Ensuring fair play in public procurement: The critical role of clear tender rules and the need for clarification

To err is human, the old saying goes. But what happens when such human frailties come up against the strictures of public tendering? Can tenderers be allowed to correct mistakes in their submissions without unfairly preferring them over other tenderers? And what happens when the contracting authority fails to express its requirements with sufficient precision and clarity? In the often time-pressured and complex environment of bidding for public contracts, such questions are commonplace but never easy to resolve.

The judgment of the Court of Appeal on 14 February 2025 in Optima Health v Secretary of State for Work and Pensions sheds some light on the tricky area of when a contracting authority must or can seek clarification from a tenderer. The case was a win for the appellant/excluded tenderer Optima Health (Optima), with the Court finding that the Department for Work and Pensions (DWP) had not properly exercised its discretion by excluding Optima's tender from the procurement and by failing to seek clarification of perceived errors in Optima's tender. In so doing, the Court of Appeal overturned the High Court's earlier judgment in favour of DWP, which now appears to have taken an overly-rigid approach to seeking clarifications of tenders.

Background

Optima submitted a tender for a call-off contract with DWP for the occupational health and employee assistance programs under a Crown Commercial Services framework (RM6182).

The invitation to tender (ITT) required bidders to complete a pricing schedule and provide a price for each of the 133 line items specified by DWP. The pricing schedule explained that no unit price was to exceed the "Framework Maximum Prices", whilst also stating that any bids exceeding the Framework Maximum Prices would be "discounted".

Stay up to date by subscribing to the latest Public and Regulatory insights from the experts at Fieldfisher.

Subscribe now

During the evaluation of Optima's bid, DWP found that Optima had exceeded the Framework Maximum Prices for three out of 133 service lines. This occurred because of some "cut and paste" errors that arose during various re-submissions of the pricing schedule (the procurement did not have a smooth or happy course, with numerous re-submissions of tenders being needed). DWP excluded Optima on the basis of these errors, relying on the requirement of the ITT that unit prices were not to exceed the Framework Maximum Prices. The errors had a negligible impact on the overall pricing score, and if Optima had not been excluded from the mini competition, it would have been awarded the contract as it had otherwise submitted the best bid.

During the High Court trial, Optima argued that the pricing schedule contained "obvious" clerical errors and that its disqualification infringed the principles of equal treatment, transparency, and proportionality. The High Court was asked to determine: (i) whether the tender documentation clearly and transparently outlined the consequences of exceeding framework prices, and (ii) if the tender documents were clear and DWP had discretion, whether it acted unlawfully by excluding Optima instead of taking alternative actions, such as reducing the three prices in question to the Framework Maximum Prices, waiving the non-compliances, or seeking clarification.

The High Court ruled against Optima on both counts, stating that (i) the tender documentation, understood in its commercial context, clearly indicated that bids with prices exceeding framework prices could be excluded, and (ii) DWP lawfully excluded Optima from the competition.

Grounds of appeal

Optima appealed on the following grounds:

The High Court erred in concluding that the ITT clearly set out a mandatory exclusion provision for bids exceeding the Framework Maximum Prices; and
DWP should have requested Optima to clarify the relevant pricing errors in its tender.

The Court of Appeal allowed the appeal, determining that the tender documentation did not clearly establish a mandatory exclusion rule. Additionally, DWP failed properly to exercise its discretion regarding the clarification of errors. In this context, DWP was obliged to seek clarification, and doing so would not have breached the principle of equal treatment.

Judgment

Was there a mandatory exclusion clause?

A key part of the appeal was whether DWP was obliged by the terms of the procurement to exclude Optima's bid for including prices in excess of the Framework Maximum Prices. This turned on the meaning of the statement that any bids exceeding the Framework Maximum Prices would be "discounted". DWP argued that "discounted" meant "excluded". Optima argued that "discounted" meant that the prices in question would be reduced to the level of the Framework Maximum Prices and the Court of Appeal agreed.

In reviewing the matter, the Court of Appeal noted that the term "discounted" as mentioned in the relevant part of the procurement documentation was not used elsewhere in the ITT. However, the term "discount" did appear elsewhere in the ITT to signify a reduction in price or costs. Therefore, upon evaluating what the term meant in the context of the ITT as a whole, the Court of Appeal concluded that the obvious meaning of "discounted" was "reduced", not "excluded" or "disqualified".

The Court of Appeal also applied the well-known "RWIND tenderer" (reasonably well-informed and normally diligent tenderer) test when interpreting the ITT. The Court stated that "the issue is not what the ITT meant, but whether its meaning would be clear to any reasonably well-informed and normally diligent (RWIND) tenderer". If part of an ITT was being relied upon to disqualify a tender, the ITT "must clearly and transparently set that out". The Court concluded that, when read in its context, the relevant section of the ITT did not contain a mandatory exclusion provision, and that no RWIND tenderer would have reached such a conclusion.

Although a decision on the facts of this case, the Court of Appeal's rulings emphasise the need for particular clarity of expression in the case of key or mandatory requirements where non-compliance can lead to severe consequences such as exclusion.

Clarification and correction of errors

Having established that DWP did not have a duty to exclude Optima's bid, the Court went on to consider whether DWP could or should have sought clarification from Optima. The Court took the opportunity to survey the domestic and EU case law on post-tender clarification. It considered that there are three stages to consider when addressing whether or not a contracting authority has the discretion to seek clarification, when that discretion become a duty, and what the permissible limits are to any response to a request for clarification.

