Of contracts, shifting goalposts and lawfulness

[Edit 01/09/2010. There has been a further change to the FAQ discussed in this post. See the new post here]

Bear with me. This is going to be a bumpy ride.

The LSC’s terms of tender for civil contracts stated

Paragraph 15.11: “For a tender to be complete, the Applicant Organisation must, prior to the deadline, submit a tender consisting of (1) a response to the PQQ and (2) a response to an ITT (including the Mandatory Form).”
Paragraph 15.13: “The Applicant Organisation must not amend or alter any document comprising part of the tender after the deadline”
Paragraph 15.37: “The Applicant Organisation agrees to keep any tender valid and capable of acceptance by the LSC up to the 14 October 2010 (Contract start date).”

Obviously, part of the tender was the number of matter starts bid for.

On 20th August 2010, the LSC published a Frequently Asked Questions (FAQ) document on its website about verification of Civil contracts. It included the following:

“[Q] I am concerned that I will not be able to deliver all the matter starts that I have been allocated, what should I do? “[A]Under the contract, you will be required to deliver both the volume and breadth of services for which you have tendered….” .

On 23 August 2010, the LSC published a revised FAQ document. At 3.2, in place of the answer above, this FAQ states:

“[A] If you are in any doubt as to whether you can deliver all your matter starts, please contact us through the message board and let us know how many you would like. We will then adjust your total. It is important that you receive the right allocation at the start of the contract.”

That unannounced change is a major shift in position. It also makes interesting reading next to the previously announced ‘verification exercise’, which was stated to be “aimed at ensuring providers can deliver on the new matter start numbers they have successfully bid for.”

But beyond that, what does this mean for the tender process? The tender rules on this point appear to be quite clear. Any tender (which included the number of matter starts bid for) must be kept valid up to 14 October 2010 and cannot be changed after the submission deadline.

The first version of the verification FAQ, from 20 August 2010, would appear to be in accord with this. Matter starts allocated in response to a tender must be delivered.

The second version appears to say that if a provider is having second thoughts about its ability to deliver the matter starts bid for and allocated under the tender process, the LSC will agree a reduced figure with them. This clearly means that the LSC are prepared to not only waive but actively assist firms who are, at the very least on the face of it, in breach of the tender rules. That this would be a breach of the tender rules is a position that the LSC has itself previously espoused – see the ‘verification exercise’ statement.

One can speculate about the reasons for this change in position. For example, so many firms were about to fail the verification exercise in addition to those not awarded contracts that the LSC would be left with such gaping holes in provision that it had to take steps to avoid this result. Alternatively, the number of providers making successful appeals outstripped the capability of the LSC’s (now admitted) secret stash of matter starts to provide reasonable contracts. Or a combination, of course.

But, perhaps more significantly, does this undermine the whole tender process to the point of a challenge?

Consider it this way. The number of matter starts bid for, set against the matter starts available for the procurement area was a factor in the award of contracts/matter start numbers, subject – perhaps – to some (unspecified) minimum number of providers per area (and I’m here going on assertions by the LSC in relation to Family contracts that there would be at least 5 providers per area) and also, of course, the number held back by the LSC in their secret stash. The other decider was point scores, but the point score required to be ‘successful’ was very clearly dependent on the number of matter starts bid for by the higher scorers.

So, as a hypothetical example – which probably has real life exemplars – you missed out on a contract because those with 1 point more put in bids which accounted for the whole of the available matter starts. Now, out of the blue and arguably in breach of its own tender conditions, the LSC is prepared to let those same providers reduce the number of matter starts they have been allocated, on the basis that they can’t fulfil the number bid for and/or awarded. But nothing is going to be done about contract awards.

Does this potentially invalidate the entire award process? If the award process was indeed a matter of awarding matter starts to the highest scoring bidders in relation to the numbers bid for, until the matter starts ran out (subject to secret stash), then I would consider it arguable that it did. Clearly, providers whose point scores were just below the ‘winners’ in such a scenario would have missed out of a contract on a false premise – that the winners could deliver what was bid for – and now the LSC seeks to unilaterally alter the terms of the tender without addressing the award of contracts. To me that sounds like a basis for challenge.

