Scottish Court of Session Decisions

Pursuer: M Ross; Brodies LLP

First Defenders: J MacGregor; Glasgow City Council

Second Defenders: Haywood, solicitor advocate; DWF Biggart Baillie DWF LLP

6 December 2012

[1] The pursuer is Glasgow Rent Deposit & Support Scheme, a company limited by guarantee, with a place of business at Brooke Street, Glasgow. It is a charity aimed at alleviating the needs of homeless people in Glasgow. For several years it has been grant aided by the first defender, Glasgow City Council, for the purpose of helping it to fulfil its statutory obligations to the homeless in its area. The second defender is Ypeople, a trading name of YMCA, Glasgow. (The designated second defender is Ypeople Ltd, but it was acknowledged that this is a mistake).

The background to the present dispute

[2] Glasgow City Council sought tenders for a service to provide increased access to a range of temporary and permanent private rented properties throughout Glasgow for households who are assessed as homeless or threatened with homelessness. There were two strands to the proposed service: firstly, a deposit guarantee scheme, and secondly, the provision of temporary furnished accommodation.

[3] The pre-contract documentation was lodged in court, including a pre-qualification questionnaire. It indicated that the project value is an estimated annual spend for the council of £230,000. However the council offered no guarantee on the value of the project; the information as to value was given merely as guidance. The invitation to tender told interested parties that the contract is expected to run for two years commencing on 8 October 2012 and ending on 7 October 2014, with an option to extend for a further year. The tender would involve two specialisms, the deposit guarantee scheme, and access to temporary furnished accommodation. It was made clear that applicants must supply both specialisms. The evaluation of the quality of bids would account for 60% of the total score, with the remaining 40% referable to the quoted price. Interested parties could raise queries, the questions and answers being made available to all interested parties. One answer indicated that, so far as the project is concerned, the budget would be agreed for year one, but would be subject to review thereafter.

[4] The pursuer sought clarification as to whether the authority was expecting a competitive bid in respect of a contract value of up to £230,000 for one year, or up to £690,000 to encompass all three years of the contract. The response was that the ICPB (integrated care proposal budget) should be completed based on the contract value of £230,000. The author of this answer continued by saying, "If this is not helping you to understand, can you please give me a call and I can try to assist."

[5] The pursuer submitted its tender to the council, as did two other parties. The pursuer's bid contained the lowest price. By letter of 8 October 2012 the pursuer was informed that its bid had been unsuccessful. In an annexe to that letter, the pursuer was given information as to the evaluation criteria used to assess the tenders, the scores of the pursuer and those of the successful tenderer (the second defender). The annexe set out the reasons for the failure of the pursuer's bid, and included the following comments:

"The areas where the information you provided was deemed to have been weaker were where there was a lack of clarity on service delivery and overview of service. There were instances where your responses did not show evidence to substantiate claims and your answers were quite narrow in construction. Although the clear understanding of key elements was evident, important details were lacking, eg timescales around process and how they would be implemented, and there was no provision of detail on working relationships with landlords. A number of your responses concentrated on describing the service currently provided by GRDSS and did not address how you would develop the model to meet the requirements of the tender. You clearly convey that your objectives meet the council's overall strategic objectives, but your response was lacking in relation to the key elements of the homelessness strategy and how GRDSS would bring added value. Your response lacked clear evidence of understanding of the range of potential outcomes for different groups of service and in areas did not address all areas of service required. You clearly recognised individuals' choice and the potential financial benefit in moving to registered social landlords. However, this tender was directly about lack of RSL accommodation, so in areas your response was unclear about overcoming challenges faced and how you would work with households to identify other solutions."

The annexe then explained why the successful bid was given a higher mark.

