This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its October 2009 decision in Kabara Development Corporation Ltd. v. Attorney General, the Court of Appeal of Fiji ruled that an alleged contract extension was invalid due to the contravention of applicable statutory rules regulating open procurement. The case dealt with a three-year contract for shipping services valued at $30,000 that was originally awarded pursuant to a tendering process. A dispute arose over whether that originally tendered contract had been, as the contractor alleged, extended for an additional ten years. The government denied agreeing to the extension. The Court of Appeal ruled that, even if the alleged extension had been agreed to by government officials, it would have been void for contravening the statutory rules that required the open tendering of any such contracting opportunity:
The calling of tenders is required by law … Regulation 3 requires strict compliance with the Regulations. Non-compliance with them or with the tender process defeats the entire purpose of the regulations. Seddon on “Government Contracts” (Supra) page 357 expresses the view that “if legislation is directed at preserving the integrity of the competition for government business (that is usually a tendering procedure) the non-observance renders the process invalid”.
The Court of Appeal also determined that it was unlikely that the government would have agreed to such to such a significant scope increase without first calling for tenders as required by law:
The regulation gave the Controller that final say and not the Minister. A 10-year extension would commit the State to an expenditure of $3.6 Million. We think it most unlikely that the Controller would commit the State to such a level of financial liability without calling for tenders in face of the earlier calling of tenders for a far shorter period and for a lesser amount.
The Court of Appeal also ruled that the contractor was well aware of the government’s procurement procedures and that it could not rely on alleged contract extension representations made by government officials that deviated from those procedures:
We are in no doubt that the appellant had no contract for 10 years because the tender process under the regulation was not followed and because the Controller had not signed the contract. The appellant was no stranger to the procedure and in our view could not rely on any ostensible authority which might have appeared to be given to S. Umu, the Permanent Secretary for Communication, Works and Energy to sign on behalf of the Controller.
The Court of Appeal therefore dismissed the contractor’s appeal.
As this case illustrates, post-tendering contract extensions must be carefully managed to ensure that they do not contravene the open tendering obligations that apply to public institutions. A contract, even where validly tendered, cannot be extended beyond its original scope without potentially triggering the duty to engage in a new tendering process. Public institutions should therefore ensure that extension rights are properly treated in the scope of their initial tender solicitations if they plan to extend the initial term of a tendered contract.
