Price and quality criteria: ensuring transparency and equality

Monday April 11th, 2011

By Daradjeet Jagpal, Solicitor, Harper Macleod LLP

A recent decision of the High Court of Justice in Northern Ireland has again highlighted the need for contracting authorities to act transparently when disclosing evaluation criteria to bidders.

In the case of Traffic Signs & Equipment Limited v Department for Regional Development, the Central Procurement Department of the Department of Finance and Personnel, Northern Ireland (“CPD”), procured the supply and delivery of permanent and temporary road traffic signs and signposts under 21 contracts. The evaluation criteria were lowest price (with a 60% weighting) and service delivery (with a 40% weighting). The service delivery criteria were further subdivided into delivery methods, environmental issues and complaints handling. Traffic Signs & Equipment Limited (“TSE”) was awarded only two of the 21 contracts. TSE alleged that CPD had breached the procurement regulations in that:

  • The evaluation criteria were not sufficiently objective or capable of verification, particularly since the bidders were required to demonstrate that they were accredited in terms of “Sector 9A”, a quality management British Standard relating to the manufacture of permanent and/or temporary road traffic signs, which should have resulted in overall bid quality being a less decisive factor and therefore having a lower weighting than 40%; and
  • Changing the price/quality ratio from 80%/ 20% (the weighting model used by the CPD in previous similar procurements) to 60%/40% for price and quality, respectively, had a decisive effect on the award of contracts and favoured another bidder, thereby breaching the principle of non-discrimination. If the 80%/20% ratio had been adopted, TSE would have won five contracts instead of only two.

The High Court made the following remarks:

  • Contracts should be awarded on the basis of objective criteria, which ensure compliance with the principles of transparency, non-discrimination and equal treatment;
  • There needs to be a sufficient degree of transparency so that tenderers are reasonably informed of criteria and arrangements which will be applied to identify the most economically advantageous tender;
  • In this case, the price aspect of the assessment was objective and transparent, as were the quality criteria, although assessment of the quality criteria included a subjective element;
  • Price and quality criteria should be considered in combination because it is the overall assessment that determines the most economically advantageous tender;
  • Where particular criteria will have a decisive effect on the evaluation of bids, a contracting authority may need to explain its evaluation methodology in more detail in order to ensure objectivity and transparency. It may not be enough for a contracting authority simply to identify criteria and their respective weightings. In this case, the allocation of 40% weighting to the quality element of the evaluation criteria required greater explanation to ensure objectivity and transparency; and
  • Given the background history to the procurement of traffic signs contracts and the introduction of Sector 9A accreditation, the use of a 40% quality weighting, which was a decisive factor when awarding contracts, required explanation and justification. As CPD was unable to provide such explanation and justification, it was found to have breached the principles of objectivity and transparency.

While the High Court did not consider that the shift in approach to 60%/40% for the cost/quality ratio, had in fact favoured another bidder, it did set aside CPD’s award decision in relation to three contracts where TSE had suffered, or risked suffering, loss or damage because of this shift, noting that, had the original 80%/20% split been applied, TSE would have won these contracts.

CPD notified the High Court of its intention to appeal the decision. The High Court therefore suspended the entry into the contracts until such time as a decision was made on the appeal or the time limit for appeal expired.

This decision highlights the importance of compliance with the EU principles of transparency, non-discrimination and equal treatment during the tender process. In particular, contracting authorities need to ensure that significant advance disclosure of all quality criteria, including sub-criteria, and the weightings to be applied to such criteria, is made. Contracting authorities also need to put in place appropriate evaluation methods to assist in evaluating award criteria, and make sure that this is included in the tender document. If this is not done correctly, the risk of post-award challenges from aggrieved bidders is greatly increased.

Daradjeet Jagpal is a solicitor at Harper Macleod LLP and can be contacted on daradjeet.jagpal@harpermacleod.co.uk

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