The recent High Court judgment in Bechtel’s failed procurement challenge against HS2 further clarifies the principles that will be applied to claims brought by unsuccessful bidders and provides guidance for contracting parties and tenderers alike.
Background
The procurement related to the construction of Old Oak Common station in West London. When completed, Old Oak Common will be one of the Southern ‘super-hub’ stations that will form part of the HS2 high-speed rail link connecting London with Birmingham, Manchester, and Leeds. Costing over £1.3bn, it will be one of the most expensive railway stations ever to be built in Europe.
Four bidders tendered to be HS2’s construction partner for the project. The winning bidder was a consortium of Balfour Beatty, Vinci and Systra (BBVS), who scored 75.38%. Bechtel scored higher than BBVS on quality but lost overall due to its price, and narrowly missed out with a score of 73.76%.
Bechtel claimed £100m in damages from HS2, alleging that:
- HS2 was in breach of its obligation under the Utilities Contracts Regulations 2016 (‘UCR 2016’) in the way the evaluation was conducted;
- neither its own tender, nor that of BBVS, were evaluated correctly;
- the BBVS bid was an abnormally low tender;
- had the procurement process been carried out correctly, Bechtel would have been the first-ranked bidder and been awarded the contract;
- BBVS ought to have been disqualified from the competition, and/or that the competition ought to have been abandoned; and
- changes made to the contract actually entered into for the project differed from the one procured in the competition, such that the competition should have been re-conducted.
Part of HS2’s defence was that a substantial qualification in Bechtel’s proposed contract, which heavily pushed back on a transfer of risk, meant it would never have been awarded the contract in any event.
The High Court’s judgment
Bechtel’s claim failed on all grounds. Affirming its reluctance to interfere with tender evaluations, the Court restated its approach to procurement challenges. As a useful starting point, we have set out a few of the key points from the judgment below.
- The Court emphasised that “hindsight is of no assistance in proceedings such as these”. It is not the Court’s job to carry out a re-evaluation of the different bids where they are absent of manifest error or some other breach of the UCR 2016. Extrapolating a different outcome to a procurement competition after the event and based on hypothetical information is a futile exercise.
At all times, parties to a procurement challenge should keep their focus on establishing manifest error in the tenders actually submitted. It should be noted that “manifest error” is a very high threshold that goes way beyond a mere disagreement with the result of a procurement competition.
- While procurement law does not impose a “counsel of perfection upon contracting authorities and utilities” such that “any failure to achieve perfection will result in the court’s interference”, the Court underscored the significance it attaches to maintaining an audit trail to “ensure moderation and moderation assurance is fully documented and all score changes and reasons for changes are fully explained and justifiable”.
Therefore, while the Court is hesitant to interfere in the evaluation of tenders, contracting authorities should still be mindful of the detailed documentation and records they might be required to produce, should a claim be brought against them by an unsuccessful bidder.
- The Court provided useful reasoning when deciding whether the procurement competition should or could have been abandoned in the event that changes made to the contract actually entered into for the project differed from the one procured in the competition. Putting aside its conclusion that Bechtel had failed to make out its claims, the Court emphasised the “highly complex” nature of the HS2 project and the “exceptional delay and disruption to the programme” re-conducting the procurement process would have caused. In practical terms, abandoning the procurement would have been disproportionate and ultimately not justified.
In light of this, parties should give due consideration to the wider impact of abandoning complex procurements and/or recommencing the entire process, and the practical consequences this might have.
Conclusion
This judgment is informative for contracting authorities, utilities and potential challengers alike. It deals with issues that frequently arise in procurements and affirms earlier cases regarding the Court’s reluctance to interfere in the tender process, absent of a manifest error or a breach of obligations of equal treatment or transparency. This is the focus of the Court’s attention and the threshold for intervention is high.
When deciding whether to file a procurement challenge, unsuccessful bidders must pragmatically assess whether their claim would realistically overcome the “manifest error” hurdle. This is a high threshold. If the grounds of the claim would essentially be a re-characterisation of a tender following a disappointing result, it is unlikely that the Court would interfere with the evaluation by the contracting authority.
For contracting authorities and utilities, this judgment underlines the importance of taking certain practical steps from the outset of a procurement process, such as maintaining a thorough audit. This means that potential challenges can be dealt with efficiently, and that every stage of the process can be assessed transparently should a challenge arise. This is especially important where there has been a change in decision and that change might need to be justified.
Finally, a bidder should not expect to make significant qualifications to its bid and expect to win. Both contracting authorities/utilities and private sector bidders will benefit from a careful reading of the principles applied by the Court, and the practical lessons that might be drawn from its assessment of Bechtel’s claim.
