Insights

In a judgement delivered on 30 June 2021 in the names of MSD (Darlington) Limited vs Dipartiment tal-Kuntratti, the Court of Appeal upheld an appeal lodged by the Department of Contracts (‘DoC’) and confirmed an evaluation committee’s decision to disqualify a bidder who disclosed the financial offer in the technical offer which was prohibited under the 2005 Public Contracts Regulations.

The sequence of events leading up to this judgement was as follows:

1. on 9 August 2005, DoC issued a call for tenders for the ‘Procurement of Hoists for Dry Standing Facilities at Kavallerizza – Marsaxlokk’;
2. four (4) tenderers, the claimant included, submitted tenders in response to the call;
3. on 17 October 2005, DoC informed the claimant that its offer had been disqualified on the ground of non-compliance with Part XII of the 2005 Public Contracts Regulations (the ‘2005 Regulations’). The 2005 Public Regulations required that tenders are submitted in 3 separate physical packages for tenders exceeding LM250,000 in value: (1) the bid bond; (2) the technical offer; and (3) the financial offer. The law required that these envelopes would be opened in public consecutively and only opened if the tenderer complied with ‘tendering procedural requirements’ and ‘specifications’.
4. In this case, the claimant had disclosed the financial offer (which could only have been disclosed in third package) in the technical offer, the second package. DoC disqualified its offer on this basis.
5. The claimant filed an objection before the Public Contracts Appeals Board (the ‘Appeals Board’). In its decision on 30 December 2005, the Appeals Board upheld the decision of DoC to disqualify the claimant’s bid as non-compliant;
6. The claimant filed a further appeal before the First Hall Civil Court (the ‘FHCC’).

In its judgement delivered on 18 May 2016, FHCC noted that the claimant had included the price for its two alternative proposals on the first page of the technical offer when the second package was strictly intended for the submission of the tenderer’s technical offer. The price should only have been included in third package which was intended for the submission of the tenderer’s financial offer only.

The claimant argued that neither the tender dossier nor the 2005 Regulations expressly provided for the disqualification of an offer on the basis that the price is included in the second package intended for the technical offer. On the other hand, DoC insisted that the rationale behind the law was to guarantee the impartiality of the members of the evaluation committee assessing the technical offer. This was a matter of departmental policy which was reflected both in the tender dossier and in the 2005 Regulations.

The Appeals Board had agreed with DoC, stating that the law was ‘clear and not subject to possible interpretations’ and consequently failure to adhere with the separate packages requirement had been tantamount to a procedural breach by the claimant.

FHCC disagreed. It stated that no internal policy can be given the force of law. An offer cannot be disqualified on the basis of a requirement which did not emanate from either the instructions to tenderers in the dossier or a logical reading of the applicable law.

FHCC held that the offer cannot be declared null on the basis of a failure to adhere to internal policies, particularly when the economic operator had followed the instructions contained in the applicable law and the tender dossier. Such a decision would have been in breach of the principles of natural justice and fairness.

FHCC also held that:

1. any ambiguity in the tender dossier must benefit the tenderer;
2. an express prohibition against the inclusion of price in the second package was often included in other calls for tenders. Since such prohibition was not included in the dossier in question, then the intention must have been to exclude it;
3. disqualification of the offer for failure to adhere to the separate packages requirement was an extreme measure which should only have been resorted to in the case of substantial departures or restrictions; and
4. disqualification in the current circumstances was a disproportionate measure particularly since the inclusion of the financial offer in the second package had no practical effect and did not create any prejudice against other tenderers.

In delivering judgement, FHCC declared that the claimant’s offer was fully compliant with the tender conditions and annulled the decision of the Appeal Board.

DoC appealed against the judgement of FHCC before the Court of Appeal. It referred to a clause in the tender dossier which unequivocally required tenderers to adhere to the specific provision in the 2005 Regulations which provided for the submission of separate packages. DoC argued that a breach of the applicable law amounted to a breach of the tender conditions and that the sole rationale behind the law was to guarantee that the financial offer of each bid was not disclosed to the evaluation committee before its administrative and technical parts were fully assessed and evaluated. This requirement was established to safeguard the impartiality of the committee. Just because the requirement was more expressly stipulated in other tenders did not mean that it was to be discarded in the absence of such an express stipulation, DoC continued to argue.

The Court of Appeal agreed with the submissions of the DoC in their entirety. It stated that the procedural need for three separate packages guaranteed the equal treatment of tenderers and avoided a situation where an evaluation committee might be tempted to protect a non-compliant tender because of its financially advantageous nature.

While this case now dates back to over 15 years, and the law has now been superseded by the 2014 EU Directives, these remain issues that haunt bidders and contracting authorities alike. The evaluation of tenders is most of the time a balancing act between treating bidders equally and acting proportionately.  However, it is interesting to note that the current practice is for the list of tenderers together with the respective prices to be revealed and made available to the public on the date scheduled for the opening of the bids through the Opened Tender Report on ePPS (www.etenders.gov.mt). The order of evaluation of bids has remained the same: the administrative, the technical and then the financial aspects of a bid are assessed consecutively. Therefore, much of the contracting authorities’ concerns about impartiality, seem to have been trumped by the need of guaranteeing transparency of who is participating in tenders and at what price.

This report was first published in the Malta Independent.