Letting International Ltd v London Borough of Newham

Factual and Procedural Background

The claimant, a property management company engaged in procuring, maintaining, and managing private sector leased accommodation for local authorities, participated in a tender process conducted by the Defendant, a London Borough Council. The Defendant advertised two framework contracts relating to procurement, management, and maintenance of private sector leased properties. The claimant submitted a tender which was ultimately unsuccessful. The claimant challenged the tender process, asserting breaches of the Public Contracts Regulations 2006 ("the Regulations") and an implied contract, alleging a lack of transparency and unfair application of criteria by the Defendant. The claimant currently provides similar services to the Defendant and stands to lose a significant portion of its business as a result of the unsuccessful tender.

Procedurally, the claimant obtained an interim injunction restraining the Defendant from entering into contracts pursuant to the tender. The injunction was initially discharged but reinstated on appeal by the Court of Appeal. Subsequent disclosure orders were made concerning the successful tenders, with some evidence heard in camera due to confidentiality concerns. Both parties adduced oral evidence during the proceedings.

Legal Issues Presented

1. Whether the Defendant failed to provide the requisite degree of transparency by not sufficiently disclosing contract award criteria and weightings in advance, including detailed criteria and sub-criteria used in marking tenders (Issue A).
2. Whether the Defendant failed to apply the disclosed criteria correctly by awarding only partial marks for full compliance with the specification and reserving higher marks for exceeding the specification (Issue B).
3. Whether the Defendant made manifest errors in marking the tenders that demonstrate unfair and unreasonable treatment of the claimant's tender (Issue C).
4. Whether the claimant must establish loss or risk of loss as part of its cause of action and, if so, whether it can do so (Issue D).
5. Whether the claimant can bring a claim for breach of an implied contract (Issue E).
6. What is the appropriate remedy if the claimant succeeds on any head of its claim (Issue F).

Arguments of the Parties

Claimant's Arguments

• The Defendant breached the Regulations by failing to disclose in advance the detailed award criteria, weightings, and sub-criteria used to evaluate tenders, contrary to the principle of transparency required under EU law and the Regulations.
• The Defendant unlawfully applied the criteria by awarding only three out of five marks for full compliance with the specification, reserving higher marks for exceeding the specification, without prior disclosure.
• The claimant's tender would have been prepared differently had the full criteria and weightings been disclosed, potentially improving its chances of success.
• The claimant argues that loss or risk of loss suffices to bring a claim under Regulation 47(6), and it has lost the significant chance of obtaining the contract due to the Defendant’s breaches.
• Submissions emphasize substance over form, asserting that the Method Statements and their sub-criteria constituted award criteria requiring disclosure.

Defendant's Arguments

• The Defendant contends it complied with the Regulations by disclosing broad criteria and weightings, and was not obliged to disclose detailed sub-criteria or their weightings in advance.
• The Defendant distinguishes between award criteria and the Method Statements, arguing the latter are merely descriptions of how tenderers propose to meet the contract specifications, not criteria themselves.
• The Defendant submits the claimant ought to have anticipated the relative importance of certain criteria such as customer care and that the claimant was not prejudiced by any non-disclosure.
• The Defendant argues the claimant has failed to demonstrate it would have changed its tender or that disclosure would have affected the outcome, thus no actionable loss or risk of loss exists.
• The Defendant maintains that any alleged marking errors were within the evaluators’ discretion and not manifest errors warranting judicial intervention.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Case C-470/99 Universale-Bau and Others [2002] ECR I-11617	Requirement of transparency and disclosure of weighting criteria in public procurement to ensure equal treatment and fairness.	The court applied its principles to hold that detailed weighting criteria and sub-criteria must be disclosed in advance to tenderers to satisfy transparency obligations.
Case C-331/04 ATI EAC and Others [2005] ECR I-10109	Permissibility of attaching specific weight to subheadings of award criteria if pre-defined and disclosed; conditions for lawful weighting.	The court used this precedent to assess whether the Defendant’s post-submission weighting of sub-criteria breached transparency and equal treatment principles.
Case C-532/06 Lianakis	Obligation to disclose all elements and weightings of award criteria in advance, including sub-criteria, to avoid discrimination and ensure transparency.	The court relied on this decision to conclude that failure to disclose sub-criteria and their weightings before tender submission breaches the Regulations.
Lion Apparel Systems v Firebuy Ltd [2007] EWHC 2179 (Ch)	Standards for reviewing public procurement decisions, including scrutiny for manifest errors and ensuring compliance with transparency and objectivity.	The court adopted the principles that manifest errors must be clearly established and that courts should respect evaluators’ discretion absent such errors.
Case T-250/05 Evropaiki Dynamiki-Proignena Systimata v Commission of European Communities	Requirement that manifest errors must be material to the outcome of the procurement decision to invalidate it.	The court applied this to hold that manifest errors in marking must be consequential to the final result to justify relief.
Devilbiss Medequip Ltd v NHS Purchasing and Supply Agency [2005] EWHC 1757	Interpretation of "risk of loss" under procurement regulations allowing claims before actual loss is suffered.	The court used this to support the view that risk of loss suffices to bring claims under the Regulations, consistent with the claimant's position.

