Court of Appeal rules on duty to clarify tender submissions with bidders in UK public procurement

The Court of Appeal (CoA) has allowed an appeal brought by Optima Health and overturned a recent decision by the Technology and Construction Court that had held that the Department for Work and Pensions (DWP) had acted lawfully in disqualifying Optima from a procurement process.

In a significant judgment in Working on Wellbeing Ltd trading as Optima Health v (1) Secretary State for Work and Pensions (2) Department for Work and Pension [2025], the CoA clarified the circumstances in which corrections to tenders might be permissible and the circumstances in which a contracting authority has a discretion to seek clarification – and when that discretion turns into an obligation to do so.

Procurement background

The procurement in question was a call-off from the Crown Commercial Service framework RM6182 (Occupational Health, Employee Assistance Programmes and Eye Care Services) to provide services to the DWP.

The procurement exercise took nearly 12 months to complete and involved the authority issuing numerous iterations of a pricing schedule comprising 190 individual prices.  The revised versions of the pricing schedule were issued by the DWP as a result of none of the bidders submitting a fully compliant pricing schedule. In relation to the final version of the pricing schedule, one bidder submitted a fully compliant bid.

The invitation to tender set out the maximum prices the supplier could charge – the "framework maximum prices" – and further stipulated that any bidder who submitted prices in excess of these limits would be "discounted". Separately, the tender documents contained a broad right to exclude a bidder that submitted a non-compliant bid.

Pricing errors

Optima ultimately submitted three prices in excess of the framework maximum prices.

One error arose as a result of Optima failing to update its price after the DWP changed the unit of measure of one price in the final iteration of the pricing schedule from "per telephone check" to "face to face", without calling out the change to bidders.  The change resulted in Optima's previously compliant price becoming non-compliant.

Two further errors arose as a result of changes to the unit of measure of prices over the course of the revised pricing schedules that were not called out to bidders by DWP. Upon reviewing Optima's final tender submission, the DWP quickly identified and described the errors as "cut and paste errors".  

The effect of each of these errors was minor as they were either rated at "0" volume – meaning the pricing provided didn't affect scoring at all – or otherwise had very low impact on the score. The result was that the errors had an overall impact on the scoring of just 0.02%, and Optima was otherwise the clear winner with a far higher quality score than other bidders. However, the DWP excluded Optima's bid without requesting further clarification, citing Optima's non-compliance.  During the proceedings, it became clear that DWP considered that the word "discounted" in the tender documents gave rise to a mandatory requirement for the DWP to exclude Optima from the procurement, and that if DWP had allowed Optima to correct the three errors, this would have amounted to a breach of equal treatment on the basis of allowing Optima to effectively revise its prices.

High Court challenge

Optima challenged the DWP's decision to exclude it from the procurement, arguing that the pricing schedule contained "obvious clerical errors" and that its disqualification was in breach of the principles of transparency and equal treatment, as well as being disproportionate.

The High Court was asked to determine:

1. Whether the tender documentation clearly and transparently set out the consequences of exceeding framework prices, focusing in particular on the meaning of "discounted"; and
2. if the tender documents were clear and the DWP therefore had a discretion to exclude Optima, did the DWP act unlawfully by excluding Optima rather than taking alternative action?

The High Court found against Optima on both grounds; it held that (i) it was clear and obvious from the tender documentation to the "reasonably well-informed and normally diligent (RWIND) tenderer" that bids with prices in excess of the framework maximum prices would or could be excluded, and (ii) the DWP had taken into account the relevant factors when considering its options and had reasonably exercised its discretion to exclude Optima.

In response to Optima's argument that the errors were obviously clerical and, therefore, the DWP should have sought clarification, the High Court found that the mistake was not in fact obvious and the approach suggested by Optima was "far too nuanced". A contracting authority was not required to seek clarification where the underlying reasons for the error were unclear, and adjusting it might have led to a real change in the bid.

