This article is an excerpt from the 2021 edition of The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its June 2020 decision in Bus and Coach Association (New Zealand) Incorporated v. Attorney-General, the High Court of New Zealand ruled that a Request for Proposal (RFP) process initiated by the government prior to completing promised industry consultations was potentially subject to judicial review. However, the Court also ruled that this cause of action did not justify granting an injunction to stop the tendering process until the dispute was resolved. As the Court summarized, the dispute arose over ongoing discussions between the New Zealand government and New Zealand’s Bus and Coach Association (BCA), an incorporated society that represents bus and coach operators and which claims to represent 90 percent of businesses conducting school bus services throughout New Zealand.
In June 2020, the BCA initiated a judicial review application to challenge the government’s decision to proceed with two rounds of tenders for school bus services. As the Court stated, “BCA considers the two tender approach to be seriously flawed, and contrary to the interests of its members and the sectors of the public that school bus services are intended to cater for.” Furthermore, BCA claimed “that the design of tenders for the forthcoming contracts for school bus services was intended to be the subject of meaningful consultation with it, but that such consultation has not occurred” and that “the Ministry is insisting on proceeding with the two tender process despite BCA’s protests at the lack of meaningful consultation and the substantive deficiencies in the design of the tenders.”
As part of that legal challenge, the BCA sought an injunction to stop the tendering process while the litigation proceeded. By way of background, the government had initiated discussions about the future RFP with the BCA, but during the COVID-19 crisis, it stopped those consultations and did not proceed to market to seek new bids:
The last nationwide procurement process for school bus services took place between 2006 and 2008, leading to contracts for those services beginning in January 2009. The contracts offered then were for six year terms with two rights of three year renewals. Extensions to them have taken place, to have them expiring at the end of 2021. Complaints about that process led to a report by the Auditor-General, who considered that consultation had been undertaken with interested stakeholders. In late 2017, the Ministry started on consultation for the design of a new process for procuring school bus services. A steering committee met regularly between early 2018 and mid-2019. In addition to contributors from various government agencies, the then chief executive of BCA, Mr Barry Kidd, became a member of that steering committee.
On 16 March 2020, Dr Borren was given a further assurance in an email from Mr Meffan that there would be engagement on topics relevant to the procurement of school bus services. In early April 2020, Mr Meffan cited the disruption of the COVID-19 pandemic as a reason for lack of consultation and reiterated the need to re-engage with the industry.
Based on that background, the Court agreed that the BCA had grounds to bring legal proceedings against the government over the alleged lack of promised consultations:
My provisional view is that BCA clearly had tenable grounds for complaining that the Ministry failed to comply with numerous assurances that it would undertake meaningful consultation on the consequences for BCA members of the terms on which tenders for school bus services were to occur. Meaningful consultation could only occur after BCA representatives were given sufficient detail of what was proposed to consider it and respond.
The Court noted that the common law scope of judicial review in government procurement decisions was recently narrowed by the New Zealand Court of Appeal to circumstances involving fraud, corruption, or bad faith. The Court also stated that the right to a judicial review in this case was not based on any statutory duty to engage in consultations. Rather, the Court found that in this specific case, the right to judicial review arose from the government’s conduct, since the government created the legitimate expectation that it would engage in industry consultations prior to proceeding with the tendering process. After summarizing the competing legal arguments, the Court then set out the governing analysis for legitimate expectations in a three-part test that considers the nature of the commitment, whether it resulted in a legitimate reliance, and whether that reliance should properly result in a remedy:
Would inadequate consultation provide a ground for judicial review?
This is not a circumstance in which there is any statutory obligation on the decision-maker to consult. That distinguishes it from cases where that feature arises.
Mr Curran characterised the relevant conduct as a part of a procurement process on behalf of a Crown agency that is, as a matter of law, free of any public law overlay that might trigger administrative law obligations. He submitted that the Court of Appeal’s analysis in Attorney-General v Problem Gambling Foundation New Zealand is a complete answer to any attempt to challenge the conduct of a government agency in a tendering process.