Court's Reasoning and Analysis

The court began by emphasizing the fundamental principle of transparency in public procurement, as mandated by the Regulations and reinforced by EU law and ECJ jurisprudence. It held that a contracting authority must disclose all award criteria, their weightings, and any sub-criteria sufficiently in advance to enable tenderers to prepare their bids effectively and fairly.

Applying the principles from the ECJ decisions in Universale-Bau, ATI EAC, and Lianakis, the court found that the Defendant failed to disclose the detailed breakdown of the Method Statements and their weightings, which constituted award criteria. The court rejected the Defendant’s argument that these were merely evaluation machinery or sub-sub-criteria, emphasizing substance over form and noting that these criteria materially influenced the tender evaluation.

The court accepted the claimant’s expert evidence that knowledge of the true weightings and sub-criteria would have materially affected the preparation and focus of its tender, thus satisfying the test of whether non-disclosure could have affected tender preparation.

Regarding the Defendant’s contention that non-disclosure did not prejudice the claimant because it could have included all relevant information, the court rejected this, noting the practical disadvantage of not knowing the relative importance of criteria and the evaluators’ preference for focused tenders aligned with disclosed criteria.

The court also found that the Defendant’s approach of awarding only three out of five marks for full compliance with the specification, reserving higher marks for exceeding it, was not disclosed and thus breached the transparency requirements. The court considered that the ITT’s language did not sufficiently notify tenderers of this marking scheme.

On the issue of manifest errors in marking, the court acknowledged some errors in the scoring of the claimant’s tender but concluded these were insufficient to affect the overall outcome and did not establish unfair treatment warranting relief.

Regarding the requirement to establish loss or risk of loss under Regulation 47(6), the court adopted the view that actual loss need not be shown; a significant chance of obtaining the contract lost due to breaches suffices. The court found that the claimant had a significant chance of success had proper disclosure been made and that the framework agreement nature did not preclude risk of loss claims.

Holding and Implications

The court held that the Defendant acted unlawfully by failing to disclose detailed contract award criteria and weightings in advance, and by failing to apply the disclosed criteria correctly, thus breaching the transparency obligations under the Regulations and EU law.

The court dismissed the claim of manifest marking errors as insufficient to alter the outcome of the tender process.

On the issue of loss, the court held that the claimant was entitled to bring a claim based on the loss of a significant chance of obtaining the contract, without needing to prove actual loss.

The court invited the parties to agree on an appropriate remedy, suggesting that instead of re-running the tender, the claimant’s name could be added as a successful tenderer under the framework agreement. The court acknowledged this as a suggestion and remained open to submissions if the parties disagreed.

No new precedent was established beyond reaffirming and applying existing ECJ principles on transparency and disclosure in public procurement.