Stuart-Smith J’s judgment in Lancashire Care NHS Foundation Trust & Blackpool Teaching Hospitals NHS Foundation Trust v Lancashire County Council provides helpful guidance on how not to conduct moderation meetings and highlights the defendant’s failure to provide adequate reasons for its decision making. What it does not provide is a finding on who deserved to win the contract.
The judgment follows an expedited trial on a procurement challenge brought under the Public Contracts Regulations 2015. The court found that the decision to award a £104 million contract for the provision of community services under the Healthy Child Programme to Virgin Care Services Ltd should be set aside.
This post looks at the lessons in process and record keeping, and considers why the court set aside the decision without carrying out a rescoring exercise.
The assessment and moderation process
The procurement was carried out using the “light touch procedure“. The court identified a number of shortcomings in the evaluation and moderation process, and the recording of reasons for the scores awarded.
The court found inconsistencies in the application of the award criteria. The qualitative award criteria (implementation and mobilisation, delivery model, and so on) each listed a non-exhaustive set of bullet points that described the requirements against the back-drop of the specification. The scoring methodology graded responses by the extent to which they demonstrated understanding of and met the defendant’s requirements.
However, no system was in place to ensure that the responses were assessed against each of the specified bullets and the assessment panel members recorded their reasons for their own scores slightly differently. Some provided reasons under each bullet and others applied a more general approach. Nevertheless, the court did not find that the defendant had failed to apply the correct award criteria or had taken into account undisclosed or unlawful sub-criteria.
The court did, however, find that the reasons given were inadequate:
- No consensus on reasons. The moderation meeting looked at the initial scores of panel members and then sought to reach a consensus following discussion. The moderator took notes of the discussion on his laptop but these were not shown to the panel during the meeting. The evaluators’ original score sheets did not help identify the agreed reasons as evaluators often changed their position at consensus. The evidence at trial indicated that there was probably not any consensus reached on the reasons for the consensus score.
- Template for reasons unhelpful. The template used by the panel and the moderator had two boxes, one headed “Positive Comments” and the other headed “What was missing or could have made the answer better”. This led to a recording of positive and negative comments of unequal weight with some in bold text, which did not explain how the consensus score was reached by reference to the criteria and scoring methodology.
- Inconsistent moderation notes and confusing edits. The court found that edits were made to the moderation notes without any explanation and some conflicting points were recorded without an attempt to reconcile them or explain which points reflected the final consensus view. Edits were also made at the end of the meeting to describe the relative strengths of the successful bid for the standstill letter (using words such as “wider” or “stronger”). The court accepted that comparative scoring did not take place, but these edits further obfuscated the consensus reasons.
- Failure to agree moderation notes. The internal guidance required panel members to agree the moderation notes. This was ignored. The panel members did not see the moderation notes until witness statements were prepared.
The court accepted the submission that:
“… a procurement in which the contracting authority cannot explain why it awarded the scores which it did fails the most basic standards of transparency.”
The court cited with approval the statement in Healthcare at Home Ltd v The Common Services Agency that the reasoning disclosed must be sufficient both to enable the person affected to defend their rights and to enable the court to exercise its supervisory jurisdiction.
The court concluded that the notes did not provide a sufficiently full, transparent or fair summary of the discussion leading to the consensus score and there was no or no sufficient account of the reasons that led panel members to resolve their differences.
The court cited with approval the statement in MLS (Overseas) Ltd v Secretary for Defence that manifest error will typically occur:
“… where there has been a failure to consider all relevant matters (or consideration of irrelevant matters), or the decision is irrational in that it is outside the range of reasonable conclusions open to it…”
The court referred to the need to show that any manifest errors are material, that is, they could have affected the tender outcome. The scores were very close. The reasoning for the scores was not apparent from the moderation notes (see above) and the court found that the defendant failed to make good that deficiency in the evidence at trial.
In these circumstances, the court was unable to identify whether any manifest errors of reasoning were material without re-marking the bids from scratch as there was:
“… no pleaded case or satisfactory evidence about what scores should have been awarded on a counterfactual basis.”
