Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION

[2016] CSOH 132

CA77/16

OPINION OF LORD TYRE

In the cause

BOSTON SCIENTIFIC LIMITED

Pursuer

against

THE COMMON SERVICE AGENCY

Defender

Pursuer:  Lindsay QC; MacRoberts LLP

Defender:  O’Rourke; NHS Scotland Central Legal Office

Interested Party (Biotronik UK Limited: C O’Neill, Solicitor Advocate; Brodies LLP)

15 September 2016

Introduction

[1]        The pursuer is a supplier of medical equipment.  The defender is the agency responsible inter alia for the procurement of medical equipment for the NHS in Scotland.  For the purposes of the Public Contracts (Scotland) Regulations 2012 (being the regulations in force at the material time), the pursuer is an economic operator and the defender is a contracting authority.

[2]        In about January 2016, the defender issued a contract notice for the purpose of establishing a framework agreement for the supply of cardiac resynchronisation therapy devices and systems, and implantable cardiac defibrillator devices and systems and delivery kits.  The procurement exercise was divided into 11 lots.  An invitation to tender was issued on 3 February 2016.  The pursuers submitted a tender for lots 1 to 10 to the defenders on 11 March 2016.  On 9 May 2016, the defender informed the pursuer that their tender in respect of three lots (1, 2 and 10) had been successful but that their tender in respect of the remaining lots (3 to 9) had been unsuccessful.

[3]        In these proceedings the pursuer seeks (i) declarator that the defender’s decision to select three other tenderers as parties to the proposed framework agreement as regards lots 3 to 9 was made in error and in breach of the defender’s obligations under the 2012 Regulations; and (ii) an order in terms of regulation 48 to set aside the defender’s decision to select those three tenderers in respect of lots 3 to 9; alternatively, the pursuer seeks damages in the sum of £3,000,000.  The effect of the raising of these proceedings, in terms of regulation 47(9), is that the defender must not conclude the framework agreement unless the proceedings come to an end or the court, by interim order, brings an end to the prohibition.  The defender has applied by motion for such an order.

The invitation to tender
[4]        In its Invitation to Tender (“ITT”) the defender invited tenders for the supply of products from potential framework participants within 11 lots.  Prospective tenderers were advised that the defender intended to appoint three participants to the framework in respect of each lot (or five in the case of lots 10 and 11).  Tenderers were required to answer certain mandatory questions and meet certain minimum standards set out in a questionnaire.  All tenders surmounting those hurdles would be evaluated by a panel comprising representatives from National Procurement (a division of the defender) and representatives from the Commodity Advisory Panel (“CAP”), which, according to an affidavit provided by Mr Paul Hornby, the defender’s Head of Strategic Sourcing and Commercial at National Procurement, comprised cardiologists able to advise on the types of products and specifications required by Health Boards.

[5]        Section 3 of the ITT set out the weighting system to be applied to all tenders.  In respect of each of lots 1 to 10, the weighting was set out as follows:

Criteria                                   Weighting

Cost                                         60%

Quality Products                    Pass/Fail on Product Specification (Essential Features)

Quality Products                    Desirable Features @ 20%

Quality Products                    Longevity @ 20%

Scoring was then explained in detail.  In relation to longevity, the tender receiving the highest total longevity score would receive 20 points.  Each other tender would receive “20‑X points where X = 0.2 x the percentage by which each price in each tender exceeded the lowest price tender achieving the lowest total price score”.  The total score for each lot would be the sum of the scores achieved for cost and the two quality assessments (desirable features and longevity).

[6]        With regard to longevity, tenderers were required to indicate the longevity in months of each of their products, under reference to specified criteria.  Tenderers were not required to submit any further material vouching the accuracy of the figures provided by them for longevity.

[7]        Following the issue of the ITT and during the period prior to the date for submission of tenders, the defender operated an online message board where prospective tenderers could ask questions about the ITT.  The pursuer participated in use of the message board.  The questions and answers could be viewed by all users of the message board.  On 11 February 2016, the following question appeared on the message board:

“Could you please confirm that we only need to select the yes/no in the schedules NP633-16 Lots 1 to 11 Specifications?  We would like to make sure as previously you were asking for the page numbers for the source documents.”