Court of Appeal decision

Optima's appeal centred around two main grounds:

1. Whether the High Court had erred in finding that the tender documentation contained a clear rule of mandatory exclusion; and
2. Whether, in the circumstances, the DWP ought to have permitted Optima to correct and / or clarify the errors in its tender.

Optima was successful in its appeal on both grounds.

In relation to the first ground, the CoA determined that the tender documentation did not contain a clear provision for mandatory exclusion. The CoA found that the use of the word "discounted" did not clearly mean to "exclude" when taken in the context of the tender documents.  Instead, an RWIND tenderer may have interpreted "discounted" to mean "reducing" the relevant excess prices down to the framework maximum prices. In any event, it was wholly unclear and thus lacked the transparency required of an exclusion provision.

In relation to the second ground, the CoA found that in the circumstances, the DWP had a duty to clarify the errors with Optima and allow them to correct those errors.  In making its judgment, the CoA set out a new test in which contracting authorities have a duty to clarify errors with bidders:

1. Was the error obvious and material to the outcome?

The CoA cited the broader test of Archus as being the preferred approach, which requires that authorities should not spend time second guessing what had happened or what the answer was supposed to have been (which would render pointless the need for clarification) – but instead on whether the error was indeed "obvious". In this case, the CoA held that the errors had indeed been immediately obvious to the DWP, in reference to the evaluators having quickly identified the errors as "cut and paste errors".  The errors also materially impacted the outcome, as Optima achieved the highest score and, but for the exclusion, Optima would have been awarded the contract.

2. If there was an obvious and material error, the authority has a duty to take the least onerous option.

In circumstances where the bidder has made an obvious error, the least onerous option will usually be to clarify the error with the bidder rather than exclude. The CoA confirmed that there is no requirement for all bidders to have made the same error in order for the duty to clarify to arise. What matters is whether the error is obvious and material. Contracting authorities have a duty to undertake a proper evaluation of bids, and where a bid contains an obvious and material error, the contracting authority may be unable to undertake a proper evaluation of the tenders without knowing the answer to the request for clarification.

3. When clarification is sought, the tenderer cannot put in a new bid or make substantial amendments.

The CoA acknowledged that applying a strict and over-literal interpretation of these words would prevent any clarification or correct of bids whatsoever, as any change to a tender submission technically amounts to a "new bid". The CoA held that it is clearly important to prevent bidders from having "a second bite at the cherry”.  Instead, the CoA held that authorities should adopt a common sense when applying the public procurement rules. The information stemming from clarification should be evaluated with a view to enabling healthy and fair competition and to permit the proper evaluation of the tenders. Experienced evaluators should be able to recognise when a bidder's corrections or clarifications amount to a "simple adjustment of the kind they generally expected, and when it is an attempt to have another go." In this case, Optima's errors amounted to an incomplete bid, and so rather than being given a second bite at the cherry, they were "simply being allowed to complete the first bite."

The CoA emphasised that equal treatment is not an end in itself. Instead, the principle should always be applied with a view towards ensuring healthy and effective competition and allowing a proper evaluation of the tenders. Equal treatment, then, is framed as a means of steering away from "arbitrary and capricious decision-making".

Osborne Clarke comment

The case law on the extent to which contracting authorities can or must clarify errors or omissions in tender documents has long been a source of confusion among bidders and contracting authorities. In particular, it is not unusual for contracting authorities to want to clarify bids but choose not to do so for fear of breaching equal treatment.

This judgment sets out a clear process that authorities can apply to decide if they may or must clarify bids. It should also empower authorities to exercise their discretion in a common-sense way that prioritises the importance of fair and healthy competition in public procurement.  In relation to drafting exclusion provisions in tender documents, this judgment also serves as a healthy reminder for contracting authorities to ensure drafting, particularly around exclusion provisions, is as clear as possible.

While this judgment relates to a procurement conducted under the Public Contracts Regulations 2015, it will remain of relevance to the interpretation of the extent to which authorities may or must clarify bidders under sections 19 and 30 of the Procurement Act 2023, which will apply to public procurements commenced from 24 February 2025.