The present case

[6] The pursuer has raised an action seeking declarator that the decision was in breach of, firstly, regulation 4(3) of the Public Contracts (Scotland) Regulations 2006, and secondly, the principles of equal treatment, transparency, non-discrimination and proportionality. Regulation 4(3) provides that a contracting authority shall treat economic operators "equally and without discrimination and act in a transparent and proportionate manner". The pursuer also asks for an order in terms of regulation 47A setting aside the decision of 8 October, along with any procedure that has taken place in relation to the proposed contract. The action has been defended firstly, by the council and secondly, by the successful bidder, Ypeople. In terms of regulation 47(10), the raising of these proceedings has stopped the award of the contract until they are resolved or until, by interim order, the court ends the prohibition. The council has now moved the court to grant an interim order in terms of regulation 47A(2), which provides:

"In any interim proceedings under this part of the regulations, the court may decide not to grant an interim order when the negative consequences of such an order are likely to outweigh the benefits having regard to the following considerations:

(a) the decisions taken by a contracting authority shall be reviewed effectively and in particular as rapidly as possible;

(b) the probable consequences of an interim order for all interests likely to be harmed; and

(c) the public interest."

[7] There have been a number of recent decisions in the Outer House in respect of similar applications. There was no dispute between the parties as to the correct approach to be adopted. The court requires to consider the respective strengths of the parties' cases; the balance of convenience, including having regard to whether damages might be an adequate remedy; and the public interest. On behalf of the council, Mr McGregor reminded me of my own comments in the case of Shetland Line 1984 Ltd v The Scottish Ministers 2012 CSOH 99 as follows:

"The court should be mindful of the risks of becoming embroiled in the merits of the evaluation and assessment of tenders in a public procurement exercise. Not only is the court poorly placed to do this, it would be quite wrong for it to trespass on the jurisdiction clearly given to the contracting authority to exercise a broad discretionary judgment as to the identification of the most economically advantageous bid. The court's jurisdiction is to supervise the way in the which the process has been carried out, and to review whether proper procedures and the basic principles underlying the Directive have been respected, for example, those concerning equality of treatment and transparency" (paragraph 26).

In a recent decision, namely Amey LG Ltd v The Scottish Ministers (2012) CSOH 181, Lord Hodge expressed his agreement with those remarks. They are in line with English authority which stresses that, in respect of matters involving judgment and the assessment of rival bids, the court should not disturb the authority's decision except in cases of manifest error.

[8] On behalf of the pursuer, Ms Ross did not challenge any of this, but submitted that the application for an interim order should be refused and the prohibition on the awarding of the contract maintained. She stressed that damages would not be an adequate remedy. The pursuer is a not for profit charity which will effectively lose its funding and its main activity if it loses the contract. It has carried out this type of work for the council for some years. The pursuer does not seek an alternative award of damages. This justifies a distinctive approach to the balance of convenience. For the pursuer, damages would be "no remedy at all". Ms Ross relied upon the general principle of effective review of public procurement decisions, buttressed by what she described as a reasonable prima facie case.

The grounds of challenge

[9] Ms Ross presented three complaints as to the council's decision-making process. The first was that, in an appendix to the invitation to tender, the promise was made that, of the 40% of the overall evaluation devoted to the matter of the price of the bids, "full marks will be awarded to the lowest price bid with all other bids achieving a ­pro rata mark from the highest mark". The pursuer submitted the lowest price. However, if one looks to the annexe to the decision letter, it is apparent that rather than receive full marks of 4,000, this part of the bid was scored at 3,656. Ypeople's bid was scored on price at 3,040. On behalf of the council, Mr McGregor accepted that the statement as to full marks for the lowest bid was misleading. If one looked further on in the same document (at page 29) it was apparent that there are two aspects to the issue of price. The pursuer's bid had received full marks on the second part, but had been marked down slightly on the integrated care proposal budget. If the pursuer's bid was rescored to give full marks on price, the scores of the other bidders would require to be revised upwards. Even if this was left out of account, an additional 344 points to the pursuer's bid would not bridge the gap between the overall scores, namely 7,196 as opposed to 7,660. There would still be a 120 point difference in favour of the second defender. According to Mr McGregor, it follows that even if there is merit in this ground of challenge, it leads nowhere for the pursuer. In response Ms Ross observed that the grounds of challenge are cumulative. This would bring the pursuer "within touching point" of the successful bidder's score, though of course this assumes no revisal upwards of the other bidders' scores on price.

