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Court of Appeal clarifies the circumstances in which a contracting authority is obligated to seek clarification

14 March 2025
In a judgment handed down on 14 February 2025, the Court of Appeal ("CoA") allowed an appeal by Working on Wellbeing Ltd trading as Optima Health ("Optima") against the Department of Work and Pensions ("DWP") relating to the exclusion of its bid from a procurement. 
The judgment follows a significant earlier decision by the Technology and Construction Court ("TCC"), in which the DWP's decision to exclude Optima's bid on the basis it was non-compliant was found to be lawful. 

We consider the material impact of the updated decision below, and our analysis of the earlier decision can be found here

Facts 

The procurement related to a call-off contract under a framework agreement for occupational health and employee assistance programme services (the "Procurement"), which was subject to the Public Contracts Regulations 2015 ("PCR 2015"). 

The invitation to tender documents ("ITT") indicated that any bids containing prices in excess of those detailed in the framework would be "discounted" from the Procurement. 

Notwithstanding the fact that Optima would otherwise have been the winning bidder, the DWP rejected Optima's bid on the basis that its pricing schedule included a number of items that exceeded the framework prices. 

Issues at trial

Optima contested the decision to exclude its bid, alleging that the pricing schedule contained obvious "clerical errors", and that its exclusion from the Procurement was contrary to the principles of fairness and transparency under the PCR.  

At trial, the TCC considered:

1. Whether the ITT clearly stated the consequences of exceeding the framework prices; and 

2. If the ITT was clear, whether the DWP acted unlawfully by rejecting the bid and not taking alternative action (such as seeking clarification from the bidders). 

The TCC found in favour of the DWP on both issues, concluding that it was clear from the ITT that bids in excess of the framework prices may be excluded from the Procurement. Consequently, the TCC held that DWP's decision to exclude Optima's bid was lawful. 

Issues on appeal

Optima appealed the TCC decision on the basis that (i) the TCC Judge had erred in finding that the ITT contained a clear mandatory exclusion; and (ii) the DWP ought to have allowed Optima to clarify (or correct) its bid. 

In determining whether a contracting authority has the discretion or obligation to seek clarification, the CoA identified three stages that ought to be considered:

Stage 1

The need to seek clarification ought only to arise where the error or ambiguity is obvious to the contracting authority and material to the outcome of the procurement; 

Stage Two

Where the error or ambiguity is obvious, the contracting authority has a discretion whether to seek clarification and whether that discretion becomes an obligation will turn on the facts of the case. However, the contracting authority must seek the least onerous option (i.e. the obligation will usually be to seek clarification, rather than to exclude the tender from the procurement); and 

Stage Three

If a tenderer is asked to provide clarification, there is "limited room for manoeuvre" insofar that the clarification cannot result in substantial amendments, or effectively the submission of a new bid. 

In considering the three stages, Coulson J held that the TCC's approach was wrong for three reasons:

1. The DWP's original stance and the TCC judgment were tainted by the "erroneous belief" that the ITT contained a mandatory exclusion provision; 

2. It was wrong of the TCC Judge to say that the DWP had considered other options, save for the decision to exclude Optima's bid; and 

3. There was "no question" that the rules relating to equal treatment pursuant to the PCR had been infringed. 

Specifically, Coulson J commented that "there was either a failure to exercise any discretion, or a wrongful exercise of discretion, because DWP fettered themselves from the outset. That is what the judge should have found". 

The CoA judgment contains an in-depth analysis of the existing authorities and emphasises that (i) the principles of fairness and equal treatment are concerned with the outcome of the procurement in question and (ii) whether clarification is sought (in respect of an obvious error or ambiguity that may affect the outcome (as is the case with Optima)) is a "potentially critical factor". In those circumstances, whether a contracting authority is obliged to seek clarification will turn on whether the error or ambiguity in a tender is obvious and material to the outcome of the procurement. Such clarifications should therefore be permitted, provided that they do not result in substantial amendments to (or a re-submission of) the original bid.  

On conclusion, Coulson J commented that "the most probable answer to the request for clarification was that the erroneous prices should be reduced back to the Framework Maximum Prices, and that this would have been a permissible answer which would not have amounted to a new bid or a substantial amendment to the existing bid". The CoA therefore found in favour of Optima and allowed the appeal.

Comment 

This is a significant judgment for both bidders and contracting authorities, demonstrating the CoA taking a firm approach to upholding the principles of fairness and equal treatment to ensure that the decision to exclude a bid is not taken lightly. 

The judgment will be of particular interest to contracting authorities when conducting evaluations, and caution should be exercised when deciding whether to exclude a bid, especially in circumstances where there is an error or obvious ambiguity likely to affect the outcome of the procurement. We would suggest that authorities remain live to the possibility of a challenge when excluding a bid and to ensure that all options are considered, including whether there is an obligation to seek clarification in the first instance. 

A copy of the judgment can be found here

DWF is a leading adviser on public procurement. We act for a wide range of clients, including many contracting authorities and key suppliers to the public sector. We have the expertise and experience to help public sector clients with both facilitating a procurement and responding to procurement challenges. 
 
Feel free to get in touch with our procurement lawyers if it would assist to discuss any of the above, or indeed any other matters related to a public procurement (including responding to a procurement challenge). 

Further Reading