UK: Roads Ahead As Legal Challenge Fails

Amey LG Ltd v. The Scottish Ministers

Rarely are our domestic courts asked to consider what does, or does not, amount to an "abnormally low" bid in public procurement terms. The Outer House of the Court of Session was, however, called upon to consider this very issue last month. Amey LG Ltd challenged the Scottish Ministers'/Transport Scotland's procurement of contracts for management and maintenance of the Trunk Roads Network in the North West and South West of Scotland.

Background:

Pricing strategy is often thought of as something for bidders to set as they wish – provided the strategy complies with any restrictions under the ITT. Following a rejection of its bid by Transport Scotland, Amey LG Limited brought legal proceedings against TS arguing that TS had acted in an irrational and unlawful manner by rejecting its bid as abnormally low.

Pricing and evaluation was complex, but to summarise, Amey priced 84 out of 88 core items at 0.01p, and included a hugely negative 'discount rate' which on assessment reduced Amey's comparative cost of tender by approximately £15million. This was 80% below the estimated contract value and significantly lower than the comparative cost of other final tenders.

At bid evaluation, TS had considered representations by Amey that its price was not abnormally low and instead was a holistic bid carefully derived on the basis of previous experience as an incumbent provider. However, TS concluded that the bid carried significant unacceptable risks and was not economically viable or sustainable. TS rejected Amey's submission that, they took the commercial risk of non-performance.

Decision:

Both Parties agreed that in determining whether the Court ought to make an interim order they had to consider the strength of the parties cases, the balance of convenience and the public interest. In doing so, Lord Hodge granted the interim order sought by the Scottish Ministers under regulation 47(10) of the Public Contracts (Scotland) Regulations 2006and lifted the automatic prohibition on contract award (put in place by Amey's legal proceedings). He did so for the following reasons.

First, he considered that Amey had a weak prima facie case. He did not accept Amey's submissions that the Scottish Ministers had made a manifest error by failing to understand the holistic nature of the bid or take into account the performance bond and guarantee. Lord Hodge disagreed with Amey's view that the final decision letter issued by TS to Amey was not sufficiently transparent in setting out its reasons for rejecting Amey's bid.

When considering the balance of convenience test, Lord Hodge came to the view that a number of factors supported bringing prohibition to an end. These included the lack of a strong prima facie case, the need for certainty and to avoid delay in a procurement process, and the likely disruption in regard to the mobilisation of resources over winter months when plant and equipment are in greatest demand (including the consequent costs to both the successful bidders and TS). The secondary remedy of damages would also be available to Amey if it pursued its claim.

Finally Lord Hodge thought there was a public interest in the "economic and efficient operation of the procurement process and in the proper provision of the desired services to Scotland's trunk roads", and so also considered it to be in the public interest to lift the suspension.

The full text of the Court's decision can be found here.

© MacRoberts 2012

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