[10] The second ground of complaint raised in the summons also relates to the scoring on price. Attention was drawn to the question asked of the council seeking clarification as to whether the council was expecting a competitive bid in respect of a contract value of up to £230,000 for one year, or of up to £690,000 to cover three years. The answer was that the bid should be based on the contract value of £230,000. The pursuer submitted a bid on this one year basis, but now complains that, if it had been allowed to submit a bid over a three year period, and because of costs savings in the second and third years, it could have submitted a more advantageous bid. The pursuer wants the whole procedure to be set aside so that bids can be re-submitted on a three year term. When asked as to the basis for the proposition that the council was not entitled to answer the question in the way it did, Ms Ross pointed to the passage in the pre-contract documentation which spoke of an expectation that the contract would run for 2 years with an option to extend for up to 12 months thereafter. She acknowledged that the complaint that the pursuer should have been allowed to tender on a 3 year basis was raised for the first time in the present summons.

[11] Mr McGregor pointed to paragraph 3 of the pre-qualification questionnaire, which stated that the estimated annual spend for the project was £230,000 with no guarantee given as to the value of the project. There was no promise as to a three year term. Reference was made to an answer to a question which stated "the budget will be agreed for year one but will be subject to review thereafter". Everyone was aware of that. When the specific question was asked, the answer given was clear and unobjectionable. Even if any of this did amount to a breach of regulation 4(3), again it takes the pursuer no distance towards an effective challenge to the ultimate decision. At best for the pursuer, it can only add to its score on price, and even if it is given full marks and the other bids stay the same, there remains a gap in favour of the successful bid. Under reference to Lord Glennie's opinion in Electa Ltd v The Commons Services Agency 2011 SLT 815 at paragraph 21, for a successful challenge the pursuer requires to demonstrate that the tender it might have put forward on some alternative basis "had a realistic chance of success". The pursuer is unable to satisfy that test. All that said, according to Mr McGregor the short point here is that the answer to the question concerning one or three years bids did not amount to a breach of the regulations.

[12] The third ground of challenge averred in the summons relates to the 60% overall evaluation devoted to the quality of the respective bids. Here the complaint concerns the explanation given for marking down the pursuer's bid on quality in the annexe to the decision letter. Ms Ross drew attention to the table in the annexe to the decision letter which sets out the scores given to the pursuer and the successful bidder in the assessment exercise. In respect of section 1, concerning "service design and model," out of an available score of 1,500, which is 15% of the total, the pursuer was given 768 and the second defender 1,128, a difference of 360 marks. The pursuer's concern is focused on the sentence in the explanation which stated,

"A number of your responses concentrated on describing the service currently provided by GRDSS and did not address how you would develop the model to meet the requirements of the tender."

This failed to recognise that the pursuer had already developed a model of service provision over a number of years of working with and for the council in respect of homeless people in Glasgow. The pursuer had begun as a small church-based charity in the west end of Glasgow. In 2001 it received grant funding from the council which allowed the project to grow. This is the first time that the work has been put out to tender. The pursuer had developed a rent deposit guarantee scheme. The council had funded it to the tune of £200,000 per annum for several years, all without significant complaint. It could not be correct to say that the pursuer had failed to address how to develop the model to meet the tender requirements. According to Ms Ross, this raises a substantial question as to how the assessment regarding section 1 of the evaluation table was carried out. This amounts to a prima facie case of a procedural failure. There had been inadequate recognition of the pursuer's particular situation as the incumbent who had provided the service for several years.

[13] In response Mr McGregor pointed out that this was not a like for like procurement exercise. The pursuer had developed and operated a rent deposit guarantee scheme, but there was more to the tender exercise than that. The bidders were also expected to address the second strand of the contract, all as explained in the relevant documentation, namely the question of access to temporary furnished accommodation. Reference can be made to paragraph 1.5 of the invitation to tender. The pursuer was not the only party to have developed and operated a rent deposit guarantee scheme. In section B of the annexe to the decision letter, the council was addressing both strands of the invited tender. The reasons for the decision referred to vague statements made on behalf of the pursuer. Other criticisms were made in explanation of the relatively low mark. The reference to the pursuer's model concerned the new model covering the two strands to the new service. The second was important as it would allow the council to enter into a direct relationship with landlords, giving it control over the suitability of premises used by homeless people. This was a new venture and the council wanted to "test the market". Section C of the annexe explained why the successful bidder scored more highly. The pursuer was criticising the exercise of the council's commercial judgment as to the identification of the best bid. The courts have consistently emphasised that this is out of bounds in challenges of the current nature. The pursuer has not made out a prima facie case.

