Strand, London, WC2A 2LL
B e f o r e :
| MATRIX-SCM LIMITED
|- and -
|LONDON BOROUGH OF NEWHAM
Nigel Giffin QC and Ewan West (instructed by Trowers & Hamlins LLP) for the Defendant
Hearing dates: 27 and 28 July 2011
Crown Copyright ©
Ms Susan Prevezer QC:
a. On 15 December 2009, Newham commenced the procurement of a 5- year contract (with an optional 2-year extension) for the provision of vendor neutral managed services ("the Procurement"). The Procurement was conducted in accordance with the "restricted procedure" pursuant to the Public Contract Regulations 2006 ("the Regulations"), with the Contract to be awarded to the "most economically advantageous tender" (Regulations 4(3) and/or 16 and 47(1) of the Regulations). This involved identifying a range of factors and evaluating the value of the bid by reference to the criteria chosen. The criteria had to be made public and the "most economically advantageous tender" was not simply the lowest bid. The procurement procedure commenced by advertising the procedure on Newham's Electronic Contract and Tendering Resource ("NECTR") and Newham's website, which allowed all bidders to have access to the same tender information, documents and relevant communications at the same time. As at 15 December 2009, Beeline was the incumbent supplier.
b. Bidders for the Contract were required to submit pre-qualification questionnaires ("PQQ") to Newham for assessment by 21 January 2010 and Matrix submitted its PQQ accordingly.
c. On 18 March 2010, bidders that had successfully prequalified, including Matrix and Beeline, were given access to an Invitation to Tender (the "ITT"). The ITT, which was also uploaded onto NECTR, included an Evaluation Model ("the Evaluation Model") that set out the criteria on which Newham would base its decision to award the Contract. In summary, 70% of the marks were to be awarded based on an assessment of quality ("the Quality Element"); 25% of the marks were to be awarded based on price ("the Pricing Element") and 5% of the marks were to be awarded based on savings ("the Savings Element"). The Pricing Element and the Savings Element were separate elements, but formed part of a 30% weighting for price, and the tests in relation to the Pricing and Savings Elements were set out in Section 13.1 of the ITT and Sections 4.1 and 4.2 of the Evaluation Model, which included an example, in tabular form, setting out how three hypothetical bids would be scored in relation to both the Pricing Element and the Savings Element ("the Table"). The covering letter to bidders, sent with the ITT, emphasised that "full details" of the scoring and evaluation methods were contained in the Evaluation Model.
d. Matrix downloaded the tender documentation on 25 and 26 March 2010 and reviewed Section 13 of the ITT, the Pricing Schedule and the Evaluation Model, giving, according to Mr Young, "very close attention" to these documents. (Mr Young's understanding of the documents, which is relevant to the present application, is set out in more detail below).
e. Bids were initially required to be submitted by noon on 26 April 2010. This deadline was subsequently extended to 6 May 2010, following which bidders were then interviewed by Newham. Matrix was interviewed by Newham's Procurement team in mid June 2010.
f. Following a process of evaluation, a decision was made to recommend the award of the Contract to Beeline, and this recommendation was approved by the Council's Mayor on 16 September 2010.
g. On 30 September 2010, Matrix was informed by Newham of the results of the competition and received a letter setting out the scores received by it and its competitors. The letter revealed that Beeline had beaten Matrix by only 0.39%. On 6 October 2010, Matrix received a further letter from Newham stating that there had been a clerical error in the marks awarded to Beeline and that Beeline had in fact won by only 0.14%.
h. On 8 October 2010 Matrix attended a de-briefing session with Newham, and Matrix was provided with a document containing the raw price and savings figures submitted by both Beeline and Matrix ("the Tender Evaluation").
i. On 14 October 2010, Matrix wrote to Newham challenging its decision to award the Contract to Beeline. The initial basis of that challenge was not as is now advanced by Matrix in its Particulars of Claim, and it was not until 26 October 2010 that all the grounds of challenge upon which Matrix now relies were put forward.