The defender’s commodity manager provided the following response:

“Yes we only need you to complete our specification spreadsheet.  Previous tenders have asked for evidence but we have not asked for and do not require evidence this time.  If a supplier submits their specification that they meet our specification then that is all we require.”

The defender’s response to the pursuer’s tenders
[8]        The pursuer submitted a tender in respect of lots 1 to 10 inclusive.  On 9 May 2016, the defender sent two letters to the pursuer.  The first letter informed the pursuer that it had been successful in being selected as a party to the framework agreement in respect of lots 1, 2 and 10.  The second letter informed the pursuer that it had not been successful in respect of lots 3 to 9.  The pursuer was advised that there would be a standstill period of 10 days and that the defender intended to enter into a framework agreement with successful tenderers on 20 May 2016.  Attached to the letter was a table (Appendix A) containing the following information in respect of each of lots 3 to 9:

• Names of successful suppliers and products;
• Scores given to each of the successful suppliers and to the pursuers in respect of price, quality (desirable features) and quality (longevity) together with total scores.

Although the letter stated that the table contained details of “the reasons for the award of these scores indicating the characteristics and relative advantages of the winning tenderer(s)”, no information other than the scores was in fact provided.

[9]        On 18 May 2016, Mr Panos Somalis, the pursuer’s pricing and contracts manager for UK and Ireland, wrote to Mr Hornby expressing the view that the defender had failed to provide the pursuer with the information that had to be included for effective review of the procurement and remedies during the standstill period.  Mr Somalis expressed “wider concerns” in relation to the procurement, principally in relation to the scores awarded for quality (longevity).  The defender required confirmation of the basis for the scores of quality (desirable features) and reassurance that the successful tenders for lots 3 to 9 were “compliant, correct in their assertions and not abnormally low tenders, given the significant differences in evaluation scores in respect of pricing, for our tender and those of the other tenders”. 

[10]      Mr Hornby replied on behalf of the defender by letter dated 20 May 2016.  He referred to the appendix annexed to the letter of 9 May and confirmed that it had been scored in accordance with the guidance issued within the ITT.  By way of explanation in relation to longevity scoring, Mr Hornby stated:

“The weighting for Longevity was 20% therefore in each lot the longest longevity submitted received 20 points.

The scoring guidance in section 3.3 clearly identifies the points allocated to longevity and how the tender would be scored.  The table in Appendix A for each lot allows the unsuccessful supplier to see specifically the characteristics and relative advantages of the successful bids against their own submission (i.e. if one product had longevity or 100 months (longest) it would score 20 points and if a different product submitted had a longevity of 50 months it would score 10 points).

All this information has been provided in the ITT and also in Appendix A.

All bids were scored in accordance with criteria detailed in the tender.  The scoring methodology was not queried through the bulletin board during the tender process and was similar to that used in [three other tendering processes] in which your company participated in.”

The standstill period was extended to 25 May.

[11]      On 23 May 2016, a letter was sent to Mr Hornby by solicitors acting on behalf of the pursuer, reiterating the pursuer’s concerns and asserting that the pursuer was currently market leading in longevity as independently confirmed in recently published trials.  Concern was expressed that there may have been an error in evaluation of longevity, and that the bids of other tenderers might not have been accurate.  Further detail on the longevity of the pursuer’s tendered products was provided.  The pursuer required the defender to provide inter alia (1) original evaluators’ scores and comments on the pursuer’s tender and the successful tenders; (2) details of any moderation or adjustment of scores that took place; and (3) internal records of discussions which took place regarding longevity and scoring thereof.  It also demanded “detailed information and an explanation as to how the bidder with market leading longevity (Boston Scientific) did not score maximum marks for longevity”.  An intention to consider raising legal proceedings was intimated.

