AG has advised High Speed Two (HS2) Limited in its successful defence of a major procurement challenge brought by Bechtel Limited in a comprehensive judgment handed down today


Introduction

In a significant judgment (running to 152 pages), the High Court has dismissed all claims brought by an unsuccessful bidder, Bechtel Limited, in relation to HS2's £1.3 billion procurement for its Construction Partner for Old Oak Common, one of the two major Southern Stations on the new high speed line. 

The judgment provides helpful analysis for authorities, utilities and bidders on a number of aspects of public procurement processes. The Court re-emphasised that authorities have a wide scope in the setting of the terms of their procurement processes and, provided those rules are followed rationally and transparently, the courts will be slow to interfere in the decision made by authorities (and their assessors) in applying those rules.  

The decision also reinforces the risk bidders take if they choose to submit tenders seeking to qualify/amend fundamental terms of the contract to be let.  Authorities are not obliged to change the tendered contract, especially if that would change the risk profile of the contract (and thereby create a risk of challenge by other bidders if they did so).

Background

The winning bidder was a joint venture between Balfour Beatty Group Ltd, Vinci Construction (UK) Ltd, Vinci Construction Grands Projets SAS and Systra Ltd (BBVS). The outcome of the procurement for these two bidders was that BBVS scored 75.38% and Bechtel scored 73.76%.

Bechtel alleged that HS2 was in breach of its obligations under the Utilities Contract Regulations 2016, that aspects of both the BBVS bid and Bechtel's own bid had been evaluated incorrectly and that, consequently, BBVS should have scored lower and Bechtel higher. Bechtel also claimed that the BBVS bid was an abnormally low tender (ALT). HS2 denied that it was in breach and maintained that the scoring exercise had been carried out correctly. HS2 also denied that BBVS' bid was abnormally low.  The ITT was specifically designed to require a minimum Lump Sum Fee of 7% (a Fee Collar), thereby pre-specifying the ‘abnormally low’ threshold for the Fee percentage.  Bids were further considered for potentially ALT in any event. Finally, and a significant point of HS2's defence, Bechtel had included a very substantial and fundamental qualification to its tendered submission that was not acceptable to HS2. Despite numerous requests from HS2, Bechtel refused to remove that qualification. HS2 therefore argued that, had Bechtel in fact been the highest scoring bidder following evaluation, HS2 would have been entitled to, and would have, disqualified Bechtel as a result of this qualification. 

The claim was issued in February 2019, with Bechtel claiming estimated losses in excess of £100m. Following the parties reaching an agreement on HS2's application to lift the automatic suspension on contract award, the contract was awarded to BBVS in September 2019. The trial was heard before Mr Justice Fraser in the TCC over the course of three weeks in October and November 2020, with judgment handed down today. 

Courts' approach to scoring challenges generally

It is clear from Mr Justice Fraser's judgment that, "absent manifest error or breaches of other obligations (such as equal treatment or transparency), there is no basis for the court to interfere" in an authority's decision and that challenging bidders should not use court proceedings as "an appeal against the outcome of a procurement competition". The court's role in procurement challenges is not to re-mark or re-score an evaluation exercise, but instead to determine whether there was a manifest error. Mr Justice Fraser also confirms that this is a "high hurdle" and requires more than a "disagreement" by the unsuccessful bidder as to the score that was awarded during the evaluation exercise. 

On the facts of this case, Bechtel was unable to establish that any error had been made in the evaluation of either the BBVS or Bechtel bid.  The Judge concluded that "Bechtel has failed to demonstrate any breaches of transparency, or equal treatment, or any errors of assessment (still less, any manifest errors) in any of the evaluations".

Proper process of evaluation

Helpfully, the judgment in this case provides some clear authority on the expectations on authorities in undertaking evaluation exercises.  It also recognises the use of subject matter experts to evaluate bids – "They are likely to know the subjects in which they are expert. That is not to say that they can never be wrong. However, the court will recognise their competence.

Bechtel attempted to challenge the change in views of some assessors between their original "draft scores", generated during their own independent assessment, and the final moderated scores agreed by consensus between the two assessors.  The judgment provides helpful guidance, explaining that, where such draft scores are utilised in the evaluation process, those scores should not be elevated to some sort of special status, nor require "some sort of cogent explanation…from HS2 as to why these initial scores were not identical to the ones awarded by the assessors after the moderation". Rather, the important point is for an authority to record and be able to clearly demonstrate the reasons for the final score allocated to a bidder, and why those scores are justified by reference to the applicable scoring criteria.