j. The parties then engaged in extensive correspondence culminating in an unsuccessful mediation. During this period, Newham agreed not to take any point on limitation from 27 October 2010, reserving its right to contend (as it now does) that Matrix's claim was time barred prior to that date.
k. On 11 January 2011, Matrix issued its claim and its Particulars of Claim were served on 25 January 2011.
l. Newham served its Defence on 21 February 2011, and on 8 April 2011, Newham issued its application to strike out and/or for summary judgment on Matrix's Claim.
Summary of the Parties' Arguments
a. Firstly, it is alleged that Newham failed properly to apply the Pricing Element in the ITT, and used a methodology to calculate the Pricing Element inconsistent with the test set out in the ITT (Paragraphs 56(a) and 62 of Particulars of Claim) ("Ground 1").
b. Secondly, it is alleged that Newham adopted and applied a criterion- the Savings Element- independently of the Pricing Element, which meant that Newham failed to award the Contract to the most economically advantageous tender (Paragraphs 56(b) and 63-64 of the Particulars of Claim) ("Ground 2").
c. Thirdly, it is alleged that Newham gave illegitimate preference to Beeline, as the incumbent supplier, in making its decision to award the Contract to Beeline and therefore failed to assess each tenderer's submission objectively and equally (Paragraphs 56(e) and 69 of the Particulars of Claim) ("Ground 3").
Time Limits under the Regulations/Extending Time/ Applications to Strike Out
"(7) Proceedings under this Regulation must not be brought unless-
(b) those proceeding are brought promptly and in any event within 3 months from the date when grounds for the bringing of the proceedings first arose, unless the Court considers that there is good reason for extending the period within which proceedings may be brought"
a. The words "the date when grounds for the bringing of proceedings first arose" more naturally refer to a mere breach of the Regulations rather than breach plus potential loss. It is the infringement which is the event which constitutes the breach of duty and no appreciation of loss is required to bring proceedings (Paragraph 46). Accordingly, the expression "grounds for bringing proceedings" should be treated as effectively synonymous with "infringement" in a broad sense (Paragraph 127).
b. This construction is consistent with the policy of "rapid review" under the Regulations, as identified by the ECJ. "The date on which an infringement takes place is a fact which is relatively easy to understand and ascertain. It is a date which can be made to fit in with the objective of rapidity. The date, if different, on which it somehow objectively becomes apparent that loss has or may have been caused is (if different) not so readily definable and is a less certain date from which to start a limitation period which is supposed to be short" (Paragraph 47).
c. Further, a claimant does not have to have great detail of how any breach came about before he has knowledge for the purposes of Regulation 47(7)(b). "Claimants start actions (and are expected to start actions for limitation purposes) at a time when their knowledge is incomplete and when detail is not known. Any attempt to require detail would be likely to run counter to the principle that challenges should be indicated swiftly and mounted swiftly. The standard ought to be a knowledge of facts which apparently clearly indicate, though they need not absolutely prove, an infringement" (Paragraph 130).
d. Further, the limitation period should start to run from the date when the Claimant first knew that it had a cause of action, irrespective of whether it knew when it had first arisen or the circumstances of its first arising (Paragraph 159).