[12]      On 3 June 2016 a response was sent by NHS Scotland Central Legal Office.  It is, I hope, a fair summary of that response that it confirmed that the scores for all tenderers had been arrived at solely by an arithmetic process using the data, including figures for the longevity of their products, supplied by tenderers in their tenders, and that that arithmetic process had been in accordance with the methodology set out in section 3 of the ITT.  It was explained in particular that the defender had requested longevity figures to be submitted in accordance with criteria set by the CAP and included in the ITT.  The defender noted that no clarification questions on the criteria had been received and that it had consistently used these criteria and this methodology for similar tenders.  The CAP had chosen single criteria applied to all longevity figures in order that figures submitted would be on a like for like basis.  It was confirmed that no moderation or adjustment of evaluation scores had taken place as a mathematical calculation had been used.  In the light of the further information contained in the letter, the standstill period was extended to 13 June.  On 7 June, the pursuer’s agents replied reiterating the pursuer’s concerns and expressing the further concern that bidders were not required to provide any back-up information or evidence relating to their “longevity estimations”.  The present action was subsequently raised, triggering the prohibition in regulation 47(9) of the 2012 Regulations.

The statutory test
[13]  Regulation 48(2) of the 2012 Regulations provides:

“In any interim proceedings under this Part 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 –

1. that decisions taken by a contracting authority must be reviewed effectively and, in particular, as rapidly as possible;
2. the probable consequences of an interim order for all interests likely to be harmed; and
3. the public interest.”

It was common ground between the parties that in applying the statutory test the court should have regard to the strength of the parties’ cases, the balance of convenience having regard (but not overwhelming regard) to the question of whether damages might be an adequate remedy, and the public interest.  I need not rehearse the authorities in which that approach has been formulated and applied.

Argument for the pursuer
[14]      On behalf of the pursuer it was submitted that the court should refuse to grant an interim order ending the regulation 47(9) prohibition.  In the first place, the defender was in breach of its obligation under regulation 32 to provide the pursuer with the reasons why its tender in respect of lots 3 to 9 had been unsuccessful.  The reasons given in the letter of 9 May 2016 and in subsequent correspondence were inadequate and did not enable the pursuer to ascertain what had gone wrong with the tender procedure.  Something must, however, have gone wrong to produce the scoring that had been produced in relation to longevity.  There were a number of possibilities: tenderers might have misunderstood what information was requested; or they might have submitted inaccurate information; or the defender might have misconstrued the information submitted.  It was impossible to know.  Without such knowledge the pursuer could not be certain what was the correct ground of challenge.

[15]      In the second place, it was submitted that the procedure adopted by the defender had caused a breach of its obligations of transparency and equal treatment.  It was well known, and moreover readily apparent from the independent published material submitted to the defender by the pursuer after being informed that its tender for lots 3 to 9 had been unsuccessful, that the pursuer was the market leader with regard to longevity of devices.  The defender’s decision to dispense with the need for “evidence” in support of longevity figures submitted by tenderers had deprived it of the opportunity to verify the accuracy of the figures.  In the circumstances of the present tender, self-certification was not a legitimate means of verification.  It left open the possibility that a tenderer would submit inaccurate longevity data with the consequence that the assessment process lacked transparency and failed to treat all tenderers equally.  Because of the results there must inevitably have been a failure to compare like with like because if there had not been such a failure the pursuer would have had the highest longevity scores.

[16]      As regards the balance of convenience (including the public interest), senior counsel for the pursuer emphasised patient safety considerations.  A shorter battery life in an implanted device could necessitate further surgical intervention, with the concomitant risks.  There was no likelihood of the defender running short of devices pending a re-running of the tender process.  Damages would not constitute an adequate alternative remedy because of difficulties of quantification in circumstances where (i) the ITT related to a framework agreement  and (ii) any additional cost to the defender arising out of the pursuer’s challenge was speculative.  The balance of convenience accordingly favoured refusing an interim order.

Argument for the defender
[17]      On behalf of the defender it was submitted that an interim order should be made.  In the first place, adequate reasons for the decision had been given.  The defender’s letter of 9 May 2016 and the subsequent correspondence made clear that the scoring methodology was straightforward and consisted of the application of the weighting system described in the ITT to the information supplied by tenderers.  As explained in these letters, it was a purely arithmetic exercise and did not depend upon any qualitative assessment by the defender of the information supplied.  There was little that the defender could have added to that explanation.