The court found that conducting a re-mark of both bids from scratch was not its proper function.
Limited observations were made on some of the manifest error submissions and the conclusion was reached that:
“… the pervasive inadequacy of the account of the panel’s reasoning and reasons… prevents any reliable assessment of the extent or materiality of any error in the reasons actually adopted.”
The remaining issue was whether the transparency breach had caused the claimants to lose the contract or lose a chance of being awarded the contract.
The defendant’s failure to provide transparent and comprehensible reasons either at the award stage or later at trial as to why Virgin won rather than the claimants prevented the court from making a reliable assessment of the materiality of errors in circumstances where only a modest adjustment in scores would be decisive. It was said to be common ground in these circumstances that the decision to award the contract to Virgin must be set aside.
Firstly, this judgment will cause contracting authorities to pause and ask themselves whether their assessment and moderation processes are sufficiently transparent. In particular:
- Are evaluators recording their reasons consistently and by reference to the criteria, sub-criteria and scoring methodology?
- Does the moderation process ensure that a full transparent record is made of both the moderated score and the reasons on which it is based, and that those reasons support the score and are aligned to the award criteria, sub-criteria and scoring methodology?
- Do the assessors review and agree the moderation notes at the moderation meeting?
Secondly, in cases where the decision making process is not transparent, the claimant does not necessarily have to show that manifest errors in scoring meant that they were wrongly deprived of the contract to gain the set-aside remedy.
Once the claimant has established that the reasons recorded contemporaneously were inadequate, it is for the defendant to make good the deficiency with explanations and evidence enabling the court to understand the reasons for the scores awarded, assess what the scores should have been and reach conclusions on the materiality of any errors.
If the defendant’s original reasoning was deficient, it fails to plug the gap through evidence and the proximity of scores means that it is possible that the alleged errors could have affected the outcome, the court will be more inclined to set aside the decision rather than embark on a re-scoring exercise from scratch.
In Energysolutions EU Ltd v Nuclear Decommissioning Authority (NDA), the court grappled with similar issues in a manifest error claim where the contract had been entered into and the only available remedy was therefore damages. In that case, the court considered the lawfulness of the award decision by reference to the reasons made available to the claimant prior to the issue of proceedings, but also had regard to the evidence of other reasons provided later when considering what the score should have been and causation for the claim. In effect, the NDA gave the court something to work with and a complex re-scoring exercise was undertaken before the finding was ultimately reached that the claimant had submitted the most economically advantageous bid and was entitled to damages.
In Lancashire, the court was rather more reluctant to re-score bids. There may be an element of pragmatism in going straight for the set aside remedy once it is apparent that the process is flawed and the errors made could have changed the outcome. However, it is worth noting that the court in Energysolutions EU did not accept that there was any difference of principle in the approach in procurement cases based on whether the main relief sought was set aside or damages.
A detailed re-scoring exercise may also have been more proportionate in Energysolutions EU, where the Ccaimant was seeking over £100 million in damages. Though in Woods v Milton Keynes, the court re-scored bids on a much smaller claim where it identified manifest errors in order to work out whether a different result should have occurred.
The refusal to re-score in Lancashire is best explained simply by the defendant’s apparent failure at trial to put forward reasons for the decision and evidence that the outcome was correct. Had it done so, the court may well have been willing to undertake the same exercise of re-scoring questions where there were manifest errors as it did in Energysolutions EU or Woods.
The message for the parties in procurement claims is clear. The court will be ready to set aside the award decision if the tender process is defective due to insufficiency of reasons and scores are close, unless the defendant can present a cogent case and evidence that the outcome is right.
Finally, the successful bidder may also want to lend its weight in procurement cases if the authority is not defending the award decision with sufficient resources or conviction. Its rights as an interested party are recognised by the TCC Guidance Note on Procedures for Public Procurement Cases (Appendix H to the TCC Guide).