"19. At the heart of this case lies the question: what degree of knowledge or constructive knowledge is required before time begins to run? The knowledge must relate to and be sufficient to identify, the "grounds" for bringing proceedings, as it is expressed in Regulation 32(4)(b). The Directive does not use that word but instead Article 1 speaks of taking proceedings rapidly against a decision involving an "infringement" of Community law. The concept of "grounds" in the regulations must be read consistently with that concept of "infringement" as the judge below recognised (para 127). So the question becomes: when is the information known or constructively known to the appellant sufficient to justify taking proceedings for an infringement of the public procurement requirements? "
" ..That is no doubt for the good policy reason that it is in the public interest that challenges to the tender process of a public service contract should be made promptly so as to cause as little disruption and delay as possible. It is not merely because the interests of all those who have participated in the tender process have to be taken into account. It is also because there is a wider public interest in ensuring that tenders which public authorities have invited for a public project should be processed as quickly as possible. A balance has to be struck between two competing interests; the need to allow challenges to be made to an unlawful tender process, and the need to ensure that any such challenges are made expeditiously"
This sentiment has been repeated in cases since Jobsin, such as Mears Ltd v Leeds CC  BLR 155; Harry Yearsley Ltd v Secretary of State for Justice  EWHC 1160 (TCC); Allan Rutherford LLP Solicitors v Legal Services Commission ("Rutherford")  EWHC 3068 (Admin); Parker Rhodes Hickmotts Solicitors v Legal Services Commission  EWHC 1323 (Admin); Matra Communications SA v Home Office  1 WLR 1646.
a. The importance of the issues in question
b. The strength of the claim
c. Whether a challenge at an earlier stage would have been premature, the extent to which the impact of the infringement is unclear and the claimant's knowledge of the infringement
d. The existence of prejudice to the defendant, third parties and good administration.
Claims under Grounds 1 and 2
and, as stated above, for the purposes of the application, I must assume that the infringements alleged by Matrix exist, so as to determine in relation to each claim whether it is in or out of time.
The criteria against which bids were to be evaluated were contained at Section 13 of the ITT. Of relevance, Section 13.1 provided as follows:
"13.1 It is important that the Service provides value for money and the contract delivers quality workers at competitive rates (that the marketplace can sustain) with minimal effort expended by recruiting managers. The contact will be awarded on the basis of the most economically advantageous tender and the evaluation will be based on a split of 25% price, 5% savings and 70% quality.
The price element will be evaluated on the basis of the lowest bid (based on the set of jobs and all additional costs) being awarded 25 marks. Higher bids will then be based on a percentage of the 25 marks according to the difference between each tenderer's bid and the lowest bid.
The savings element of the Bid submission will be evaluated on the basis of the highest savings (based on the set of jobs and all additional costs) being awarded 5 marks. Lower estimated savings will then be scored based on a percentage of the 5 marks according to the difference between each tenderer's savings and the highest estimated savings.
The quality element will be measured by responses given to the proposed Method Statements and as detailed in Evaluation Model of this ITT for the first stage. Further quality assessment for shortlisted tenderers progressed to the second stage may also include demonstration of their e-system, interview with presentation and reference site visits. The Council reserves its right to vary this evaluation process and methods
Each Method Statement will be marked and weighted as detailed in the Evaluation Model of this ITT. The total possible overall quality score available is 1050 marks
"4 / PRICING/COST OF SERVICE
4.1 Evaluation of Price
In line with the details contained in the Instructions to Tender, the price element of the Bid submissions will be evaluated on the basis of the lowest bid being awarded 25 marks. Higher bids will then be based on a percentage of the 25 marks according to the difference between each tenderer's bid and the lowest bid.
4.2 Evaluation of Savings
In line with the details contained in the Instructions to Tender, the savings element of the Bid submission will be evaluated on the basis of the highest savings (based on the set of jobs and all additional costs) being awarded 5 marks. Lower estimated savings will then be scored based on a percentage of the 5 marks according to the difference between each tenderer's savings and the highest estimated savings.