[18]      It was further submitted that there was no merit in the pursuer’s argument based on breach of obligations of transparency and equal treatment.  The ITT made clear what weight would be attached to longevity and indeed in respect of some lots the pursuer had received the top score for longevity.  The pursuer’s case lacked specification with regard to what was said to have gone wrong.  Although it was accepted that in some cases a contracting authority might have a duty to validate information provided by a tenderer, this was not such a case.  The defender did not have the means to verify independently the figures for longevity provided by tenderers.  It had stated clearly prior to the date for submission of tenders that supporting evidence was not sought.  It had protected itself in a different way by making clear that the framework agreement would include a clawback provision if battery life fell short of the figure submitted in a tender.  Having adopted this approach, it would not have been open to the defender, after receipt of tenders and in the absence of any manifest error, to carry out a verification exercise based upon published or other information supplied by the pursuer: to do so would be a breach of obligations owed to other tenderers, whether successful or unsuccessful, and obviously challengeable.  If the pursuer had had concerns about a tender procedure in which supporting evidence would not be required, those concerns ought to have been raised at the time when the ITT was issued; it was too late, under reference to regulation 47(7), to do so now.

[19]      On the balance of convenience, it was submitted that significant extra cost, of the order of £20,000 per week, would be expended by the defender until the framework agreement could be concluded and implemented.  The issue of longevity was not, as the pursuer had represented it, a question of life and death.  Damages would be an adequate and appropriate remedy if the pursuer were ultimately to succeed.

Arguments for the interested party
[20]      On behalf of the interested party (one of the successful tenderers in respect of lots 3 to 9), the solicitor advocate adopted the defender’s arguments, emphasising that the court was not concerned with assessing the wisdom of the defender’s weighting of longevity against cost.  It was further submitted that the court should not be persuaded that there was a causal link between any error on the part of the defender in verifying longevity and any loss sustained by the pursuer as a consequence of the failure of its tender.  The latter would require proof that a revised scoring would have affected the overall outcome.  Given that longevity attracted only 20% of the weighting, and that the pursuer had scored poorly on cost which attracted 60% of the weighting, it was unclear that revision of the longevity scores would make any material difference to the winners and losers in the tender process.

[21]      As regards balance of convenience, it was submitted that the effect of the prohibition on successful tenderers was a relevant consideration.  The interested party was not a current provider.  If the pursuer’s challenge eventually failed, the loss sustained by the interested party in the meantime would not be recoverable.  Moreover, a re-run of the tender would be unfair to all of the successful tenderers in respect that the pursuer would now possess what ought to be confidential information regarding the pricing approach adopted by the other tenderers.

Decision: strength of case
[22]      In my opinion the pursuer’s prima facie case is very weak.  As regards the adequacy of the reasons given by the defender for the pursuer’s tender having been unsuccessful in respect of lots 3 to 9, the critical point to bear in mind is that the tender scoring system as explained in the ITT was a purely arithmetic exercise.  No provision was made in the ITT for the application of any quality appraisal or for the conducting of any verification process in relation to the tenders received.  The message board entry to which I have referred confirmed, shortly after the  ITT had been issued, that evidence was not requested nor required.  In these circumstances, the only reason that the defender could provide for the pursuer’s tender being unsuccessful in respect of the lots in question was that the scoring process had been applied as described in the ITT to the tenders received, and the pursuer was not among the three highest scorers.  By supplying the pursuer with the information contained in Appendix A to its letter of 9 May 2016, the defender, in my view, gave proper, adequate and intelligible reasons as to why the pursuer’s tender had been unsuccessful to the extent that it was.