Stages for seeking clarification
Stage 1	Is there an error which is (a) obvious to the contracting authority and (b) material to the outcome of competition. This type of error will, according to the Court, be rare and the duty to seek clarification will only arise in exceptional cases. If the error is immaterial or irrelevant to the outcome of the competition, no further action is necessary.
Stage 2	Where there is an obvious and material error, the contracting authority must consider whether clarification should or must be sought to fulfil the purposes of the procurement. Generally, the contracting authority has a discretion to seek clarification but in some factual circumstances this may turn into an obligation. An obligation may arise where it is clear that the details of a tender require clarification or where it is a question of the correction of obvious clerical errors. A contracting authority should not however spend too much time second guessing what the answer to any request for clarification might be. When considering whether or not to seek clarification, the contracting authority must take the least onerous option: that will usually be to seek clarification rather than to exclude the tender altogether.
Stage 3	A tenderer cannot use the mechanism of clarification to put in a new bid or make substantial amendments to the existing bid. However, a strict and over-literal approach should be avoided as this may lead to the exclusion of the best tender for no objectively justifiable reason (the correction of errors will inevitably result in something which is literally "new"). The contracting authority should consider the nature, scope and extent of the obvious material error or ambiguity that is being corrected.

In applying the three-stage 'clarification test', the Court concluded that there was no rational basis for excluding Optima. Moreover, the Court considered that the decision to disqualify Optima was "plainly disproportionate", particularly in circumstances where "the quality of their bid was so much higher than any of the others; where theirs was easily the best bid overall, regardless of the errors; and where the errors had – and were known by DWP at the time to have – a de minimis impact on the tender evaluation". The least onerous option should have been taken, and DWP should have sought the relevant clarifications from Optima.

Will the same test apply under the Procurement Act 2023?

The Optima case involved the application of the Public Contracts Regulations 2015 (PCRs) and related case law that has built up over many years. With the Procurement Act 2023 (PA23) coming into effect for new procurements from 24 February 2025, will the Courts take the same approach to tender clarifications under the new regime?

It is interesting to note in this regard that the Court of Appeal deciding the Optima case comprised three highly experienced and knowledgeable procurement judges (Coulson, Fraser and Zacaroli LJJ), who gave a judgment just days before the PA23 came into force, restating and developing in some detail the principles applicable to tender clarifications under the PCRs. It is hard not to imagine that they had in mind that their ruling would read across into the PA23.

We have highlighted below how some of the key factors relevant to tender clarification might be considered under the new regime.

Principle	Application under the Procurement Act 2023
Clarification of errors	The PCRs contain an express right for contracting authorities to request clarification of tenders where information submitted appears to be incomplete or erroneous, provided that the principles of equal treatment and transparency are complied with (this was obviously a key element of Optima's case). There is no equivalent express right in the PA23. But equally there is no express prohibition. Under the new competitive flexible procedure, contracting authorities will be able to (and have to) design their own award procedures. The onus will therefore be on contracting authorities to set out in their tender documents whether and in what circumstances clarifications might be sought.
Equal treatment	Like the PCRs, the PA23 contains an equal treatment rule though it is phrased in different terms (suppliers must be treated the same unless a difference between suppliers justifies a different treatment). Since the PCR case law on tender clarifications largely rests on the application of the equal treatment principle, it will clearly be open to the Courts to apply a similar approach to that set out in Optima when considering tender clarifications under the PA23.
Transparency	Unlike the PCRs, there is no overriding duty of transparency towards bidders under the PA23. Under the PA23, contracting authorities have to have regard to the importance of sharing information for the purpose of allowing suppliers and others to understand the authority's procurement policies and decisions, but there is no general duty to act transparently. In the context of tender clarifications under the PCR, although the principle of transparency is always recited alongside equal treatment, it is arguably equal treatment that matters more in the context of deciding whether and how to seek clarification, than transparency as such. Transparency is however relevant to clarity of tender documentation. If tender documentation is unclear suppliers are unlikely to be able to fully understand the authority's "procurement policies and decisions". Further, there is an express requirement in the PA23 that tenders must not be invited unless the contracting authority is satisfied that the tender documents contain "information sufficient to allow suppliers to prepare…a tender". Sufficiency of information opens the door to something similar to the RWIND tenderer approach taken under the PCRs.
Most advantageous tender	The PA23 emphasises the award of public contracts to the "most advantageous tender". Whilst this may not amount to a substantive change from the regime under the PCRs (which permits the award to the "most economically advantageous tender"), it would lend weight to an argument, similar to that arising in the Optima case, that where a contracting authority, through over-zealous application of the equal treatment principle, fails to seek clarification and thereby excludes what would otherwise be the most advantageous tender, the authority has failed to comply with its most basic duty in the Act.
Proportionality	Under the PA23, contracting authorities must ensure that the procedure is a proportionate means of awarding a public contract, and they must have regard to the nature, complexity and cost of the contract. However, there is no general duty to behave proportionately when, for example, evaluating tenders or considering whether to seek clarification/exclude. Much is likely to turn, therefore, on the terms of the procurement as set out in the tender documents and the other considerations outlined above.

If your organisation (whether a contracting authority or supplier) requires any advice in relation to the PA23, please contact Nick Pimlott or Holly Johnson.

The content of this blog does not constitute legal advice and is provided for general information purposes only. Specific legal advice should be sought before taking any actions based on the content of this blog.

Ensuring fair play in public procurement: The critical role of clear tender rules and the need for clarification

Don't miss a thing, subscribe today!