The Method by which savings will be generated should be answered within the relevant Method Statement
Example-Assuming for demonstration purposes only 3 companies were bidding
Pricing comparison Pricing 30% of total Total price Savings Score total price Score savings Minimum total cost Max saving Total price score 25 5 15,000,000 600,000 Company 1 20,100,000 3,000 18.66 0.025 18.68 Company 2 40,000,000 150,000 9.38 1.25 10.63 Company 3 15,000,000 600,000 25 5 30.00
5 OVERALL EVALUATION
5.1 The contract will be awarded on the basis of the most economically advantageous tender and the evaluation will be based on a split of 70% quality, 25% price and 5% savings
Example- combining Total Quality Score and Total Price Score
Company 1 Company 2 Company 3 Total Quality Score 61.24 66.67 35.00 Total Price Score 18.68 10.63 30.00 Overall Score 79.92 77.29 65.00 Rank 1 2 3
(i) The Pricing Element issue
a. First, it is necessary to determine the difference between the lowest price (that is "the winner") and the higher price (as may be obvious, by subtracting the lowest price from the highest price);
b. Secondly, that number must be converted into a percentage of the lowest price (with the difference as the numerator and the lowest price as the denominator). That calculation gives the percentage by which the higher price was greater than the lower price; and
c. Thirdly the higher price gets a proportion of the maximum 25 marks, as reduced by this percentage. (see Mr Young's evidence at Paragraph 3.14)
evaluated the bids. Rather it applied a test that appears only when, according to Mr Randolph, one "re examines and reverse engineers" the figures in the Table which is provided at the end of Section 4.1 of the Evaluation Model (as set out above), and which sets out the Example of the Pricing Test with regard to 3 hypothetical bids. The test which Newham applied, so Mr Randolph QC contends, is a curious and wrong approach for Newham to have taken, albeit he accepts that it is the exact same approach applied in relation to the 3 hypothetical bids set out in the Table. This approach followed by Newham meant that:
a. Firstly, it divided the lowest price by the higher price;
b. It then converted that number into a percentage; and
c. Finally, it multiplied that percentage by 25- and the higher priced tenderer then received that amount of marks.
It is thus an approach that does not calculate the "difference" between the lowest price and the higher price nor does it give the higher bid a percentage of the 25 marks based on that difference, as required by Section 13.1 of the ITT. Whereas, on the wording of Section 13.1 the ratio of "loser: winner" should have been used; applying the approach in the Table, the ratio of "winner: loser" was used by Newham. As a result, Newham got its maths wrong. It used a test not provided for in the ITT or the Evaluation Model; alternatively, if it was provided for in the ITT and the Evaluation Model (because it was in fact the test set out in the Table), it was not reasonably clear to Matrix and any other tenderer, and therefore Newham failed to act transparently. Had the correct approach been applied by Newham, Beeline's score would have been 72.94 and Matrix's score 73.08; whereas Newham's incorrect and non transparent approach produced a score for Beeline of 73.22 and for Matrix of 73.08.
a. He reviewed and gave "very close attention" to all the documents- the ITT, the Pricing Schedule and the Evaluation Model (Paragraphs 3.4 and 3.5).
b. He considered the descriptions in Section 13.1 in light of the further description set out in the Evaluation Model and noted that the words used in the Evaluation Model (at 4.1) were precisely the same words used in Section 13.1 (Paragraph 3.10).
c. He examined the Table, which he noted set out example prices and savings for 3 hypothetical bidders and the scores that they would receive based on those prices and savings. However, in his view, the Table did "not contain any additional formula to that set out in Section 13.1 of the ITT or Sections 4.1 and 4.2 of the Evaluation Model", nor did "it contain any "working" to show how the scores set out in the table were arrived at" (Paragraph 3.12).
d. "[His] understanding of the test for the Pricing Element set out in the ITT and the Evaluation Model was, at the time of the submission of Matrix's tender, very clear. The lowest price would get full (that is 25) marks. Those tenderers who did not submit the lowest price would receive a percentage of the 25 marks "according to the difference " between their bid and the lowest" (paragraph 3.13).
e. Accordingly, his understanding of the mechanics of the computation of the Pricing Element was one requiring the three steps identified in Paragraph 29 (a) to (c) above, and he regarded this method as "very sensible" and "based on [his] extensive experience in the industry", a method similar to that used by other public authorities to score price.
