On 14 February 2025, the Court of Appeal handed down a judgment which overturned the High Court's decision in a claim brought by Wellbeing Ltd t/a Optima Health (Optima) against the Secretary of State for Work and Pensions and the Department for Work and Pensions (together, the DWP).
The Court of Appeal held that the DWP had been wrong to exclude Optima from the procurement and should have sought clarification of the obvious and material errors in Optima's tender. In failing to do so, the DWP's decision to disqualify Optima was irrational and disproportionate. As a consequence of their conclusions, the Court found that DWP should have awarded Optima the contract.
First instance decision
The decision concerns an appeal to the judgment of Mr Justice Freedman ([2024] EWHC 766 (TCC)) in respect of a claim brought by Optima against the DWP, challenging the DWP's decision to disqualify Optima from a procurement of a call-off contract for occupational health and employee assistance programmes. Optima's case was that DWP acted unlawfully by excluding its bid (which would have been comfortably the winning bid) rather than by seeking clarification of the errors in Optima's tender. Further, the errors (two out of three of which were described as "cut and paste errors") were in respect of exceptionally minor pricing items amongst almost 200 correct items. In response, DWP denied breaches of the principles of transparency and equal treatment, or that it had acted unlawfully in excluding Optima; it had exercised a discretion, and had considered its options before doing so.
At first instance, the High Court dismissed Optima's claims on all grounds and found that the DWP had lawfully disqualified Optima from the procurement process on the basis of its non-compliant bid. Mr Justice Freedman's first instance decision was the subject of a previous Trowers' Insight, which we would recommend revisiting in order to understand the context and outcome of the Court of Appeal's decision.
The Appeal
Optima appealed against the High Court judgment on the basis of six grounds of appeal, which Lord Justice Coulson grouped into three main issues for the Court of Appeal to determine
- Whether DWP's Invitation to Tender contained a mandatory exclusion provision which meant that, if any of the tendered line items exceeded the existing Framework Maximum Prices, the whole tender would be excluded from consideration.
- Whether DWP were entitled or even obliged to seek clarification of the errors in Optima's bid, where those errors had no effect on the scoring and an impact of just 0.02% on the evaluation of the price.
- Questions of detail about requests for clarification during a tender process, and in particular the limits on what a tenderer can permissibly do when answering such a request.
The Decision
Optima's appeal was successful. In Lord Justice Coulson's detailed judgment, the Court of Appeal held that:
- There was no mandatory exclusion clause in the relevant part of the ITT. The relevant clause which DWP had relied upon provided that "any bids for any service line submitted… in excess of [the Framework Maximum Prices] will be discounted" and the Court held that, in the context of the ITT as a whole, the obvious meaning of 'discounted' to a RWIND tender was 'reduced', not excluded or disqualified. The High Court's approach to this issue was therefore erroneous.
- There are three stages to consider when addressing whether a contracting authority has discretion to seek clarification of a tender, when that discretion becomes a duty, and what the permissible limits are to any response to a request for clarification:
- Whether there was an error or ambiguity which was obvious to the contracting authority and which was material and relevant to the outcome of the competition.
- If there is an obvious and material error or ambiguity, a contracting authority must then consider whether clarification should or must be sought. The authority has discretion (as per Regulation 56(4) of the Public Contracts Regulations 2015) and only the factual circumstances of any case would turn that discretion into an obligation. When considering whether or not to seek clarification, an authority must take the least onerous option, which will usually be to seek clarification rather than exclude the tender altogether.
- If a clarification is raised, it must not be used as a mechanism to allow the tenderer to put in a new bid or make substantial amendments to the existing bid. Common sense is required when considering this stage, and authorities should avoid a strict and over-literal approach as to what is a new bid or a substantial change, which may lead to the exclusion of the best tender for no objectively justifiable reason.
- Applying the above stages, the Court of Appeal concluded that the three line-item errors in Optima's bid amounted to obvious and material errors. On the facts of the case, the High Court was wrong to say that DWP was under no duty to seek clarification; a duty on DWP to clarify arose once it became apparent that Optima's tender contained obvious mistakes and/or ambiguities which were highly material to the outcome of the competition and affected the proper evaluation of the tenders. Correction of the errors (by reduction of the line items back to the Framework Maximum Prices) would not amount to a new bid or a substantial amendment to Optima's bid; the mere fact that a different number is provided is not illegitimate – it all depends on factual context.
- On the evidence, the DWP failed to properly exercise their discretion in respect of the obvious errors / ambiguities, or wrongly fettered that discretion. Their decision to disqualify Optima was irrational and was also disproportionate. The principle of equal treatment did not preclude DWP from seeking clarification from Optima; equal treatment is not an end in itself (it is simply one of the ways in which the purpose of public procurement is advanced) and equal treatment is also concerned with the outcome of the procurement. DWP was obliged to seek clarification of the erroneous line items and could have done so without a breach of the duty of equal treatment.
- In light of the Court of Appeal's conclusions, the Court held that DWP should have awarded Optima the call-off contract.
Practical Implications
The Court of Appeal's comprehensive judgment provides a detailed analysis of the relevant authorities applicable when considering the exclusion of tenders and the discretion (or duty) on contracting authorities to seek clarification. It clarifies and corrects much of the analysis undertaken at first instance, and is therefore essential reading for lawyers and public procurement practitioners.
Whilst the decision concerns a procurement undertaken under the Public Contract Regulations 2015, the principles and authorities set out in the Court of Appeal's judgment are likely to remain applicable in respect of procurements run under the Procurement Act 2023.
Working on Wellbeing Ltd trading as Optima Health v Secretary of State for Work and Pensions, Department for Work and Pensions [2025] EWCA Civ 127 – the judgment can be found here.
