Did you know…ambiguities in your tender documents can render them unfair

By Owen Hayford.

Key Points:
Mistakes or ambiguities in the tender documents issued with the RFT can affect the fairness of the tender process.

In the decade since Justice Finn’s landmark decision in Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151, it has become well established that:

• in certain circumstances, the issue of a request for tenders (RFT) for a contract can itself give rise to a separate legally binding contract governing the conduct of the tender process - often called a "tender process contract"; and
• where the party issuing the RFT is a public body, any tender process contract arising from the RFT will include an implied term requiring the procuring body to conduct the tender process fairly and in good faith.

While most procuring bodies would now readily accept that the implied term of fair dealing and good faith requires them to treat tenderers equally when communicating information concerning the tender process, and when assessing tenders against the stated evaluation criteria, many may not realise that mistakes or ambiguities in the tender documents issued with the RFT can also affect the fairness of the tender process and give rise to a breach of this implied term.

In a recent Irish case[1], the court found that a mistake or ambiguity in the tender documents which causes a tenderer to proceed on a mistaken or different basis to other tenderers, and submit a tender which is materially different from the tender which it would otherwise have submitted, will result in a breach of the implied term of fair dealing.

Although the decision is not binding in Australia, the logic is sound. So what steps can you take to avoid breaching this implied term?

Firstly, you should carefully review your tender documents to minimise the potential for mistakes and ambiguities which could significantly affect a tender.

Secondly, consider including a provision in your RFT which requires tenderers to notify you of any mistakes or ambiguities which come to their attention.

Thirdly, if you become aware of a mistake or ambiguity, promptly issue an addendum to the tender documents which corrects or clarifies the position.

You may need to consider extending the closing time for tenders, to give tenderers sufficient time to adjust their tenders, if necessary, in light of the addendum. If tenders have already been submitted, you will need to give affected tenderers an opportunity to revise their tenders.

Ideally, your RFT will include express powers to take all of these steps, including an express power to issue addenda after the close of tenders.

Thanks to Charbel Azzi for his assistance with the preparation of this article.

 [1] Scott v Belfast Education & Library Board [2007] NICh 4.

For further information, please contact Owen Hayford.