Lessons from the tendering court

By Caroline Boot, Plan A and Clever Buying.

A SUPPLIER HAS WON a legal challenge to a council’s tendering processes, which is a sobering lesson for local authorities to get their processes and their paperwork right.

What happened? A Northland-based civil construction company, the Rintoul Group, was excluded from four cycleway tenders on the basis that it had put false statements in its tender documents. The statements in the Relevant Experience section related to a past contract, which the documents stated was completed in January 2016 for a sum less than the tendered price.

When the evaluation of the tenders was almost complete, Rintoul’s tender was emerging as the preferred option, with a combined potential saving over four contracts of $630,000, which outweighed the low scores of their attributes on all four tenders.

However, Far North District Council staff members discovered that Practical Completion had not been signed off on a contract nominated within the Relevant Experience section; and there were significant amounts still being claimed for ongoing work, several months after completion had been claimed.

The evaluation team had reservations about environmental and traffic management, which added to council’s worries that anti-competitive pricing may have been applied. These potential problems had not been directly addressed in the selection criteria within the RFT document. A meeting was arranged with the contractor in May last year to discuss these concerns, together with fears that Rintoul may not have the resources to complete all four cycleway sections within the required timeframe.

At that stage, it was not conclusive that the tenderer would win the contract, while these concerns were still under consideration. However, these issues were over-shadowed by the discovery that information within the tender documents appeared false. Some discussion and checking of internal council records was carried out, then in early July, the tenderer was formally informed that its tender had been excluded.

To complicate matters further the council project manager resigned over this period. Months later in the High Court, it emerged that the manager had waived several of the requirements for Practical Completion; had given verbal indications that Practical Completion had been achieved; and had agreed on further variations (and the basis for pricing those) direct with the contractor. However, neither the contractor nor council’s project manager had documented those agreed variations to the contract specifications in the contract file.

The High Court judgment was ultimately in the contractor’s favour based on the evidence that these items had, in fact, been agreed between council’s (then) project manager and Rintoul. Therefore, the information provided in the tender response was not false, and the tenderer should not therefore be excluded on that basis.

What can we all learn from this?

There are three headline messages that we can learn from the unfortunate experiences of both parties in this case.

Grounds for Exclusion: Councils, be very clear what the grounds for exclusion are, and make sure these align with factors that you consider may be game-breakers to the success of the contract. In this case, there were concerns following past experiences of unauthorised variations that escalated costs, however an exclusion criterion relating to this was not clearly articulated in the RFT’s Track Record section.

Moreover, there were differences of opinion on what constituted a variation. For example, if a variation is a cost more than (say) 10 percent above the tendered sum, then this should be defined clearly.

These factual definitions not only make the cut-offs very clear to tenderers, but they also relieve your tender evaluation team of the onerous and potentially risky task of debating what is acceptable and what’s not, after the evidence is put in front of them. Putting fact-based scoring and non-conformance criteria in the RFT will shorten and simplify the tendering process for both sides, and both sides are more likely to get what they want.

Contractors, if there is not a clear definition of what constitutes a ‘fail’ for any attribute (for example, if a so-called ‘pass’ mark of 35 percent is not accompanied by a fact-based description), you should ask for transparency. There is no point investing the time and effort into preparing a tender response if you are going to fail at the first hurdle. You need to know how high the hurdle is before you commit to the race.

Councils, if you’re contemplating elimination of a tender, communicate! If exclusion from a contract is under consideration, it’s prudent to meet with the tenderer to discuss the grounds for exclusion. In this case, clarification from the contractor that there had been verbal agreements made with council’s project manager may have saved a great deal of cost for both sides.

In another recent conundrum (involving another council), a tender was excluded for not including a Contract Quality Plan. The lowest price tenderer had to be excluded because the RFT made that requirement tightly defined and clearly stated.

In that case, had the RFT wording allowed equivalent documents, a face-to-face informal meeting would have clarified that the ‘Inspection and Test Plan (ITP)’ that had been submitted was the same thing. Provided that the ITP covered the required detail, that meeting may have saved the day for the tenderer. It also might have saved the council a considerable sum that it forfeited for not accepting the lowest tender.

Contractors, you need an eagle eye to spot anything that could cause your tender to be rejected. If you’re asked for a Contract Quality Plan, make sure that’s what you give them. If you’re asked if there were time extensions or variations, don’t get caught up in differences between the verbal and the written records. Even if (as in this case) you win in the end, it’s better not to have those battles. Confirm everything that’s agreed in writing. And make sure your tender says the same story. It’ll save everyone (except the lawyers!) a truckload of money and angst.

Get your paperwork in order. Councils and contractors, remember that any communication involving variations from the contract specifications ‘must’ be provided in writing. Under NZS 3910, if the engineer gives a verbal instruction but does not back that up with a written order, then the contractor is responsible for putting that instruction, and their intentions to follow it, in writing. Had both parties properly documented their agreed changes, this case would never have been initiated.

Contractors, you also need an experienced eagle eye to review your tender to make sure that there can be no grounds for exclusion. It would be a crying shame if your tender was excluded on a technicality, especially when your attributes scored highest and your price was right. It would also be a tragedy if a simple factual error or inconsistency got you kicked out of contention.

A final word

Nobody benefits, and nobody really wants to find themselves defending or attacking their clients or their suppliers in court.

Yet, it’s a disturbing fact of life that more and more challenges to tendering processes are being launched and are winning – both here and overseas. Some of these result in substantial payments having to be made by agencies to challengers of their tender processes.

More than ever before, buyers need to get their paperwork right. Not cluttered with 67 pages of extra legal conditions that contractors spend a fortune on getting legally checked. Not recycled RFTs that ask the same questions for large and small projects of very different types, no matter what the risks or the drivers for value are.

The right paperwork means RFTs that are based on simple, clearly stated criteria that are obviously designed to choose the best supplier for the job. Clear, fact-based scoring systems that give confidence in the integrity of the process and encourage appropriately positioned suppliers to engage. Up-front, well-thought-through definitions of what will make a tender non-conforming, so both tenderers and evaluators have a firm basis on which to decide whether they should engage.

Equally, tenderers must make sure their written response is clear, accurate, and aligned to their client’s needs. If there are variations on your past contracts, make sure they’re fully agreed and (importantly) comprehensively documented. A reputation for poor quality or obstruction, coupled with burgeoning costs, may count against you in future.

If you’re planning to work together in future, the first step is to build clear understanding and cooperative relationships in your tender processes. That way, we’ll all win.

• Clever Buying provides procurement training, advocacy, expert support and NZQA qualification assessment to tender evaluators from councils and government organisations throughout the country. For more information or to comment on this article, please contact Caroline Boot on 021 722 005 or caroline.boot@cleverbuying.com.