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When Is an Abnormally Low Tender (ALT) Not an ALT?

on Wednesday, 19 September 2018.

The case of SRCL Ltd v National Health Service Commissioning Board illustrates how a challenge based on a contracting authority's perceived breach of Regulation 69 of the Public Contracts Regulations 2015 must take into account...

  • the complexities of the business, plus the fact that the winning bidder does not require a minimum margin of profit similar to that of the challenger, to win
  • a winning bidder's decision as to how it deploys whatever commercial advantages it has over its competitors so far as overheads (and profit) are concerned, in order to win, does not mean the resulting tender was abnormally low

Background

The facts of the case are as follows: SRCL was the main incumbent provider of the services (clinical waste collection and disposal, for pharmacies and GPs in Cumbria and NE England) under a framework agreement compiled and run by NHS England (NHSE). Each mini-competition under the framework agreement awarded a call-off contract for each region of the UK. The contract award for Cumbria and NE England carried out by electronic reverse auction was awarded to SRCL's competitor, HES. SRCL issued a legal challenge contending:

  1. that the winning bid, and the next lowest bid, were both ALTs (and thus acceptance was in breach of Regulation 69 of the PCR)
  2. the way in which NHSE dealt with the costs of complying with TUPE in the competition, was unlawful
  3. that although SRCL appeared to be outside of the 30 day period for issuing a legal challenge, there were good grounds for the court to exercise its discretion under the PCR for an extension of time to challenge the award decision though the courts

The judge gave short shrift to SRCL's arguments under contentions (2) and (3) and dismissed them. In the case of contention (1) - the matter central to the challenge - the judge ruled that the challenge failed because in the context of the competition and the complexity of that particular business, there was no ALT, just a business that made use of the advantages it had over competitors including setting a margin of profit which could justifiably be below that of its competitors - as the contracting authority concluded.

Comment

The case reminds us of the imperative contained within Regulation 69, namely, that where an ALT is apprehended, the contracting authority must investigate, and give the tenderer a chance to explain the perceived ALT. We also conclude that it is still quite difficult to mount a challenge under ALT.   


For more information please contact Robert Prater in our Procurement team on 020 7665 0927. 

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