Ecolog International Fze v The Secretary of State for Defence of the United Kingdom & Northern Ireland

An implied tender contract is not automatic and its terms depend on the documents and circumstances. Issuing an invitation to tender may create a limited obligation to consider a conforming bid in good faith, even where the authority reserves power to change or cancel the process. References to the Defence and Security Public Contracts Regulations 2011 do not, without clear contractual intention, extend statutory protection to a supplier outside the statutory definition of an economic operator. A good-faith consideration duty does not itself require a procurement to be conducted fairly, equally, transparently, or in accordance with the tender documents or Regulations. Procedural defects may nevertheless inform whether the bid was genuinely considered in good faith.

The claimant, a company established in the United Arab Emirates, challenged the Ministry of Defence’s award of a facilities-management contract following a procurement conducted under the Defence and Security Public Contracts Regulations 2011. It was common ground that the claimant was not an economic operator entitled to bring a direct statutory claim. The claimant instead alleged an implied tender contract arising from the procurement documents and its participation.

The court determined four preliminary issues: whether any implied contract arose; whether its terms were limited to consideration of the bid in good faith; whether wider duties of fairness, equality, transparency and compliance with the tender documents or Regulations were implied; and, if necessary, whether further terms applied.

The court answered the preliminary issues as follows.

1. Formation. No binding tender contract arose at the PQQ stage because the documents stated that only the express terms of a later written contract would have contractual effect. The subsequent ITN did, however, impliedly offer at least a limited contract to consider any submitted tender. Ecolog accepted that offer by submitting its bid. A reservation allowing the MOD to change or cancel the procurement did not prevent that limited contract.
2. Scope of implication. The existence and scope of an implied tender contract are fact-sensitive. The court applied the principles in Marks & Spencer plc v. BNP Paribas Securities Services Trust Co. (Jersey) Ltd [2015] UKSC 72, [2016] AC 742. Any term had to be reasonable and equitable, necessary for business efficacy, obvious, capable of clear expression and consistent with express terms.
3. Statutory context. The Regulations applied to the procurement but protected only eligible economic operators. Ecolog, as a UAE supplier, had no direct statutory rights. The court accepted that parties could contractually agree to deal with an excluded supplier as if the Regulations applied, but found no such contractual intention here. References to the Regulations and equal-treatment duties did not establish that broader obligation.
4. Equality and good faith. The MOD’s statutory duty to treat an eligible supplier equally did not create a contractual right of equal treatment for Ecolog. The implied duty was limited to honestly considering Ecolog’s bid alongside other bids. It was not a wider duty to conduct the procurement fairly, equally, transparently, or in accordance with the ITN or Regulations. Evidence of those matters might support an inference that the bid was not considered in good faith, but did not enlarge the contract. The court relied on the limited approach in Blackpool & Fylde Aero Club Ltd v. Blackpool Borough Council [1990] 1 W.L.R. 1195 and JBW Group v. Ministry of Justice [2012] EWCA Civ 8.
5. Disposition. Issue 1 was answered yes. Issue 2 was answered on the basis of a limited good-faith consideration duty. Issue 3 was answered no. Issue 4 did not arise.

not stated in the judgment.