This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its February 2011 decision in Mountain Catering Ltd v. Punangi, the Papua New Guinea National Court of Justice upheld a controversial government contract award decision that overruled an evaluation committee’s contract award recommendations. The dispute dealt with a tender call for supply of catering and hospitality services for the Papua New Guinea Defence Force.
The complainant’s bid was initially recommended for award by the Defence Technical Evaluation Committee, referred to in the decision as DTEC, but that recommendation was ultimately reversed after military officials expressed their preference for the incumbent service provider. As the Court noted, members of the evaluation committee took issue with what they perceived to be interference in the evaluation process. The Minister of Finance wrote to the Central Supplies and Tenders Board (referred to below as CSTB), raised concerns over the perceived interference, and insisted that the contract be awarded as recommended by the evaluation committee:
On 8 April, 2009, the then Minister for Finance and Treasury wrote to the Chairman of the CSTB … and informed him that two members of the DTEC namely, Mr Billy Porykali and Mr Andrew Kadiesany had lodged a complaint with him complaining that the tender process was hijacked by people with ulterior motives and advised that in the exercise of the powers given to him under the PFM Act, he was instructing him … to rescind the CSTB’s recommendation … and that he had endorsed the DTEC’s recommendation to award the contract to the plaintiff.
However, as the Court noted, the Minister eventually reversed that position after receiving an explanation from the relevant military officials and instead “re-endorsed the decision by the CSTB” to award to the other bidder. The Court ultimately upheld the contract award decision after finding that the CSTB, in its statutory position as a central tenders board, was not compelled to follow the recommendations of the evaluation committee and could take other factors into account in making its contract award decision:
I am also of the opinion that the CSTB also had the power to look at sources outside of the DTEC for advice and assistance if it (CSTB) was of the opinion that such information and or advice would assist it to properly decide which tender should be accepted for the contract. Thus the CSTB was not restricted to the DTEC report and submission. In my opinion, the Secretary for Defence and the Defence Council were two such sources from which the CSTB could seek and obtain assistance and advice on the tenders. They are two highest authorities in the Department of Defence and PNGDF which had direct interest in the tenders as they were going to be directly involved in the implementation of the contract. Thus, in my opinion there was nothing improper in the Secretary for Defence and the Defence Council expressing legitimate views on the tenders to the CSTB, but again such views and advices were not binding on the CSTB because ultimately the decision was for the CSTB to make.
The relevance and the overall authority of the Secretary for Defence in the tender process in my opinion cannot be denied. He had a legitimate role to play in the process. This is reflected clearly in his involvement in the selection of DTEC members to be co-opted to the CSTB. This was a proper administrative process which is consistent with s. 42 (2) of PFM Act and s. 9 of the Defence Act…As a matter of law and good governance, the…defendant could not be expected to sign and endorse a submission which he could not agree with. It was still subject to his views as the overall authority in the Department of Defence. This is also consistent with his powers and functions under s. 9(1) (b) of the Defense Act and the requirements under the tender process as I have alluded to earlier.
As this case illustrates, the approval of contract award recommendations by oversight boards, and the latitude that those approving bodies may have to take other considerations into account and depart from evaluation committee recommendations, remains a complex and often controversial area. Government institutions would therefore be well served to clearly define and adhere to their contract award procedures to better ensure the defensibility of their award decisions against potential legal challenges.