Ms Chen submitted that the context in which the Problem Gambling application for judicial review arose was distinguishable from the present case. She submitted that the present was a very strong case of legitimate expectation of the conduct of public officials. BCA holds an important position as the industry group representing over 90 per cent of school bus operators. Given the context in which responsible representatives of the Ministry provided explicit assurances of meaningful consultation, BCA and its members were entitled to expect that a decision on the design of the tender process would not be made without meaningful consultation occurring. Ms Chen was inclined to accept the essence of her argument as an analogy with some form of public law estoppel.
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The High Court quashed the decisions on new contracts made by MOH. The Attorney-General appealed to the Court of Appeal, which reversed the outcome on a number of grounds. The Court of Appeal considered the relative scope of review as depending upon context. In that case, the scope was narrow and restricted to intervention for fraud, corruption, bad faith or situations analogous to those.
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The Court of Appeal held that breach of a legitimate expectation or of mandatory rules for procurement were not available as grounds of review. On the facts, the Foundation could not have a legitimate expectation that their proposal would be evaluated according to certain criteria to which the decision-maker could not be confined. It was relevant that the mandatory rules for procurement applying to Crown agencies had not been breached. The Court of Appeal adopted criteria from an earlier decision as to the requirements for making out legitimate expectation:
To found a claim of breach of legitimate expectation, the Foundation had to meet the criteria espoused by this Court in Comptroller of Customs v Terminals (NZ) Ltd:
Where legitimate expectation is raised, the inquiry generally has three steps. The first is to establish the nature of the commitment made by the public authority whether by a promise or settled practice or policy. This is a question of fact to be determined by reference to all the surrounding circumstances. A promise or practice that is ambiguous in nature is unlikely to be treated as giving rise to a legitimate expectation in administrative law terms.
The second is to determine whether the plaintiff’s reliance on the promise or practice in question is legitimate. This involves an inquiry as to whether any such reliance was reasonable in the context in which it was given.
The third, and often most difficult part of the inquiry, is to decide what remedy, if any, should be provided if a legitimate expectation is established.
In challenging the existence of a tenable cause of action, Mr Curran submitted that BCA could not satisfy those three requirements. However, I did consider that there are tenable grounds on which BCA could bring itself within those three requirements. The course of conduct by Ms Myers and Mr Meffan, whose positions within or for the Ministry might reasonably entitle BCA to attribute their statements to the Ministry, and the context in which the assurances of consultation occurred, could arguably constitute a sufficient commitment to meet the first requirement.
The requisite extent of reliance on the assurances of consultation would require further argument. Provisionally, it appeared that members of BCA, whilst having different interests in the preferable form of tender (for example as between small and large-scale operators) were substantially supportive of BCA’s concerns that the sequential two tender process was not the optimum process for either potential providers of the services, or the range of those interested in the quality of services to be provided for school transport.
After considering the arguments and applicable law, the Court concluded that the BCA had established that it had the legitimate expectation of ongoing consultations, stating that “I considered that BCA had tenable grounds for claiming that assurances of consultation about the form of tender were provided by Ministry personnel and in terms and circumstances that could give rise to a legitimate expectation on BCA’s part.” However, the Court denied the request for an interim injunction against the tendering process, finding that the operational impact on the government outweighed the applicant’s right to stop the tendering process during the judicial review proceedings.
As this case illustrates, when government bodies make commitments to consult with industry in the design of a solicitation process, they expose themselves to legal claims based on the allegations that they failed to properly conclude those consultations prior to proceeding with the planned tendering process. Since the steps required to satisfy the duty to consult remain unclear, government institutions should proceed with caution and avoid making open-ended pre-tendering commitments that fetter their ability to proceed with a planned procurement. Given that most tendering processes are already subject to pressing time constraints driven by operational needs, public institutions would be well served in setting formal parameters and clear expectations around any commitments to consult with industry groups in the design of a tendering process.
