Does failing a pass/fail question = disqualification?

Shortly before Christmas the judgment in the case of MLS (Overseas) Ltd v The Secretary of State for Defence [2017] EWHC 3389 TCC was released, containing important lessons for bidders and contracting authorities involved in public procurement.

The Ministry of Defence tendered a contract worth around £385m for the provision of port, maritime and logistical support services to the Royal Navy. The tender was subject to the Defence and Security Public Contracts Regulations 2011, which impose duties on contracting authorities to treat bidders equally, and to act transparently and proportionately. Identical duties are also contained in the Public Contracts Regulations 2015, which govern the procurement of many other contracts outside of the defence sector.

MLS was the incumbent provider of the services and submitted a tender. The contract award notice sent to MLS noted that its bid had scored the highest mark for the technical/quality section of the tender, and that MLS had also offered the lowest price. It would therefore have won the tender, had its bid not been disqualified because it had not passed a pass/fail question on providing evidence of safety in its supply chain. As a result of MLS’s disqualification, the MoD therefore intended to award the contract to the next highest bidder.

MLS challenged the decision on a number of grounds, including on the basis that the Invitation to Tender (ITT) issued by the MoD had not made it clear that a fail on the supply chain safety question would result in disqualification.

The Court agreed with MLS, and noted that in relation to other pass/fail questions, the ITT explicitly stated (in bold type) that failing to meet the requirement would result in disqualification. A drafting error by the MoD meant that this warning was not included on the section of the ITT which included the supply chain safety question. The Court concluded that it was not possible for a reasonable tenderer to determine from the ITT that failing the supply chain safety question would (or may) lead to disqualification, and as such the MoD was in breach of its duties of equal treatment and transparency, and its decision to disqualify MLS and award the contract to the next highest bidder was unlawful.

This case should act as a warning to contracting authorities that tender documents must be absolutely clear and unambiguous to avoid the risk of challenge by a bidder. In all cases where failure to meet a mandatory requirement will or may lead to disqualification, this should be flagged up to bidders in the ITT.