A recent case before the High Court of England and Wales shows the importance of a contracting authority carefully considering a suspect tender that appears abnormally low. The case of Morrison Facilities Services Limited v Norwich City Council, [2010 EWHC 487 (Ch)], in which judgment was given on 22 February 2010, involved an injunction by the claimant "Morrison" pending trial of Morrison's complaints regarding a tender process. Morrison was the unsuccessful tenderer in a procurement for contracts for the maintenance and repair of social housing owned and managed by the defendant, "the Council".
Morrison's case for an injunction was based on two complaints:
that the successful tenderer had submitted an abnormally low tender and that the Council should have rejected the tender under Regulation 30(6) of the UK procurement regulations, the Public Contracts Regulations 2006; and that the Council had applied undisclosed additional criteria when assessing the quality element of the tenders. On the facts, the prices submitted by the various tenderers lay mainly within a range of £23 to £26 million-odd. There were two higher tenders, one of around £31 million and one of around £47 million. The successful tenderer's price was £17.5 million, which was around £5.5 million lower than the lowest of the principal group of tenderers. That was a difference that is over 30% of the successful tenderer's bid price.
Morrison argued that £17.5 million was an unsustainable price for the contract in question and provided evidence in support of this, including a financial analysis of the contract and each work element.
The question arose as to how, as a matter of law, Regulation 30(6) of the Public Contracts Regulations 2006 (which is the analogous provision of Regulation 69(1) of the European Communities (Award of Public Authorities' Contracts) Regulations 2006) was to be applied, whether it imposed a duty upon the Council as a contracting authority to investigate abnormally low tenders, and if so to whom the duty was owed.
Morrison submitted that it was seriously arguable that the preferred tender was an abnormally low tender and, that being so, the Council had come under a duty to investigate it to see whether it was a properly sustainable bid but that it had failed to carry out the requisite investigations. Morrison relied upon the decision of the Court of First Instance (as it then was) in Case T-4/01 Renco SpA v Council of the European Union ( ECR...