f. Further, and critically, for present purposes, he considered the Table in the light of the clear wording set out in Section 13.1 of the ITT and Section 4.1 of the Evaluation Model and "While [I] read the table, I did not consider it necessary to analyse it in any great detail. It merely set out a series of figures and as I have noted above, it did not contain any further formulas or workings. As it was headed "Example", I assumed (reasonably in my view) that it simply put into effect the test set out in Section 13.1 of the ITT and Section 4.1 of the Evaluation Model". "It certainly did not occur to me .. that the Table would adopt an entirely different assessment to that described in Section 13.1 of the ITT and in Section 4.1 of the Evaluation Model and that this alternative methodology would then be used by Newham in scoring the tenders. There was nothing in the ITT which suggested that the Table did anything other than what had been set out in Section 13.1 of the ITT and Section 4.1 of the Evaluation Model and was expressly described as an "Example" of the test there set out. I would not, based upon my experience, have expected that the scores in the Table would have been calculated based upon the assessment criteria that were entirely different to that set out in Section 13.1 of the ITT and Section 4.1 of the Evaluation Model."
g. Finally, whilst Mr Young accepts that it was clear in Section 13.1 of the ITT and Section 4.1 of the Evaluation Model how Newham would score the Pricing Element "the words used in Section 13.1 and Section 4.1 of the Evaluation Model are perfectly clear and Matrix proceeded on that basis when formulating the price and savings figures that it eventually submitted. There was nothing on the face of the Table which introduced any uncertainty in my mind as to the test that would be applied".
a. Newham's letter to bidders of 18 March 2010 clearly stated that full details of the scoring and evaluation methods were contained within the Evaluation Model section of the ITT.
b. The Evaluation Model comprised both a written description of the approach to be adopted and the Table, which set out a hypothetical example. The Table was an integral part of the Evaluation Model.
c. Prospective bidders were thus required and reasonably expected to read the entirety of the documentation- the written description and the Table, which was clearly marked "Example" and which could only be understood as showing what was meant by the wording to which it related and what Newham was going to do when the bids were evaluated.
d. Further, the examples given within the Table were clear and straightforward and the Table set out plainly how bids would be scored. The figures used in the Table did not need to be "reverse engineered" or scrutinised in any great detail- the maths applied was apparent on the face of the Table.
e. The approach Newham adopted, in accordance with the wording of Section 13.1 and Section 4.1 was in fact "based on a percentage according to the difference between [the two prices]". It looked at the proportionate difference between the prices concerned. But more importantly, as Mr Giffin QC for Newham rightly contends, the examples given in the Table clearly demonstrated what the approach would be.
f. Indeed, the only possible purpose of the Table was to show in unambiguous, mathematical terms the intended meaning of the relevant wording in Section 4.1 (which was identical to Section 13.1) and the approach that Newham would be adopting. As I have already remarked, there is in fact no dispute that the approach taken in the Table was the approach that Newham took. Equally, there is no dispute that the Table is not consistent with the approach that Matrix says it expected Newham to adopt, and that Matrix thought should have been adopted.
a. The lowest bid of 15,000,000 (in terms of price) of Company 3, is awarded 25 marks- in accordance with the first sentence of Section 4.1;
b. Company 1's bid of 20,100,000, (which is next lowest in terms of price) is awarded 18.66 marks- and this is computed by dividing Company 3's lowest bid of 15,000,000 by Company 1's bid of 20,000,000 and multiplying that by 25. This is a percentage of the 25 marks according to the difference between Company 1 and Company 3's respective bids; and
c. Company 2's bid of 40,000,000, (which is the highest bid) gets 9.68 marks, again by dividing Company 3's bid of 15,000,000 by Company 2's bid of 40,000,000 and multiplying that by 25.