[14] For completeness I should add that Ms Ross mentioned that the wording of part of the recently lodged defences for the council raised a question in her mind as to whether the council had relied upon an undisclosed criterion concerning the second defender's ability to offer the immediate availability of fifty premises when scoring the bids, and that this unfairly benefitted the second defender. She accepted that Mr McGregor might be able to provide reassurance on this point, and she indicated that if he did, she was not in a position to contradict it. In due course Mr McGregor did so, explaining that the bids were evaluated by reference only to the declared criteria, and that the issue of the second defender being able to provide fifty premises has been relied upon only after presentation of the current challenge, all in the context of the balance of convenience. In other words this factor gained the successful bidder no additional marks. Mr McGregor confirmed that there was no concealed criterion in operation. Everyone was treated equally and without discrimination. In these circumstances I propose to say no more about this additional issue raised by Ms Ross.

Discussion and decision

[15] Turning to my conclusion on the issue of prima facie case, I will begin with the challenge concerning the reasons given for the low score on certain aspects of the quality of the pursuer's bid. In my opinion this is a classic example of the kind of challenge which will not be entertained. The assessment of the quality of the bids is a matter for the judgment and discretion of the authority. The court will only interfere with such decisions if there is a manifest error. This is not an invitation to disappointed bidders to stop the contract process and tell the court why it thinks that the decision-maker was wrong, or to criticise the reasoning. The term "manifest error" means an error which is clear and obvious beyond reasonable contradiction. I agree with Mr Haywood's comment that it should "almost jump from the page". The reason for this restrictive approach is that otherwise the court would be trespassing upon the jurisdiction given to the contracting authority to exercise its own broad and discretionary judgment as to the identification of the most economically advantageous bid. The contracting authority enjoys no such margin of discretion where the basic principles of public procurement have been breached. But this is far from such a case. There is no question of discrimination, bad faith or misuse of power, only of alleged mistakes in the assessment process. A conviction that errors or misjudgements have occurred will often be held by unsuccessful bidders. It is important that it is understood that this will not justify an allegation of a breach of the 2006 Regulations, not least given the automatic halt in the process arising simply from the fact of such a challenge.

[16] Whatever else, the pursuer's challenge ignores the fact that this was not a like for like procurement exercise. It was not limited to a renewal of the type of service previously operated by the pursuer. In any event, the mere fact that the pursuer had provided a rent deposit guarantee scheme does not justify an investigation into the merits or otherwise of the assessment of one aspect of the quality of the pursuer's bid. For these and the other reasons offered by Mr McGregor, in my view this ground of challenge is clearly without merit.

[17] The same can be said of the challenge based on the pursuer (and the other bidders) having been told to tender on the basis of a one year contract. There was no cogent explanation as to how and why this led the council into a breach of the regulations. The most the pursuer can say is that previously it was told that the contract was expected to extend to two and perhaps three years. If there had been anything in this point, one might have expected it to be raised by the pursuer at the appropriate time. However it complied with the tendered advice without question, and only raised this complaint after the event.

[18] The closest the submissions came to a prima facie case was in respect of the pre-contract documentation which stated that the lowest priced bid would attract full marks in that part of the evaluation process. As it was, despite being the lowest bid, 344 points were deducted. Mr McGregor explained how and why this came about. The pre-contract documentation was misleading in this respect. Nonetheless, all bids were treated in the same manner and in accordance with the same criteria. There was no suggestion that had the scoring process been fully and properly explained in advance, the pursuer's, or any other bids, would have been couched in different terms. It is far from clear to me that this relatively minor error in the pre-contract documentation creates a breach of the regulations in the subsequent procedure. But even if it does, for the reasons summarised earlier, it takes the pursuer nowhere in terms of a realistic chance of a different outcome. If the pursuer's bid had received a score of 4,000, and even ignoring the consequential need to revise the other scores on price upwards, it would still have fallen short of the evaluation of the successful tender.

