming damages in excess of £100 million.

The focus of the challenge was evaluation; whether scores for certain parts of the tenders had been awarded lawfully, and if they were not, the court was asked what scores should have been awarded and/or whether there had been a manifest error in the way that the scores were awarded. We are seeing more and more challenges on the basis of alleged errors made during the evaluation of tenders and there are some very useful lessons coming out of this case. 

Outcome and criticisms made by the Judge

In his 320 page judgment (and there are further confidential parts of the judgment), the Judge found that a number of scores had not been awarded lawfully and that there had been a manifest error in the evaluation. The Judge reiterated previous case law on manifest errors and explained that for the Court to interfere in the marking carried out by evaluators the error had to be manifest and material.

The Judge criticised the NDA for the way it ran the procurement process in that it was concerned about a legal challenge from the outset and so some of its governance arrangements for the process, although well planned out, were aimed at defending a procurement challenge rather than running a process to comply with the principles of transparency, equal treatment and non-discrimination. In particular, the Judge criticised the following on the part of the NDA:

• the fact that the evaluators were discouraged from making any notes outside of the procurement portal (despite evaluators having to read through hundreds of files), were not allowed to send emails in relation to the evaluation and were only allowed to seek guidance from the person leading the procurement process by leaving the room and speaking to him. This meant that certain conversations and also decisions about scoring were made "off stage" and the Judge said that this meant that important aspects of the evaluation process were wholly lacking in transparency;
• the fact that no notes on the dialogue stages were kept (the dialogue stage lasted months); This meant that evaluators often had to rely on their memories for aspects of the process and some of their scores were inconsistent with feedback they had provided to the bidders during dialogue – this resulted in Energy Solutions being marked poorly in some areas despite being given express approval of their approach to those areas during dialogue;
• although there was a data room with documents for the bidders to refer to during the procurement process, the evaluators themselves had not read/could not remember the documents within the data room – this caused an issue with bidders referring to material of which the evaluators were unaware (but should have been aware). The Judge made the point that the correct point of law was could a reasonably well informed and diligent tenderer could reasonably have expected that at least one of the evaluators would know the content of the documentation that had been referred to within a tender response given that it was in the data room. Unsurprisingly, the Judge said that the rather obvious answer to that question was yes; 
• some individual evaluators’ scores were changed following the moderation/consensus meeting and once they had been closed down in the procurement portal with no notes explaining the reasons for the changed scores, the decision as to whether the winning bidder should actually have been disqualified was made in an unrecorded conversation so no one could explain how the decision had been taken to allow the winning bidder to remain in the process when in fact it had failed to meet a mandatory requirement;
• during the trial, those evaluators who were cross examined gave different reasons for their scoring to the reasons set out in the procurement portal records.

The Judge found that the winning bidder should have been disqualified from the procurement process for failing to meet a mandatory requirement. The consortium that Energy Solutions was a part of should therefore have won the contract.

Lessons learned

Procurement professionals should not be put off from reading this case on the basis of the length of the judgment, it is a fascinating read with some quirky issues (such as Energy Solutions entering into agreements with its evaluators that they would be paid a bonus if Energy Solutions won – this was found to be contrary to public policy so is not advisable, although in this case the Judge found it did not impact on their evidence) and we see the key lessons learned (which, in reality, are reminders of what we know already) as follows:

• evaluators should be given adequate time to carry out the evaluation properly – the evaluators in this case were under a lot of time pressure (we see this is so many procurement processes);
• evaluators must make contemporaneous notes when carrying out their evaluation to justify the reasons for their scores;
• any changes to scores made during/after moderation meetings need to be recorded contemporaneously, accurately and explained. This would enable a contracting authority to demonstrate that it has complied with its obligations rather than limited documentation which a Court may then look at suspiciously;
• evaluators need to be aware of and have read the documents available to the bidders in the procurement process;
• mandatory/pass or fail requirements need to be properly thought through when the procurement process and associated documents are being developed. The evaluators need to understand those requirements and apply them in the way the procurement documents describe;
• careful consideration needs to be given to the wording in the evaluation methodology – words such as "material", "fundamental" and "key" can be open to interpretation which, in this case, led to inconsistent scoring.

Conclusion

Procurement teams and evaluators need to ensure that they are fully prepared for their role in evaluation – they need to have been given enough time to prepare and carry out the evaluation phase. It would be far better to delay a process by a few weeks to allow evaluators a reasonable amount of time rather than rushing it through and dealing with the consequences of costly and timely litigation. Evaluators need to take their role seriously and understand the impact of their decisions and the needs to records the reasoning for their scores in great detail.