The Law Society’s Judicial Review of the Family tender rumbles on, but I would not be surprised at all if there weren’t other challenges on this basis emerging.

About Giles Peaker

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts, and still is Nearly Legal on Google +.
Posted in Housing law - All, Various (non-housing) and tagged , , .

10 Comments

  1. Well spotted Nearly! In all the mayhem we had missed this change at ilegal and thanks for alerting us.

    This makes a mockery of the whole tendering system. If you can choose not to deliver what you’re contracted for FROM THE START it’s not a fair contract process at all. Have you alerted Law Soc to this? I would.

    The most obviously injustice is where a successful bidder, having promised to expand and deliver all matter starts in an access point, and having potentially put its competitor(s) out of business, can theoretically now decide to revert to its original capacity, reducing supply and access to its advantage. How anti-competitive is that? Surely EC law would not permit any of this?

  2. Yes, well spotted NL. It is also seemingly at odds with the following statement in the verification letter that providers are receiving:

    “For the avoidance of doubt, you will be required to deliver both the volume and breadth of services for which you have tendered. The delivery of new matter starts (NMS) is a key performance indicator (KPI) under your contract and breach may result in contract sanctions
    (including termination, where appropriate). Failure to deliver in accordance with your tender will also be taken in to account in any future tender exercises.”

  3. I can’t take credit for spotting it – I was tipped off by a reader.

    It is clearly a deliberate change, not an error. But the effect is far from being just an administrative convenience.

  4. A nice analysis. I think the broader point here is that such tendering for (in effect) monopolies is a terrible model through-and-through.

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  6. I cannot see any tender breach here. The AO has no right to rescind the offer made, however that does not affect the LSC’s ability at the time of the contract starting to agree a lesser NMS capacity with the supplier, and this is the exercise currently being conducted [not only to check preparedness, but also to free up NMS for successful firms on appeal]. Only if the AO purported to unilaterally decide that they could not meet the tendered for NMS capacity would any breach arise, and even then it is doubtful that the LSC would, in the circumstances of the present tender round, be concerned so as to action any sanction. This is all dealt with in the specification. The point Colin Henderson makes is a valid one, and whether any action would lie if those circumstances arose would need to be answered by a procurement expert, but I am certain that that remedy lies outside of the tender itself.

    • Andrew,

      We will have to disagree to some extent. While I flagged tender breach as questionable/potential, your argument would only hold water if the LSC had held to the same guidance throughout and specifically prior to tender submissions – which they didn’t. Now we have a yet further change, arguably in response to the points raised here and elsewhere, see the new (third) version of a response detailed in this new post. I do however agree that any remedy lies outside the tender – public law beckons. I note that you do not actually address the issue of the determination of awards of contracts on – in part – the basis of matter starts bid for.

  7. I can address that point, and we are probably not that far apart in any evident (perhaps I am being pedantic). It would depend on whether a tender criteria based solely on “what do you say you can deliver”, instead of “what evidence can you provide to support that you can deliver X NMS’s”, is public law compliant. It is ironic that the capacity/verification tests are being conducted post tender instead of pre;

    • It is beyond ironic. It is daft.

      But where number of matter starts bid for was a factor in whether bidders got contracts or not – so top scorers on the points assessment got their matter start bids mapped on to the available pool, such that the higher the numbers bid for by them, the lower the chances that slightly lower scoring bidders would get a contract at all (as per CLP) – then whether the number allocated is fixed or can be reduced with little trouble if the number bid for ‘turns out to be’ beyond capability to deliver arguably renders irrational, or at least unfair, the basis on which contracts were awarded. Particularly where such ‘flexibility’ was explicitly denied in public pronouncements on the tender and award process by the LSC right up to 23 August.

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