Healthcare at Home Limited v The Common Services Agency

In public procurement, whether tender criteria satisfy the principle of transparency is determined objectively. The court asks whether all reasonably well-informed and normally diligent tenderers could interpret the criteria in the same way.

Evidence may explain technical language, industry practice and other relevant context. Evidence of how actual tenderers understood the criteria does not determine the issue. The hypothetical tenderer embodies a legal standard applied by the court, rather than an empirical standard proved through witnesses.

Reasons for rejecting a tender must clearly disclose why it failed and the successful tender’s relative characteristics and advantages. The authority need not provide its evaluation report or a detailed comparative analysis.

Healthcare at Home Limited v The Common Services Agency concerned a competition for a contract to provide medical services to Scottish health authorities. The appellant, the existing supplier, was unsuccessful. It alleged breaches of the Public Contracts (Scotland) Regulations 2006, contending that the award criteria lacked transparency and that the reasons for rejecting its tender were inadequate.

Following an eight-day proof, the Lord Ordinary rejected the challenge: [2012] CSOH 75. The Inner House refused the appeal: [2013] CSIH 22; 2013 SC 411. It held that the reasonably well-informed and normally diligent tenderer was a hypothetical construct whose understanding was determined objectively by the court.

The central questions were whether that standard should instead be established through evidence of actual tenderers’ understanding, whether the criteria met the required standard of transparency, and whether adequate reasons had been given.

1. Appeal dismissed unanimously. Lord Reed delivered the only judgment. Lord Mance, Lord Kerr, Lord Sumption and Lord Hughes agreed.

2. The reasonably well-informed and normally diligent tenderer is a hypothetical legal construct. Like the reasonable person in other legal contexts, the construct expresses an impersonal legal standard whose application is for the court. The transparency requirement identified in SIAC Construction Ltd v County Council of the County of Mayo Case C-19/00 requires award criteria to permit all such tenderers to interpret them in the same way.

3. The court must place itself in the position of that hypothetical tenderer and assess the documents objectively on a properly informed basis. Evidence may explain technical expressions, relevant industry circumstances and matters which an informed tenderer would know. Evidence of what actual tenderers thought the criteria required is essentially irrelevant. Such evidence cannot determine the outcome because the inquiry applies a legal test rather than conducting a purely empirical investigation.

4. The rationale of the standard is to ensure equality of treatment and legal certainty. An objective approach also permits the rapid review required by article 1 of the Directive 89/665/EEC. Requiring proof of each tenderer’s subjective understanding would be inconsistent with those purposes.

5. Reasonable foreseeability adds nothing useful to the established procurement test and may cause confusion with other branches of law. The correct inquiry is what the hypothetical tenderer would understand to be encompassed or entailed by the invitation. The Lord Ordinary’s reference to foreseeability caused no error because he applied that substantive test.

6. Once it was accepted that the courts below had applied the correct legal test, the Supreme Court would not readily interfere with their assessment that the criteria were sufficiently transparent. No recognised ground for intervention was established.

7. Article 41 of the Directive 2004/18/EC required adequate reasons for rejection. The reasons had to make the unsuccessful tenderer aware of why it failed, permit it to defend its rights and enable judicial supervision. The authority was not required to provide its evaluation report or a detailed comparative analysis. The courts below applied the correct approach and permissibly found the reasons adequate.

• United Kingdom Supreme Court: By [2014] UKSC 49, unanimously dismissed the appeal and upheld the Inner House’s refusal of the appeal.
• Court of Session, Inner House: By [2013] CSIH 22; 2013 SC 411, refused the appeal from the Lord Ordinary.
• Court of Session, Outer House: By [2012] CSOH 75, the Lord Ordinary rejected the challenge following an eight-day proof.