[23]      The pursuer’s case founded upon lack of transparency and equal treatment is also weak.  Scoring of all of the tenders proceeded according to the methodology set out in the guidance in the ITT.  It was accordingly transparent and treated all tenderers equally.  I reject the proposition that the defender was bound, or even entitled, to conduct some form of post-submission verification process in relation to the longevity figures supplied by tenderers for each of their products.  No notice of intention to conduct such a process had been given in the ITT.   Whether this represented a departure from the defender’s previous tendering practice (which was a matter of dispute) is neither here nor there.  If the defender had reacted to the pursuer’s challenge by amending its scoring or by re-running the tender procedure in the light of information said to be contained in material supplied to it by the pursuer, that would in my opinion have been a clear breach of its obligations of transparency and equality: the award process would have departed materially from the procedure described in the ITT and would have taken account of evidence provided by one tenderer when  tenderers generally had been informed that evidence was not requested.

[24]      Nor in my opinion is the process challengeable on the ground of manifest error.  The pursuer’s argument proceeds upon the basis that it is a matter of indisputable fact that their products have significantly greater longevity than those of the successful tenderers, and accordingly that any outcome which did not place them as top scorer on longevity must ipso facto demonstrate that an error has been made.  In my view, that is not the correct starting point.  As the ITT made clear, scoring in relation to longevity was to be based upon figures supplied by the tenderers.  That of itself is unexceptionable: see eg Public Interest Lawyers v Legal Services Commission [2010] EWHC 3277 (Admin), Cranston J at para 64; Parkes Rhodes Hickmotts Solicitors v Legal Services Commission [2011] EWHC 1323 (Admin), McCombe J at paras 35-40, in each of which cases it was held that the contracting authority was entitled to rely upon a process of self-verification or self-certification by tenderers.  In the circumstances of the present case, the defender was entitled to proceed on the basis – made clear to tenderers – that supporting evidence was not required.  The defender’s scoring bears to proceed on the basis of the information provided by tenderers.  There is no manifest error in the scoring produced.  The pursuer’s argument to the contrary is circular, in that it depends upon an  assertion that there must be a manifest error in any scoring system for longevity that does not make it a clear winner in all lots. 

[25]      The pursuer expressly disavowed any challenge to the tendering process on the ground that the ITT ought, as a matter of law, to have provided for some means of verification of tenderers’ longevity figures, whether by a requirement to submit evidence with the tender, a post-submission verification procedure, or otherwise.  Nevertheless it seems to me that this may well be the pursuer’s true complaint.  It may be that it was not advanced because of a recognition by the pursuer that the present proceedings, if based upon such a challenge, would be out of time in terms of regulation 47(7)(b).  Be that as it may, as the argument was not advanced I need not address it further.

[26]      I also consider that there is force in the submission advanced on behalf of the interested party that it is far from clear that the scoring system desiderated by the pursuer would have had a material effect on the outcome of the tendering process.  Longevity scores attracted a weighting of only 20%.  It is apparent from the results in Appendix A to the defender’s letter of 9 May 2016 that the pursuer scored poorly on price, and I am not satisfied, on present information, that a higher score for longevity to the pursuer (albeit presumably resulting in lower scores for longevity to other tenders) would be likely to have had the effect of elevating the pursuer into the top three scorers for any or, a fortiori, all of the lots in respect of which it was unsuccessful.

Balance of convenience
[27]      I am satisfied that patient safety is not a factor affecting the balance of convenience one way or the other.  It was not suggested that there was any risk of the defender running short of implantable devices and systems if an interim order were to be refused.  On the other hand I was informed that electronic systems provide early warning of low battery life in a device.  On the basis of the information presented to me at the hearing, I am unable to make any confident assessment of the pursuer’s assertion that its products have a battery life so much longer than those of the successful tenderers as to render a need for surgery for implantation of a replacement device materially less likely.  The estimated cost to the defender of £20,000 per week if conclusion of the framework agreement is delayed is significant but not decisive.  I accept the submission on behalf of the interested party that delay will result in it sustaining an unrecoverable loss.  I do not accept that if the pursuer were to succeed in this action damages would be especially difficult to quantify: the courts are now accustomed to valuing the loss of a chance.  On the whole I conclude that the balance of convenience, including the public interest in minimising cost to the defender, favours the granting of an interim order.

Disposal
[28]      For the foregoing reasons, and in particular because of the weakness of the pursuer’s case, I shall grant an interim order under regulation 47(9)(b) bringing to an end the prohibition of the defender from entering into a framework agreement with the successful tenderers.