| Date | 10 November 1999 |
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| Judgment | Harmon CFEM Facades (UK) Limited -v- The Corporate Officer of the House of Commons, TCC 28 October 1999 |
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| The Issue | The operation of the Public Works Contract Regulations 1991. |
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| Implication |
Where procurement is to be based on the most economically advantageous tender, clear criteria have to be set out in the contract notice, and objective scoring systems based on these criteria have to be strictly observed in determining the successful tenderer. |
printThe manner in which public works contracts may be awarded within the European Community is tightly controlled under EC Law. Three elements underpin the rules: (1) Free and equal access to information concerning public procurement is to be available to all suppliers or contractors within the EC. (2) All tenderers regardless of origin within the EC are entitled to have their offers considered on a fair and equitable basis, and criteria should not be used to evaluate offers that have the effect of unfairly excluding foreign suppliers. (3) Tenderers who believe that they have been discriminated against should have access to remedies that can be readily applied and that compensate them for their losses. Article 30 of EC Counsel Directive 93/37 outlines the criteria upon which a contracting authority must base its award of contract. These are: a) either the lowest price only or, b) the most "economically advantageous tender" based on stated and objective criteria, e.g. price, period for completion, running costs, profitability or technical merit. The Public Works Contract Regulations 1991 provide for enforcement, and provide that where there is a breach of the duties owed, the court may suspend the procedure leading to the award of the contract, order the setting a side of a contract, and/or award damages to a contractor who has suffered loss as a consequence of the breach. These issues were closely examined in the Technology and Construction Court in the case between Harmon CFEM Facades (UK) Limited -v- House of Commons. His Honour Judge Humphrey Lloyd Q.C. found that the House of Commons had fallen far short of the necessary standards in public procurement. The case arose out of the construction of Portcullis House, the New Parliamentary Building for the House of Commons at Westminster designed by Sir Michael Hopkins and Partners. The building is to provide offices for some 210 Members of Parliament and much criticism has been made of its £250m price tag. Harmon, a French company, submitted a tender for the fenestration for the building. This is not merely a cladding system or a curtain wall but it functions as an integral component of the building in engineering terms, providing proof against terrorist attack. Harmon claimed that the House of Commons had failed to observe the EC procurement regulations in its award of the contract to an alternative UK bidder, Seele-Alvis. The Parliamentary Works Directorate represented the House of Commons in all its dealings on the project. The court held it had made errors in procurement from the very start of the process. Despite advice to the contrary, its tender notice in the Official Journal of the EC stated that the award criteria would be "overall value for money." Judge Lloyd held that this did not comply with the regulations and left the tenderers completely in the dark as to what criteria would properly be used in the assessment of tenderers. This was seen to be a deliberate ploy by which the Parliamentary Works Directorate would be able to apply a wide discretion in its choice of contractor. Behind this lay concerns that UK based businesses should be able to tender for the works. Whilst Judge Lloyd concluded that there was no general policy to "buy British," it became clear that such thinking had greatly influenced the procurement process. A shock was in store for the project team when tenders were returned. Against a budget of £20m, the tenders ranged from £40.5m to £59m. Harmon was the lowest tenderer. Second was the only British tender, Seele-Alvis, at some £1m higher. As might be expected the tenders were heavily qualified and related to different design solutions. A proper scoring system based on acknowledged criteria was now more important than ever, but such an approach was rejected. Instead the project team went through a process of negotiation and review of the tenders, in order to obtain substantial cost savings. Second phase tenders were requested. When these were returned the position had not changed. Harmon were still the lowest tenderer. It was suggested that the Seele-Alvis tender was technically superior but the project team were not in agreement, and no comparative bid could be obtained on that specification. Judge Lloyd commented that by now the tendering process had become a charade. Although he was satisfied that the construction manager and project quantity surveyor had refused to play a part, the tender assessment had become a game in which enough adjustments were to be made so as to reduce the gap between the two tenderers to a margin that would justify the choice of Seele-Alvis. A recommendation was made to accept the tender of Seele Alvis but no clear calculations could be made to demonstrate that this represented "best value for money." When Harmon were informed that they had been unsuccessful they asked for reasons, as they were entitled to under the regulations. Judge Lloyd found the answers to be deliberately evasive and inaccurate. The project team then closed ranks around this decision and its aggressive tone in response to Harmon no doubt provided considerable motivation for the litigation that ensued. In a substantial judgment running to nearly 250 pages plus appendices, Judge Lloyd concluded that the House of Commons plainly never complied with the requirements of the Public Works Regulations. Having failed to set out the criteria for the "most economically advantageous tender," it was bound in law to award the contract on the basis of price alone. In conclusion the House of Commons would become liable to pay Harmon's abortive tendering costs and damages calculated on the basis of the margin or loss of profit it would have earned had its tender been accepted.
CJ-9943
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