The clear intention is that a bidder should get increasingly fewer marks the higher its bid (in terms of pricing).
a. subtracted 15,000,000 from 20,100,000, to get 5,100,000;
b. then divided 5,100,000 by 15,000,000, which equals 0.34 (or 34%.) ; and
c. because the difference between Company 1 and Company 3's price is 34% of Company 3's price (the lowest price), one would have awarded Company 1 66% of the full 25 marks, ie 16.5 marks not 18.66 marks.
(ii) Ground 2- the Savings Element
(iii) Extension of Time
Ground 3-Illegitimate Preference- Summary Judgment
"2.12 The recommendation to award the contract to the existing provider was based on the evaluation of bids as set out in the tender documents. However, there are a number of additional benefits which can be gained by awarding to this contractor:
and then sets out five perceived "additional benefits" of awarding the Contract to Beeline, including, for example that Beeline "fully understand the needs of Newham and the various services and they have demonstrated a real partnership approach to delivering high quality resources and responding to changing demands" and "their estimate on savings is based on a 2nd generation Managed Service Provider contract and their understanding of the Council";
a. The Evaluation Criteria stated in the tender documentation were couched in `forward looking' terms. For example, Newham sought details from tenderers as to how they would develop a Community Benefits plan going forward (see Q1 Community Benefits Evaluation Criteria and Section 16 of the ITT- which refers to the appointed contractor being expected to "provide the Council with information about future skills, needs and forthcoming opportunities" in relation to Community Benefit).
b. However, it is plain from the Tender Evaluation Document (which Matrix saw for the first time in October 2010) that Newham had taken into account "strong examples of current initiatives" of Beeline,- in particular, the fact that Beeline, whilst in situ as the incumbent supplier, had developed CV workshops with local suppliers and attended local careers fairs. (Document headed "Comparison of Scores and Advantages" under Method Statement 1- Community Benefits).
c. It was wrong in law for Newham to take into account additional benefits such as those derived from being the incumbent supplier, particularly where these are not stated to be relevant to the evaluation process. There is no statement in the ITT or Evaluation Model which makes clear that current operations of the incumbent supplier would be taken into account in evaluating the bids.
d. To take into account the current experience of the incumbent supplier leads to an uneven playing field, particularly where the fact that such experience is being taken into account is not clearly explained. It flouts the principles of equality, non discrimination and transparency.
e. These documents support the submission that consciously or unconsciously, Newham took into account the experience of Beeline derived from its position as the incumbent supplier, without making clear to all other tenderers in the documentation that this would be done.
f. Further, this evidence bolsters the submission made with regard to the Briefing Note, which refers expressly to the "additional benefits". It is not "fanciful" to suggest a link between the taking into account of Beeline's "current initiatives", the evaluation of the Quality Criteria carried out Newham and the "additional benefits" referred to in the Report.
a. Section 1.1 of the Evaluation Model states very clearly that the purpose of the Method Statements is to satisfy the Council that the Tenderer has the ability, capacity and management controls in place to operate the Contract in an efficient, safe and cost effective manner.
b. Section 13.1 of the ITT refers to the quality assessment including demonstrations of tenderers' e-systems, interviews with presentation and reference site visits- ie a consideration of current initiatives or work, and Section 14.5 of the ITT headed "Method Statements" expressly refers to Site visits being arranged to existing customers to demonstrate that the tenderer has the capability of substantially delivering the Method Statement.
c. In the Schedule of Questions for tenders, there are numerous examples given where current initiatives of tenderers are relevant. With regard to Community Benefits, see Q 2; Account Management, Q 1; Management of Suppliers Q1; Workers and Service Categories, Q 1; NCCS Q1. Indeed, in each section, questions pertaining to current activities are posed.
In my judgment, there is no basis for going behind what Newham's witnesses have said about the evaluation process and if Newham's witnesses are telling the truth, then there is nothing in this claim by Matrix. Accordingly, it should be struck out now on the basis that it has no reasonable prospect of success at trial.