This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
While the duty to protect confidentiality is a core obligation in all competitive bidding processes (except, perhaps, those involving a low-bid public opening), these core duties are amplified when using a Competitive Dialogue/Best and Final Offer (BAFO) Request For Proposals (RFP), since proponents competing for major project awards typically invest significant resources in the development of unique project-specific proposals.
To address concerns over the protection of confidential and proprietary bidder information, many jurisdictions have adopted specific codes that formalize the common law duties discussed above and have expressly recognized the need to implement clear, non-discriminatory restrictions on the sharing of bidder information during a competitive bidding process. The European Union Classical Directive provides as follows:
During the dialogue, contracting authorities shall ensure equality of treatment among all tenderers. In particular, they shall not provide information in a discriminatory manner which may give some tenderers an advantage over others.
Contracting authorities may not reveal to the other participants solutions proposed or other confidential information communicated by a candidate participating in the dialogue without his/her agreement.
The European Commission Directorate General Internal Market and Services Explanatory Note on the Competitive Dialogue procedure set out in the EU Classical Directive also recognizes the same principles that have been applied by the Canadian courts:
… the dialogue should be carried out individually with each of the participants on the basis of the ideas and solutions of the economic operator concerned. Except with the consent of the parties concerned, there is therefore no danger of “cherry-picking” – i.e. the use of the ideas and solutions of one of the participants by another one – and confidentiality is further protected by a general provision on the subject, Article 6.
The general provision in Article 6 of the EU Classical Directive, referred to in the passage above, reads as follows:
Without prejudice to the provisions of this Directive, in particular those concerning the obligations relating to the advertising of awarded contracts and to the information to candidates and tenderers set out in Articles 35(4) and 41, and in accordance with the national law to which the contracting authority is subject, the contracting authority shall not disclose information forwarded to it by economic operators which they have designated as confidential; such information includes, in particular, technical or trade secrets and the confidential aspects of tenders.
Article 24 of the United Nations Commission of International Trade Law Model Law on Public Procurement (known as the UN Model Procurement Law) also recognizes the need to protect confidential bidder information during a bidding process, stating in general terms that the government entity shall not disclose information that “would prejudice the legitimate commercial interests of the suppliers or contractors or would impede fair competition” and more specifically as it pertains to negotiated RFPs, that “no party to any such discussions, communications, negotiations or dialogue shall disclose to any other person any technical, price or other information relating to these discussions, communications, negotiations or dialogue without the consent of the other party.”
The legitimate concern of the bidder community to protect proprietary proposal content is also expressed in the following passage from the 2008 United Kingdom Competitive Dialogue Guide:
Suppliers have also highlighted concerns about the protection of their intellectual property, specifically the risk of bidders’ ideas being shared with competitors during the dialogue process. These risks may have existed before Competitive Dialogue was introduced, as similar discussions happen when the competitive [consecutive] negotiated procedure is used. However, the issue is a significant concern for industry and therefore needs careful handling during procurement.
The UK Competitive Dialogue Guide elaborates on this concern, providing specific guidance on alleviating bidder concerns by way of express agreements that identify confidential information up front:
It is not appropriate for the Contracting Authority to use one bidder’s commercially confidential information to enhance other bidders’ technical solutions or to merge two or more technical solutions into a single optimal solution. …
However, the word “dialogue” has led to bidder concerns that there may be a greater danger of inappropriate use of individual bidders’ intellectual property and other commercially sensitive information compared to the [consecutive] Negotiated procedure.
The address this concern, the Contracting Authority should set out in detail how it will undertake the dialogue process. One potential mechanism for managing the treatment of intellectual property or commercially sensitive information would be for bidders to identify, and agree with the Contracting Authority, which parts of their solutions are specific to them and should be treated as confidential, and those that are generic in nature and therefore permissible to share with other bidders. Having an agreed understanding of what constitutes bidder intellectual property allows the Contracting Authority to ensure its protection.
The 2013 New Zealand Competitive Dialogue Guide also flags the importance of protecting confidential supplier information, and recommends as follows:
Competitive Dialogue is about capturing innovation to create new solutions. You want suppliers to come up with new ways of doing things.
This means asking your shortlisted suppliers to share their ideas and sensitive information about their business with you. You must protect this information unless the suppliers have agreed to share it as a condition of participating in the process.
The best way to do this is to ask your shortlisted suppliers to identify and agree their existing intellectual property (IP) and commercially sensitive information in non-disclosure agreements.
Suppliers’ ideas are their IP and you’ll need to enter into a non-disclosure agreement with each of your shortlisted suppliers before you begin your dialogue sessions.
This is important so you can differentiate any existing IP from any new IP that is developed in the dialogue sessions when you co-create solutions with your suppliers.
Unless the supplier agrees to it beforehand in writing, you must not disclose any of the information set out in the non-disclosure agreement.
Unfortunately, while the EU, UK, and New Zealand have addressed these confidentiality issues through a combination of legislation and guidelines, many other jurisdictions have failed to clearly codify the common law confidentiality duties that apply to a public sector competitive bidding process, leaving it to individual public institutions to adopt their own procedures to address these duties when managing major projects.
