THE TENDER TRAP: PITFALLS IN THE TENDER
PROCESS AND THE LEGAL CONSEQUENCES
Dr Nick Seddon, Special Counsel, Blake Dawson Waldron
APSAC conference Wednesday 24 October 2007
Session 1 Concurrent stream C
1 MM 650138978

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High risk activity
Expectations of fairness and probity
Very close scrutiny of process
A flawed process likely to cause major trouble, possibly litigation

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Not concerned with high level corruption involving fraud
ICAC Act section 9
Conduct that adversely impacts on impartial exercise of official functions
Conduct that involves breach of public trust
Conduct that undermines the ‘integrity of the bidding system’

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Government held to high standards
Hughes Aircraft Systems International v
Airservices Australia
Finn J: government as the ‘moral exemplar’
Governments themselves proclaim to adhere to high standards in, eg, purchasing policies

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Traditional analysis: tenders are offers; one offer is accepted
Yet RFT is full of terms and conditions
How can these be enforceable?
Not through contract
Possibility of estoppel, misleading conduct, administrative law

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The Hughes Aircraft case
‘Process contract’ governs pre-award period
RFT terms and conditions enforceable
Selection methodology announced in RFT binding
Selection methodology was not followed
Breach of process contract
Also misleading conduct in breach of TPA

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Breach of confidentiality
Political interference
Conflicts of interests
Improper communications

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The Hughes Aircraft case – political interference
Ministerial interference:
‘Highly imprudent’
‘Palpable and colourable’
Should ‘never have been written’
Neglected area of public administration
Common but not expressly dealt with in , eg, ministerial codes of conduct

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Get rid of ‘process contract’
What about those RFT terms and conditions?
Good or bad government practice?
Case for allowing ‘process contract’
Examples of where backfires on government

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Other channels for legal regulation of tenders
Misleading conduct
Substantial exemption from TP and FT legislation for Commonwealth and New
South Wales (but not other governments)
Estoppel?
Negligence?
Administrative law?

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The Australia-United States Free
Trade Agreement
Chapter 15 - Government Procurement
Must be implemented by domestic measures
Commonwealth Procurement Guidelines
States and Territories to follow by 2008

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The AUSFTA chapter 15
Will it change the legal framework for government tenders?
No
Ch 15 requires quick and efficient forum for tender challenges
Australian courts do not meet this requirement
Yet a ‘side letter’ stated that they do
So, no change

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Will implementation of AUSFTA change procurement?
Yes – far less flexibility
Late bids MUST be eliminated
No direct sourcing for ‘covered’ procurements
Non-conforming bids MUST be eliminated

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Pitfalls and their consequences
Is legal regime for tenders good or bad?
Despite erosion of legal basis since
Hughes , best to assume legal regime
Most likely way of ensuring proper process

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The ‘golden rules’ of government tenders
1.
Must not be a perception of uneven treatment of tenders
2.
Rational decision-making that can withstand scrutiny

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Perception of even-handedness
Implied term in ‘process contract’
Cubic case shows how perception of bias can cause trouble
Illustrates how super-sensitive tenderers are to process

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Rational decision-making
Will close scrutiny disclose flaws?
Keeping records
Defending the process against attack
Debriefing unsuccessful bidders

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Caution against disclosing confidential information
Making comparative statements is still possible
Provides a measure of protection to government
A court cannot second guess a merits decision