This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its May 2007 judgment in Process Color v. Secretary of Home, India’s High Court of Madras upheld the government’s decision to reject a non-compliant bid. The case dealt with tender call for the manufacture and supply of polyester hologram labels. The complainant’s bid was rejected since its manufacturing facilities were not contained in one premises as required by the solicitation rules and since its specimen samples did not meet the required specifications. In its legal challenge, the rejected bidder alleged that its constitutional rights were breached by the government’s biased, arbitrary, and unreasonable rejection decision.
The Court disagreed. In its judgment, the Court noted that the “materials available on record clearly show that the petitioner is not having all the facilities under one roof as prescribed by Tender Conditions.” Furthermore, with respect to the government’s finding that the submitted samples failed to meet the required specifications, the Court held that it is not the role of the courts to second-guess the technical assessment of government bodies in commercial matters unless the government’s decisions are arbitrary, discriminatory, or made with malice:
The principle is, therefore, well settled that the terms of the invitation to tender are not open to judicial scrutiny and the Courts cannot whittle down the terms of the tenders as they are in the realm of contract unless they are wholly arbitrary, discriminatory or actuated by malice.
In supporting this conclusion, the Court cited the Supreme Court of India’s decision in Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd. That decision recognized a modern trend towards judicial non-interventionism when dealing with government procurement decisions unless those decisions are unreasonable, arbitrary, biased, or made in bad faith:
After an exhaustive consideration of a large number of decisions and standard books on administrative law, the Court enunciated the principle that the modern trend points to judicial restraint in administrative action. The Court does not sit as a Court of appeal but merely reviews the manner in which the decision was made. The Court does not have the expertise to correct the administrative decision. If a review of the administrative decision is permitted it will be substituting its own decision, without the necessary expertise, which itself may be falliable. The Government must have freedom of contract. In other words, fair play in the joints is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. However, the decision must not only be tested by the application of Wednesbury principles of reasonableness but also must be free from arbitrariness not affected by bias or actuated by mala fides. It was also pointed out that quashing decisions may impose heavy administrative burden on the administration and lead to increased and unbudgeted expenditure.
The Court ultimately held that in the absence of the above-noted unfairness factors, it was not appropriate for the courts to intervene in the technical evaluation decisions of government bodies:
The tender of the petitioner has been rejected not only on the ground that the petitioner is not having all the facilities under one roof but also on the ground that the specimen samples submitted by the petitioner do not conform to the technical specifications prescribed in the tender document. Though the said ground is being contested by the petitioner, this Court cannot sit as a Court of appeal and review the administrative decision as this Court do not have the required expertise to correct the administrative decision. This Court is not having the technical expertise to decide as to whether the decision of the tender scrutiny committee that the specimen samples submitted by the petitioner do not confirm to the technical specifications prescribed in the tender document is correct or not.
The rejected bidder’s legal challenge was therefore dismissed.
As this case illustrates, government bodies should ensure that their evaluation decisions are made in accordance with fundamental fairness principles since those decisions remain subject to potential legal challenge and, in appropriate circumstances, to judicial intervention.
