Shetland ferry operator’s £12m damages claim against Scottish Ministers dismissed

A ferry operator that sued the Scottish Government after it unsuccessfully bid for a contract to provide services between the Northern Isles and mainland Scotland has failed in a £12 million damages action.

A judge in the Court of Session dismissed the claim by Shetland Line (1984) Limited because he was “not satisfied” that there had been any breach by the Scottish Ministers of public procurement regulations.

Lord Doherty heard that the pursuers were unsuccessful bidders in a competition to secure the work on the routes between mainland Scotland and Orkney and Shetland, as the defenders awarded the six-year contract to run up to March 2018 to rival bidder Serco Ltd.

However, the pursuers were dissatisfied with the public procurement process and raised a commercial action during the standstill period following the award, seeking damages of £12,730,275, claiming that the defenders breached regulation 4(3) of the Public Contracts (Scotland) Regulations 2006.

The essence of the pursuers’ case was that the defenders breached the “duty of transparency” imposed by regulation 4(3) of the 2006 regulations in two respects.

First, it was submitted that they failed to define the subject matter of the contract with the clarity required by law, as the term “current and anticipated future demand” for freight had not been defined, nor had “time sensitive freight”.

The pursuers contended that it had not been made clear to all reasonably well informed and diligent (RWIND) tenderers that the freight carried by the pursuers’ existing LoLo service - by which goods are loaded into containers which are lifted on and off the vessel by crane - did not require to be included within “current and anticipated future demand”.

The pursuers claimed that if they had been informed that they did not need to include within their bid the LoLo freight carried under their existing contract they would not have included it

Further, had they realised that a less frequent freight service could have sufficed to make proper provision for time sensitive freight their bid would have reflected that.

The pursuers claimed that if had the contract been clearer their bid “would have been different, more price competitive, and would have won the competition”.

Second, it was argued that the defenders’ evaluation of the freight proposals in the bids which had been submitted had been carried out without reference to any objective criteria - it had been “subjective and arbitrary”.

Had the evaluation exercise been carried out properly, the pursuers’ bid would have won the competition, or at least it would have had a “real prospect of winning it”.

But the defenders denied any breach and maintained that it was clear to “reasonably well informed and diligent” (RWIND) tenderers that it was up to each bidder to assess current and future anticipated demand for freight including time sensitive freight it would have to meet as the operator under the contract; and that it was for the bidder to decide what, if any, part of the freight carried by the pursuers’ exisiting LoLo service should be included within that estimate.

The judge absolved the defenders after ruling that the requirements of the contract “allowed all RWIND tenderers to interpret them in the same way”.

In a written opinion, Lord Doherty said: “All RWIND tenderers would have realised that it was for them to assess current and future anticipated demand, including appropriate provision for time sensitive freight. No RWIND tenderer would have concluded that it was obliged to include capacity to carry the LoLo freight carried by the pursuers.

“Such a requirement would have operated to the advantage of the pursuers and to the disadvantage of other bidders. The imposition of the requirement would have restricted the range of possible solutions open to bidders, to the probable detriment of the objectives of the competition process.”

The judge also observed that all the bidders were “experienced ferry operators” and concluded that RWIND tenderers “would not have had any difficulty” in understanding what the expression time sensitive freight meant.

He explained: “he expression was generally understood to mean freight which for one reason or another required to travel within a specific timeframe; and the way one could go about determining the level of demand for such freight would be through dialogue with customers. The meaning of the term would have been clear to all RWIND tenderers; but such tenderers (and indeed, actual bidders) might well have had differing views as to the level of demand for such freight.”

Lord Doherty added there was nothing in material placed before him during the case that persuaded him that if a benchmarking process had been used the outcome would have been different.

He said: “In my opinion there was no arbitrariness and no lack of transparency in the evaluation process.

“The facts are that the pursuers’ bid was given a high score for services, and a high score for quality. Serco’s bid won because, despite having lower scores than the pursuers for those matters, it scored far better than them on price.

“Nothing in the material placed before me persuades me that if benchmarking had been employed (i) that there would have been a real prospect of Serco’s bid being failed on quality grounds; or (ii) that there would have been a real prospect that the pursuers’ and Serco‘s scores would have changed so materially as to result in the pursuers bid obtaining a higher combined weighted score than Serco’s bid.”

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