Guidance for Contracting Authorities when considering Abnormally Low Tenders
Wednesday, 3rd August 2016
The recent case of F P McCann Limited v The Department for Regional Development  NICh 12 provides helpful guidance to contracting authorities as to how to investigate abnormally low tenders received in the course of a procurement process.
This was a Northern Irish case so the decision is not binding but it is likely that Courts will require strong evidence of contracting authorities undertaking rigorous investigation into any suspected abnormally low tender, including verification of price, clarification with the bidder, consultation with the evaluation team and the market. This is to ensure that where a contracting authority suspects it has received an abnormally low tender it can demonstrate that it has been clear and precise with bidders as to any concerns it has and that it conducts a thorough investigation before it makes any formal decision as to whether or not a bidder's tender can be rejected.
When considering abnormally low tenders, contracting authorities should:
- Apply the principles of fairness, equality of treatment, objectivity and proportionality at all time.
- Have in place a set of stringent procedures and a robust checklist to ensure that they seek clarification for all and every aspect of a tender which they consider is or is likely to be abnormally low and make reference to this in procurement document.
- In any bidder clarification, expressly reference which specific elements of a tender they consider may be abnormally low and the reasons for such a consideration.
- Be aware that there is no single definition of "abnormally low tender" but it is fitting and expedient to apply the notions of reliability, viability and genuineness when considering this concept.
- Verify if the tender is one that is likely to deliver the contract that the contracting authority is looking to procure.
- Have reference to and access to all parties from evaluation teams during their investigations and any final decision (this will need to include meeting with the evaluation team and questioning the accuracy of the evaluation.
- Retain a clear audit trail of all evaluation documentation and clarifications.
- Give the bidder sufficient opportunity to explain their pricing in writing before making any decision.
- A joint venture between FP McCann and Balfour Beatty ("BBMC") submitted a tender to design and construct the A8 dual carriageway between Belfast and Larne.
- The Department for Regional Development ("DRD") suspected the tender contained abnormally low rates in relation to drainage, earth works, pavements and structures and issued a clarification request to BBMC in accordance with its ITT stating DRD was concerned that BBMC's tender was abnormally low. BBMC responded to DRD with detailed information.
- DRD requested further clarification in relation to BBMC's pricing of drainage, earth works, pavements and structures (but did not make specific reference to any suspected abnormally low rates), and again BBMC responded.
- DRD appointed an independent Commercial Evaluation Panel ("CEP") which evaluated all tenders received and drafted a report and recommendations including that BBMC's bid was abnormally low which may lead to a risk of DRD not being able to agree a target price. On the basis of such report (which used dramatic language), the DRD Board rejected BBMC's bid (even though it acknowledged that BBMC's was the lowest priced tender and would likely to have been awarded the contract had it not been considered an abnormally low tender).
- BBMC brought a challenge under the Public Contracts Regulations 2006 ("PCR 2006"). The court held that DRD had breached Regulation 30 of PCR 2006 and held that DRD's decision to treat BBMC's tender as an abnormally low tender was flawed (although not manifestly unreasonable). BBMC was awarded damages for lost opportunity.
It is of further interest to note:
- Whilst the tender was undertaken in accordance with the 2006 procurement regime, the findings are useful when applying Regulation 69 Public Contracts Regulations 2015, which places a direct duty on contracting authorities to investigate abnormally low tenders.
- The case law in respect of "manifest error of assessment" has not been progressed under this case although Colton J did cite existing case law on this topic in his judgment (Lion Apparel Systems v Firebuy  EWHC 2179, BY Developments v Covent Garden  EWHC 2546 and Amey v Scottish Ministers  CSOH 181).
- BBMC was awarded "meaningful damages" for lost opportunity due to the court's consideration that BBMC's tender had had a "significant chance" of being successful. Such reference to quantification of damage is uncommon and may aid those involved in the procurement market to where a court needs to assess what the outcome would have been had the PCR 2015 not been complied with.