This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its July 1993 decision in Fairclough Building Ltd v. Borough Council of Port Talbot, the Court of Appeal of England and Wales upheld the decision of the Port Talbot Council to reject a bid due to spousal conflict of interest. The case dealt with a tender call advertising for the construction of a new civic centre. Fairclough Building Ltd. was rejected because its local director was married to Port Talbot Council’s senior assistant architect.
Fairclough launched legal proceedings to challenge its disqualification, maintaining that the Port Talbot Council had breached its implied good faith duties by rejecting its application. The trial court dismissed Fairclough’s claim, finding that the Port Talbot Council had complied with its good faith duties when it rejected Fairclough’s application due to conflict of interest:
[It] was the duty, in my judgment, of the defendants honestly to consider the tenders of those whom they had placed on the shortlist, unless there were reasonable grounds for no doing so. I well understand, indeed sympathise with, the sincerely held views of Mr Cornwall and Mr George that the defendants acted unreasonably, but looking at their dilemma on the facts and circumstances which I have reviewed objectively, I have come to the conclusion that I am unable to agree with those views put forward by and on behalf of the plaintiffs. The defendants acted reasonably in removing the plaintiffs from the shortlist after they received a section 117 notice from Mrs. George.
Fairclough appealed the trial decision, but the Court of Appeal upheld the lower court’s finding and dismissed the claim against the Port Talbot Council. As the Court of Appeal stated, allowing Fairclough to proceed would have raised serious concerns over the integrity of the process and over future contract management:
It was abundantly apparent that the situation was a serious one. Had the matter proceeded, and had the appellant company been awarded the tender and it had thereafter emerged that the tender appraisal has been one which was done with the active participation of Mrs George, certainly suspicions would have been aroused. Furthermore, even if Mrs George had not been involved in the appraisal, she was the Principal Architect and in the normal way would be dealing with the matter as this project advanced.
Port Talbot Council was therefore found to have acted appropriately in rejecting the bid. As this case indicates, the implied good faith duties that apply to the bidding process include the duty to maintain the integrity of the bidding process by prohibiting conflicts of interest and unfair insider advantages. However, while the decision to reject was upheld, the legal challenge could potentially have been avoided had the conflict rules been more clearly established from the outset to allow the bidder to recuse the conflicted individual in question from its bidding team so that the company could still have been permitted to bid.
