With the Government’s cancellation of a swathe of BSF projects and Gove’s repeated apologies as to the accuracy (or rather inaccuracy) of the all important “List”, public procurement is in the news. There are rumblings of discontent and mutterings of “Judicial Review” under many a contractor’s breath. But Gove and his government axe aren’t the only reasons public procurement is finding itself in the news.
Word on the streets has been that there has been a certain amount of “unrealistic” bidding resulting in untenably low bids being accepted in circumstances where any reasonable evaluator must surely realise that the project costs quoted won’t amount to break-even for the bidder.
Leaving aside the commercial justification to a contractor of bidding low to maintain employment in these difficult times, does it matter that the authority goes for the lowest price even if it is obviously unrealistic? Surely it just means the authority gets a great bargain? Not necessarily.
Quite apart from the risks inherent when you knowingly contract with a party at less than their break-even point (think variations and the consequent risks of insolvencies), add the new risk that accepting a lower than sustainable bid may in fact place you in breach of procurement regulations and leave you facing a claim from a disgruntled “realistic” bidder.
Morrison Facilities was an existing provider to Norwich City Council. Their contract came up for re-tendering. Norwich duly conducted a procurement in which Morrison duly bid. Morrison lost out however to Connaught Partnerships.
At £17.5m, Connaught's bid was about £5.5m lower than the lowest of the other main bidders. Morrison claimed Connaught’s bid was unsustainable; that it was an abnormally low tender which Norwich had been under a duty to investigate as to its actual sustainability but which Norwich had failed to investigate. Morrison applied for an interim injunction to prevent the award of the contract to Connaught. Morrison succeeded.
The court said there was clear evidence of an obvious disparity in the bid prices and yet Norwich had sought no explanation as to how Connaught's pricing could stack up. The judge considered that there may be a positive obligation owed by contracting authorities to investigate any tender that could be abnormally low.
We will have to wait for the full hearing to see whether the court confirms this reading of an authority’s obligations under the regulations. In the meantime, you might want to look again at any recent tenders where you were beaten by an unrealistically low fellow bidder….
