The ‘reasonably well-informed and normally diligent’ tenderer joins the Clapham omnibus

4th September 2014

Healthcare at Home Ltd v Common Services Agency (Scotland) [2014] UKSC 49

Background

The Clapham omnibus carries the reasonable man and the officious bystander amongst others, and provides a test based on an impersonal legal standard to be determined by the court. This case concerns the interpretation of the ‘reasonably well-informed and normally diligent’ tenderer and whether such a tenderer should be judged using the same objective approach.

The reasonably well-informed and normally diligent tenderer was first introduced by the European Court of Justice to allow the principle of transparency within the EU Procurement Directives to be considered (SIAC Construction Ltd v County Council of Mayo (Case C-19/00) [2001] ECR I-7725).

Relevant Facts

The Common Services Agency (CSA), for the Scottish Healthcare Service, re-tendered a single supplier framework agreement for the supply of Herceptin, along with a nursing support service.

Healthcare at Home Limited (HAH), the incumbent provider, were informed by CSA that their tender had been unsuccessful. HAH challenged this decision, claiming a lack of clarity in relation to the award criteria, an error in the evaluation of tenders and a failure to provide adequate reasoning and detail for the CSA’s decision to reject HAH’s tender.

Judgment

The challenge was initially considered by the Scottish Court of Session. HAH adduced evidence from a number of witnesses to the effect that they had not understood the criteria in the same way as the successful tenderer. The Court however found that it was unreasonable to require a contracting authority to frame its invitation to tender in such detail that two reasonable people could not reach different views on its interpretation. The Court needed to apply an objective approach of what would have been reasonably foreseeable by a reasonably well informed and normally diligent tenderer and in this case, applying that approach, the reasons that had been given were adequate.

HAH unsuccessfully appealed to the Inner House of the Court of Session. The Inner House applied the reasonably well-informed and normally diligent test on an objective basis. The Inner House considered itself satisfied that the correct interpretation of the tender was open to the hypothetical reasonably well-informed and normally diligent tenderer. It did not determine the question on the basis of evidence as to how HAH had actually interpreted the tender. Just because HAH, who might be regarded as ‘reasonably well informed and normally diligent’, construed the criteria in their own particular way did not mean the process was flawed.

HAH appealed to the Supreme Court on the basis that:

• The Inner House had erred in its application of the reasonably well-informed and normally diligent test and that the court should have considered witness evidence as to how the actual tenderer interpreted the award criteria.
• The Inner House had erred in its finding that sufficient reasons for the decision had been given.

The judgment by the Supreme Court noted the Clapham omnibus test for reasonableness was not judged by evidence of witnesses but by the application of an objective, impersonal standard determined by the courts.

The question to be considered here was not whether it was proved that all tenderers had interpreted the criteria in the same way, but whether the criteria were clear enough to allow uniform interpretation by all reasonably well-informed and normally diligent tenderers.

Evidence may be considered by the courts but only to gain an understanding of any technical terms or to set the context of the tender. The test itself could not be determined by evidence from the tenderer in relation to their interpretation of the criteria.

The Supreme Court found that the lower courts had therefore applied the correct test and would not interfere with the finding reached in relation to the review of the evaluation of the tender criteria. The Supreme Court therefore dismissed the appeal.

Conclusion

This ruling establishes that the courts will judge tender documents and award criteria on an objective basis, based on the reasonably well-informed and normally diligent tenderer test, and that witness evidence in relation to an actual or potential tenderers’ interpretation of such documents will not be taken into account. Although there was nothing to suggest that HAH were not reasonably well-informed and diligent in this case, the fact that they interpreted it differently had to be disregarded: the Court had to apply the objective test only.

Tenderers are therefore advised to carefully and objectively read any tender documents at the outset of the process and raise any points of clarification with contracting authorities as soon as they occur, to ensure they have a good understanding of the requirements of the contract.