[19] It is worth remembering that the claim is of a breach of the basic principles embedded in regulation 4(3), namely that the process should be free of discrimination, everyone should be treated equally, and the authority should act in a transparent and proportionate manner. All of this reflects the relevant Community obligations. No doubt it will often be possible to look back over a procurement exercise and identify slips and errors, but it by no means follows that this will result in a breach of regulation 4(3).

[20] Although this opinion has been required as a matter of some urgency, I have had regard to all the documentation which has been produced, including the affidavits of the representatives of the three parties. I have taken all of this material into account. I have also given myself sufficient time to reflect on the parties' submissions. My overall conclusion is that, even making allowances for the early stage of the proceedings, I am not persuaded that the pursuer has a prima facie case that the council is in breach of the regulations, nor of any of the principles of equal treatment, transparency, non-discrimination and proportionality. If I am wrong in that, at best it is a very weak case.

[21] That is sufficient to resolve the matter in favour of the grant of the interim order sought by the council. On the other matters, namely balance of convenience and the public interest, suffice to say that, for the reasons put forward by Mr McGregor, the balance of convenience clearly favours the grant of the order. The purpose of the proposed contract is to improve the council's provision to needy and vulnerable people. To continue the prohibition on the award of the contract until the present proceedings are finally resolved would have a serious adverse impact on the services which the council wants to provide to homeless people in Glasgow this winter, and on its ability to meet the statutory obligations imposed under the Housing (Homeless Persons) Act 1977. Those duties will soon become more burdensome when, at the start of 2013, the priority need category is abolished. In any event there will be increased demand on the service in the winter months.

[22] There are also the interests of the second defender to consider. The contract date expired at the end of November, and Ypeople cannot be expected to put up with the uncertainty for much longer. I was assured that the pursuer's employees would have the opportunity of a TUPE transfer, and so, in these circumstances, it seems to me that there is nothing on the other side of the balance which comes close to tipping the scales in favour of the pursuer. Emphasis was placed on the inappropriateness of an award on damages for any breach of the regulations, and that if the pursuer loses this contract and its funding from the council, it will have to "shut up shop". Even if the pursuers had a prima facie case, I would not have given this factor the decisive weight claimed for it by Ms Ross. It simply highlights the somewhat melancholy fact that this case involves a battle between two charities as to which should have the privilege of assisting the council in the performance of its services to the homeless; a battle which threatens to cause harm to the intended beneficiaries of their philanthropy. Even with the possibility of a TUPE transfer, it may be that some of the pursuer's current representatives will be personally disadvantaged, if only in respect of the, as they would see it, threat of a premature end to their current activities. However, in my view the clear public interest in the proper discharge of the council's statutory obligations to the homeless more than outweighs these factors.

[23] Ms Ross mounted an eloquent plea for, in effect, the primacy of reduction as the best method of effectively reviewing public procurement exercises, and of meeting the purposes of the legislation. She submitted that there is a danger that if the public interest in avoiding delay and disruption to such contracts always takes precedence, the purpose of the regulations and the need for effective review will be undermined. In all but extreme cases, challenges will be resolved in favour of the authority at the interim order stage. I can understand the concern, though, to an extent it ignores the fact that in many cases damages will be an appropriate form of remedy. I addressed these issues in Shetland Line at paragraphs 12, 13 and 35. I would only add that, while it seems to be true that, in general, the courts have been persuaded to grant interim orders, this might be a reflection of firstly, many challenges being mounted which do not involve an allegation of a serious breach of the basic principles of equality, non-discrimination, transparency and proportionality; and secondly, a concern that if an interim order is refused, the challenger will obtain the desired result by default, simply because any material delay pending a final resolution will often force the contracting authority to abandon the process and start again. For the reasons I expressed in Shetland Line, the principle of effective review is not wholly dependent on the remedy of reduction.

[24] In all the circumstances I am satisfied that, having regard to the terms of regulation 47A(2), I should grant an interim order which will end the prohibition on the awarding of the contract to the successful bidder.