Public procurement: When does a contracting authority have an obligation to seek clarification?

In the recent case of Work on Wellbeing Ltd t/a Optima Health v Secretary of State for Work and Pensions, the Court of Appeal has provided useful guidance on how a contracting authority should exercise its discretion to seek clarification of errors and ambiguities in bids, and when they are obliged to do so.

Optima Health were an occupational health provider, and submitted a bid to the DWP for a call-off contract under a framework agreement to provide DWP with an occupational health and employee assistance programme. Their bid was rejected for non-compliance, because their pricing schedule contained three line items which exceeded the maximum prices permitted under a pricing schedule contained within the overarching framework agreement. Had their bid not been excluded, Optima would have won the contract, having scored the highest quality mark and the highest score overall. In fact, only one bidder had submitted a fully compliant pricing schedule, and that bidder was subsequently awarded the contract.

Optima brought a claim challenging their disqualification, arguing firstly that the requirement not to exceed the framework pricing schedule was not clear and transparent, because it did not spell out that the consequences of non-compliance would be disqualification, and secondly that DWP should have sought clarification of their bid and had not properly exercised their discretion to exclude.

The High Court dismissed Optima’s claim, but that decision has now been reversed on appeal, with the Court of Appeal outlining key principles for contracting authorities where a bid contains an error or ambiguity as follows:

1. First, contracting authorities should consider whether the error or ambiguity is obvious, and whether it is material to the outcome of the tender. If the error or ambiguity will not have any material impact, no further action is necessary.
2. If there is an obvious and material error or ambiguity, contracting authorities must next consider whether clarification should or must be sought. This will depend on the nature of the error. Where a bid contains an obvious clerical error – for example a mathematical error in adding up a list of prices, or a typo which changes the meaning of a sentence such as a missing ‘not’ – then clarification must be sought. If the error or ambiguity is less ‘clerical’ in nature then the authority may rather than must seek clarification, but it should usually do so if the consequence of the error will otherwise be the exclusion of the tender.
3. Finally, if the contracting authority has sought clarification, it must then consider how to deal with the response received from the tenderer. Clarifications must be truly clarificatory, and cannot be used by bidders to make substantial amendments to their bid, or put in what essentially amounts to a new bid.

In Optima’s case, the Court of Appeal found that the three line items in their pricing schedule which exceeded the framework maximum were both obvious – because DWP knew from the framework itself what the maximum prices should be – and highly material to the outcome of the competition. DWP was therefore obliged to seek clarification from Optima. Their argument that seeking clarification would have breached their duty of equal treatment to the bidder who had submitted a compliant pricing schedule was wrong; Regulation 56(4) of the Public Contracts Regulations 2015 expressly contemplated that contracting authorities may seek clarification of bids.

Finally, had DWP sought clarification, the effect would likely have been that the three line items would have been reduced to the maximum permissible price. This would not have constituted a new bid or a substantial change to the bid, and the outcome would have been that the contract should have been awarded to Optima.

This case provides welcome guidance in an area where contracting authorities can often be reticent in exercising their discretion – and sometimes duty – to seek clarification of obvious and material errors. Bidders who are concerned their bids have been wrongfully excluded or marked down as a result of a failure by contracting authorities to seek clarification of errors should contact our public procurement team for advice; we have recently assisted a number of bidders in having their bids reinstated or re-marked following a failure by contracting authorities to seek clarification of obvious errors.

Our public procurement lawyers regularly advise clients on bringing and defending challenges to procurement awards. If you have a procurement challenge, please contact our public procurement team, who would be happy to help.