This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its October 2015 decision in The Central Tenders Board & Anor v. White (t/a White Construction Services) (Montserrat), the Judicial Committee of the Privy Council upheld prior lower-court rulings that found the government of Montserrat liable for improperly rescinding a contract award. The dispute involved a construction contract that was awarded to the low bidder pursuant to a public tendering process. A losing bidder wrote a complaint letter to the government’s Central Tenders Board (CTB), claiming that the low bid was non-compliant since that bid failed to clearly specify a completion period for the work. The government rescinded the award. The low bidder sued. The trial and appeal courts both found the government liable for improperly rescinding the deal. The government appealed to the Privy Council, arguing that it could not be liable for rescinding the original award since awarding to a non-compliant bid exceeded its powers and the initial award was therefore void from the outset. However, the Privy Council disagreed, finding that the applicable statutory provisions were silent to tender compliance and that the applicable tender call rules only stated that bids could be rejected for non-compliance, not that they would be:
It is argued by the CTB that although it possesses statutory power to award contracts for the procurement of goods and services, in this instance it had no power to accept Mr White’s tender, by reason of his failure to state the completion date in the stipulated place; that the CTB thereby failed to comply with the procedural requirements which it had laid down, and that the resulting contract was void.
There is a narrower and a broader answer to this argument. The narrower answer is that the instructions to tenderers did not state that any failure to comply strictly with the instructions would automatically result in a tender being disregarded. Rather, they stated that such failure was “liable to cause [the] tender to be rejected”. There is a difference. By way of illustration, the instructions also contained a paragraph about bribery. That paragraph stated that the offer of a bribe to any person with the object of influencing the placing of the contract “will result in instant rejection of the tender concerned”. When the CTB wished to indicate that something would result in instant rejection of the tender, it said so. The words “liable to be rejected” are more equivocal. A reasonable tenderer would understand them to mean “may be”. It is unsurprising that the CTB did not pre-commit itself to a particular response in the event of a lack of strict compliance with the instructions to tender, because this might vary in significance from one case to another. In the present case the architect considered it to be of no significance to the question whose bid should be accepted, because the necessary information for evaluating Mr White’s tender was to be found in his construction programme.
The broader answer is that if one assumes (without deciding, because the Board has not heard full argument on the point) that the statutory power of the CTB to make a contract for the procurement of goods and services is confined to a power to accept an offer obtained through a public tendering process, Mr White’s tender was indeed such a tender (whether or not it was in strict conformity with the terms of the instructions to tender).
Further, the Privy Council was reluctant to find a government contract void due to a procedural defect if that denied compensation to an innocent contracting party:
For the court to invalidate a contract entered into between a public body and a party acting in good faith, by reason of a procedural defect in the contractual process, and moreover to do so without compensation (for it is not obvious what compensation would be available), would be a serious denial of that person’s rights. It would offend against orthodox principles of private law (contractual rights) and public law (the right not to be deprived of property without compensation).
In the present case, neither section 57 nor the regulations made under it imposed any procedural requirements as to how a public tender process was to be conducted. This was left to the CTB. It had express statutory power to decide which, if any, tender to accept. So there can be no question of the CTB acting ultra vires, in the proper sense, when it accepted Mr White’s tender. Ultra vires is not, of course, the only ground on which a court may quash an administrative decision, but it would be wrong for a court to do so in such a way as to nullify a contract made between a public body pursuant to a legal power and a person acting in good faith, except possibly on terms which adequately protect that person’s interest.
The Privy Council also ruled that the government was not compelled to rescind the contract award in the face of non-compliance allegations by the next-lowest bidder since that bidder could obtain a lost profits remedy under a tendering process contract if it could prove that the government improperly accepted a non-compliant bid:
What if something goes wrong in the process of awarding a contract by tender, giving rise to a legitimate grievance on the part of an unsuccessful bidder that if he had been fairly and properly treated, he would have secured the contract, or have had a good chance of doing so? If so, there is a possible remedy which does not involve setting aside a contract lawfully made with the successful bidder. The decision of the Court of Appeal in Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195 is instructive. The council invited tenders for a concession to operate pleasure flights from Blackpool airport. Relevant parts of the council’s Standing Orders with respect to contracts were attached to the instructions to tenderers. These included the words “No tender which is received after the last date and time specified shall be admitted for consideration”. The plaintiff club was the highest tenderer, but a mistake on the part of a council employee resulted in its tender being wrongly marked as received late. So it was not considered by the council’s relevant committee, which awarded the concession to the highest under-bidder in the belief that it was the top bidder. When it discovered the error, the council attempted to declare the process invalid and to seek tenders for a second time. But the under-bidder contended that the council was contractually bound by the council’s acceptance of its tender and threatened to bring legal proceedings. At that stage the council decided to honour the contract made with the under-bidder, and it was then sued by the club.
The Court of Appeal held that there was an implied contract between the council and a person who was invited to tender that if he submitted a conforming tender in time, it would be opened and considered in conjunction with all other conforming tenders. In reaching that conclusion Bingham LJ asked rhetorically what the position would have been if the council had opened the first tender and accepted it, although the deadline had not expired and other invitees had not responded; or if the council had accepted a tender admittedly received well after the deadline. The import of his reasoning was that the council owed a duty to treat all invitees fairly and equally, which was enforceable by way of an implied contract. It was an important part of the context that the council was conducting a tender process governed by its Standing Orders. If a private citizen had invited offers for the sale of some personal possession and set a deadline, it by no means follows from the Court of Appeal’s judgment that such a person would be barred by an implied contract from accepting an earlier offer or a later offer, but it is unnecessary to explore that distinction in the present case.
In a case such as the present, there would be no difficulty in finding that the CTB owed an implied contractual duty to the under-bidder and to every other invitee that they would be treated fairly and equally. If a breach of that duty caused a tenderer to suffer a loss of a chance of a contract, the tenderer would be entitled to damages. In fact there has been no such claim by the under-bidder, and that is no cause for surprise. The CTB had a discretion to accept Mr White’s tender and the under-bidder would have no legitimate cause for complaint.
The appeal was therefore rejected, and the government was found liable for improperly reversing its original contract award decision. As this case illustrates, purchasing institutions must be careful to follow due process when reversing course and rescinding a contract award due to protest from losing bidders. While the improper award of a contract could give rise to legal challenges from losing bidders, the improper reversal of a valid award can equally give rise to legal challenges from awardees who have their contracts arbitrarily revoked.