The judgment is also a useful reminder that a claimant's evidence as to what it considers the "correct" score is likely to be of little or no relevance to the questions the court has to answer when considering whether a manifest error has occurred.  Equally, a bidder's subjective view will not assist the court in determining what a reasonably well informed and normally diligent (RWIND) tenderer (the test of the notional objective tenderer applied by the Courts when interpreting and applying tender documentation) would understand of tender documents.  Rather, such evidence should be limited to explaining any technical terms in the context of the particular procurement, if the Court requires evidence on any such terms.

Qualification of Tenders

On the qualification point, the Court confirmed that it is for each bidder to decide whether and how it qualifies its bid (and to consider the risk of same) and that the consequence of doing so, subject to the terms of the relevant competition documents, may be a rejection of the qualified bid by the authority. In this case, Bechtel had been asked to withdraw its qualification on a number of occasions.  Its qualification went to the heart of the proposed contract – in such circumstances, bidders should consider the commercial reality of their qualifications and also the obligations on the authority under procurement law. In this case, if HS2 had accepted the qualification posed by Bechtel, it is likely that there would have been further work to do and changes to be made for the other bidders to ensure equal treatment and transparency. 

The Court found on the evidence that Bechtel would maintain its position and take the risk that it would potentially be disqualified. Ultimately, in the Judge's mind, this completely undermined Bechtel's case and Bechtel failed at the first hurdle, causation. 

Abnormally Low Tender

This judgment also recognises the margin of appreciation afforded to authorities in evaluating bids, and the respecting of any pre-determination process an authority may choose to set out in its tender documentation for bidders when considering ALTs. The Judge commented in this case that HS2's approach was not to set an arbitrary limit, but was considered by reference to sound evidence available to HS2 relevant to the particular contract to be let.  Bechtel's arguments based on the level of resources in BBVS' bid (rather than price specifically) also failed on the basis that the tender was specifically designed to evaluate resourcing and pricing separately.  In any event, Bechtel had failed to establish that BBVS' resources were abnormally low.   

Record Keeping

There was one meeting which was held between HS2 and BBVS after the conclusion of the evaluation process for which the Court found HS2 had failed to keep adequate records, which occurred as a result of no formal minutes of the meeting being produced contemporaneously, though hand written notes taken at the meeting were made and disclosed in the proceedings. However, the Court found that the records, whilst not being formal minutes, were sufficient for the Court to exercise its supervisory jurisdiction.  The Judge also concluded that the contents of that meeting were limited to permissible clarifications, were provided for in the terms of the ITT and did not affect the outcome of the competition - "BBVS was the winning bidder before the meeting".

Practical considerations

The judgment provides helpful analysis for authorities and bidders alike on a number of aspects of procurement processes, including the courts' involvement in challenges. 

The Court has re-emphasised points made clear in the 2019 Rail Franchising litigation (see here) that authorities have a wide scope in the setting of the terms of their procurement processes and, provided those rules are followed rationally and transparently, the courts will be slow to interfere in the decision made by authorities (and their assessors) in applying those rules.  

The decision also reinforces the seriousness of bidders deciding to submit tenders with qualifications which seek to amend the fundamental terms of the contract to be let. There is no obligation on an authority to change its tendered contract, particularly where that would change the risk profile of the contract let.  In fact, as was found in this case, were an authority to do so, and accept such qualifications, it is likely to be open to (justified) challenge by all other bidders who have bid on the basis of the contract terms as advertised.

AG's involvement

AG advised HS2 in this case, instructed by the HS2 General Counsel, Nicole Geoghegan. The AG team was led by Partner Bill Gilliam, Legal Director Ryan Geldart and Associate Charlotte Parkinson, and also included Michael Rainey, Paul Rowley, Emily Wallam, Jaime Carr, Alexandra Robinson, Amelia Shaw, Ilona Bateson, Elliott Hill and Rosalind Davies. 

HS2's Counsel team comprised Sarah Hannaford QC, Simon Taylor and Ben Graff of Keating Chambers.

Key Contacts

Bill Gilliam

Bill Gilliam

Partner, Dispute Resolution
Leeds

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Charlotte Parkinson

Charlotte Parkinson

Associate, Commercial Litigation
Leeds, UK

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Ryan Geldart

Ryan Geldart

Legal Director, Commercial Disputes
Leeds

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Michael Rainey

Michael Rainey

Partner, Commercial
Manchester, UK

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