Procurement in a Nutshell – Optima Health v Secretary of State for Work and Pensions [2025] EWCA Civ 127
28th February, 2025
This Nutshell provides a summary of the recent case Optima Health v Secretary of State for Work and Pensions [2025] EWCA Civ 127, and assess its impact upon the application of current procurement regulations.
The facts
The Claimant (Optima Health) had tendered for a call-off contract under a Framework Agreement to provide occupational health services to the Department for Work and Pensions (DWP).
Under the Framework Agreement, suppliers could not charge prices in excess of the prices set by the framework. Optima submitted a pricing schedule in which a small number of items were in excess of the framework prices. This error had no effect on scoring, and an impact of just 0.02% on the evaluation of the price of the tender.
However, DWP considered Optima’s tender to be non-compliant and excluded it from the competition, without requesting any further clarification from the Claimant. This was despite the fact that Optima’s tender received the highest score on quality and would (but for its non-compliant prices) have been the winning bidder.
Optima argued that the pricing schedule included in their tender contained ‘obvious clerical errors’ and that its disqualification was in breach of the principles of transparency and equal treatment.
At trial, the Court was asked to determine:
(i) whether the tender documentation clearly and transparently set out the consequence of exceeding framework prices; and
(ii) if the tender documents were clear and DWP therefore had a discretion, whether DWP had acted unlawfully by excluding Optima rather than taking alternative action.
The High Court initially found in favour of DWP but the Claimant’s appeal to the Court of Appeal was ultimately successful.
The judgement
The Court of Appeal concluded that the tender documentation did not contain a clear rule of mandatory exclusion regarding framework prices. In particular, the provision of the Invitation to Tender relied on by DWP to exclude Optima stated that prices in excess of the framework maximum would be ‘discounted’, not that the entire bid would be excluded.
The Court also held that DWP had failed to properly exercise its discretion in relation to clarifying the errors made by the Claimant in its tender, and in doing so, was in breach of the principle of equal treatment.Key takeaways
In making its judgement, the Court of Appeal outlined the key considerations for contracting authorities regarding the duty to clarify errors with bidders.
Key takeaways
In making its judgement, the Court of Appeal outlined the key considerations for contracting authorities regarding the duty to clarify errors with bidders.
The Court held that a contracting authority must undertake a proper evaluation of tenders during a competition. If a mistake was obvious and material to the outcome of the competition then it is likely that the contracting authority will be obliged to seek clarification in order to ensure than any such evaluation is proper.
However, the Court stressed that any clarification sought must be done in a fair and transparent manner, so as to prevent bidders from having “a second bite at the cherry”. The information resulting from a clarification should be evaluated with a view to enabling healthy and fair competition and to permit the proper evaluation of the tenders. It should not amount to a new bid. In adopting this approach, the Court has balanced the need to ensure a proper assessment of tenders with the duty to uphold equal treatment.
What this means
This case stresses the importance of clear and transparent tender documents. DWP’s failure to specify clearly that exceeding framework prices would result in the exclusion of the entire bid resulted in a significant legal challenge by Optima.
This case also clarified the position regarding obvious and material errors. Contracting authorities must ensure the proper evaluation of tenders, and so where an error is material, seeking clarification is likely to be necessary. However, the case emphasised that the duty to clarify errors must be balanced with the need to treat suppliers equally.
While this judgment relates to a procurement conducted under the Public Contracts Regulations 2015, it will remain of relevance under the Procurement Act 2023, which will apply to public procurements commenced from 24 February 2025. The key objectives of the Act include the duty to act with integrity, to share information for the purpose of allowing suppliers to understand the authority’s requirements and to treat suppliers the same. These objectives align with the overall principles established within this case, and so contracting authorities should take note of the key takeaways discussed herein.
For further information please contact Melanie Pears or Tim Care in our Public Sector Team.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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